Opinion
No. C-03-5598 SC.
August 24, 2004
ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFF'S MOTION TO DISMISS DEFENDANTS' COUNTERCLAIMS AND THIRD-PARTY COMPLAINT
I. INTRODUCTION
Presently before the Court is Plaintiff and Counter-Defendant NU Science Corporation and Third-Party Defendants Deutrel Industries and Jerlad Rhoten's (collectively, the "moving parties" or "Third-Party Defendants") motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6) the First Amended Counterclaim and Third-Party Complaint filed by Defendant eFasteam.com and EFT, INC., the successor in interest to eFasteam.com. The Court, having reviewed EFT's counterclaims and third-party complaint and the parties' submissions on this matter, hereby grants in part and denies in part the present motion. The moving parties' motion is granted as to EFT's second, third, and fourth causes of action, which are hereby dismissed without prejudice, but denied as to EFT's first claim for relief.
According to the First Amended Counterclaim and Third-Party Complaint, EFT, Inc., is the successor in interest to eFasteam.com ("Fasteam"). All references in this order to Fasteam will be attributed to EFT.
II. BACKGROUND
The following allegations are taken from EFT's First Amended Counterclaim and Third-Party Complaint (hereinafter "Third-Party Complaint") and will be assumed as true for purposes of the present motion. Fasteam marketed and sold a cell food product, specifically a colloidal mineral formula concentrate, under the unregistered trademark of "SUPER HYDRO-OXY." Third-Party Complaint, ¶ 24. Plaintiff NU Science markets and sells mineral supplements under the registered trademark "CELLFOOD." Id. at ¶ 26. Sometime in 1999, Fasteam formed a relationship with NU Science whereby Fasteam placed an order with NU Science for an unspecified number of bottles of CELLFOOD. Id. In or about the summer of 2000, Fasteam placed a second order for approximately 8,000 bottles of CELLFOOD. There was no written agreement between the parties for either order save and except for invoices from NU Science to Fasteam. Id. at ¶ 27, 28.
EFT alleges that for each of these orders, Third-Party Defendant Jerlad Rhoten ("Rhoten") caused to be printed and affixed to the bottles of CELLFOOD product labels which read "SUPER HYDRO-OXY CELL FOOD". Id. at ¶ 29, 30. EFT alleges that such labels gave substantial predominance to Fasteam's pre-existing trademark, did not use the CELLFOOD trademark, and showed Fasteam to be the sole vendor thereof.
EFT alleges that Rhoten is "CEO of Deutrel and the CEO or other officer and a director of NU Science." Third-Party Complaint, ¶ 9.
In or about September 2003, Fasteam attempted to obtain from NU Science a more favorable price for its next order of CELLFOOD. EFT alleges that "NU Science and RHOTEN refused to provide to Fasteam a more favorable price for the Cellfood Product preferring instead to maintain an artificially high price therefor notwithstanding the fact that the Labels permitted Fasteam to market the Cellfood Product under its own name and logo." Id. at ¶ 33. EFT refers to this decision by NU Science as the "Price Maintenance." As a consequence of the alleged price maintenance, there was no further business relationship between Fasteam and NU Science.
In or about the latter part of 2003, Fasteam embarked upon a course of action to change the name of its colloidal mineral formula concentrate to be marketed under its own trademark of "SUPER HYDRO-OXY CELL NUTRITION", and during this changeover Fasteam reduced the price for its renamed product. Id. at ¶ 35. EFT alleges that this changeover and price reduction, along with Fasteam's failure to continue to order CELLFOOD, caused NU Science to initiate litigation against Fasteam. On December 12, 2003, NU Science filed suit against Fasteam and Jack Qin asserting four causes of action: (1) Trademark infringement; (2) Unfair Competition by passing off; (3) False Advertising; and (4) Interference with Prospective Economic Advantage by stealing customers. See Complaint.
