Medline Industries v. Strategic Comm'L Solutions

• Decision Date: 05 May 2008
• Docket Number: Case No. 07 C 2783.
• Citation: 553 F.Supp.2d 979
• Parties: MEDLINE INDUSTRIES, INC., Plaintiff, v. STRATEGIC COMMERCIAL SOLUTIONS, INC.; Capital Payment Systems, LLC; World Wide Merchants, LLC; Prime Time Solutions, Inc.; 9120-3140 Quebec Inc.; Groupe Claddagh Inc.; 9133-9069 Quebec Inc.; 9154-4619 Quebec, Inc.; Thomas Wong; Mohammed Abukhalid; Defendants.
• Court: U.S. District Court — Northern District of Illinois

553 F.Supp.2d 979

MEDLINE INDUSTRIES, INC., Plaintiff, v. STRATEGIC COMMERCIAL SOLUTIONS, INC.; Capital Payment Systems, LLC; World Wide Merchants, LLC; Prime Time Solutions, Inc.; 9120-3140 Quebec Inc.; Groupe Claddagh Inc.; 9133-9069 Quebec Inc.; 9154-4619 Quebec, Inc.; Thomas Wong; Mohammed Abukhalid; Defendants.

Case No. 07 C 2783.

United States District Court, N.D. Illinois, Eastern Division.

May 5, 2008.

COPYRIGHT MATERIAL OMITTED

Janet A. Marvel, Jared D. Solovay, Pattishall, McAuliffe, Newbury, Hillard & Geraldson LLP, Chicago, IL, for Plaintiff.

John Todd Shapiro, David L. Ter Molen, Freeborn & Peters, Patrick F. Lambe, Forrest L. Ingram, Forrest L. Ingram P.C., Chicago, IL, for Defendants.

MEMORANDUM OPINION AND ORDER

RUBEN CASTILLO, District Judge.

This is a novel case where an alleged victim of trademark infringement has sued multiple parties who were allegedly party to a telemarketing scheme in which the victim's trademark was used. At issue are two motions to dismiss the Second Amended Complaint ("SAC") of Plaintiff, Medline Industries, Inc. ("Medline"). Defendant Strategic Commercial Solutions ("SCS") filed a motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(2), for lack of personal jurisdiction over SCS, and pursuant to Federal Rule of Civil Procedure 12(b)(6), for failure to state a claim against SCS upon which relief can be granted. (R. 33, SCS Mot. to Dismiss.) In addition, Defendants Thomas Wong and 9121-3140 Quebec Inc. (collectively, the "Wong Defendants") filed a motion to dismiss the SAC pursuant to Rule 12(b)(2) for lack of personal jurisdiction. (R. 41, Wong Mot. to Dismiss.)

BACKGROUND¹

I. Factual History

Medline is a manufacturer and distributer of medical products, with annual sales of over S3 billion. (R. 31, SAC ¶ 16.) Medline has used the trademark MEDLINE in connection with its medical products since at least 1968, and owns federal trademark registrations for this mark. (Id. ¶¶ 17-19.)

Medline alleges that sometime in 2006, Defendants Wong and Mohammed Abukhalid ("Abukhalid") began telephoning consumers under the name "Medline Savings" and fraudulently pressuring them into purchasing "pharmaceutical discount packages" for $398. (Id. ¶¶ 24-33.) Wong and Abukhalid are residents of Quebec, Montreal. (Id. ¶¶ 10, 12.) In connection with the "Medline Savings" operations, Medline alleges that Wong and Abukhalid entered into contracts under the names Benashore Marketing Group, Inc. ("Benashore") and Media Alliance Marketing, Inc. ("Media Alliance"). (Id. ¶ 25.) These entities were allegedly dummy corporations with no officers, assets, or valid addresses. (Id. ¶ 25-28.) Wong and Abukhalid allegedly worked with Defendant 9154-4619 Quebec, Inc. d/b/a Identacall, Inc. ("Identacall") to record the end of the "Medline Savings" calls to consumers, at which point the consumers appeared to authorize the $398 transactions. (Id. ¶¶ 30-31.) Medline alleges that the consumers' consents to the transactions were coerced. (Id. ¶¶ 30-33.)

In July 2006, SCS was engaged by Benashore to provide customer service for "Medline Savings" consumers. (R. 26, Mot. to Compel, Ex. 3, SCS Resps. to Pl.'s Interrogs. at No. 5.) Neil Haboush ("Haboush") is the president and owner of SCS, a Canada corporation with its offices and employees in Quebec. (R. 34, SCS Mot. to Dismiss, Ex. A Haboush Decl. ¶¶ 1, 5.) SCS does not have offices or employees located within the United States. (Id.) As part of the service SCS provided to Benashore, SCS allegedly listened to the recording of the consumers' conversations with Wong or Abukhalid to verify their consent to purchase the "pharmaceutical discount package." (R. 31, SAC ¶¶ 34-35.) If SCS concluded that the consent was informed, it would allegedly instruct Defendants Capital Payment Systems or World Wide Merchants to debit the consumers' bank accounts from numerous banks throughout the United States, including Illinois. (Id. ¶¶ 35, 40.) The electronic deductions were performed under the name "Medline Savings." (Id. ¶ 36.) Defendant Prime Time Solutions then fulfilled the consumers' orders by sending them their "pharmaceutical discount package," which consisted of promotional materials bearing the name "Medline" or "Medline Savings." (Id. ¶ 38.)

