Aviva Sports, Inc. v. Fingerhut Direct Mktg. Inc.
| Decision Date | 23 September 2011 |
| Docket Number | Civil No. 09-1091 (JNE/JSM) |
| Parties | Aviva Sports, Inc., Plaintiff, v. Fingerhut Direct Marketing, Inc., Menard, Inc., Kmart Corporation, Wal-Mart Stores, Inc., and Manley Toys, Ltd., Defendants. |
| Court | U.S. District Court — District of Minnesota |
Plaintiff Aviva Sports, Inc. (Aviva) brought this action against Defendants Fingerhut Direct Marketing, Inc. (Fingerhut), Menard, Inc. (Menard), Kmart Corporation (Kmart), Wal-Mart Stores, Inc. (Wal-Mart), and Manley Toys, Ltd. (Manley), alleging patent infringement and false advertising in violation of the Federal Lanham Act, 15 U.S.C. § 1125(a) (2006), and the Minnesota Uniform Deceptive Trade Practices Act (UDTPA), Minn. Stat. § 325D.44 (2010). In an Order dated June 27, 2011, this Court granted Wal-Mart's Motion for Partial Summary Judgment as to the Lanham Act claim (Count III of the Amended Complaint). There are currently several motions before the Court, some of which have not yet been fully briefed or argued. At this time, the Court only addresses Defendants Fingerhut, Menard, and Kmart's Motion for Summary Judgment as to Counts III and IV of the Amended Complaint, which allege violations of the Lanham Act and UDTPA. Defendants argue that Aviva lacks standing to bring claims under either statute. For the reasons stated below, the Court agrees and grants summary judgment to Defendants on Counts III and IV of the Amended Complaint.
Aviva manufactures and sells, among other things, inflatable waterslides and pools. Manley also manufactures and sells inflatable waterslides and pools. Aviva's and Manley's products are both available through retailers including Fingerhut, Menard, and Kmart. Aviva claims that Manley's advertisements violate the false advertising provisions of the Federal Lanham Act and Minnesota UDTPA. According to Aviva, Manley superimposed scaled-down images of children onto images of its products to make the products appear larger than they actually are.
The defendant retailers sell the Aviva and Manley products to ultimate consumers through in-store sales, catalogs, and the internet. A very small percentage of Aviva's sales are to consumers directly through its website. Those undisputed percentages are, from 2001 through 2010, (1) 3.71% of Aviva's total sales were retail; (2) 0.13% of Aviva's total sales were retail sales of products at issue in this case; and (3) 0.73% of Aviva's sales of products at issue in this case were retail.
Defendants Fingerhut, Menard, and Kmart are not wholesalers of the products at issue. They sell Manley's and Aviva's products in their stores and on their websites. Aviva allows the consuming public to purchase slides and pools from its website, but points to no evidence that it attempts to compete at the retail, as opposed to the wholesale, level. It has not tried to improve its retail sales or take retail business away from retailers such as Fingerhut, Menard, and Kmart. Aviva again cites to the deposition testimony of its Federal Rule of Civil Procedure 30(b)(6) witness, Garry Bowhall, in which he testified that Aviva competes with some retailers and has suffered injury in the form of "lost opportunities" for sales.
Summary judgment is proper "if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). To support an assertion that a fact cannot be or is genuinely disputed, a party must cite "to particular parts of materials in the record," show "that the materials cited do not establish the absence or presence of a genuine dispute," or show "that an adverse party cannot produce admissible evidence to support the fact." Fed. R. Civ. P. 56(c)(1)(A)-(B). "The court need consider only the cited materials, but it may consider other materials in the record." Fed. R. Civ. P. 56(c)(3). In determining whether summary judgment is appropriate, a court must look at the record and any inferences to be drawn from it in the light most favorable to the nonmovant. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986).
In Count III of its Amended Complaint, Aviva claims that Defendants violated the Lanham Act. Specifically, Aviva alleges that Defendants engaged in unfair competition by using advertisements and packaging that contain misleading representations and/or false descriptions of the products. Defendants assert that Aviva lacks standing to bring this claim.
