Opinion
CIVIL NO. 3-99CV2440-P
April 14, 2000.
MEMORANDUM OPINION AND ORDER
Now before the Court for consideration are Defendants' Motion to Dismiss under Rules 8(a), 9(f), 9(g), 12(b)(6), and Brief in Support, filed December 13, 1999; Plaintiff's Response to Defendants' Motion to Dismiss and Brief in Support, filed January 3, 2000; Defendants' Amended Motion to Dismiss under Rules 8(a), 9(f), 9(g), 12(b)(6), and Brief in Support, filed February 9, 2000; Plaintiff's Response to Defendants' Amended Motion to Dismiss and Motion for Summary Judgment and Brief in Support, filed February 29, 2000; Defendants' Reply in Support of Their Amended Motion to Dismiss and Motion for Summary Judgment and Authorities Argument in Support, filed March 17, 2000; and Plaintiff's Motion to Strike or in the Alternative Rule 56(f) Motion to Defer Adjudication, filed April 7, 2000. After reviewing the arguments along with the applicable law, the Court hereby DENIES Defendants' Motion for Summary Judgment, DENIES Defendants' Motion to Dismiss, and GRANTS Plaintiff's Motion to Strike Defendants' Reply.
FACTUAL BACKGROUND
Sometime before 1995, Defendant Sidney Stubbs Davis ("Davis") founded Collections by Stubbs, Inc., a company involved in the business of designing, manufacturing, distributing, and selling clothing and related goods. In April 1995 Collections by Stubbs, Inc., changed its name to Stubbs Collections, Inc. ("SCI"), the plaintiff in this cause of action. Davis was the president of SCI and served on its board of directors until his resignation in October of 1997, and he is a minority shareholder of the company. See Pl's First Amended Compl. at ¶¶ 8-9.
The record does not indicate Collections by Stubbs, Inc.'s founding date.
SCI claims that since early 1992 it has continuously used the Stubbs name in advertising its goods and the Stubbs trademark on its goods. See Pl's First Amended Compl. at ¶ 10. On February 22, 1995, an application for registration of the Stubbs trademark at issue in this cause of action was filed in the United States Patent and Trademark Office by Collections by Stubbs, Inc. See Exh. A, Pl's First Amended Compl. On April 20, 1995, Collections by Stubbs, Inc. changed its name to SCI. See Exh. 1, Pl's Response to Def's Amended Mot.
SCI alleges that soon after Davis resigned from SCI in October 1997, he and co-defendant Stubbs Davis Company began using the Stubbs name and mark to sell and advertise clothing and related goods in a manner which is confusingly similar to SCI's use of the Stubbs name and mark. See Pl's First Amended Compl. at ¶¶ 17-19.
Plaintiff filed this lawsuit for trademark infringement, false representation, false designation of origin, and dilution under the Lanham Act; dilution under Texas statutory law; and common law trademark and trade name infringement, unfair competition, and misappropriation. In response to Plaintiff's claims, Defendants move for summary judgment on the grounds that Plaintiff does not have standing to bring this lawsuit. Alternatively, Defendants move to dismiss under Rule 12(b)(6) of the Federal Rules of Civil Procedure. The Court will address each of Defendants' arguments in turn.
DISCUSSION
I. Defendants' Motion for Summary Judgment
Defendants attached evidence to their Amended Motion to Dismiss and Plaintiff included an affidavit and exhibits in its Response to Defendants' Amended Motion to Dismiss. This evidence constitutes material outside the pleadings submitted for the Court's consideration. When matters outside the pleadings are presented to and not excluded by the Court, the Court must convert a motion to dismiss into a motion for summary judgment.See Fed.R.Civ.P. 12(b); Burns v. Harris County Bail Bond Bd., 139 F.3d 513, 517 (5th Cir. 1998). Therefore, the Court evaluates Defendants' pleading as a motion for summary judgment under the standards of Rule 56 of the Federal Rules of Civil Procedure.
A. Summary Judgment Standard
In general, summary judgment is proper when the pleadings, depositions, answers to interrogatories, and admissions on file, together with affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. See Fed.R.Civ.P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 323-25 (1986). The moving party must identify the evidence on file in the case which establishes the absence of any genuine issue of material fact.See Celotex, 477 U.S. at 323. Once the moving party has made an initial showing, the party opposing the motion must offer evidence sufficient to demonstrate the existence of the required elements of the party's case. See Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986).
