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Food Sciences Corp. v. Nagler

October 20, 2010

FOOD SCIENCES CORPORATION D/B/A ROBARD CORPORATION, PLAINTIFF,
v.
WILLIAM M. NAGLER, DEFENDANT.



The opinion of the court was delivered by: Simandle, District Judge

OPINION

I. INTRODUCTION

This matter is before the Court on Plaintiff's motion to file an amended complaint in response to this Court's earlier dismissal of the Complaint for failure to state a claim [Docket Item 43]. The principal issue is whether the proposed amended complaint is futile, which turns on whether a reasonable fact-finder could conclude that the way Defendant's website displays and sells NUTRIMED products is likely to confuse consumers about Defendant's affiliation with Plaintiff, given that Defendant was at one time an authorized distributor of NUTRIMED products.

II. BACKGROUND

Food Sciences Corporation, doing business as Robard Corporation, brings this lawsuit against Dr. William M. Nagler based on Dr. Nagler's practice of selling NUTRIMED dietary food supplements through his website without Robard's authorization. Robard alleges that Dr. Nagler was formerly an authorized distributor of its NUTRIMED products, but that this relationship was terminated in part because of Dr. Nagler's insistence on selling NUTRIMED products over the internet, which Robard does not permit. (Am. Compl. ¶¶ 23-25.) Robard contends that Dr. Nagler's post-termination online sale of NUTRIMED products as "Dr. Nagler's Diet Foods" creates consumer confusion over whether Dr. Nagler is still an authorized distributor of the products. (Id. ¶ 28.) At some point after February 9, 2009, Dr. Nagler added a disclaimer telling customers that he is not sponsored by or affiliated with Robard. (Am. Compl. ¶ 29.) Robard contends that both the pre- and post-disclaimer version of the website caused sponsorship confusion, giving Robard causes of action under 15 U.S.C. § 1114(1) (trademark infringement), § 1125(a) (false designation of origin), and unfair competition under New Jersey law.

This Court's March 22, 2010 Opinion dismissed the Complaint as originally pleaded because it only alleged that Dr. Nagler identified and sold genuine NUTRIMED products by name on Dr. Nagler's website, which without more does not state a claim for sponsorship confusion.*fn1 [Docket Item 41 at 22-24.] The Court permitted Robard to propose an amended complaint that would add the allegations necessary to state a claim for sponsorship confusion.

The amendments proposed by the present motion add allegations regarding the nature of Robard's distribution system and Dr. Nagler's former participation in it, as well as allegations regarding Dr. Nagler's website and how it causes sponsorship confusion. As explained below, the Court will permit Robard to amend the Complaint, but will reject as futile those claims related to the post-disclaimer website.

III. DISCUSSION

A. Standard of Review

1. Motion to Amend

Rule 15(a)(2) provides that leave to amend should be freely given when justice so requires. Fed. R. Civ. P. The decision to permit amendment is discretionary. Toll Bros., Inc. v. Township of Readington, 555 F.3d 131, 144 n. 10 (3d Cir. 2009). Among the legitimate reasons to deny a motion to amend is the futility of the proposed amendments. Lorenz v. CSX Corp., 1 F.3d 1406, 1414 (3d Cir. 1993) (citation omitted). Futility is determined by the standard of legal sufficiency set forth in Rule 12(b)(6), Fed. R. Civ. P. In re Burlington Coat Factory Litigation, 114 F.3d 1410, 1434 (3d Cir. 1997). Accordingly, an amendment is futile where the complaint, as amended, would fail to state a claim upon which relief could be granted. Id.

Dr. Nagler maintains that the proposed amended complaint is futile, because it still does not contain sufficient factual allegations to state a plausible claim of sponsorship confusion. See Bell Atl. Corp. v. Twombly, 550 U.S. 544, 556-57 (2007) (explaining need for plausible grounds to support ultimate conclusions). In assessing whether the Complaint is futile, the Court will "accept all factual allegations as true and construe the complaint in the light most favorable to the plaintiff." Phillips v. County of Allegheny, 515 F.3d 224, 231 (3d Cir. 2008) (quoting Pinker v. Roche Holdings Ltd., 292 F.3d 361, 374 n.7 (3d Cir. 2002)).

2. Likelihood of Confusion and Futility

The parties agree that Robard's claims for trademark infringement, false designation of origin and unfair competition are measured by identical standards. See A & H Sportswear, Inc. v. Victoria's Secret Stores, Inc., 237 F.3d 198, 210 (3d Cir. 2000). The Lanham Act provides that any person who in commerce makes any representation that "is likely to cause confusion, or to cause mistake, or to deceive as to the affiliation, connection, or association of such person with another person, or as to the origin, sponsorship, or approval of his or her goods, services, or commercial activities by another person" shall be liable to any person damaged by such action. 15 U.S.C. § 1125(a)(1)(A). The touchstone of any trademark claim, including a sponsorship confusion claim, is whether there is a likelihood of confusion.

Robard argues that likelihood of confusion cannot ever be the subject of a motion to dismiss under Rule 12(b)(6) (or opposition to a motion to amend, as in this case) because the analysis is fact-laden. But Robard's position is an overstatement of the true principle, which is that such fact-laden issues will rarely be appropriate for adjudication on a motion to dismiss. See Merck & Co., Inc. v. Mediplan Health Consulting, Inc., 425 F. Supp. 2d 402, 412 (S.D.N.Y. 2006) ("The likelihood of confusion test is a fact-intensive analysis that ordinarily does not lend itself to a motion to dismiss."). When there are disputed facts, the Court cannot resolve the dispute on a motion to dismiss. And the Court does not inquire into the strength of Robard's evidence at this stage. But a trademark claim, like any claim, is subject to dismissal when even the factual allegations do not amount to a violation of Robard's legal interests. It is not sufficient, as Robard suggests, to merely identify a cause of action that might relate to the subject matter of the complaint; a complaint's factual allegations must present a plausible basis for relief under that cause of action. See Ashcroft v. Iqbal, 129 S.Ct. 1937, 1951 (2009).

Whether a particular action taken by an unauthorized reseller in a particular context is likely to cause sponsorship confusion is a question of fact. However, identifying a claim as turning on an issue of fact does not necessarily protect it from dismissal on a Rule 12(b)(6) motion. This is because when an element of a claim involves some abstract fact, including those dealing with mental states such as questions of intent or likelihood of confusion, the factual conclusion cannot simply be asserted in the complaint, but must be sufficiently grounded in more concrete factual allegations. See Ashcroft v. Iqbal, 129 S.Ct. 1937, 1951 (2009) (discussing the conclusory nature of allegations regarding general mental states). And if the conclusion is not a reasonable inference from the alleged facts, it may be disregarded. Id.; see GFL Advantage Fund, Ltd. v. ...


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