Opinion
No. 3:17-cv-01484-HZ
02-10-2018
PACIFIC OFFICE AUTOMATION, INC., an Oregon corporation, Plaintiff, v. DANIEL TRACY, and NORTHWEST IMAGING ANALYSTS LLC, an Oregon limited liability company, Defendants.
Everett W. Jack, Jr. Aaron K. Stuckey Kaley L. Fendall Davis Wright Tremaine LLP 1300 SW Fifth Ave., Suite 2400 Portland, Oregon 97201 Attorneys for Plaintiff Phil J. Nelson Keith A. Pitt Slinde Nelson Stanford 111 SW Fifth Ave., Suite 1940 Portland, Oregon 97204 Attorneys for Defendants
OPINION & ORDER // // // Everett W. Jack, Jr.
Aaron K. Stuckey
Kaley L. Fendall
Davis Wright Tremaine LLP
1300 SW Fifth Ave., Suite 2400
Portland, Oregon 97201
Attorneys for Plaintiff Phil J. Nelson
Keith A. Pitt
Slinde Nelson Stanford
111 SW Fifth Ave., Suite 1940
Portland, Oregon 97204
Attorneys for Defendants HERNÁNDEZ, District Judge:
Plaintiff Pacific Office Automation, Inc. ("POA") brings claims against Defendants Daniel Tracy and Northwest Imaging Analysts LLC ("NIA") for false designation of origin and false advertising under the Lanham Act, 15 U.S.C. § 1125(a), common law unfair competition, and injunctive relief. Defendants move to dismiss Plaintiff's claims or in the alternative for a more definite statement under Rule 12 of the Federal Rules of Civil Procedure. Defendants' Motion to Dismiss [12] is granted.
BACKGROUND
POA is an office equipment and management solutions company that provides office technology products and related services to a variety of customers. Compl. ¶ 7, ECF 1. Tracy worked for POA from 2002 to 2010, initially as a sales representative and later as a field sales manager. Id. at ¶ 8. Tracy's wife, Megan Tracy, also worked for POA. Id. at ¶ 9. In 2010, Tracy left POA and formed NIA with his wife. Id. NIA directly competes with POA in Oregon, Washington, and California. Id. Plaintiff alleges that Defendants made "several false and/or misleading representations regarding [NIA's] business relationships and/or affiliations with certain office equipment manufacturers and supplies for which POA serves as an authorized dealer." Id. at ¶ 11. Specifically, Plaintiff alleges that Defendants made false representations to current and former POA customers that it was authorized to sell and service products from certain manufacturers. Id. According to POA, Defendants are intentionally misleading customers into believing that they have business relationships or affiliations with manufacturers in order to divert customers from POA. Id. at ¶¶ 12-14.
STANDARDS
On a motion to dismiss, the court must review the sufficiency of the complaint. Scheuer v. Rhodes, 416 U.S. 232, 236 (1974). A complaint is construed in favor of the plaintiff, and its factual allegations are taken as true. Daniels-Hall v. Nat'l Educ. Ass'n, 629 F.3d 992, 998 (9th Cir. 2010). "[F]or a complaint to survive a motion to dismiss, the non-conclusory factual content, and reasonable inferences from that content, must be plausibly suggestive of a claim entitling the plaintiff to relief." Moss v. United States Secret Serv., 572 F.3d 962, 969 (9th Cir. 2009) (internal quotation marks omitted). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). "[O]nce a claim has been stated adequately, it may be supported by showing any set of facts consistent with the allegations in the complaint." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 563 (2007). The court, however, need "not assume the truth of legal conclusions merely because they are cast in the form of factual allegations." Id. "[A] plaintiff's obligation to provide the 'grounds' of his 'entitle[ment] to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do . . ." Id. at 555. // //
DISCUSSION
Defendants move to dismiss each of Plaintiff's four claims. First, Defendants argue that Plaintiff's Lanham Act claims for false designation of origin and false advertising should be dismissed for failure to meet the heightened pleading standard under Federal Rule of Civil Procedure 9(b). Defendants assert that Plaintiff has insufficiently alleged the circumstances constituting Defendants' fraud. Second, Defendants move to dismiss Plaintiff's common law unfair competition claim on the ground that Oregon common law does not allow such claims based on false designation of origin or false advertisement. Third, Defendants move to dismiss Plaintiff's claim for injunctive relief because it is a request for a remedy based on Plaintiff's substantive claims and is not a distinct claim for relief.