B. Plaintiff's Standing to Sue: Federal Trademark Infringement Claim
Defendants move for summary judgment on the grounds that Plaintiff lacks proper standing to bring this cause of action before the Court. Specifically, Defendants claim that Davis, not Plaintiff, is the owner of the Stubbs mark in dispute and that Plaintiff has failed to document a "trail of ownership" from Defendant Davis to Plaintiff SCI.
Count I of Plaintiff's First Amended Complaint alleges that Defendants infringed upon SCI's trademark in violation of Section 32 of the Lanham Act, 15 U.S.C. § 1114. The statute's language makes trademark registration, not ownership, the crucial factor in identifying a person with standing to sue under this section.See 15 U.S.C.A. § 1114(1) (West 1999) (stating that any person infringing upon a trademark "shall be liable in a civil action by the registrant for the remedies hereinafter provided" (emphasis added)); see also Finance Inv. Co. v. Geberit AG, 165 F.3d 526, 531 (7th Cir. 1998) ("only the trademark's registrant (or her assignee) may sue under [§ 1114(1)]").
While Defendants repeatedly point to the fact that the Patent and Trademark Office originally registered the mark on December 26, 1995, to Collections by Stubbs, Inc., it is clear that SCI presently is the registrant of the mark. First, Collections by Stubbs, Inc. changed its name to SCI a mere two months after the application for registration of the mark was filed. A change of corporate name "is not a change of the identity of a corporation and has no effect on the corporation's property, rights, or liabilities." Alley v. Miramon, 614 F.2d 1372, 1384 (5th Cir. 1980). Therefore, SCI is the rightful holder of the Stubbs mark registration because the corporation's name change did not divest the company of its status as the mark's registrant.
Further proof that the Stubbs mark is registered to SCI comes in the form of the Patent and Trademark Office's Notice of Recordation of Assignment Document, recorded April 3, 1996. This document gives notice that the trademarks registered to Collections by Stubbs, Inc. are now registered to Stubbs Collections, Inc. The Certificate of Amendment issued by the Texas Secretary of State shows that the transaction underlying the recordation (the corporate name change) is valid. See Exh. 1, Pl's Response. Because the Court finds that the Stubbs mark is undisputedly registered to SCI, Plaintiff SCI as the registrant has proper standing to bring a claim of federal trademark infringement in Count I of its complaint. Therefore, summary judgement on these grounds is inappropriate.
C. Plaintiff's Standing to Sue: Other Federal and State Claims
Defendants assert that Plaintiff lacks standing to sue with regard to Count II (federal false representation and false designation of origin), Count V (Texas common law unfair competition), Counts III and VI (federal and Texas dilution, respectively), and Count VII (common law misappropriation) of Plaintiff's First Amended Complaint because Davis, not Plaintiff, is the owner of the Stubbs mark in dispute and because Plaintiff has not documented a "trail of ownership" from Davis to Plaintiff SCI. Defendants assert that Plaintiff's claimed ownership of the trademark's registration is inadequate to establish Plaintiff's ownership of the trademark. Def's Amended Mot, at 5.
The "point" used in Defendants' motion to support this argument states, "[T]he Plaintiff is Stubbs Collections, Inc., and the trademark upon which Plaintiff relies is registered in Collections by Stubbs, Inc." Id. at 4. Plaintiff responded by presenting evidence to show a link between SCI and Collections by Stubbs, Inc. in the mark's registration. See Exh. 1, Pl's Response to Def's Amended Mot. Defendants countered in their reply by asserting for the first time that Davis has priority of use of the Stubbs name and marks, that Davis permitted SCI to use the Stubbs name and marks, and that "Plaintiff has failed to show a 'trail of ownership' from Defendant Sidney Stubbs Davis, the original owner of the Stubbs Name and Marks, to itself." Def's Repl. at 4.
Based upon the foregoing sequence of arguments, the Court finds that Defendants' motion for summary judgment is premature. With regard to this issue of priority, which the Defendant did not raise until its Reply brief, Plaintiff has had no opportunity either to present evidence to the Court or to brief the Court on Plaintiff's legal arguments. Accordingly, the Court GRANTS Plaintiff's Motion to Strike Defendants' Reply. Furthermore, Plaintiff has had no opportunity to conduct any meaningful discovery that might lead to admissible evidence on this issue. Plaintiff made a sufficient showing of its registration and ownership of the Stubbs mark to render summary judgment on these grounds at this early stage of the case improper and unwarranted. Therefore, Defendants' Motion for Summary Judgment is DENIED.