This Court recently reviewed an identical claim by Aviva against Wal-Mart. In its June 27 Order, this Court thoroughly detailed the federal standing requirements under the Lanham Act. Again, but briefly this time: In federal court, standing involves both constitutional and prudential limitations. Bennett v. Spear, 520 U.S. 154, 162 (1997). To establish constitutional standing under Article III of the United States Constitution, plaintiffs must show (1) that they have suffered an injury in fact; (2) that the injury is fairly traceable to the defendant's conduct;and (3) that a favorable decision will redress the injury.2 Id. Prudential limits are concerned with the proper role of courts in a democratic society. Id. Generally, (1) litigants may not assert the rights of third parties; (2) courts should refrain from adjudicating matters of wide public significance which amount to generalized grievances; and (3) litigants must demonstrate that their asserted interests are arguably within the zone of interest intended to be protected by the statute, rule, or constitutional provision upon which the claim is based. Int'l Ass'n of Firefighters of Saint Louis v. City of Ferguson, 283 F.3d 969, 973-74 (8th Cir. 2002).
Section 43(a) of the Lanham Act provides that "any person who believes that he or she is or is likely to be damaged" may bring a civil action. 15 U.S.C. § 1125(a)(1). The Eighth Circuit Court of Appeals has stated that the prudential limitations on standing should apply to false advertising Lanham Act claims. Am. Ass'n. of Orthodontists v. Yellow Book USA, Inc., 434 F.3d 1100, 1103-04 (8th Cir. 2006). While the Eighth Circuit has not yet adopted a framework from which to determine standing, other circuits have articulated three approaches: (1) a categorical test, requiring that the plaintiff and the defendant be competitors; (2) a five-factor aggregate test, first recognized in Conte Bros. Automotive, Inc. v. Quaker State-Slick 50, Inc., 165 F.3d 221 (3d Cir. 1998); and (3) a reasonable interest test.
This Court concluded that Aviva lacked standing against Wal-Mart under all three tests. First, as a commercial wholesaler with evidence of only nominal direct consumer sales, no reasonable fact-finder could conclude that Aviva competes with Wal-Mart on the retail level. Rather, Wal-Mart is actually Aviva's customer. Thus, Aviva lacked standing under the categorical test.
Second, Aviva lacked standing under the five-factor test. This test considers: (1) the nature of the plaintiff's alleged injury—whether it is of a type that Congress sought to redress; (2) the directness or indirectness of the asserted injury; (3) the proximity or remoteness of the party to the alleged injurious conduct; (4) the speculativeness of the damages claim; and (5) the risk of duplicative damages or complexity in apportioning damages. Conte Bros., 165 F.3d at 233. The first factor weighed against prudential standing because Aviva alleged only injury to its commercial interest and not damage to its ability to compete, its reputation, or its good will. Congress sought to redress all these types of injuries. The second factor weighed against standing because Aviva's injuries were only indirectly related to Wal-Mart's alleged misconduct. The causal chain was too attenuated, because it was Manley's representations that caused the alleged injury—Wal-Mart merely passed the representations on to the ultimate consumer. The third factor weighed against standing because other retailers in competition with Wal-Mart would be more proximately injured by Wal-Mart's conduct. Those on the same level in the distribution chain would be more likely to vindicate the public interest. The fourth factor slightly supported Aviva's standing because its damages claim was not entirely speculative. Finally, the fifth factor weighed against Aviva because recognizing the right of every potentially injured party in the distribution chain to bring a claim would subject defendants to too great a risk of multiple liability and complex damages proceedings. It could also result in the flooding of federal courts with relatively insignificant cases.
Third, Aviva lacked standing under the reasonable interest test, under which a plaintiff has standing if he can demonstrate: (1) a reasonable interest to be protected against the alleged false advertising; and (2) a reasonable basis for believing that the interest is likely to be damaged by the alleged false advertising. Famous Horse Inc. v. 5th Ave. Photo Inc., 624 F.3d 106, 113(2d Cir. 2010). If the plaintiff and defendant are not direct competitors, the plaintiff must make a "more substantial showing" of "injury and causation" to satisfy the reasonable basis prong of the standing requirement. Ortho Pharm. Corp. v. Cosprophar, Inc., 32 F.3d 690, 694 (2d Cir. 1994). For the reasons already discussed, Aviva lacked standing against Wal-Mart under this test.
Aviva concedes that the Court's previous analysis of standing under the Lanham Act with respect to Wal-Mart also applies to these three retail Defendants. Because there is no genuine dispute as to any material fact with respect to the Lanham Act claim, the Court grants Defendants' Motion for Summary Judgment as to Count III of the Amended Complaint.
In Count IV of its Amended Complaint, Aviva alleges that these Defendants violated the Minnesota UDTPA by using misleading visual images in their advertising and product packaging. Defendants argue that...
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