I. Lanham Act Claims
Plaintiff brings two claims for relief under the Lanham Act: (1) false designation of origin; and (2) a false advertising. See 15 U.S.C. § 1125(a)(1)(A), (B). Both claims substantially rely on allegations that Defendants made "false and/or misleading representations regarding their business relationships and/or affiliations with certain office equipment manufacturers . . . ." See Compl. ¶¶ 16-25. Defendants argue that Plaintiff's Lanham Act claims must be dismissed under Rule 9(b) because they have not been sufficiently pled and fail to put Defendants on notice of the particular misconduct that constitutes the alleged fraud.
Rule 9(b)'s heightened pleading standard provides: "In alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake." Fed. R. Civ. P. 9(b). The parties dispute whether Rule 9(b) is applicable to Plaintiff's Lanham Act claims. While "fraud" is not a necessary element of Plaintiff's Lanham claims, the particularity requirement of Rule 9(b) may apply where the plaintiff alleges "a unified course of fraudulent conduct and rel[ies] entirely on that course of conduct as the basis of a claim." Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1103-04 (9th Cir. 2003). Such claims can be said to be "grounded in fraud." Id.
The Ninth Circuit has not established that Rule 9(b) applies to false designation of origin and false advertising Lanham Act claims. However, "several district courts in this circuit have held that false advertising claims under the Lanham Act must be pleaded in accordance with Rule 9(b)." SKEDKO, Inc. v. ARC Prod., LLC, No. 3:13-cv-00696-HA, 2014 WL 585379, at *3 (D. Or. Feb. 13, 2014) (collecting cases); see also Nutrition Distribution, LLC v. New Health Ventures, LLC, No. 16-cv-02338-BTM-MDD, 2017 WL 2547307, at *4 (S.D. Cal. June 13, 2017) (recognizing that "[l]ower federal courts have applied this heightened pleading standard to claims under the Lanham Act that are grounded in fraud"). The Court is persuaded by the weight of authority from other district courts within the Ninth Circuit that Rule 9(b) applies to Plaintiff's claims.
Next, the Court must determine whether Plaintiff's allegations satisfy the heightened pleading standard of Rule 9(b). The Ninth Circuit held that in order "[t]o satisfy Rule 9(b), 'a pleading must identify the who, what, when, where, and how of the misconduct charged, as well as what is false or misleading about the purportedly false statement, and why it is false." SKEDKO, 2014 WL 585379, at *1 (quoting Cafasso, U.S. ex rel. v. Gen. Dynamics C4 Sys., Inc., 637 F.3d 1047, 1054-55 (9th Cir. 2011)). This standard may be "relaxed" for claims that are based on fraudulent omissions where the "circumstances of the alleged fraud are peculiarly within the defendant's knowledge or are readily obtainable by him." Neubronner v. Milken, 6 F.3d 666, 672 (9th Cir. 1993).
Plaintiff's Lanham Act Claims allege in a general fashion that Defendants have mislead customers into believing that they have business connections that do not exist. See Compl. ¶¶ 15-25. For example, Plaintiff's false designation of origin claim alleges:
Defendants' false and/or misleading representations regarding their business relationships and/or affiliations with certain office equipment manufacturers, which infer and imply to the general public that Defendants are authorized to sell and service such manufacturer's products, are likely to cause confusion or mistake, or to deceive customers and potential customers as to an affiliation, connection, or association between Defendants and such manufacturers when no such affiliation, connection, or association exists.Id. at ¶ 16. Plaintiff's other allegations include substantially similar descriptions of Defendants' conduct. District courts within the Ninth Circuit have concluded that more detailed allegations were insufficient to satisfy the requirements of Rule 9(b). For example, in Nutrition Distribution, the plaintiff alleged the following: "Defendant has purposely made false and misleading descriptions of fact concerning the nature, characteristics and qualities of its DMZ products by . . . failing to disclose their status as controlled substances and failing to disclose the overwhelming clinical evidence that such products pose extreme health risks." 2017 WL 2547307, at *4.The trial court held the plaintiff "fail[ed] to plead with particularity [the defendant's] alleged misleading descriptions of its DMZ products, [the plaintiff] merely makes general allegations about its advertisements—which are insufficient under Rule 9(b)." Id.
Likewise, in SKEDKO the district court concluded that even under the "relaxed" Rule 9(b) standard, the plaintiff's allegations lacked sufficiently particularity. 2014 WL 585379, at *3. The court explained that the "[d]efendant's pleadings fail to state when the alleged misrepresentations were made; where the misrepresentations were made; or who relied on them." Id. In a further example, in Vanguard Products, Judge Brown concluded that the defendant's Lanham Act counterclaim had "not met the pleading standards of either Rule 9(b) or Rule 8(a)[.]" Vanguard Prod. Grp. v. Merch. Techs., Inc., No. 07-cv-1405-BR, 2008 WL 939041, at *7 (D. Or. Apr. 3, 2008). In that case, the defendant alleged that the plaintiff "made false and misleading statement in bad faith knowing that [the plaintiff] was overstating the scope of [the plaintiff's] patent rights." Id. at *5 (internal quotation marks omitted).
