Nestle USA, Inc. v. Ultra Distribuciones Mundiales S.A. De C.V.

• Decision Date: 01 February 2021
• Docket Number: No. 5:20–CV–384–DAE,5:20–CV–384–DAE
• Citation: 516 F.Supp.3d 633
• Court: U.S. District Court — Western District of Texas
• Parties: NESTLE USA, INC., and Societe des Produits Nestle S.A., Plaintiffs, v. ULTRA DISTRIBUCIONES MUNDIALES S.A. DE C.V., and Ultra International Distributors, Inc., Defendants.

516 F.Supp.3d 633

NESTLE USA, INC., and Societe des Produits Nestle S.A., Plaintiffs,

v.ULTRA DISTRIBUCIONES MUNDIALES S.A. DE C.V., and Ultra International Distributors, Inc., Defendants.

No. 5:20–CV–384–DAE

United States District Court, W.D. Texas, San Antonio Division.

Signed February 1, 2021

Charles Stephen Kelley, Mayer Brown LLP, Houston, TX, Dale J. Giali, Daniel D. Queen, Pro Hac Vice, Mayer Brown LLP, Los Angeles, CA, Stephen M. Cohen, Adam Hudes, Pro Hac Vice, Mayer Brown, LLP, Washington, DC, for Plaintiff Nestle USA, Inc.

Charles Stephen Kelley, Mayer Brown LLP, Houston, TX, for Plaintiff Societe des Produits Nestle S.A.

Angeles Garcia Cassin, Mary-Olga Lovett, Greenberg Traurig LLP, Adelaida Vasquez Mihu, Greenberg Traurig, L.L.P., Houston, TX, Daniel Pulecio-Boek, Greenberg Traurig, LLP, Washington, DC, for Defendants.

ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS’ MOTION TO DISMISS

David Alan Ezra, Senior United States District Judge

Before the Court is Defendants’ Motion to Dismiss Plaintiffs’ First Amended Complaint, filed by Ultra Distribuciones Mundiales S.A. de C.V. ("Ultra Mundiales") and Ultra International Distributors, Inc. ("Ultra International") (collectively, "Defendants") on August 15, 2020. (Dkt. # 37.) Pursuant to Local Rule CV-7(h), the Court finds this matter suitable for disposition without a hearing. After careful consideration of the memoranda filed in support of and against the motion, the Court—for the reasons that follow—GRANTS the motion in part and DENIES the motion in part.

FACTUAL BACKGROUND

This dispute concerns Defendants’ sale and distribution of Nestlé products in the United States from Mexico. Nestlé USA, Inc. ("NUSA") and Societe des Produits Nestlé S.A. ("SPN") (collectively, "Plaintiffs") are wholly-owned subsidiaries of Nestlé, S.A. (Dkt. # 37.) NUSA sells Nestlé food and beverage products throughout the United States. (Dkt. # 26.) SPN owns Nestlé’s trademarks in the United States. (Id. ) NUSA is the exclusive licensee of those trademarks and all of their associated rights. (Id. ) According to Plaintiffs, "NUSA is responsible for the marketing, labelling, and distribution of Nestlé food and beverage products in the United States." (Id. )

Ultra Mundiales is a Mexican-based global distributor of Mexican products, including products manufactured by Nestlé Mexico that are intended for sale only in Mexico. (Id. ) Ultra International is a Texas-based subsidiary of Ultra Mundiales that imports and sells Mexican products in Texas, California, and elsewhere in the United States. (Id. ) According to Plaintiffs, these products include Nestlé Mexico products that Ultra Mundiales gives to Ultra International to sell in those locations. (Id. ) The products allegedly use Nestlé trademarks, including the trademarks "Nescafé" and "Nido." (Dkt. # 41.) Neither Defendant is an owner or licensee of Nestlé trademarks in the United States, and Plaintiffs have not authorized Defendants to sell Nestlé-trademarked products that are intended for sale in Mexico to U.S. consumers. (Dkt. # 26.) The products are therefore "gray market goods," which means that they are "foreign manufactured goods, for which a valid United States trademark has been registered, that are legally purchased abroad and imported into the United States without the consent of the American trademark holder." Weil Ceramics & Glass, Inc. v. Dash, 878 F.2d 659, 662 n.1 (3d Cir. 1989) ; see K Mart Corp. v. Cartier, Inc., 486 U.S. 281, 285, 108 S.Ct. 1811, 100 L.Ed.2d 313 (1988).

