Iding v. Anaston

• Citation: 266 F. Supp. 1015
• Decision Date: 18 April 1967
• Docket Number: No. 66 C 2354.,66 C 2354.
• Parties: John L. IDING and John C. Albertson, d/b/a Sweden House Smorgasbord, Plaintiffs, v. Phil Manolis ANASTON, d/b/a Arlington Sweden House, Defendant, and Arlington Sweden House, Inc., Defendant.
• Court: U.S. District Court — Northern District of Illinois

266 F. Supp. 1015

John L. IDING and John C. Albertson, d/b/a Sweden House Smorgasbord, Plaintiffs, v. Phil Manolis ANASTON, d/b/a Arlington Sweden House, Defendant, and Arlington Sweden House, Inc., Defendant.

No. 66 C 2354.

United States District Court N. D. Illinois, E. D.

April 18, 1967.

John D. Vosnos, Chicago, Ill., for plaintiffs.

Dean A. Olds, Hume, Groen, Clement & Hume, Chicago, Ill., for defendant.

OPINION

WILL, District Judge.

This is an action for infringement of a common law service mark and for unfair competition. Plaintiffs are residents of Florida. The individual defendant is a resident of Illinois and the corporate defendant is an Illinois corporation doing business solely in Illinois. Defendants have moved to dismiss based upon the following grounds: (1) that plaintiffs are not the real parties in interest, (2) for want of diversity jurisdiction and (3) for failure to state a federal claim. In addition, the individual defendant has moved to dismiss on the ground that he is not a proper party to the action, but in light of our rulings on the other motions we do not reach this question.

Plaintiffs have alleged federal jurisdiction under 28 U.S.C. §§ 1332, 1338 (a), 1338(b) and 15 U.S.C. § 1125(a). We first turn to an examination of whether the real parties in interest are bringing this action and whether, as a result of our conclusion on the question of proper parties there is diversity jurisdiction present here pursuant to § 1332.

Plaintiffs seek protection of their alleged service mark "Sweden House Smorgasbord." The facts alleged in the complaint and supplemented in the briefs indicate that although plaintiffs contend that as individuals they render restaurant services at two Illinois locations, in fact, two corporations, Sweden House, Inc. at Elgin, Illinois and Naperville Sweden House, Inc. at Naperville, Illinois, operate restaurants under the service mark "Sweden House Smorgasbord." Plaintiffs are 100% stockholders of the stock of the two corporations. There is no allegation that plaintiffs have licensed the mark to the two corporations or that the mark is used by them elsewhere. By use of the "d/b/a" designation plaintiffs have attempted to bring this case within the diversity jurisdiction of this court.

In the absence of any allegation that a license arrangement exists or that the corporations are mere shells, use of the "d/b/a" designation is misleading and inappropriate. The two corporations are actively conducting the businesses operated in Illinois. In short, they and not the individuals are the real parties in interest, Rule 17 F.R.Civ.P. Moreover, there is no allegation that the corporations are unable to bring suit to protect the common law service mark under which they conduct business. We conclude, therefore, that plaintiffs as individuals are not doing business as "Sweden House Smorgasbord", but that, on the contrary, two Illinois corporations are and in connection therewith use the mark alleged to be infringed solely in Illinois.

Rule 17 provides that before dismissal on the ground of improper parties, a reasonable time be allowed for the real parties in interest to prosecute the action. Here, however, unless a federal claim is stated, no purpose would be served in having the corporations become the plaintiffs since at that point there would be no diversity between them and the individual and corporate defendants.

As a consequence of the foregoing, the status of the case in this court depends on whether any federal claim upon which relief can be granted, Rule 12(b) (6), F.R.Civ.P., has been alleged in the complaint. For the reasons stated herein, we hold that plaintiffs have failed to allege a claim under the trademark laws of the United States, and that, therefore, the case should be dismissed.

