OUT OF THE BOX ENTERPRISES, LLC, a Texas limited liability company v. EL PASEO JEWELRY EXCHANGE, INC., a Nevada corporation

NOT FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
OUT OF THE BOX ENTERPRISES,
LLC, a Texas limited liability company,
Plaintiff-Appellee,
v.
EL PASEO JEWELRY EXCHANGE,
INC., a Nevada corporation; EL PASEO
JEWELRY, INC.; IVAN KALENSKY, an
individual,
Defendants,
and
RAJU MEHTA, an individual,
Defendant-Appellant.
No. 13-55239
D.C. No.
5:10-cv-01858-VAP-DTB
MEMORANDUM*
Appeal from the United States District Court
for the Central District of California
Virginia A. Phillips, Chief Judge, Presiding
Argued and Submitted May 9, 2017
Submission Vacated May 30, 2017
Resubmitted April 27, 2018
Pasadena, California
FILED
APR 30 2018
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
* This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.

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Before: CHRISTEN** and FRIEDLAND, Circuit Judges, and LASNIK,*** District
Judge.
Defendant-Appellant Raju Mehta appeals a judgment entered in favor of
Plaintiff-Appellee Out of the Box Enterprises, LLC.1 We have jurisdiction under
28 U.S.C. § 1291. Because we conclude that the district court erred by denying
Mehta’s motion for judgment as a matter of law under Rule 50(b) of the Federal
Rules of Civil Procedure, we reverse.
We review de novo an order denying a Rule 50(b) motion for judgment as a
matter of law. Dunlap v. Liberty Nat. Prods., Inc., 878 F.3d 794, 797 (9th Cir.
2017). We ask “whether the evidence, construed in the light most favorable to the
nonmoving party, permits only one reasonable conclusion, and that conclusion is
contrary to that of the jury.” Id. (quoting Estate of Diaz v. City of Anaheim, 840
F.3d 592, 604 (9th Cir. 2016)).
** Judge Christen was drawn to replace Judge Pregerson on the panel
following his death. Judge Christen has read the briefs, reviewed the record, and
listened to the oral argument.
*** The Honorable Robert S. Lasnik, United States District Judge for the
Western District of Washington, sitting by designation.
1 Because the parties are familiar with the facts, we do not recite them
here.
2

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The Lanham Act prohibits false advertising. 15 U.S.C. § 1125(a). Where a
plaintiff establishes that a competitor has engaged in false advertising, the Lanham
Act allows recovery of: (1) the defendant’s profits; (2) the plaintiff’s damages; and
(3) the costs of the action, so long as recovery “constitute[s] compensation and not
a penalty.” 15 U.S.C. § 1117(a). “[T]he court must ensure that the record
adequately supports all items of damages . . . lest the award become speculative or
violate [the Lanham Act’s] prohibition against punishment.” TrafficSchool.com,
Inc. v. EDriver, Inc., 653 F.3d 820, 831 (9th Cir. 2011) (alterations in original)
(quoting ALPO Petfoods, Inc. v. Ralston Purina Co., 913 F.2d 958, 969 (D.C. Cir.
1990)).
Viewing the evidence in the light most favorable to Out of the Box, the only
reasonable conclusion in this case is that Out of the Box failed to meet its burden
of adequately proving: (1) that El Paseo’s advertisements caused Out of the Box to
lose profits; and (2) the amount of any lost profits. See Lindy Pen Co. v. Bic Pen
Corp., 982 F.2d 1400, 1407 (9th Cir. 1993) (“A plaintiff must prove both the fact
and the amount of damage.”), abrogated on other grounds by SunEarth, Inc. v. Sun
Earth Solar Power Co., 839 F.3d 1179, 1181 (9th Cir. 2016) (en banc) (per
curiam). Even assuming Nolte was qualified to render an opinion about how
consumer behavior might change in response to variations in the price of gold, and
3

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setting aside Out of the Box’s scant business history, Nolte’s testimony established
only a correlation—not a causal relationship—between El Paseo’s advertisements
and a decline in Out of the Box’s projected profits. Nolte’s testimony also did not
provide the jury with a way to determine by a preponderance of evidence the
amount of any lost profits Out of the Box may have suffered as a result of El
Paseo’s advertisements. In short, the record provides “no way to determine with
any degree of certainty what award would be compensatory,” as required by our
precedent. TrafficSchool.com, 653 F.3d at 831.
Nolte’s disgorgement calculation is also fatally flawed.2 The infirmities in
Nolte’s damages calculation undermine his disgorgement calculation as well.
Additionally, Nolte assumed that all of El Paseo’s profits during the relevant
period were due to its advertisements, without evidence to support that assumption.
As in TrafficSchool.com, there is no way to determine whether the disgorgement
award was compensatory or punitive. See TrafficSchool.com, 653 F.3d at 831.
Out of the Box’s claims under California’s Unfair Competition Law, Cal.
Bus. & Prof. Code §§ 17200 et seq., and False Advertising Law, id. § 17500, fail
along the same lines. Those statutes allow private litigants to recover restitution,
2 Mehta’s Rule 50(b) motion re-raised the arguments he made in his
Rule 50(a) motion at the close of Phase II, wherein he pointed out that Nolte’s
disgorgement calculation was impermissibly speculative.
4

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but not damages. Colgan v. Leatherman Tool Grp., Inc., 38 Cal. Rptr. 3d 36, 59
(Ct. App. 2006). Any award of restitution under those statutes must be of a
“measurable amount” and “that measurable amount must be supported by
evidence.” Pulaski & Middleman, LLC v. Google, Inc., 802 F.3d 979, 988 (9th
Cir. 2015) (quoting Colgan, 38 Cal. Rptr. 3d at 61). Exact proof is not necessary,
but California law requires “some reasonable basis of computation.” Id. at 989
(quoting Marsu B.V. v. Walt Disney Co., 185 F.3d 932, 938–39 (9th Cir. 1999)).
As discussed, Out of the Box’s evidence at trial fell short of that mark.
Because we conclude that Out of the Box failed to introduce evidence
sufficient to establish the existence and amount of its damages or permissible
disgorgement, we need not address the other issues Mehta raises on appeal.
REVERSED.
5

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