II. Defendant's Rule 12(b)(6) Motion to Dismiss
A. Standard for Dismissal under Rule 12(b)(6)
The law regards a dismissal for failure to state a claim under Rule 12(b)(6) with disfavor, and a dismissal is justified only if it appears beyond doubt that the plaintiff can prove no set of facts in support of its claim that would entitle it to relief.See In re United States Abatement Corp., 39 F.3d 556, 559 (5th Cir. 1994). In evaluating the propriety of a dismissal, the Court accepts the plaintiff's well-pleaded facts as true. See Norman v. Apache Corp., 19 F.3d 1017, 1021 (5th Cir. 1994).
B. Specificity Requirements of Rule 9
Defendants contend that Plaintiff's allegations of confusion resulting from Defendants' use of the Stubbs name and mark amount to claims of fraud or mistake subject to the heightened pleading requirements of Rule 9(b). See Fed.R.Civ.P. 9(b) ("the circumstances constituting fraud or mistake shall be stated with particularity"). A false statement or misrepresentation forms the basis of a fraud claim, but scienter — the intent to deceive — is also among the required elements of a claim of fraud. See, e.g., Meineke Discount Muffler v. Jaynes, 999 F.2d 120, 126 (5th Cir. 1993) ("To succeed on a claim of fraudulent [trademark] registration, the challenging party must prove by clear and convincing evidence that the applicant made false statements with the intent to deceive the licensing authorities"); Cyrak v. Lemon, 919 F.2d 320, 325 (5th Cir. 1990) (elements of a fraud claim include: 1) a misstatement or omission; 2) of material fact; 3) made with the intent to defraud; 4) on which the plaintiff relied; and 5) which proximately caused the plaintiff's injury). Pleading fraud with particularity in the Fifth Circuit requires "time, place and contents of the false representations, as well as the identity of the person making the misrepresentation and what [that person] obtained thereby."Tuchman v. DSC Communications Corp., 14 F.3d 1061, 1068 (5th Cir. 1994). If Plaintiff's causes of action satisfy the elements of a claim of fraud, Rule 9(b) will require Plaintiff to plead its claims with specificity.
1. Plaintiff's Lanham Act Claims
Count I of Plaintiff's First Amended Complaint alleges that Defendants infringed SCI's trademark in violation of Section 32 of the Lanham Act, 15 U.S.C. § 1114. This section provides a cause of action for infringement of a registered mark where a person uses (1) any reproduction, counterfeit, copy or colorable imitation of a mark; (2) without the registrant's consent; (3) in commerce; (4) in connection with the sale, offering for sale, distribution or advertising of any goods; (5) where such use is likely to cause confusion or to cause mistake or to deceive. See Boston Pro Hockey Ass'n v. Dallas Cap and Emblem Mfg., Inc., 510 F.2d 1004 (5th Cir. 1975).
A claim of fraud requires not only the making of a false statement but also the intent to defraud the victim. See Meineke, 999 F.2d at 126. However, likelihood of confusion — the test for infringement under 15 U.S.C. § 1114 — does not consider the actor's intent in determining whether infringement has occurred. The fact that a party did not intend to defraud is not a defense to a trademark infringement violation because intent is not an element of the claim. See Fuji Photo Film Co., Inc., v. Shinohara Shoji Kabushiki Kaisha, 754 F.2d 591, 596-97 (5th Cir. 1985). Therefore, a claim of infringement under 15 U.S.C. § 1114 does not constitute a claim subject to the heightened pleading requirements of Rule 9(b).
The language of 15 U.S.C. § 1114 clearly states that a violation of the statute occurs if a person's actions are likely to cause the public to be confused, mistaken, or deceived, regardless of whether the actions were intended or meant to produce such a result. "Any person who shall, without the consent of the registrant — (a) use in commerce any reproduction, counterfeit, copy, or colorable imitation of a registered mark in connection with the sale, offering for sale, distribution, or advertising of any goods or services on or in connection with which such use is likely to cause confusion, or to cause mistake, or to deceive . . . shall be liable in a civil action by the registrant for the remedies hereinafter provided." 15 U.S.C.A. § 1114(1) (West 1997) (emphasis added).
