Poly-America, LP v. STEGO INDUSTRIES, LLC

• Citation: 694 F. Supp.2d 600
• Decision Date: 08 March 2010
• Docket Number: Civil Action No. 3:08-CV-2224-G ECF.
• Parties: POLY-AMERICA, L.P., Plaintiff, v. STEGO INDUSTRIES, L.L.C., Defendant.
• Court: United States District Courts. 5th Circuit. United States District Courts. 5th Circuit. Northern District of Texas

694 F. Supp.2d 600

POLY-AMERICA, L.P., Plaintiff, v. STEGO INDUSTRIES, L.L.C., Defendant.

Civil Action No. 3:08-CV-2224-G ECF.

United States District Court, N.D. Texas, Dallas Division.

March 8, 2010.

Erica W. Harris, Terrell W. Oxford, Susman & Godfrey, LLP, Houston, TX, Janet R. Randle, Law Offices of Van Shaw, Dallas, TX, for Plaintiff.

Thomas N. Tarnay, Sidley, Austin, Brown & Wood, Dallas, TX, Pamela K. Jacobson, Robert J. Carlson, Christensen, O'Connor, Johnson, Kindness, PLLC, Seattle, WA, for Defendant.

MEMORANDUM OPINION AND ORDER

A. JOE FISH, Senior District Judge.

Before the court is the motion of the defendant Stego Industries, L.L.C. ("Stego") to dismiss the complaint of the plaintiff Poly-America, L.P. ("Poly-America") for lack of subject matter jurisdiction (docket entry 7). For the reasons discussed below, the motion is denied.

I. BACKGROUND

A. Factual Background

Poly-America is a limited partnership organized under the laws of the State of Texas that seeks to manufacture, market, and sell yellow polyethylene sheeting for use in the construction industry as a vapor barrier or vapor retarder. Complaint at 1-2. Stego—a limited liability company organized under the laws of the State of Washington with its principal place of business in San Clemente, California—researches, designs, develops, produces, and distributes high-performance geo-membrane materials used in various construction related applications. Id.; Motion to Dismiss Complaint for Lack of Subject Matter Jurisdiction ("Motion") at 1-2. Stego possesses a federally registered trademark for the color yellow as applied to "`plastic sheeting used in the construction industry as a vapor barrier and as a vapor retarder.'" Complaint at 2 (quoting U.S. Reg. No. 2,790,352). Poly-America believes that it may lawfully manufacture and sell a yellow vapor-barrier product of its own without seeking a license from Stego. Complaint at 2. Poly-America also has taken definite, concrete steps in manufacturing and marketing its yellow vapor-barrier product. Id.

This is the second declaratory judgment action filed by Poly-America against Stego relating to the yellow vapor-barrier product. The chain of events that triggered the filing of the first action began near the end of 2006, when Stego learned that Poly-America might begin selling a yellow vapor-barrier product that would compete with Stego's trademarked product. Declaration of Paul Blasdel in Support of Defendant Stego Industries, L.L.C.'s Motion to Dismiss ("Blasdel Declaration") at 2, attached to Motion at A-2. On January 3, 2007, Lee E. Johnson, an attorney for Stego, sent a letter to Poly-America that stated in part:

It has recently come to our attention from industry sources that Poly America is considering selling a product that will compete with our client's plastic sheeting. It is our client's intention to vigorously enforce its trademark rights embodied in the trademark registration and its long time use. We therefore request in advance that you avoid any use of the color yellow with your products that would lead to a likelihood of confusion with our client's registered trademark.

Letter of January 3, 2007, attached to Motion at A-7. Less than two weeks later, Poly-America filed a complaint for a declaratory judgment against Stego in this court (case number 3:07-CV-0092-G). See Declaration of Robert J. Carlson in Support of Defendant Stego Industries, L.L.C.'s Motion to Dismiss ("Carlson Declaration"), Exhibit A, attached to Motion at B-4 to B-11. In a memorandum opinion and order dated November 19, 2008, the court dismissed Poly-America's complaint for lack of subject matter jurisdiction. See Carlson Declaration, Exhibit D, attached to Motion at B-37 to B-45. The court held that there was no actual controversy between the parties, as required by Article III of the Constitution and the Declaratory Judgment Act, see 28 U.S.C. § 2201(a), because Poly-America had not expressly claimed prior to filing suit that it had a right to produce its yellow vapor-barrier product without licensing Stego's trademark. Id. at B-44 to B-45.

In December 2008, Terry Mallory, Poly-America's senior sales manager, had a conversation with Paul Blasdel, a member of Stego, in which Mallory stated that "Poly-America believed it had a right to produce and sell yellow plastic sheeting as vapor barrier without a license and that Poly-America intended to begin selling the yellow vapor barrier that it had been holding for nearly two years." Affidavit of Terry Mallory of April 17, 2009 ("Mallory Affidavit") at 1-2, attached to Plaintiff's Response to Defendant's Motion to Dismiss ("Response"). The parties dispute the precise content of Blasdel's response. According to Mallory, Blasdel "responded that if Poly-America did so, Stego would sue Poly-America for willful infringement of Stego's trademark." Mallory Affidavit at 2. According to Blasdel, Mallory asked him "whether Stego would sue Poly-America if Poly-America began selling a yellow vapor barrier product," and Blasdel "responded by stating that if the product infringed upon Stego's trademark rights, then Stego would enforce these rights against Poly-America." Supplemental Declaration of Paul Blasdel in Support of Defendant Stego Industries, L.L.C.'s Motion to Dismiss at 1, attached to Defendant Stego Industries, L.L.C.'s Reply in Support of Its Motion to Dismiss ("Reply") at A-1.

