Mugworld, Inc. v. G.G. Marck & Associates, Inc., 4:05cv441.
Decision Date | 23 August 2007 |
Docket Number | No. 4:05cv441.,4:05cv441. |
Citation | 563 F.Supp.2d 659 |
Parties | MUGWORLD, INC., Plaintiff/Counter-Defendant, v. G.G. MARCK & ASSOCIATES, INC., Defendant/Counter-Plaintiff. |
Court | U.S. District Court — Eastern District of Texas |
Mark John Zimmermann, Dealy Zimmermann Clark Malouf & MacFarlane, PC, Dallas, TX, for Plaintiff/Counter-Defendant.
Bryan Hillary Burg, Clyde Moody Siebman, Spencer Brock Benson, Siebman Reynolds Burg & Phillips, Sherman, TX, Daniel T. Ellis, Lydy & Moan, Sylvania, OH, for Defendant/Counter-Plaintiff.
Before the court are Plaintiff Mugworld's Motion to Dismiss Defendant Marck's Counterclaims of Lanham Act Violations, Unfair Competition and Fraud (Dkt.55), Third-Party Defendant Rich Neely's Motion to Dismiss Marck's Second Amended Counterclaims (Dkt.95), and Mugworld's Motion for Partial Summary Judgment (Dkt.94). After having considered the motions and Marck's responses, the court is of the opinion that Marck's claims against Mugworld and Neely for violations of the Lanham Act, unfair competition, conspiracy, fraud, and fraud in the inducement should be dismissed.
Defendant and Counter-Plaintiff G.G. Marck & Associates, Inc. ("Marck") is in the business of marketing and selling underrated coffee mugs ("blankware") to customers in the sublimation industry who apply artwork to the blankware and then sell them to consumers. Plaintiff and Counter-Defendant Mugworld, Inc. ("Mugworld"), which is in the sublimation business, has purchased blankware from Marck. Mugworld is not an importer of mugs. Rather, it buys blank mugs from importers, like Marck, in order to decorate them at its facilities in Gainesville, Texas.
Mugworld has filed the underlying breach of contract and deceptive trade practices action alleging that Marck refused to refund its money after Mugworld returned blankware that it deemed commercially unacceptable for the sublimation process. Marck, in turn, has asserted the following counterclaims against Mugworld: breach of contract, groundless DTPA suit, violations of the Lanham Act, unfair competition, conspiracy, and fraud and fraud in the inducement. Marck has also alleged that third-party defendant, Rich Neely, is liable as a conspirator with Mugworld for all of these acts.
Other than its breach of contract, groundless DTPA, fraud, and fraud in the inducement claims, the remainder of Marck's claims are based on Mugworld's apparent purchase of blankware from some of Marck's competitors, Photo U.S.A. Corporation, North American Investments Corp., and Photo USA Electronic Graphic, Inc., which are all owned or operated by James Peng and his wife ("the Peng Companies"). The Peng Companies have not been made parties to the underlying suit, but form the basis of most of Marck's claims against Mugworld and Neely.1
Both Marck's and the Peng Companies' mugs are manufactured in China where they are coated with a material that will facilitate sublimation. Third-party defendant, Rich Neely, manufactures and sells the coating and coating machines used by the Peng Companies and some of the coating used by Marck. After the mugs are coated, they are then imported to the United States for purchase by, among others, Mugworld.
In its this suit, Marck alleges that, while its mugs designate their country of origin as China, none of the mugs produced by the Peng Companies or decorated by Mugworld do. Marck further alleges that the mugs imported by the Peng Companies are made using forced or prison labor. Additionally, Marck alleges that the Peng Companies regularly ship overweight containers from China and under-report values of goods to reduce their importation tariffs. Marck alleges that Mugworld and Neely conspired with the Peng Companies in all of these alleged wrongdoings and seeks damages and injunctive relief as a result.
For purposes of its claims here, Marck has not alleged that it purchases any mugs from Mugworld for use in its blankware business. Marck has also not alleged that it is a direct competitor of Mugworld or Neely. Rather, Marck's claims are based on Mugworld's purchase of mugs from the Peng Companies. Marck claims that Mugworld's use of mugs made by the Peng Companies has caused it to lose sales and suffer a decrease in its profit margins.
In their motions to dismiss and motion for summary judgment, Mugworld and Neely seek to have Marck's Lanham Act and unfair competition claims dismissed because Marck has no standing to bring them. Mugworld further argues that Marck's conspiracy and fraud claims fail. The court agrees that, whatever grievances Marck may have against the Peng Companies for their alleged conduct, it does not have standing to pursue them vicariously through Mugworld and Neely in this case.
