Monoflo Intern., Inc. v. Sahm, Civ. A. No. 89-1285-A.

• Citation: 726 F. Supp. 121
• Decision Date: 29 November 1989
• Docket Number: Civ. A. No. 89-1285-A.
• Parties: MONOFLO INTERNATIONAL, INC., Plaintiff, v. Ekkehard SAHM, and Kunststoff Kontor GmbH, Defendants.
• Court: U.S. District Court — Eastern District of Virginia

726 F. Supp. 121

MONOFLO INTERNATIONAL, INC., Plaintiff, v. Ekkehard SAHM, and Kunststoff Kontor GmbH, Defendants.

Civ. A. No. 89-1285-A.

United States District Court, E.D. Virginia, Alexandria Division.

November 29, 1989.

Robert A. Vanderhye, Nixon & Vanderhye P.C., Arlington, Va., for plaintiff.

Daniel E. Johnson, David G. Baldacci, Calligaro & Mutryn P.C., Washington, D.C., for defendants.

MEMORANDUM OPINION

ELLIS, District Judge.

A threshold dismissal motion directed at Count I of plaintiff's Amended Complaint presents questions concerning the reach Section 43(a) of the Lanham Act (the "Act"), 15 U.S.C. § 1125(a),¹ and of state and federal unfair competition laws. Specifically, the following two questions are presented:

(1) Does Section 43(a) of the Act reach misrepresentations that do not pertain to any goods or services?

(2) Does the common law tort of unfair competition reach

(i) misrepresentations that do not pertain to any goods or services, or

(ii) threats of "unspecified and groundless criminal action"

where there is no effect on competition?

This is the second time these questions have been before the Court. The first occurred in the context of defendants' motion to dismiss plaintiff's original complaint. The Court granted that motion, but did so without prejudice because it was unclear from the original complaint whether there was any set of facts plaintiff could allege to support claimed violations of the Act and the unfair competition laws of the United States or Virginia. Plaintiff's Amended Complaint, by adding essentially no new facts, now makes clear that disposition of the motion to dismiss on the merits is appropriate.² For the reasons stated here, the Court concludes that the facts alleged in the Amended Complaint fail to state a cause of action under either Section 43(a) of the Act or the unfair competition laws of the United States or Virginia.

FACTS³

Plaintiff, Monoflo International, Inc. ("Monoflo") is a Virginia corporation apparently engaged in the sale, inter alia, of collapsible plastic boxes. The corporate defendant, Kunststoff Kontor GmbH ("KKG"), is a German corporation apparently engaged, inter alia, in the purchase of collapsible plastic boxes. Ekkehard Sahm, the individual defendant, is a German citizen and resident and the managing director and "moving force" of KKG with respect to the acts complained of in the Amended Complaint.

At a time prior to the acts complained of, KKG purchased collapsible plastic boxes from Monoflo for resale in Europe. Monoflo claims there was never any written agreement between the parties relating to the sale of the boxes. There then came a time that Monoflo gave KKG formal notice that it would have no further dealings with KKG and, accordingly, ceased selling the plastic boxes to KKG. Thereafter, KKG, in an apparent attempt to obtain Monoflo boxes elsewhere, sent a letter to an American distributor for Monoflo requesting to purchase Monoflo boxes and stating that it was Monoflo's exclusive European sales agent. This representation, according to Monoflo, was false and was made for the purpose of inducing Monoflo's distributor to sell Monoflo boxes to KKG when Monoflo had declined to make such sales. Monoflo also claims, in conclusory fashion, that this representation affected commerce, damaged Monoflo and constituted a false designation of origin in violation of Section 43(a) of the Act.

Additionally, Monoflo contends that KKG and Sahm "misrepresented" to Monoflo that Monoflo was in breach of various KKG-Monoflo agreements for which KKG demanded damages. In this connection, Sahm, acting as the "driving force" behind KKG, threatened Monoflo with "unspecified and groundless criminal action" unless Monoflo settled its contractual dispute with KKG. According to Monoflo, KKG and Sahm knew the threats of criminal action were baseless and were made for the purposes of extorting money from Monoflo and gaining a competitive advantage. As such, Monoflo argues, the threats constitute acts of unfair competition under the laws of the United States and Virginia. Damages of $150,000 are alleged.

