Gateway 2000, Inc. v. Cyrix Corp.

• Decision Date: 10 September 1996
• Docket Number: Civil Action No. 96-3286 (AJL).
• Citation: 942 F.Supp. 985
• Parties: GATEWAY 2000, INC., Plaintiff, v. CYRIX CORPORATION, Defendants.
• Court: U.S. District Court — District of New Jersey

942 F.Supp. 985

GATEWAY 2000, INC., Plaintiff, v. CYRIX CORPORATION, Defendants.

Civil Action No. 96-3286 (AJL).

United States District Court, D. New Jersey.

September 10, 1996.

COPYRIGHT MATERIAL OMITTED

Thomas G. Quam, LeBoeuf, Lamb, Greene & MacRae, L.L.P., Newark, New Jersey, for Plaintiff.

Arnold B. Calmann, Saiber, Schlesinger, Satz & Goldstein, Newark, New Jersey, Russell N. Fairbanks, Jr., Cyrix Corporation, Richardson, Texas, William LaFuze, Steven R. Borgman, and Valerie K. Friedrich, Vinson & Elkins, L.L.P., Houston, Texas, for Defendant.

OPINION

LECHNER, District Judge.

This is an action by plaintiff Gateway 2000, Inc. ("Gateway") against defendant Cyrix Corporation ("Cyrix"). Removal jurisdiction is alleged pursuant to 28 U.S.C. §§ 1331, 1337 and 1338.

Gateway contends that certain Cyrix advertisements (the "Cyrix Advertisements") wrongly depicted trademarks that Gateway uses to develop, promote and advertise its computer products and services. Gateway alleges the Cyrix Advertisements have altered and diluted the distinctive quality of the trademarks in violation of New Jersey statutory and common law. Pursuant to such allegations, Gateway seeks, inter alia, injunctive relief, compensatory and punitive damages, and such further relief as deemed proper.

Gateway filed a Complaint (the "Complaint") in the Superior Court of New Jersey, Law Division, Essex County (the "Superior Court") on 2 July 1996. Cyrix filed the Notice of Removal (the "Notice of Removal") on 8 July 1996. The asserted grounds for removal are that the claims alleged by Gateway arise out of Federal law under the Lanham Act (the "Lanham Act"), 15 U.S.C. § 1051, et. seq., and the Copyright Act (the "Copyright Act"), 17 U.S.C. § 101, et. seq. Cyrix further contends removal is proper because Gateway's allegations invoke the First Amendment.

Presently before the court is the Gateway motion to remand this matter to state court pursuant to 28 U.S.C. § 1447(c).¹ Gateway filed its Motion to Remand on an Emergent Basis (the "Motion to Remand") on 12 July 1996. For the reasons set forth below, this matter is remanded to the Superior Court of New Jersey, Law Division, Essex County (the "Superior Court") pursuant to 28 U.S.C. § 1447(c).

Facts

Gateway is a corporation organized under the laws of the state of Delaware with its principal place of business in South Dakota. Complaint at ¶ 1. Cyrix is a corporation organized under the laws of the state of Delaware with its principal place of business in Texas. Id. at ¶ 2. Gateway markets personal computers and related computer products worldwide. Id. at ¶ 9. Gateway alleges it is the owner of several trademarks (collectively "Gateway Trademarks") which it uses in connection with its computer products. Id. at ¶¶ 13, 17. The registered trademarks include a design patterned after the coloration of Holstein cows, id. at ¶ 13, the mark "Gateway 2000", id. at ¶ 17, and the mark comprising of "Gateway 2000" framed in black with a block logo of the letter "G" to the left of the company name. Id. at ¶ 17. Gateway further alleges it is the owner of trademark rights in the image of a Holstein cow (the "Holstein Cow"), which it uses in the advertising, promotion and distribution of its products and services. Id. at ¶ 13.

Gateway contends its extensive use of the Gateway Trademarks has caused such trademarks to become closely associated with Gateway. Id. at ¶ 19. Gateway contends the Gateway Trademarks have come to represent the commercial strength of Gateway symbolizing its goodwill, products and services. Id. at ¶ 18-19.

Cyrix is a competitor of Gateway engaged in the sale of personal computers. Id. at ¶¶ 11-12. Gateway contends the Cyrix Advertisements depict the Gateway Trademarks in such a manner as to impute unfavorable characteristics to Gateway, its trademarks, products and services.² Id. at ¶ 23. Gateway alleges the Cyrix Advertisements were published in five computer magazines as well as sent to consumers through direct mailings. Id. at ¶ 22. Gateway contends Cyrix has, therefore, violated the statutory and common law of the state of New Jersey by diluting and diminishing the value of these trademarks. Id. at ¶¶ 46, 50, 55, 62, 68, 74. Gateway alleges violation of the New Jersey anti-dilution statute, N.J.S.A. 56:3-13.20 and the New Jersey Unfair Competition Act, N.J.S.A. 56:4-1. Gateway also asserts common law claims for tortious interference with contractual relations, tortious interference with prospective economic advantage, trademark infringement and unfair competition. The Complaint alleges no Federal claims. There is no diversity of citizenship; both parties are incorporated in Delaware.

On 2 July 1996, Gateway filed a complaint in Superior Court alleging state law claims.³ Moving Brief at 7. Between 28 June 1996 and 2 July 1996, Gateway filed similar state court actions in New York, California, Connecticut and Massachusetts. Notice of Removal at ¶ 5. Service was effectuated on Cyrix on 28 June 1996. Id. at ¶ 2.

On 8 July 1996, Cyrix filed the Notice of Removal. Cyrix claims that removal is proper because the actions described in the Complaint arise under the Lanham Act and the Copyright Act and therefore present Federal questions over which this court has original jurisdiction. Cyrix additionally argues removal jurisdiction is appropriate on the basis of the First Amendment. For the reasons stated below, this action is remanded to Superior Court.