Plaintiffs allege that Defendants’ sale of these "gray market" Nestlé products in the United States has created consumer confusion. (Id. ) Specifically, purchasers and others in the United States "are likely to believe NUSA authorizes and controls the sale of Defendants’ products, or that Defendants are associated with or related to NUSA or are authorized by NUSA to distribute or sell the NUSA Products in the United States." (Id. )

Plaintiffs allege that the gray market products look very similar to the corresponding NUSA products, but they are materially different. (Id. ) For instance, some differences concern the products’ regulatory compliance. (See id.) According to Plaintiffs, the gray market products are not properly labeled in compliance with FDA regulations. (Id. ) For example, some labels are only in Spanish or contain different nutritional information than the NUSA version of those products. (Id. ) In addition, Plaintiffs contend that the gray market products "may contain formulations not intended for the United States market, and/or are not subject to NUSA's rigorous quality control standards for post-sale services." (Id. ) Plaintiffs contend that Defendants’ actions have resulted in "substantial losses to NUSA and its authorized distributors, disruptions to NUSA's business relationships with its customers[,] and the rights that NUSA has granted to its authorized distributors." (Id. )

PROCEDURAL HISTORY

Plaintiffs allege the following claims in their First Amended Complaint: (1) federal trademark infringement; (2) federal false designation of origin and unfair competition; (3) federal trademark dilution; (4) federal unlawful importation of goods infringing U.S. trademarks or names; (5) trademark dilution under Texas law; (6) trademark dilution under California law; (7) statutory unfair competition under California law; (8) unfair competition by misappropriation; (9) common law unfair competition; and (10) tortious interference with existing business relations. (Dkt. # 26.) On August 15, 2020, Defendants filed a motion to dismiss the Amended Complaint. (Dkt. # 37.) In the motion, Defendants seek partial dismissal of Plaintiffs’ claims.¹ (See id.) Plaintiffs responded to the motion on September 25, 2020. (Dkt. # 41.) Defendants filed a reply on November 2, 2020 (Dkt. # 46) before filing an amended reply on November 11, 2020 (Dkt. # 47).²

LEGAL STANDARD

Defendants move to dismiss Plaintiffs’ claims pursuant to Federal Rules of Civil Procedure 12(b)(2) and 12(b)(6).

With respect to Rule 12(b)(2), a federal court may exercise personal jurisdiction over a defendant if (1) the state's long-arm statute allows it; and (2) exercising jurisdiction would not violate the Due Process Clause of the Fourteenth Amendment. Halliburton Energy Servs., Inc. v. Ironshore Specialty Ins. Co., 921 F.3d 522, 539 (5th Cir. 2019). The two-step inquiry reduces to the federal due process analysis because the Texas long-arm statute extends to the limits of federal due process. Id.

Federal due process requires two things. First, the plaintiff must show that the defendant purposefully availed himself of the benefits and protections of the forum state by establishing minimum contacts with the state. Walk Haydel & Assocs., Inc. v. Coastal Power Prod. Co., 517 F.3d 235, 243 (5th Cir. 2008). Second, the "exercise of jurisdiction ... does not offend traditional notions of fair play and substantial justice." Id. When determining whether the exercise of jurisdiction is unfair or unreasonable, the Court examines five factors: (1) the burden on the nonresident defendant; (2) the forum state's interests; (3) the plaintiff's interest in securing relief; (4) the interest of the interstate judicial system in the efficient administration of justice; and (5) the shared interest of the several states in furthering fundamental social policies. Burger King Corp. v. Rudzewicz, 471 U.S. 462, 477, 105 S.Ct. 2174, 85 L.Ed.2d 528 (1985). "[I]t is rare to say the assertion [of jurisdiction] is unfair after minimum contacts have been shown." McFadin v. Gerber, 587 F.3d 753, 759–60 (5th Cir. 2009) (quoting Wien Air Alaska, Inc. v. Brandt, 195 F.3d 208, 215 (5th Cir. 1999) ).

There are two types of minimum contacts: general and specific jurisdiction. The parties agree that general jurisdiction does not exist in this case. (See Dkts. ## 41, 47.) Specific jurisdiction exists when a nonresident defendant has purposefully directed its activities at the forum state and the litigation results from alleged injuries that arise out of or relate to those activities. Burger King, 471 U.S. at 472, 105 S.Ct. 2174. "[A] non-resident defendant can only develop minimum contacts with a forum state through ‘actions by the defendant himself that create a substantial connection with the forum State.’ " Halliburton, 921 F.3d at 543 (quoting Burger King, 471 U.S. at 475, 105 S.Ct. 2174 ). A substantial connection is not formed by the unilateral activity of another party or a third person. Burger King, 471 U.S. at 475, 105 S.Ct. 2174 ; Halliburton, 921 F.3d at 543. "[A]n individual's contract with an out-of-state party alone [cannot] automatically establish sufficient minimum contacts in the other party's home forum." Burger King, 471 U.S. at 478, 105 S.Ct. 2174. Courts will evaluate "prior negotiations and contemplated future consequences, along with the terms of the contract and the parties’ actual course of dealing ... in determining whether the defendant purposefully established minimum contacts within the forum." Halliburton, 921 F.3d at 544 (quoting Gulf Coast Bank & Trust Co. v. Designed Conveyor Sys., L.L.C., 717 F. App'x 394, 399 (5th Cir. 2017) ).

Federal Rule of Civil Procedure 12(b)(6) authorizes dismissal of a complaint for "failure to state a claim upon which relief can be granted." To survive a Rule 12(b)(6) motion to dismiss, a plaintiff must plead "enough facts to state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged."

Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). In analyzing whether to grant a 12(b)(6) motion, a court accepts as true "all well-pleaded facts" and views those facts "in the...