ANALYSIS

(1) The Lanham Act Claim

Whether Section 43(a) of the Act reaches KKG's false statement concerning its status as Monoflo's exclusive European sales agent is a question of statutory construction. And it is settled that "statutory construction must begin with the language employed by Congress and the assumption that the ordinary meaning of that language accurately expresses the legislative purpose." Park 'N Fly, Inc. v. Dallas Park & Fly, Inc., 469 U.S. 189, 194, 105 S.Ct. 658, 661, 83 L.Ed.2d 582 (1985). (construing the Lanham Act). Thus, the pertinent portions of Section 43(a) provide that

Any person who shall affix, apply, or annex, or use in connection with any goods or services ... a false designation of origin, or any false description or representation, including words or other symbols tending falsely to describe or represent the same, and shall cause such goods or services to enter into commerce ... shall be liable to a civil action....

15 U.S.C. § 1125(a) (emphasis added). The plain meaning of this language, while broad, does not encompass the alleged KKG misrepresentation. That misrepresentation concerned KKG's status as Monoflo's sales agent; it was not a "false ... representation" made "in connection with any goods or services" which tended "falsely to represent" those goods or services. Put another way, Section 43(a) reaches only misrepresentations that tend falsely to represent some aspect of a product or service; it does not reach, as here, misrepresentations essentially unconnected to a product or service. In misrepresenting its status as Monoflo's exclusive European sales agent, KKG said nothing that would tend falsely to represent anything about the quality, nature, or characteristic of any product or service.

To be sure, misrepresentations concerning a party's status or commercial relationships may tend, in other contexts, to mislead or create confusion about a product or service. Not so here, however, as is well illustrated by considering a range of other misrepresentations KKG might have made to achieve the desired end of inducing Monoflo's distributor to sell KKG the boxes. Thus, to achieve this end, KKG might have misrepresented that Monfolo owned all or part of KKG, that Monoflo and KKG were joint venturers in Europe or Asia, that Monoflo had recommended that KKG purchase the boxes from the distributor, or that Sahm was the brother-in-law of Monoflo's chief executive. Like the misrepresentation in issue, each of these is a false representation concerning the relationship between Monoflo and KKG; each is a false representation designed to induce the sale of Monoflo's plastic boxes to KKG; and each is essentially unconnected to any KKG product or service. For this latter reason, none falls within Section 43(a). To reach the opposite conclusion would sweep within the Act's ambit almost any misstatement made in the context of a commercial transaction, a result contradicted by the Act's plain meaning and sharply at odds with its application by the courts. In sum, Section 43(a), by its plain meaning, does not reach KKG's claim to be Monoflo's exclusive European sales agent because that statement does not falsely represent anything about a KKG product or service.

Consistent with this result and with the Act's plain meaning, most courts have held that a misrepresentation is actionable under Section 43(a) only if it concerns the defendant's own goods or services.⁴ A few courts, chiefly within the First Circuit, have read the Act more narrowly to proscribe only "palming off" or similar claims.⁵ Still another minority of courts have read the Act more liberally to include claims of deceptive comparative advertising.⁶ But no court has extended Section 43(a) to reach, as here, misrepresentations unconnected with the defendant's product or service. Instead, as even Monoflo's cited authorities reflect, Section 43(a) reaches only a defendant's misrepresentations concerning its products or services.⁷

Monoflo incorrectly cites Consumers Union of United States v. New Regina Corp., 664 F.Supp. 753 (S.D.N.Y.1987); Chicago Lawyer v. Forty-Sixth Ward Regular Democratic Organization, 220 U.S.P.Q. 511 (N.D.Ill.1982); and U.S. News & World Report v. Campaigner Publications, 222 U.S.P.Q. 123 (D.D.C.1982), as supporting authority directly in point. These decisions are neither directly in point, nor supportive of Monoflo's position. Unlike the instant case, all three involve representations that tend falsely to represent some aspects of the defendant's service and product. In Consumers Union, defendants misrepresented that its vacuum cleaner products were endorsed by plaintiff when it referred to plaintiff's publication in television advertising for the vacuum cleaners. In Chicago Lawyer, the defendant political organization distributed material reflecting its endorsement of candidates in a judicial election. By including excerpts from plaintiff's publication in a misleading fashion, defendants effectively made a false representation that its product, i.e., the material setting forth its endorsements, was concurred in by plaintiff's publication. Similarly, in U.S. News & World Report, defendants' publications published stories obtained when defendants' reporters misrepresented themselves as reporters from U.S. News and World Report. This deception caused confusion concerning the source of defendants' stories, i.e., their products. None of these decisions suggests that Section 43(a) reaches, as here, misrepresentations unconnected with defendant's product.

While there is no decision directly in point, Computer Associates International, Inc. v. Computer Automation, Inc., 678 F.Supp. 424 (S.D.N.Y.1987), is sufficiently close that its result and rationale are instructive. There, plaintiff's complaint alleged that defendant had violated Section 43...