Similarly, the Lanham Act does not require a showing of fraudulent intent to establish a violation of 15 U.S.C. § 1125(a). This statute proscribes not only use of a false designation of origin but also use of any false or misleading description or representation of fact tending to misrepresent goods, services, or commercial activities in commerce. See 15 U.S.C.A. § 1125(a) (West 1999). A violation exists where the trademarks used by the plaintiff are so associated with its goods that the use of the same or similar marks by another company constitutes a representation that its goods come from the same source. See Boston Pro Hockey Ass'n, 510 F.2d at 1010. Again, the statute does not require intent to deceive as a necessary element of a Section 1125(a) violation. Therefore, Plaintiff's federal Lanham Act claims do not allege claims of fraud and are not subject to Rule 9(b)'s particularity in pleading requirements.
Some courts have held, however, that the "fraud-like" nature of Section 1125(a) false advertising claims should require a plaintiff to specify the nature and content of any alleged misrepresentations attributed to the defendant. See, e.g., In re Century 21-RE/MAX Real Estate Adver. Claims Litig., 882 F. Supp. 915, 927 (C.D. Cal. 1994); Barr Labs., Inc. v. Quantum Pharmics, Inc., 827 F. Supp. 111, 117-18 (E.D.N.Y. 1993); Max Daetwyler Corp. v. Input Graphics, Inc., 608 F. Supp. 1549, 1556 (E.D. Penn. 1985). Other courts have held Section 1125(a) claims to the standard of Rule 8(a). which requires a "short and plain statement of the claim showing that the pleader is entitled to relief." See Fed.R.Civ.P. 8(a); Syncor Int'l Corp. v. Newbaker, 12 F. Supp.2d 781, 783-84 (W.D. Tenn. 1998); John P. Villano Inc. v. CBS, Inc., 176 F.R.D. 130, 131 (S.D.N.Y. 1997);Brandt Consol., Inc. v. Agrimar Corp., 801 F. Supp. 164, 170 (C.D. Ill. 1992).
The Supreme Court has said that plaintiffs may take Rule 8(a) at face value:
Federal Rules of Civil Procedure do not require a claimant to set out in detail the facts upon which he bases his claim. To the contrary, all the Rules require is "a short and plain statement of the claim' that will give the defendant fair notice of what the plaintiff's claim is and the grounds upon which it rests.Leatherman v. Tarrant County Narcotics Intelligence and Coordination Unit, 507 U.S. 163, 168 (1993) (quoting Conley v. Gibson, 355 U.S. 41, 47 (1957)). Furthermore, Rule 9(b) requires particularity in pleading only for those actions specifically enumerated by the rule — fraud or mistake. See id.
Because Plaintiff's Lanham Act claims are not claims of fraud or mistake, they do not fall within the category of actions required by 9(b) to be stated with particularity. Plaintiff's federal claims are subject only to the notice requirements of Rule 8(a)(2), which means what it says — a "short and plain statement" is all that Plaintiff must provide.
2. Plaintiff's Common Law Claims
Plaintiff's First Amended Complaint also states claims of common law trademark and trade name infringement, unfair competition, and misappropriation. Common-law trademark ownership is established by use, not by registration. See Union Nat'l Bank of Texas, Larado, Texas v. Union Nat'l Bank of Texas, Austin, Texas, 909 F.2d 839, 842 (5th Cir. 1990). Otherwise, "a common law trademark infringement action under Texas law presents no difference in issues than those under federal trademark infringement actions." Zapata Corp. v. Zapata Trading Int'l, Inc., 841 S.W.2d 45, 47 (Tex.App. .— Houston [14th Dist.] 1992, no writ) (citing Waples-Platter Co. v. General Foods Corp., 439 F. Supp. 551, 583 (N.D. Tex. 1977)). Thus, the touchstone for any action of trademark infringement is likelihood of confusion. See Marathon Mfg. Co. v. Enerlite Prod. Co., 767 F.2d 214, 217 (5th Cir. 1985). Because the likelihood of confusion standard's lack of scienter does not fulfill the requirements of a fraud claim, Plaintiff's common law trademark and trade name infringement claims are not subject to Rule 9(b).
