Mother Waddles Perpetual Mission, Inc. v. Frazier

• Decision Date: 18 October 1995
• Docket Number: No. 95-73000.,95-73000.
• Parties: MOTHER WADDLES PERPETUAL MISSION, INC., et al., Plaintiffs, v. Rick FRAZIER, et al., Defendants.
• Court: U.S. District Court — Eastern District of Michigan

904 F. Supp. 603

MOTHER WADDLES PERPETUAL MISSION, INC., et al., Plaintiffs, v. Rick FRAZIER, et al., Defendants.

No. 95-73000.

United States District Court, E.D. Michigan, Southern Division.

October 18, 1995.

COPYRIGHT MATERIAL OMITTED

Melvin Hollowell, Detroit, MI, for Plaintiffs.

Gregory J. Reed, Detroit, MI, Lynn H. Shecter, Bloomfield Hills, MI, George E. Bushnell, Jr, Detroit, MI, for Defendants.

OPINION AND ORDER DENYING DEFENDANTS' MOTION TO DISMISS FOR LACK OF SUBJECT MATTER JURISDICTION FILED AUGUST 24, 1995, AND DENYING DEFENDANTS' MOTION FOR SUMMARY JUDGMENT¹ FILED AUGUST 25, 1995

EDMUNDS, District Judge.

This matter came before the court at a hearing held on August 30 and 31, 1995. For the reasons set forth below, Defendants' motion to dismiss for lack of subject matter jurisdiction is denied and their motion for summary judgment also is denied.

I. Facts

Mother Waddles Perpetual Mission, Inc. was founded by Charleszetta "Mother" Waddles. The Mission is a charity which provides food, funds, and other assistance to the poor. Plaintiffs allege in their complaint that the Mission has used the "Mother Waddles" name since 1963, and that the name is well known throughout southeast Michigan.

According to the complaint, in 1992, the Mission contracted with Rick Frazier for the development and operation of a car donation program. As a result, Rick Frazier incorporated the Mother Waddles Car Donation Program, Inc. Rick Frazier operated the Program with his brother, Terry Frazier. The purpose of the Car Donation Program was to accept donated vehicles and then sell them at low prices to the poor. The Program was obligated to pay a portion of its proceeds to the Mission.

In mid-1995, the Mission and Mother Waddles claimed that the Car Donation Program failed to pay the Mission the full sum it was due under the contract, thereby breaching the contract. They also claimed that the Fraziers breached the contract in other ways, including failing to obtain a state license and failing to file certain federal tax forms. On July 24, 1995, the Mission and Mother Waddles terminated the contract with the Fraziers and the Car Donation Program.

As a result, the Mission and Mother Waddles brought this suit against Rick Frazier, Terry Frazier and the Car Donation Program, alleging the following claims in a five count complaint:

1. Declaratory judgment, that the contract was properly terminated and Defendants do not have the right to use the name "Mother Waddles";

2. Invasion of privacy/right to publicity and misappropriation of name;

3. Violation of the Lanham Act, 15 U.S.C. § 1125(a), unfair trade practice and unfair competition 4. Breach of contract; and

5. Accounting.

The complaint alleges that the district court has federal question jurisdiction based on the Lanham Act claim.

On August 24, 1995, Defendants filed a motion to dismiss for lack of subject matter jurisdiction. Defendants contend that this is a state law breach of contract case and not a Lanham Act case and thus there is no federal question jurisdiction. On August 25, 1995, Defendants filed a motion for partial summary judgment, alleging that the trademark was not used in interstate commerce and thus that the Lanham Act does not apply. Thus, Defendants contend that the Lanham Act claim should be dismissed.

II. Standard of Review

A. Motion to Dismiss

In considering a motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6) this court "must construe the complaint in the light most favorable to the plaintiff, accept all factual allegations as true, and determine whether the plaintiff undoubtedly can prove no set of facts in support of his claims that would entitle him to relief." In re DeLorean Motor Company, 991 F.2d 1236, 1240 (6th Cir.1993). The complaint must include direct or indirect allegations "respecting all the material elements to sustain a recovery under some viable legal theory." Id. (citations omitted).

B. Summary Judgment

Summary judgment is appropriate only when there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. Fed. R.Civ.P. 56(c). The central inquiry is "whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251-52, 106 S.Ct. 2505, 2512, 91 L.Ed.2d 202 (1986). After adequate time for discovery and upon motion, Rule 56(c) mandates summary judgment against a party who fails to establish the existence of an element essential to that party's case and on which that party bears the burden of proof at trial. Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986).

