Optimistic Invs. v. Kangaroo Mfg.

Optimistic Investments LLC, et al., Plaintiffs, v. Kangaroo Manufacturing Incorporated, et al., Defendants.

No. CV-21-02212-PHX-MTL

United States District Court, D. Arizona

April 22, 2022

ORDER

MICHAEL T. LIBURDI, UNITED SLATES DISTRICT JUDGE.

This case is about copyright disputes over products sold on Amazon.com (“Amazon”). Defendant Justin Ligeri has filed over 200 Amazon complaints regarding Plaintiffs' use of copyrighted images and packagings of products which he claims he or one of his entities own. Ligeri's complaints have impaired Plaintiffs' ability to sell on Amazon. Plaintiffs assert that they own the copyrights in question, and move for a temporary restraining order (“TRO”) requiring Ligeri to withdraw his prior complaints and barring him from filing new ones. (Doc 14.) The Court held a two-day evidentiary hearing. For the following reasons, the Court grants the TRO and denies the request for an order to show cause.

I. BACKGROUND

This case presents a gordian knot of facts twisted around a central question: who owns the subject copyrights, and other intellectual property rights, for certain products sold on Amazon. Plaintiffs Optimistic Investments, LLC (“Optimistic”), owned by Joshua Tischer; OIG Brand Management, LLC (“OIG”), owned by John Burns; and Michael S. Murphy have an extensive business and personal history with Defendants Kangaroo Manufacturing, Inc. (“Kangaroo”) and its owner Justin Ligeri. Plaintiffs and Ligeri testified that they have also conducted business through and with Ligeri's other companies- Cheyenne Brands Holdings, LLC (“Cheyenne”) and Kbrands, LLC (“Kbrands”)-and with Tischer's other company, Lightning Quick, LLC (“Lightning”). The Amazon seller accounts FBA King, Toy-Time, Fun-Raiser, Over the Moon, Front Porch, Divine, and Crazy Games have been used to sell the subject products on Amazon. (Admitted as Plaintiffs' Exhibit 18.). Finally, the parties testified that they have also done business with the many subsidiaries of Lightning, Optimistic, Kangaroo, Cheyenne, and OIG.

The parties have entered into numerous agreements involving the intellectual property rights at issue. On May 30, 2019, Kangaroo and Optimistic executed an “Assignment and Reseller Agreement.”^[1] (Admitted as Plaintiffs' Exhibit 4.) Based on the testimony at the hearing, this agreement was meant to resolve a gambling debt Ligeri owed Tischer.^[2] In it, Kangaroo conveyed trademarks and other intellectual property rights to Optimistic. (Id.) Ligeri testified that he did not remember signing the document and that he did not read the document. He also testified that he could have been under the influence when the document was signed, and that the notary's explanation when verifying that he signed the document was inconsistent. Finally, Ligeri testified that business between the parties was unchanged after the agreement was signed.

Certain intellectual property was later conveyed to Plaintiff Murphy in a “Settlement Agreement and General Release” executed between Optimistic, Kangaroo, Murphy, and Ligeri dated June 11, 2020. (Admitted as Plaintiffs' Exhibit 7.) Murphy testified that this agreement was intended to transfer Ultra-Glow Super Star trademarks and copyrights. Murphy also explained at the evidentiary hearing he always believed that he owned the copyrights to Ultra-Glow Super Stars. But he wanted to settle the issue, so he signed the “Settlement Agreement and General Release.” Ligeri testified that the agreement was never meant to assign copyrights and that the agreement was signed under duress. Ligeri testified that he believed that Murphy never owned the copyrights and that, notwithstanding their agreement, Ligeri is still the rightful owner of the copyrights.

The parties also entered into an “Asset Purchase Agreement” on July 1, 2019, where, while still acting as the COO of Cheyenne, John Burns sold the FBA King seller account and all of its intellectual property to Cheyenne for $240, 000. (Admitted as Plaintiffs' Exhibit 38.) Burns testified that this was done because Ligeri owed him money. Ligeri testified that was not the case, and that Burns stole money from him. Later, Tischer, through Lightning Quick, bought Cheyenne in October 2021 at a bankruptcy auction. (Admitted as Plaintiffs' Exhibit 1 at ¶¶ 25-26; Admitted as Plaintiffs' Exhibit 14.) After Tischer purchased Cheyenne, Burns told him that Cheyenne still owed money on the FBA King “Asset Purchase Agreement.” After paying off the remaining balance on the $240, 000, Tischer took control of the FBA Account.

