Ny Mach. Inc. v. Monthly
| Decision Date | 31 May 2018 |
| Docket Number | Case No. 17-cv-12269 (SDW)(LDW) |
| Parties | NY MACHINERY INC. and KLEANERS LLC, Plaintiffs, v. THE KOREAN CLEANERS MONTHLY, JOHN CHUNG a/k/a SEUNG CHAE CHUNG, and JOHN DOES 1-10, Defendants. |
| Court | U.S. District Court — District of New Jersey |
NOT FOR PUBLICATION
Before this Court is Defendants The Korean Cleaners Monthly ("Defendant TKCM") and John Chung's ("Chung") (collectively, "Defendants") Motion to Dismiss the Complaint pursuant to Federal Rule of Civil Procedure ("Rule") 12(b)(6). Jurisdiction is proper pursuant to 28 U.S.C. § 1331. Venue is proper pursuant to 28 U.S.C. § 1391. This opinion is issued without oral argument pursuant to Rule 78. For the reasons stated herein, Defendants' Motion to Dismiss is GRANTED in part and DENIED in part.
Robert Lee ("Lee") is the President of Plaintiff NY Machinery Inc. ("Plaintiff NYM"), which sells washing machines and dry-cleaning products, including EM Soap, a petroleum-based dry-cleaning detergent, for which Lee owns a patent. (Compl. ¶¶ 2, 9, 11, ECF No. 1.) Lee also owns and operates Plaintiff Kleaners LLC ("Plaintiff Kleaners"), a magazine publication for the Korean dry-cleaning industry. (Id. ¶¶ 3, 15.) Defendant Chung owns and operates Defendant TKCM, a monthly trade publication that also targets the Korean dry-cleaning industry. (Id. ¶¶ 4-5.)
Plaintiff NYM is a former client of Defendants, having previously advertised its products in Defendant TKCM's magazine. (Id. ¶ 14.) In October 2016, Plaintiff NYM stopped advertising its products in Defendant TKCM due to concerns about the accuracy of the information contained therein. (Id.) Thereafter, Lee formed Plaintiff Kleaners and began advertising Plaintiff NYM's products in his own industry magazine. (Id. ¶ 15.) Plaintiffs allege that Defendants, in retaliation, began a "malicious defamatory campaign" against Plaintiffs in December 2016 to damage their businesses and simultaneously boost their competitors' businesses, some of which Defendant Chung allegedly has an ownership interest in. (Id. ¶¶ 16-18.) Specifically, Plaintiffs allege that Defendants "published numerous articles in TKCM . . . falsely accusing NYM of committing a crime and deceiving . . . customers[.]" (Id. ¶ 19.) In an August 2017 issue of Defendant TKCM, Plaintiff NYM is allegedly referred to as "crooks" and a "fraud," both in an article, and on the magazine's cover. (Id. ¶ 20.) Plaintiffs sent cease and desist letters to Defendants in August, September, and October of 2017. (Id. ¶ 47.) According to the Complaint, Defendants have persisted in their defamatory conduct, causing Plaintiffs to lose business and customer goodwill. (Id. ¶¶ 48-51.)
On November 30, 2017, Plaintiffs filed an eight-count Complaint alleging: (1) unfair competition in violation of § 43(a) of the Lanham Act, 15 U.S.C. § 1125(a) (Count One); (2) unfair competition in violation of N.J. Stat. Ann. § 56:4-1 (Count Two); (3) common law unfair competition (Count Three); (4) false advertising in violation of § 43(a) of the Lanham Act, 15 U.S.C. § 1125(a) (Count Four); (5) tortious interference with prospective economic relations (Count Five); (6) defamation per se (Count Six); (7) false light (Count Seven); and (8) trade libel(Count Eight).1 (See generally id.) On January 24, 2018, Defendants moved to dismiss the Complaint. (See ECF No. 10.) Plaintiffs submitted their opposition on February 20, 2018, and Defendants replied on February 26, 2018. (See ECF Nos. 13-14.)