III. Analysis

A. Lanham Act Jurisdiction in a Breach of Contract Case

Federal question jurisdiction is determined on the face of a well-pleaded complaint. Caterpillar Inc. v. Williams, 482 U.S. 386, 392, 107 S.Ct. 2425, 2429-30, 96 L.Ed.2d 318 (1987). "The rule makes the plaintiff the master of the claim; he or she may avoid federal jurisdiction by exclusive reliance on state law." Id. at 392,² 107 S.Ct. at 2429.

The concept that a plaintiff is master of the complaint is further reinforced by federal statute 28 U.S.C. § 1658, which provides for amendment of defective allegations of jurisdiction. If a plaintiff sues in federal court and fails to properly allege a federal claim upon which jurisdiction may be based, he can amend his complaint to set forth the allegations needed for jurisdiction.³ Amendments for the purpose of correcting allegations of jurisdiction are broadly permitted in order to avoid dismissals on technical grounds. Miller v. Davis, 507 F.2d 308, 311 (6th Cir.1974).

The Lanham Act, 15 U.S.C. §§ 1051-1128, provides for federal jurisdiction over trademark actions. "The district and territorial courts of the United States shall have original jurisdiction ... of all actions arising under this chapter, without regard to the amount in controversy or to diversity or lack of diversity of the citizenship of the parties." 15 U.S.C. § 1121. Further, 28 U.S.C. § 1338(a) provides, "The district courts shall have original jurisdiction of any civil action arising under any Act of Congress relating to ... trademarks."

In trademark, patent, and copyright cases, circumstances often give rise to suits alleging both violation of trademark, patent, and copyright statutes under federal law and breach of contract principles under state law. In a typical lawsuit, the plaintiff is the owner of a trademark who permitted defendant to use the trademark pursuant to a contract. The defendant breached the contract, and the plaintiff revoked the right to use the trademark. The plaintiff claims that he had grounds to revoke because the breach was material and the material breach gave him the right to rescind the contract. The plaintiff then brings suit, alleging a violation of the Lanham Act and breach of contract. Courts disagree about whether federal jurisdiction is found in such a case, i.e., whether a claim asserting infringement as a result of a breach of contract arises under federal law.

There is no question but that the mere existence of a trademark, copyright, or patent does not confer jurisdiction over a contract dispute.

The federal grant of a patent or copyright has not been thought to infuse with any national interest a dispute as to ownership or contractual enforcement turning on the facts or on ordinary principals of contract law.

T.B. Harms Co. v. Eliscu, 339 F.2d 823, 826 (2d Cir.1964), cert. denied, 381 U.S. 915, 85 S.Ct. 1534, 14 L.Ed.2d 435 (1965); accord Silverstar Enterprises, Inc. v. Aday, 537 F.Supp. 236, 241 (S.D.N.Y.1982) (mere existence of trademark does not establish federal jurisdiction). The disagreement among courts centers around whether to look outside the bare allegations of the complaint to determine jurisdiction. The Sixth Circuit has not addressed this issue.

In T.B. Harms, while not faced with precisely the same issue presented here, Judge Friendly set forth the face of the complaint rule to determine whether a suit "arises under" the Copyright Act:

... if and only if the complaint is for a remedy expressly granted by the Act, e.g., a suit for infringement or for the statutory royalties for record reproduction ..., or asserts a claim requiring construction of the Act, ... or, at the very least and perhaps more doubtfully, presents a case where a distinctive policy of the Act requires that federal principles control the disposition of the claim.

Id. at 828. Under this test, the court examines only the complaint to determine whether the plaintiff's suit arises under federal law. In T.B. Harms, the plaintiff did not allege infringement, but instead sought an accounting of profits from joint authorship. The Second Circuit held that under the face of the complaint test, the claim did not arise under the Copyright Act. The court did not face the precise issue presented here, whether a claim asserting infringement as a result of breach of contract arises under federal law. However, in cases which did deal with this precise issue, the Fourth, Fifth, and Eleventh Circuits and certain judges of the Southern District of New York followed the face of the complaint rule. Sullivan v. Naturalis, Inc., 5 F.3d 1410, 1412 n. 2 (11th Cir.1993); Arthur Young & Co. v. City of Richmond, 895 F.2d 967, 970-71 (4th Cir. 1990); Goodman v. Lee, 815 F.2d 1030, 1031 (5th Cir.1987); Foxrun Workshop, Ltd. v. Klone Mfg., Inc., 686 F.Supp. 86, 90 (S.D.N.Y.1988).

In contrast, some courts follow an "essence of the complaint" test. In Berger v. Simon & Schuster, 631 F.Supp. 915 (S.D.N.Y.1986), the court looked beyond the complaint and examined whether the plaintiff wanted to enjoin infringement of his copyrighted work or whether he wanted a declaratory judgment that conditions precedent to revocation of the...