On December 17, 2008, Poly-America filed this action for a declaratory judgment. Poly-America seeks a judicial declaration that: (1) Poly-America has not infringed and will not infringe Stego's trademark; (2) Stego's trademark is not registrable; (3) Stego has no trade-dress protection in the color yellow as applied to plastic vapor-barrier sheeting in the construction; and (4) Stego is liable for unfair competition for making false or fraudulent declarations or representations in obtaining its trademark. Complaint at 4-7. On March 30, 2009, Stego moved to dismiss Poly-America's complaint for lack of subject matter jurisdiction pursuant to Rule 12(b)(1) of the Federal Rules of Civil Procedure on the ground that "no justiciable case or controversy existed between the parties at the time Poly-America initiated this action." Motion at 1.

B. Procedural Background

1. Rule 12(b)(1) Standard

Rule 12 (b)(1) authorizes the dismissal of a case for lack of jurisdiction over the subject matter. FED. R. CIV. P. 12(b)(1). A motion to dismiss for lack of subject-matter jurisdiction pursuant to Rule 12(b)(1) must be considered before any other challenge because "the court must find jurisdiction before determining the validity of a claim." Moran v. Kingdom of Saudi Arabia, 27 F.3d 169, 172 (5th Cir.1994) (citation and internal quotation marks omitted); see also Ruhrgas AG v. Marathon Oil Company, 526 U.S. 574, 577, 119 S.Ct. 1563, 143 L.Ed.2d 760 (1999) ("The requirement that jurisdiction be established as a threshold matter . . . is inflexible and without exception.") (citation and internal quotation marks omitted). On a Rule 12(b)(1) motion, which "concerns the court's `very power to hear the case . . . , the trial court is free to weigh the evidence and satisfy itself as to the existence of its power to hear the case.'" MDPhysicians & Associates, Inc. v. State Board of Insurance, 957 F.2d 178, 181 (5th Cir.) (quoting Williamson v. Tucker, 645 F.2d 404, 413 (5th Cir.), cert. denied, 454 U.S. 897, 102 S.Ct. 396, 70 L.Ed.2d 212 (1981)), cert. denied, 506 U.S. 861, 113 S.Ct. 179, 121 L.Ed.2d 125 (1992).

In ruling on a motion to dismiss under Rule 12(b)(1), the court may rely on: "1) the complaint alone; 2) the complaint supplemented by undisputed facts; or 3) the complaint supplemented by undisputed facts and the court's resolution of disputed facts." MCG, Inc. v. Great Western Energy Corporation, 896 F.2d 170, 176 (5th Cir.1990) (citing Williamson, 645 F.2d at 413). Once a challenge to subject-matter jurisdiction is raised under Rule 12(b)(1), the burden falls upon the party seeking to invoke the court's jurisdiction to prove that jurisdiction is proper. Stockman v. Federal Election Commission, 138 F.3d 144, 151 (5th Cir.1998). "It is incumbent on all federal courts to dismiss an action whenever it appears that subject matter jurisdiction is lacking. This is the first principle of federal jurisdiction." Id. (citation and internal quotation marks omitted).

2. The Declaratory Judgment Act

The Declaratory Judgment Act allows federal courts the opportunity to "declare the rights and other legal relations of any interested party seeking such declaration . . . ." 28 U.S.C. § 2201(a). A declaratory judgment is often sought before a completed injury-in-fact has occurred, United Transportation Union v. Foster, 205 F.3d 851, 857 (5th Cir.2000), and "declaratory actions contemplate an `ex ante determination of rights,'" Rhode Island v. Narragansett Indian Tribe, 19 F.3d 685, 692 (1st Cir.) (quoting Step-Saver Data Systems, Inc. v. Wyse Technology, 912 F.2d 643, 647 (3d Cir.1990)), cert. denied, 513 U.S. 919, 115 S.Ct. 298, 130 L.Ed.2d 211 (1994). However, the Declaratory Judgment Act does not extend the subject matter jurisdiction of the court beyond the limits delineated in Article III of the United States Constitution. Skelly Oil Company v. Phillips Petroleum Company, 339 U.S. 667, 671, 70 S.Ct. 876, 94 L.Ed. 1194 (1950); see also Okpalobi v. Foster, 244 F.3d 405, 434 (5th Cir.2001) (en banc) ("The Declaratory Judgment Act does not itself grant federal jurisdiction."). Declaratory judgments "still must be limited to the resolution of an `actual controversy.'" United Transportation, 205 F.3d at 857 (citing Aetna Life Insurance Company v. Haworth, 300 U.S. 227, 239-40, 57 S.Ct. 461, 81 L.Ed. 617 (1937)); see also Standard Fire Insurance Company v. Sassin, 894 F.Supp. 1023, 1026 (N.D.Tex.1995) (Sanders, J.) ("The Declaratory Judgment Act does not exempt federal district courts from the...