EFT then filed its Third-Party Complaint against NU Science, RHOTEN, and Deutrel Industries, Inc., asserting four claims for relief: (1) Declaratory Judgment; (2) Tortious Interference with Prospective Economic Advantage; (3)Common Law Unfair Competition; and (4) Civil Conspiracy. NU Science, RHOTEN, and Deutrel now move to dismiss EFT's Third-Party Complaint under Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim upon which relief can be granted. As will be discussed more fully below, the moving parties' motion will be granted as to EFT's second, third, and fourth claims for relief, which are hereby dismissed without prejudice. The moving parties' motion will be denied as EFT's first cause of action.
EFT asserts that Deutrel Industries is the "parent of or a brother or sister corporation to NU Science." Third-Party Complaint, ¶ 8. Further, EFT asserts that "RHOTEN is the CEO of Deutrel and the CEO or other officer and a director of NU Science . . . and was responsible for and controlled the activities of both Deutrel and NU Science. . . ." Id. at ¶ 9, 10.
III. LEGAL STANDARD A. Motion to Dismiss
"[A] complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46 (1957). "In reviewing a 12(b)(6) motion, this Court must accept the factual allegations of the complaint as true and must draw all reasonable inferences in favor of the plaintiff." Bernheim v. Litt, 79 F.3d 318, 321 (2nd Cir. 1996); see also Usher v. City of Los Angeles, 828 F.2d 556, 561 (9th Cir. 1987). The complaint need not set out the facts in detail; what is required is a "short and plain statement of the claim showing that the pleader is entitled to relief." Fed.R.Civ.P. 8(a); La Salvia v. United Dairymen, 804 F.2d 1113, 1116 (9th Cir. 1986). Thus, the Court's task "is merely to assess the legal feasibility of the complaint, not to assay the weight of the evidence which might be offered in support thereof." Cooper v. Parsky, 140 F.3d 433, 440 (2nd Cir. 1998).
IV. DISCUSSION
In EFT's first claim for relief it seeks a Declaratory Judgment that "(a) there was no violation of the Lanham Act by Fasteam . . . by way of customer confusion of source, origin, or sponsorship . . .; (b) there was no effort by NU Science to maintain quality control over its trademark, and (c) there was no violation of the Lanham Act by Fasteam by way of customer confusion due to the remedial steps taken by Fasteam subsequent to NU Science's cease and desist letter." Third-Party Complaint, ¶ 48. The moving parties seek to dismiss this claim on the sole ground that it is "merely redundant of the denials and affirmative defenses raised in the Answer and Affirmative Defenses." Mot. to Dismiss, pgs. 5-6. While Third-Party Defendants may be correct that this claim seeks relief that is redundant to averments made in Fasteam's answer, such is not a proper basis for dismissing this counterclaim. EFT is entitled to seek a declaration regarding its rights and liabilities in this matter regardless of whether it defends the underlying action on similar grounds. Consequently, Third-Party Defendants' motion to dismiss is denied as to EFT's first cause of action.
In claim two, EFT alleges liability for tortious interference with prospective economic advantage. Third-Party Defendants move to dismiss this claim on the ground that EFT has not satisfactorily plead all of the necessary elements. To adequately state a claim for tortious interference with prospective economic advantage, the following elements must be established: "(1) the existence of a specific economic relationship between [third-party plaintiff] and third parties that may economically benefit [thirdparty plaintiff]; (2) knowledge by the [third-party defendants] of this relationship; (3) intentional acts by the [third-party defendants] designed to disrupt the relationship; (4) actual disruption of the relationship; and (5) damages to the [thirdparty plaintiff]." Rickards v. Canine Eye Registration Foundation, Inc., 704 F.2d 1449, 1456 (9th Cir. 1983).
After reviewing EFT's complaint, the Court cannot find a specific existing or prospective relationship that was allegedly harmed by Third-Party Defendants' behavior. There are no allegations in the complaint from which the court could infer the probable disruption of an actual economic relationship. Rather, EFT relies on conclusory language that merely repeats the elements of the tort. Such vague allegations do not satisfy federal pleading requirement, and thus this claim must be dismissed.
