Cisco Systems, Inc. v. Sheikh

Background

Cisco Systems, Inc. and Cisco Technology, Inc. sued several defendants over alleged efforts to import and sell counterfeit Cisco products. The claims included trademark infringement, trademark counterfeiting, false designation of origin, violations of California’s Unfair Competition Law, and unjust enrichment. Cisco later voluntarily dismissed its claims against the defendants after settlement.

Advanced Digital Solutions International, Inc. (ADSI), a third-party plaintiff, asserted indemnity claims against Nabia Uddin and several other third-party defendants: Rahi Systems, Inc., Masood Minhas, Nauman Karamat, Pure Future Technology, Inc., Karoline Banzon, and Kaelyn Nguyen. An indemnity claim seeks to require another party to reimburse or share responsibility for liability. The court had previously dismissed ADSI’s indemnity claims based on the federal trademark statute and had granted summary judgment for the other third-party defendants because the record lacked evidence supporting ADSI’s claims.

Dismissal of Uddin’s Claim

The court had issued an order to show cause asking why Uddin should not be dismissed because Cisco’s settlement and dismissal of claims appeared to leave no viable basis for ADSI’s indemnity claim. ADSI argued that dismissal was improper without a pending motion, that its claim should be decided by a jury, that Cisco’s unjust-enrichment claim supported indemnity, and that California law permits indemnity between certain intentional tortfeasors.

The court rejected those arguments. It held that a trial court may dismiss a claim on its own initiative for failure to state a claim when the third-party plaintiff cannot obtain relief, and noted that ADSI had been given an opportunity to respond. The court explained that indemnity is derivative of an underlying claim and requires shared legal responsibility for the same injury. It concluded that Cisco’s remaining possible restitution theory was tied to the federal trademark claims and that ADSI had not shown an independent claim supporting indemnity against Uddin. The court also reasoned that any unjust-enrichment recovery would be limited to ADSI’s own profits, leaving nothing for Uddin to indemnify.

The court therefore dismissed the remaining indemnity claims against Nabia Uddin with prejudice.

Attorneys’ Fees

The remaining third-party defendants sought $445,039 in attorneys’ fees under California Code of Civil Procedure section 1038. That statute permits defendants who obtain summary judgment in indemnity actions to recover reasonable and necessary defense fees when the proceeding was not brought and maintained with both good faith and reasonable cause.

The court found that ADSI’s initial decision to bring the claims was a close question and did not find that ADSI lacked reasonable cause or acted in bad faith at the outset. But after discovery closed, ADSI had very little or no evidence that the third-party defendants participated in the counterfeiting scheme. The court found that ADSI’s continued pursuit of the claims then lacked reasonable cause and good faith and appeared to be an effort to gain leverage in a related state-court action.

Because the problem arose after discovery ended, the court limited the award to fees incurred after the close of discovery. After reviewing the billing records privately, the court found the claimed hours and costs appropriate, with reductions including work attributed to Uddin. It granted the motion for attorneys’ fees in part and awarded the third-party defendants $73,510.29.

Disposition

The remaining indemnity claims against Nabia Uddin were dismissed with prejudice. The motion for attorneys’ fees was granted in part, and the third-party defendants were awarded $73,510.29. The remaining parties were ordered to submit an agreed proposed judgment within five business days.