Plaintiffs have alleged that this action is within the trademark laws of the United States. In this connection, it should first be noted that there is no allegation that they are bringing suit under a registered trademark. Plaintiffs must therefore contend that § 43(a) of the Lanham Act, 15 U.S.C. § 1125(a)¹ contains the basis for a federal unfair competition action over which this court has jurisdiction.² Whether this substantive section is properly described as a new statutory tort of unfair competition or whether it should be labeled as a "false advertising" provision, see Glenn v. Advertising Publications, Inc., 251 F. Supp. 889, 902 (S.D.N.Y.1966), there is no doubt that a new federal remedy has been created, subject to certain express limitations, which does not require ownership of a United States registration. L'Aiglon Apparel, Inc. v. Lana Lobell, Inc., 214 F.2d 649 (3 Cir. 1954); General Pool Corporation v. Hallmark Pool Corporation, 259 F.Supp. 383, 386 (N.D. Ill.1966).

It is unnecessary to consider the entire scope of § 43(a) in connection with this lawsuit. Suffice it to say, however, that Congress, in including this section in the Lanham Act, undoubtedly intended to fashion a new remedy "against a particular kind of unfair competition— namely, the use of a false designation of origin." Bogene, Inc. v. Whit-Mor Manufacturing Co., 253 F.Supp. 126, 127 (S.D.N.Y.1966), American Rolex Watch Corp. v. Jack Laufer & Jan Voort, Inc., 176 F.Supp. 858, 861 (E.D.N.Y. 1959), and see Callman, False Advertising As A Competitive Tort, 48 Col.L. Rev. 876, 886 (1948).

The threshold question before the court is whether the complaint alleges facts which meet the requirements of § 43(a), i. e., whether goods or services have been caused "to enter into commerce" with a false description or designation of origin. An examination of the complaint shows that nowhere do plaintiffs allege that the service mark or any variation thereof used by defendants have been utilized in interstate commerce. In fact, the complaint indicates all business activities of the plaintiff and defendant corporations are wholly local and intrastate in nature. Moreover, there is no allegation of any tangential effect on interstate commerce.

The interstate commerce requirement in § 43(a) is of such importance that failure to allege this element is, of itself, cause for dismissal for failure to state a claim. Plaintiffs, however, take the position that interstate commerce need not be alleged since diversity jurisdiction is present. We have already indicated that, given the proper parties, diversity would not exist between plaintiffs and defendants, but, more importantly, we note that plaintiffs' argument is in error. Irrespective of whether diversity is present or not, a claim under a specific federal statute is only stated when the requirements of that statute are met. Diversity would be one way of bringing this case into a federal court, but then only on a state claim. Pendent jurisdiction over a state claim, absent diversity, is possible, pursuant to § 1338(b), but only when the state claim is related to an independent and substantial federal claim.³ We thus return to the question of whether a claim under § 43(a) is alleged.

Although Congress in enacting the Lanham Act created a new federal remedy relating to the common law tort of unfair competition, it did not intend to make the federal courts repositories of all common law unfair competition actions. Plaintiffs, in effect, would place this construction upon § 43(a). While some of the early cases construing § 43(a) limited its application, e. g., American Automobile Association v. Spiegel, 205 F.2d 771 (2 Cir. 1953), it is now clear that a broad interpretation has been afforded by the courts. Nevertheless we know of no case where a court has found § 43(a) applicable under allegations detailing solely intrastate business activities relating to the goods or services and without any allegation of an economic effect of the use of the mark on interstate commerce. In Burger King of Florida, Inc. v. Brewer, 244 F. Supp. 293 (W.D.Tenn.1965), § 43(a) was held applicable where a local drive-in restaurant chain used a service mark similar to that of another drive-in chain. The latter chain, however, was doing business throughout the southeastern United States. The court concluded that "A purely intrastate business (referring to the local chain) is in interstate commerce for purposes of Sec. 43(a) of the Lanham Act if it has a substantial economic effect on interstate commerce. 244 F.Supp. at page 298. See also, Stauffer v. Exley, 184 F.2d 962 (9 Cir. 1950) and Pagliero v. Wallace China, 198 F.2d 339 (9 Cir. 1952). Nor is there any allegation here that advertising placed either party or the service mark in interstate commerce. Tiffany & Co. v. Boston Club, Inc., 231 F.Supp. 836 (D.C.Mass.1964).

Though infringement of a common law service mark is cognizable under § 43(a), it is...