Discussion

1. Standard for Removal

Under the general Federal removal statutes, an action brought in state court may be properly removed to Federal court only if that Federal court would have had original jurisdiction over the action. 28 U.S.C. § 1441(a)⁴; Caterpillar, Inc. v. Williams, 482 U.S. 386, 392, 107 S.Ct. 2425, 2429-30, 96 L.Ed.2d 318 (1987); Hunter v. Greenwood Trust Co., 856 F.Supp. 207, 211 (D.N.J.1992).

Federal courts are courts of limited jurisdiction conferred under Article III of the United States Constitution and appropriate congressional enactments. U.S. Const. art. III, § 2, cl. 1; Kokkonen v. Guardian Life Ins. Co. of America, 511 U.S. 375, 114 S.Ct. 1673, 128 L.Ed.2d 391 (1994). Congress created two bases of original jurisdiction in the Federal courts — Federal question jurisdiction under 28 U.S.C. § 1331 and diversity jurisdiction under 28 U.S.C. § 1332. Caterpillar, Inc., 482 U.S. at 392, 107 S.Ct. at 2429-30; Krashna v. Oliver Realty, Inc., 895 F.2d 111, 113 (3d Cir.1990). In the absence of diversity of citizenship, Federal question jurisdiction is required before removal is proper. Caterpillar, 482 U.S. at 392, 107 S.Ct. at 2429-30.

Federal courts have long recognized that "due regard for the rightful independence of state governments requires that federal courts scrupulously confine their own jurisdiction to the precise limit which the statute has defined." Finley v. United States, 490 U.S. 545, 552-553, 109 S.Ct. 2003, 2009, 104 L.Ed.2d 593 (1989). Accordingly, Federal removal statutes are to be strictly construed, resolving any doubts in favor of remand. Shamrock Oil & Gas Corp. v. Sheets, 313 U.S. 100, 108-109, 61 S.Ct. 868, 871-72, 85 L.Ed. 1214 (1941); Boyer v. Snapon Tools Corp., 913 F.2d 108, 111 (3d Cir. 1990), cert. denied, 498 U.S. 1085, 111 S.Ct. 959, 112 L.Ed.2d 1046 (1991); La Chemise Lacoste v. The Alligator Company, 506 F.2d 339, 344 (3d Cir.1974), cert. denied, 421 U.S. 937, 95 S.Ct. 1666, 44 L.Ed.2d 94 (1975); Federal Deposit Ins. Corp. v. Wissel & Sons Constr. Co., 881 F.Supp. 119 (D.N.J.1995); Mountain Ridge State Bank v. Investor Funding Corp., 763 F.Supp. 1282 (D.N.J. 1991).

When confronted with a motion to remand a matter to state court, the removing party has the burden of establishing the propriety of removal. See Dukes v. U.S. Healthcare, Inc., 57 F.3d 350, 359 (3d Cir.); cert. denied, ___ U.S. ___, 116 S.Ct. 564, 133 L.Ed.2d 489 (1995); Boyer, 913 F.2d at 111; Steel Valley Auth. v. Union Switch and Signal Div., Am. Standard, Inc., 809 F.2d 1006, 1011 (3d Cir.1987), cert. dismissed sub nom., American Standard, Inc. v. Steel Valley Auth., 484 U.S. 1021, 108 S.Ct. 739, 98 L.Ed.2d 756 (1988); Mountain Ridge State Bank, 763 F.Supp. at 1288. The removing party must show Federal subject matter jurisdiction exists and that removal is proper. Boyer, 913 F.2d at 111; Steel Valley, 809 F.2d at 1011; Moore v. DeBiase, 766 F.Supp. 1311, 1315 (D.N.J.1991); Mountain Ridge, 763 F.Supp. at 1288; Capone v. Harris Corp, 694 F.Supp. 111, 112 (E.D.Pa.1988); Blow v. Liberty Travel, Inc., 550 F.Supp. 375, 375-76 (E.D.Pa.1982).

Cyrix contends removal is proper in this case based upon Federal question jurisdiction. Cyrix contends Gateway's state law claims for dilution, false advertising, deceptive trade practices, unfair competition and trademark infringement are more properly cast as violations of the Lanham Act and the Copyright Act requiring Federal jurisdiction. Furthermore, Cyrix argues, under the complete preemption doctrine, Gateway's state law claims are transformed into Federal claims due to the preemptive effect of Section 301 of the Copyright Act. 17 U.S.C. § 301.

2. Well-pleaded Complaint Rule

Removal on the grounds of federal question jurisdiction, 28 U.S.C. § 1331, requires that a Federal question be presented on the face of the plaintiff's well-pleaded complaint. Oklahoma Tax Comm'n v. Graham, 489 U.S. 838, 840-41, 109 S.Ct. 1519, 1520-21, 103 L.Ed.2d 924 (1989); Franchise Tax Bd. of State of Cal. v. Constr. Laborers Vacation Trust for Southern Cal., 463 U.S. 1, 10, 103 S.Ct. 2841, 2846-47, 77 L.Ed.2d 420 (1983); Caterpillar, 482 U.S. at 392, 107 S.Ct. at 2429-30. Dukes, 57 F.3d at 353; Trans Penn Wax Corp. v. McCandless, 50 F.3d 217 (3d Cir.1995); Goepel v. National Postal Mail Handlers Union, 36 F.3d 306, 310 (3d Cir.1994), cert. denied, ___ U.S. ___, 115 S.Ct. 1691, 131 L.Ed.2d 555 (1995). A plaintiff, as the master of the complaint, may avoid Federal jurisdiction by exclusive...