Here, Plaintiff's generalized allegations are insufficient to satisfy the particularity requirement of Rule 9(b). Plaintiff does not allege what form Defendants' false statements or advertisements took or where they were made or advertised. More importantly, Plaintiff does not allege any time-frame for the misconduct. Plaintiff only alleges that Defendants began the misconduct at some point after leaving POA in 2010. Compl. ¶¶ 8-10. It is unclear, based on the Complaint, what affect the applicable two-year statute of limitations will have on Plaintiff's Lanham Act claims. See Official Airline Guides, Inc. v. Goss, 6 F.3d 1385, 1395 (9th Cir. 1993) (applying Oregon's two-year statute of limitations to Lanham Act claims); Collegenet, Inc. v. XAP Corp., 483 F. Supp. 2d 1058, 1062 (D. Or. 2007) (same). In sum, Plaintiff's allegations merely recite the elements of its Lanham Act claims and are not "specific enough to give defendants notice of the particular misconduct . . . so that they can defend against the charge and not just deny that they have done anything wrong." Vess, 317 F.3d at 1106 (quotation marks citations omitted).
II. Common Law Unfair Competition
Next, Defendant argues that Plaintiff's unfair competition claim must be dismissed because it is not recognized under Oregon common law. Plaintiff's unfair competition claim is based on Defendants' alleged "false and/or misleading representations" regarding their business relationships and affiliations with certain manufacturers. Compl. ¶¶ 27-30. This Court has recognized, however, that "unfair competition is limited to misappropriation of a competitor's intellectual property, such as trade names or trade dress . . ." L & A Designs v. Xtreme ATVs, Inc., No. 03:10-cv-627-HZ, 2012 WL 1532417, at *5 (D. Or. Apr. 30, 2012) (quoting Volt Servs. Grp., Div. of Volt Mgmt. Corp. v. Adecco Employment Servs., Inc., 178 Or. App. 121, 135, 35 P.3d 329, 338 (2001)). Similarly, the District of Oregon has recognized that "an unfair competition claim under Oregon common law does not allow claims for false and misleading advertisements." SKEDKO, 2013 WL 3965314, at *5. Accordingly, Plaintiff's unfair competition claim based on false and misleading statements and advertisement is dismissed.
III. Injunctive Relief
Plaintiff's Fourth Claim for Relief asserts a claim for "Injunctive Relief to Enjoin Wrongful Conduct." Compl. ¶¶ 31-33. Plaintiff's "claim" for injunctive relief is a request for a remedy to other claims and is not a claim for relief in itself. See Henry v. Gerber Prod. Co., No. 3:15-cv-02201-HZ, 2016 WL 1589900, at *4 (D. Or. Apr. 18, 2016) ("[A]n injunction is a type of relief, not a separate cause of action."); Fauley v. Washington Mut. Bank FA, No. 3:13-CV-00581-AC, 2014 WL 1217852, at *9 (D. Or. Mar. 21, 2014) (recognizing that the plaintiff's "'claim for injunctive relief' is actually a prayer for relief which the court may consider only after adjudicating her substantive causes of action" and concluding that the claim was "not a 'claim for relief' susceptible to a motion to dismiss for failure to state a claim"); Curtis v. Option One Mortg. Corp., No. 109CV1982AWISMS, 2010 WL 1729770, at *8 (E.D. Cal. Apr. 28, 2010) ("Under Federal law, an injunction is a remedy to another claim or cause of action and not a claim or cause of action in and of itself."); Davidson v. Kimberly-Clark Corp., No. C 14-1783 PJH, 2015 WL 2357088, at *4 (N.D. Cal. May 15, 2015) (collecting cases recognizing that injunctive relief is a remedy and not a cause of action). Accordingly, Plaintiff's claim for injunctive relief is dismissed with prejudice. The Court grants Plaintiff leave to amend his complaint to include injunctive relief as a remedy in its prayer for relief.
CONCLUSION
Plaintiff's First, Second, and Third claims for relief are dismissed without prejudice and with leave to amend. Plaintiff's Fourth Claim for injunctive relief is dismissed with prejudice. Plaintiff is granted leave to amend its complaint to include its request for injunctive relief as a remedy. Plaintiff is given fourteen (14) days from the date of this Order to file its amended complaint.
Dated this 10 day of February, 2018.
/s/_________
MARCO A. HERNÁNDEZ
United States District Judge