Mugworld has filed both a motion to dismiss for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6) and motion for summary judgment under Federal Rule of Civil Procedure 56, seeking to dismiss Marck's counterclaims. Neely has filed a motion to dismiss based on the same arguments.2
Rule 12(b)(6) provides that a party may move for dismissal of an action for failure to state a claim upon which relief can be granted. FED. R. CIV. P. 12(b)(6). The court must accept as true all well-pleaded facts contained in the plaintiffs complaint and view them in the light most favorable to the plaintiff. Baker v. Putnal, 75 F.3d 190, 196 (5th Cir.1996). In addition, all reasonable inferences are to be drawn in favor of the plaintiffs claims. Lowrey v. Texas A & M Univ. Sys., 117 F.3d 242, 247 (5th Cir.1997). However, dismissal for failure to state a claim does not require the appearance that, beyond a doubt, the plaintiff can prove no set of facts in support of his claim that would entitle him to relief. Bell Atlantic Corp. v. Twombly, ___ U.S. ___, 127 S.Ct. 1955, 1968, 167 L.Ed.2d 929 (2007). Rather, to survive a 12(b)(6) motion to dismiss, a plaintiff must show, after adequately stating his claim, that it may be supported by some set of facts consistent with the allegations in the "complaint. Id.
When considering a 12(b)(6) motion, the court must limit its inquiry to the facts stated in the complaint. Lovelace v. Software Spectrum, Inc., 78 F.3d 1015, 1017-18 (5th Cir.1996). If the court considers extrinsic evidence, the motion is converted into a motion for summary judgment and summary judgment standards will apply. FED. R. CIV. P. 12(b).
Summary judgment is appropriate when, viewing the evidence and all justifiable inferences in the light most favorable to the non-moving party, there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. FED. R. CIV. P. 56(c); Hunt v. Cromartie, 526 U.S. 541, 549, 119 S.Ct. 1545, 143 L.Ed.2d 731 (1999). The appropriate 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, 91 L.Ed.2d 202 (1986).
The party moving for summary judgment has the initial burden to prove there are no genuine issues of material fact for trial. Provident Life & Accident Ins. Co. v. Goel, 274 F.3d 984, 991 (5th Cir.2001). In sustaining this burden, the movant must identify those portions of pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, which it believes demonstrate the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 325, 106 S.Ct. 2548, 2553, 91 L.Ed.2d 265 (1986). The moving party, however, "need not negate the elements of the nonmovant's case." Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir. 1994) (en banc). The movant's burden is only to point out the absence of evidence supporting the nonmoving party's case. Stults v. Conoco, Inc., 76 F.3d 651, 655 (5th Cir.1996).
In response, the nonmovant's motion "may not rest upon mere allegations contained in the pleadings, but must set forth and support by summary judgment evidence specific facts showing the existence of a genuine issue for trial." Ragas v. Tennessee Gas Pipeline Co., 136 F.3d 455, 458 (5th Cir.1998) (citing Anderson, 477 U.S. at 255-57, 106 S.Ct. at 2513-14). Once the moving party makes a properly supported motion for summary judgment, the nonmoving party must look beyond the pleadings and designate specific facts in the record to show that there is a genuine issue for trial. Stults, 76 F.3d at 655. The citations to evidence must be specific, as the district court is not required to "scour the record" to determine whether the evidence raises a genuine issue of material fact. E.D. TEX. LOCAL R. CV-56(d). Neither "conclusory allegations" nor "unsubstantiated assertions" will satisfy the nonmovant's burden. Stults, 76 F.3d at 655.
Here, the parties have filed both a motion for summary judgment and motions to dismiss. As shown below, taken in tandem, these motions dispose of Marck's claims against Mugworld and Neely for violations of the Lanham Act, unfair competition, conspiracy, fraud, and fraud in the inducement.
Mugworld and Neely have first challenged Marck's standing to assert certain claims against them. Marck has the burden of proof and persuasion as to the existence of standing as to its claims under the Lanham Act, claims of unfair competition, and fraud. Lujan v. Defenders of Wildlife, 504 U.S. 555, 561, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992); Int'l Ass'n of Machinists & Aerospace Workers v. Goodrich Corp., 410 F.3d 204, 211-12 (5th Cir.2005). In determining standing, the court must undertake a "careful...
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