EFT brings its third cause of action under California's common law of unfair competition. EFT's sole allegation in connection with this claim concerns NU Science's refusal to lower its price for CELLFOOD at EFT's request. EFT claims that NU Science's refusal to renegotiate on price constitutes "unlawful and unfair business practices, . . . unfair trade practices, and . . . common law unfair competition." Third-Party Complaint, ¶ 56. There are two problems with this claim, however, which ultimately require its dismissal. First, "[t]his Circuit has consistently held that state common law claims of unfair competition and actions under the Lanham Act are 'substantially congruent.'"Cleary v. News Corp., 30 F.3d 1255, 1262-63 (9th Cir. 1994) (quoting Academy of Motion Picture Arts Sciences v. Creative House Promotions, Inc., 944 F.2d 1446, 1457 (9th Cir. 1991)). This conforms with the California Supreme Court's statement inBank of the West v. The Superior Court of Contra Costa County, 2 Cal.4th 1254, 1263 (1992) that "The common law tort of unfair competition is generally thought to be synonymous with the act of 'passing off' one's goods as those of another." EFT has not made a claim that Third-Party Defendants passed off products as those of EFT, nor has it stated any competent allegation which could form the basis for a claim under the Lanham Act. Thus, it does not appear that EFT has adequately stated a claim under California's common law of unfair competition. Second, EFT's pleadings and theory of liability regarding the Third-Party Defendants' allegedly wrongful conduct is far too scant and cursory for this Court to give it any credence. EFT's only basis for this claim is that NU Science refused to renegotiate its price for CELLFOOD at Fasteam's request. To the Court's knowledge, this alone is not an actionable harm. If EFT is trying to make out a claim for trademark misuse or some other anti-competitive behavior on the part of NU Science, it must provide far greater detail regarding Third-Party Defendants' wrongful conduct and how this amounts to a violation of the law. For the foregoing reasons this claim is hereby dismissed.
Finally, in claim four EFT alleges that Third-Party Defendants engaged in a civil conspiracy that harmed EFT in an amount in excess of $1,000,000. EFT's sole assertion in connection with this claim is that Deutrel, NU Science, and RHOTEN "conspired among themselves to commit wrongful acts by way of tortious interference with prospective economic advantage and unfair competition." Third-Party Complaint, ¶ 62. Again, EFT does not satisfy the pleading requirements for this cause of action, and thus this Court is forced to dismiss it.
As an initial matter, civil conspiracy is not a separate and distinct cause of action under California law. Research Group, Inc. v. Genesis Creative Group, Inc., 122 F.3d 1211, 1228 (9th Cir. 1997). Rather, it is a "doctrine that imposes liability on persons who, although not actually committing a tort themselves, share with the immediate tortfeasors a common plan or design in its perpetration." Applied Equip. Corp. v. Litton Saudi Arabia Ltd., 7 Cal.4th 503, 510-511 (1994). "To state a cause of action for conspiracy, facts must be alleged showing the formation and operation of a conspiracy and damage resulting from an act or acts done in furtherance of the plan. As the cause of action is for the damage suffered, and not the mere conspiracy, the complaint must state facts which show that a civil wrong was done resulting in damage." Orloff v. Metropolitan Trust Co., 17 Cal.2d 484, 488 (1941).
In the present case, EFT has not adequately alleged the formation of any conspiracy or any action on the part of each Third-Party Defendant that corresponds to the elements of a conspiracy cause of action. Moreover, EFT has not identified an actual "civil wrong" that was committed by Third-Party Defendants in furtherance of the alleged conspiracy. The only wrong that EFT mentions in this claim is merely a reassertion of its second and third claims for relief. However, as these claims have both been dismissed due to their failure to adequately allege wrongful conduct, they cannot properly serve as the basis for a civil conspiracy. In sum, EFT's pleading on this claim is woefully short of what is required to adequately state a claim for civil conspiracy. Accordingly, this claim is dismissed.
V. CONCLUSION
Based on the foregoing discussion, EFT's second, third, and fourth causes of action are HEREBY DISMISSED without prejudice, and Third-Party Defendants' motion to dismiss is HEREBY DENIED as to EFT's first cause of action.
IT IS SO ORDERED.