"Medline Savings" consumers were given a toll-free number to contact which was owned and operated by SCS. (R. 31, SAC ¶ 39.) Calls to the number reached a call center operated by SCS. (Id. ¶ 41.) SCS would ask callers to identify which toll-free number they had dialed, and when the callers identified the number (866) 395-2013, SCS would state that the caller had transacted business with "Medline Savings." (Id.) SCS would allegedly use the callers' telephone number to access their electronic records, including the verification recording related to the transaction. (Id.) Medline alleges that when customers would call to complain that Wong and Abukhalid had tricked them into authorizing the $398 transaction, SCS would try to persuade the callers not to reverse the $398 charge. (Id. ¶¶ 42-43.) Some of the calls placed to the call center came from Illinois banks and residents. (Id. ¶ 39.)

SCS also owns and operates other toll-free numbers for different telemarketing operations, including PC One, Secure Source, PharmacyCards.com, and Priority Savings. (Id. ¶ 40.) SCS also provided customer service and verification services for its other telemarketing operations, including instructing payment processors to deduct funds from banks and directing customer orders be fulfilled. (Id.)

II. Procedural History

Medline initiated this lawsuit on May 17, 2007, against SCS and Capital Payment Systems, LLC, alleging violations of the Lanham Act; the Telemarketing and Consumer Fraud and Abuse Prevention Act ("Telemarketing Act"); the Illinois Uniform Deceptive Trade Practices Act; the Illinois Consumer Fraud and Deceptive Business Practices Act; and Illinois common law. (R. 1, Original Compl.) On June 6, 2007, this Court dismissed the original complaint sua sponte, "for failure to establish jurisdiction and venue over the two non-resident defendants," and authorized Medline "to proceed with expedited discovery and either file a proposed amended complaint in this district or the appropriate district with personal jurisdiction and venue over the defendants." (R. 9, 6/6/07 Min. Order.)

Medline subsequently filed an amended complaint in this Court on October 17, 2007, adding the Wong Defendants, Abukhalid, Party World Wide Merchants, LLC, Prime Time Solutions, Inc., Groupe Claddagh Inc., 9133-9069 Quebec Inc., and 9154-4619 Quebec Inc. (R. 11, Am. Compl.) Although the Court expressed that it "still is left with serious questions about jurisdiction and venue," we allowed Medline's attorneys to complete expedited service of the amended complaint, (R. 12, 10/19/07 Min. Order.) On January 4, 2008, SCS filed a motion to dismiss the amended complaint under Rules 12(b)(2) and 12(b)(6) (R. 24), and on January 7, Medline filed a motion to compel jurisdictional discovery (R. 26), and a motion for leave to file the SAC (R. 27). The Court granted Medline's motion for leave to file the SAC and denied as moot SCS's motion to dismiss the first amended complaint. (R. 30, 1/10/08 Min. Order.)

In the SAC, Plaintiff alleges that: (1) Wong, Abukhalid, SCS, Capital Payment Systems, and World Wide Merchants violated the Telemarketing Act, 15 U.S.C. §§ 6102(a)(2) and 6104(a); (2) Wong, Abukhalid, SCS, Capital Payment Systems, World Wide Merchants, and Prime Time Solutions committed direct trademark infringement in violation of the Lanham Act, 15 U.S.C. § 1114, et seq., and common law; (3) SCS, Capital Payment Systems, World Wide Merchants, Prime Time Solutions, Identacall, and Groupe Claddagh committed contributory trademark infringement in violation of the Lanham Act, 15 U.S.C. § 1114, et seq., and common law; (4) Wong, Abukhalid, SCS, Capital Payment Systems, World Wide Merchants, and Prime Time Solutions use of Medline's trademark constitutes unfair competition, false representation, and false designation of origin in connection with Defendants' goods and services, in violation of 15 U.S.C. § 1125(a) and common law; (5) Wong, Abukhalid, SCS, Capital Payment Systems, World Wide Merchants, and Prime Time Solutions have caused and will cause dilution of Medline's trademark in violation of 15 U.S.C. § 1125(c)(1); and (6) Wong, Abukhalid, SCS, Capital Payment Systems, World Wide Merchants, and Prime Time Solutions violated the Illinois Uniform Deceptive Trade Practices Act, 815 ILCS 510/1 et seq. and the Consumer Fraud and Deceptive Business Practices Act, 815 ILCS 505/1 et seq. (R. 31, SAC.) Medline alleges that numerous consumers have been confused into believing that Medline was affiliated with or endorsed "Medline Savings." (Id. ¶ 49.)

SCS subsequently filed a motion to dismiss the SAC for lack of personal jurisdiction under Rule 12(b)(2) and for failure to state a claim under Rule 12(b)(6). (R. 33, SCS's Mot. to Dismiss.) The Wong Defendants also filed a motion to dismiss for lack of personal jurisdiction under Rule 12(b)(2). (R. 41, Wong Defs.' Mot. to Dismiss.)

On April 2, 2008, the Court granted in part Medline's motion to compel jurisdictional discovery from SCS. (R. 52, 4/2/08 Min. Order.) In addition, the Court directed "SCS to detail the nature and extent of SCS's contacts with the United States, including the nature of the contacts — whether providing customer service or another kind of service — and a description of the number and nature of telephone calls or emails, if any, that SCS or its employees made to individuals residing in the United States," in response to SCS's representation in its briefs in support of its motion to dismiss that "SCS's contacts with the United States are hardly more than its contacts with the Slate of Illinois." (Id.) Subsequently, SCS has reiterated their position that it is not subject to personal...