Another of these agreements is a “Copyright Assignment and Transfer Agreement” dated November 4, 2019. (Admitted as Plaintiffs' Exhibit 15.) This agreement appears to transfer ownership of copyrights from Kangaroo to Cheyenne for $15, 000. (Id.) Defendant Ligeri testified that the document had been backdated and was actually drafted more than one year after the date listed. He testified that he did not file or record the documents, and that the $15, 000 was never transferred from Cheyenne to Kangaroo, because a lawyer advised him that the transfer may constitute fraud.^[3] Plaintiffs' counsel cross-examined Ligeri and showed him bank records indicating that $15, 000 was transferred from Cheyenne's accounts to KBrands on November 4, 2019, but Ligeri answered that the transfer was unrelated and that it was just a coincidence that there was a $15, 000 transfer that day. (Admitted as Plaintiffs' Exhibit 37.)

By June 30, 2020, Kangaroo was in Chapter 7 bankruptcy. (See Admitted as Plaintiffs' Exhibit 13.) In the federal bankruptcy proceeding, Kangaroo filed a document, signed by Ligeri, stating that it did not own any intellectual property, and that all intellectual property Kangaroo once owned had been sold to Optimistic in March 2019 and Jackson Hole, another entity Ligeri owned, in March 2020 for $150, 000 and $50, 000 respectively. (Id.) At the evidentiary hearing in this case, however, Ligeri testified that although he signed it, there were problems with the document. First, the figures on the forms were wrong. Second, he did not read the forms. And third, he did not know that the forms were submitted by his attorney with the incorrect numbers. He attributed this to a breakdown in communication between him and his attorney. As a result, he later fired his attorney. The schedules were never amended to correct this false representation to the bankruptcy court. Ligeri blamed his attorney for this error, and claims that he was a victim of legal malpractice.

On April 5, 2021, Plaintiff Murphy and Defendant Ligeri signed an “Asset Purchase Agreement” that transferred the Narwhal Novelties brand, Galaxy Brite brand, Lunar Phase brand, and associated intellectual property from Cheyenne to Murphy. (Admitted as Plaintiffs' Exhibit 35.) Murphy testified at the hearing that the agreement was meant to transfer copyrights from Ligeri and his company to Murphy. In contrast, Ligeri testified that the agreement only transferred trademarks, since Kangaroo, not Cheyenne, owned the copyrights.

In May of 2021, an “Amended Stipulated Permanent Injunction” was filed in an Arizona State Court case involving Optimistic, Cheyenne, and Ligeri. (Admitted as Plaintiffs' Exhibit 11.) The injunction validated Optimistic's claim of ownership of intellectual property from the May 30, 2019, agreement. (Id. ¶ 1.) The listed intellectual property in the injunction included trademarks, domain names, and universal product codes, but not copyrights. (Id. at 8-16.)

Starting in December of 2021, after Ligeri re-acquired Kangaroo, Defendants and their counsel began filing Amazon complaints claiming that Plaintiffs were selling products on Amazon in violation of Defendants' copyrights.^[4] (Doc. 14 at 3; Admitted as Plaintiffs' Exhibit 1 at 9-10 ¶ 33; Admitted as Plaintiffs' Exhibit 2 at 4-5 ¶¶ 15, 17; Admitted as Plaintiffs' Exhibit 3 at 2 ¶ 5.) All in all, Ligeri has filed about 210 Amazon complaints to date. Submitting an Amazon copyright complaint prompts Amazon to delist the challenged products until the parties resolve the issue.

On December 27, 2021, Plaintiffs filed this action, seeking a declaratory judgment regarding the ownership of copyright and trademark rights and monetary damages stemming from Defendants' violations of Plaintiffs' copyright and trademark rights. (See Doc. 1.) Plaintiffs also ask this Court to order Defendants to withdraw their pending Amazon complaints and to enjoin Defendants from filing additional Amazon complaints. (See, e.g., id. at ¶¶ 76-77.)

II. LEGAL STANDARD

The standard for issuing a temporary restraining order is the same as that for issuing an injunction. Immigrant Legal Res. Ctr. v. City of McFarland, 472 F.Supp.3d 779, 783 (E.D. Cal. 2020). “A preliminary injunction is an extraordinary remedy never awarded as of right.” Winter v. Nat. Res. Def. Council, Inc., 555 U.S. 7 24 (2008). For a court to issue a preliminary injunction, a plaintiff “‘must establish that he is likely to succeed on the merits, that he is likely to suffer irreparable harm in the absence of preliminary relief, that the balance of equities tips in his favor, and that an injunction is in the public interest. '” Am. Trucking Ass'ns, Inc. v. City of Los Angeles, 559 F.3d 1046, 1052 (9th Cir. 2009) (quoting Winter, 555 U.S. at 20). In the Ninth Circuit, even “if a plaintiff can only show that there are ‘serious questions going to the merits'-a lesser showing than likelihood of success on the merits-then a preliminary injunction may still issue if the ‘balance of hardships tips sharply in the plaintiff's favor,' and the other two Winter factors are satisfied.” Shell Offshore, Inc. v. Greenpeace, Inc., 709 F.3d 1281, 1291 (9th Cir. 2013) (quoting All. for the Wild...