Serafin v. Realmark Holdings, LLC

Background

Robert Serafin sued Realmark Holdings, LLC, Realmark, Inc., Madeline Serafin, and Doe defendants. According to the complaint, Serafin and Madeline Serafin jointly formed and incorporated Realmark, Inc. in 2014, and each owns 50% of it. Serafin alleged that, in late 2022, Madeline Serafin and the Doe defendants formed Realmark Holdings, LLC, which then allegedly took over Realmark, Inc.’s website and offered the same or similar services using the “Realmark” mark. Serafin alleged that this conduct confused consumers and diverted millions of dollars in revenue from Realmark, Inc. to Realmark Holdings, LLC, harming him because he owns 50% of Realmark, Inc. but has no interest in Realmark Holdings, LLC.

Serafin asserted a claim under Section 43(a) of the Lanham Act for false designation of origin and related state-law claims. He sought monetary damages and an injunction.

The motion and judicial notice

Realmark Holdings, LLC and Realmark, Inc. jointly moved to dismiss or stay the action. They argued that the court lacked subject-matter jurisdiction because the dispute involved an asset that might be addressed in the Serafins’ pending marital dissolution proceedings; that the court should abstain from deciding the case while those state proceedings continued; that venue was improper; and that Serafin failed to state a claim because he did not allege interstate commerce or competitive injury.

The court granted the Realmark Defendants’ request for judicial notice of six public records, including documents from the pending marital dissolution proceeding and documents from a prior related proceeding. The court stated that it would take notice of the existence of the state-court order appointing a forensic accountant, but not disputed facts contained in that order. It also stated that irrelevant materials would not be considered in deciding the motion.

Subject-matter jurisdiction

The court held that it had federal-question jurisdiction over Serafin’s Lanham Act claims under 28 U.S.C. § 1331 and trademark jurisdiction under 28 U.S.C. § 1338. It also had supplemental jurisdiction over the state-law claims under 28 U.S.C. § 1367.

The Realmark Defendants relied on the domestic-relations exception, which limits federal jurisdiction in certain cases involving divorce, alimony, or child-custody decrees. The court explained that Ninth Circuit precedent limits that exception to diversity-jurisdiction cases and does not apply when federal-question jurisdiction supplies the basis for the lawsuit. Because Serafin asserted federal Lanham Act claims, the court denied dismissal on this ground.

Abstention

The court rejected both proposed forms of abstention, meaning the request that the federal court refrain from deciding a case despite having jurisdiction.

The court rejected abstention under Younger v. Harris because the pending marital dissolution proceeding was neither a civil enforcement proceeding resembling a criminal prosecution nor a proceeding involving orders uniquely related to the state court’s ability to perform its judicial functions. The possibility that the federal case could affect the state court’s consideration of marital property did not satisfy the required standard.

The court also rejected Burford abstention. It found that Serafin’s federal trademark claims were separate from the state court’s task of deciding how the Serafins’ personal assets, including their shares in Realmark, Inc., should be distributed. The federal case primarily involved federal trademark law, not questions of state law requiring abstention.

Venue

The court held that venue was proper in the Northern District of California. Serafin alleged that both Realmark Holdings, LLC and Realmark, Inc. had a principal place of business and conducted business in the district, and that events giving rise to his claims occurred there. The Realmark Defendants did not dispute those allegations or dispute that they resided in the district. The court therefore found venue proper under 28 U.S.C. § 1391(b)(1)–(2).

Failure to state a claim

The court held that Serafin plausibly stated a claim under Section 43(a) of the Lanham Act. First, the complaint adequately alleged use of the “Realmark” mark in commerce because it alleged use on a website and in a domain name. The court treated the internet as an instrumentality and channel of interstate commerce.

Second, the court rejected the argument that Serafin had to allege competitive injury. The court distinguished between false-association and false-advertising claims under Section 43(a), and stated that the precedent relied on by the Realmark Defendants concerned false advertising rather than the false-association claim at issue. The court also explained that later Supreme Court precedent rejected a categorical requirement that a Lanham Act plaintiff be an actual competitor. The Realmark Defendants did not argue that Serafin lacked another legally recognized interest in the allegedly infringed trademark, so the court treated that argument as waived for purposes of the motion. Because the court rejected the standing argument concerning the Lanham Act claims, it also rejected the related argument concerning Serafin’s state-law claims.

Disposition

The court denied the Realmark Defendants’ motion to dismiss. The court did not dismiss the case or stay it.