Plaintiff's common law unfair competition and misappropriation claims also do not fall within the scope of Rule 9(b). Courts in this circuit apply the "notice pleading" requirements of Rule 8 (a) to unfair competition claims. See Seatrax, Inc. v. Sonbeck Int'l, Inc., 200 F.3d 358, 367 (5th Cir. 2000). Because misappropriation causes of action "fall under the penumbra of unfair competition under Texas law," id. at 368, Rule 8(a) is also appropriately applied to Plaintiff's misappropriation claim. In short, plaintiff's common law claims as well as federal Lanham Act claims fall outside the scope of Rule 9(b).
Alternatively, Defendants baldly assert without elaboration that Plaintiff has not stated a claim complying with the notice requirements of Rule 8(a). Defendants are clearly wrong. All claims asserted by Plaintiff are claims for which the law provides remedies. Furthermore, Plaintiff has provided for each claim a "short and plain" statement of Defendants' alleged acts to support its claim for relief Therefore, dismissal for noncompliance with Rules 9(b) and 8(a) is clearly unwarranted.
C. Davis's Right to Use His Own Name
Defendants next claimed grounds for dismissal under Rule 12(b)(6) are that Plaintiff has failed to state a claim upon which relief may be granted with regard to the Stubbs name because Sidney Stubbs Davis has an absolute right to use his name. See Def's Amended Mot. at 4. Without citation to any authority, Defendants claim that Davis may use the Stubbs name regardless of any rights that Plaintiffs may have simply because "Stubbs" is a part of his name.
"A man has no absolute right to use his own name, even honestly, as the name of his merchandise or his business." John R. Thompson Co. v. Holloway, 366 F.2d 108, 113 (5th Cir. 1966). A name used in connection with merchandise or business becomes a trademark subject to trade regulation designed to prevent confusion of the public. See id.; see also E. J. Gallo Winery v. Gallo Cattle Co., 967 F.2d 1280, 1288-89 (9th Cir. 1992) (a court may enjoin an individual from using his or her own name in the interest of avoiding public confusion). Plaintiff correctly recognizes that the issue is not whether Davis has a right to use his name, but whether his use of that name creates a likelihood of confusion with SCI's use.
Plaintiff has pled all the required elements to establish a likelihood of confusion between Defendants' and Plaintiff's use of the name "Stubbs." See Armco, Inc. v. Armco Burglar Alarm, Inc., 693 F.2d 1155, 1159 (5th Cir. 1982) (listing factors relevant to a determination of likelihood of confusion). Therefore, Plaintiff has stated a cognizable claim for which relief may be granted, and dismissal on these grounds would be inappropriate.
D. Time and Place, Rule 9(f)
Defendants assert that they are entitled to specific allegations under Rule 9(f). Presumably, this assertion means that Defendants believe Plaintiff's complaint should state specifically the time and place of the alleged infringement. Rule 9(f) merely makes averment s of time and place material for the purpose of testing the sufficiency of the complaint. See Fed.R.Civ.P. 9(f). Nowhere in the text of Rule 9(f) does the rule require specificity in pleading time and place. Therefore, Plaintiff should not be compelled to plead specific allegations of time and place under Rule 9(f), and Defendants have no grounds to demand such allegations.
E. Special Damages, Rule 9(g)
Defendants also assert that they are entitled to specific allegations of special damages under Rule 9(g). Rule 9(g) states, "[w]hen items of special damage are claimed, they shall be specifically stated." Fed.R.Civ.P. 9(g). The purpose of the rule, in part, is to avoid unfair surprise on the part of defendants by informing them as to the nature of the damages claimed. See Great Am. Indem. Co. v. Brown, 307 F.2d 306, 308 (5th Cir. 1962).
Plaintiff's First Amended Complaint requests actual damages, punitive damages, interest, court costs, and "such other relief to which Plaintiff may be justly entitled." Pl's First Amended Compl. at 11. Although attorney's fees are items of special damage which must be specifically pleaded under Rule 9(g), see United Indus., Inc. v. Simon-Hartley, Ltd., 91 F.3d 762, 764-65 (5th Cir. 1996), Plaintiff does not do so in its First Amended Complaint. However, this failure to plead attorney's fees does not warrant dismissal under Rule 12(b)(6). Rather, it merely serves to waive a claim by the Plaintiff for attorney's fees unless Plaintiff takes further action to inform Defendants of its desire to seek such special damages in a timely manner.
CONCLUSION
For the reasons stated herein, the Court hereby DENIES Defendants Sidney Stubbs Davis and Stubbs Davis Company's Motion for Summary Judgment and Motion to Dismiss.
So ORDERED, this 14 day of April, 2000.