Rule 8(a)(2) requires a complaint to set forth a "short and plain statement of the claim showing that a pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2). This short and plain statement must "give the defendant fair notice of what the . . . claim is and the grounds upon which it rests." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). The pleading standard under Rule 8 requires "more than an unadorned, the defendant-unlawfully-harmed-me-accusation." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).
In considering a motion to dismiss under Rule 12(b)(6), a court must "accept all factual allegations as true, construe the complaint in the light most favorable to the plaintiff, and determine whether, under any reasonable reading of the complaint, the plaintiff may be entitled to relief." Phillips v. Cty. of Allegheny, 515 F.3d 224, 231 (3d Cir. 2008) (quoting Pinker v. Roche Holdings Ltd., 292 F.3d 361, 374 n.7 (3d Cir. 2002)). "[A] complaint attacked by a . . . motion to dismiss does not need detailed factual allegations[,]" Twombly, 550 U.S. at 555, but conclusory or bare-bones allegations will not do. See Iqbal, 556 U.S. at 678 (). "To survive a motion to dismiss, a complaint must contain sufficient factual matter . . . to state a claim to relief that is plausible on its face." Id. (internal quotation marks omitted); see also Fowler v. UPMCShadyside, 578 F.3d 203, 210-11 (3d Cir. 2009) ().
Section 43 of the Lanham Act, codified under 15 U.S.C. § 1125(a), states, in relevant part:
15 U.S.C. § 1125(a)(1)(B). "Subsection (B) describes the cause of action known as false advertising." Industria De Alimentos Zenú S.A.S. v. Latinfood U.S. Corp., No. 16-6576, 2017 WL 6940696, at *11 (D.N.J. Dec. 29, 2017) (citing 15 U.S.C. § 1125(a)).
To establish a false advertising claim under the Lanham Act, a plaintiff must allege:
1) that the defendant has made false or misleading statements as to his own product [or another's]; 2) that there is actual deception or at least a tendency to deceive a substantial portion of the intended audience; 3) that the deception is material in that it is likely to influence purchasing decisions; 4) that the advertised goods traveled in interstate commerce; and 5) that there is a likelihood of injury to the plaintiff in terms of declining sales, loss of good will, etc.
Parks LLC v. Tyson Foods, Inc., 863 F.3d 220, 226 n.7 (3d Cir. 2017) (quoting Warner-Lambert Co. v. Breathasure, Inc., 204 F.3d 87, 91-92 (3d Cir. 2000)).
Here, Plaintiffs have adequately pled a false advertising claim under the Lanham Act. Plaintiffs satisfy the first prong by alleging that Defendants published, and verbally disseminated, statements about Plaintiffs engaging in "deceptive business practices," and the effectiveness of Plaintiff NYM's products. (See e.g., Compl. ¶¶ 19-20, 31-35.) Specifically, Plaintiffs allege that Defendants "published numerous articles in Defendant TKCM . . . falsely accusing [Plaintiff] NYM of committing a crime[,]" referring to Plaintiff NYM as "crooks" and "a fraud," and stating that Plaintiff NYM lied to customers about the contents of its filters. (Id. ¶¶ 19-20, 31-35.) Plaintiffs also allege that Defendants, in an effort to unfairly compete with Plaintiff NYM, "encouraged [Plaintiff] NYM's customers and prospective customers to report NYM to the Better Business Bureau or a local prosecutor, and to initiate class-action lawsuits against NYM[.]" (Compl. ¶ 37.)2 Moreover, the Complaint alleges that Defendants were motivated to stop consumers from investing in Plaintiffs' businesses and instead to invest in Plaintiffs' competitors' businesses, some of which Chung has an ownership interest in. (Id. ¶¶ 16-18, 27, 38-39, 51, 93, 97.)
Under this prong, Defendants argue that their alleged defamatory statements do not constitute "commercial speech," were not made in commercial advertising or promotion, and therefore cannot give rise to a false advertising claim because they are "criticism[s] of the goods or services of another by one . . . who is not engaged in marketing or promoting a competitive product or service." (Defs.' Br. at 9, 17-19, ECF No. 10-1 (quoting Gordon & Breach Sci. Publishers v. Am. Inst. of Physics, 859 F. Supp. 1521, 1534 (S.D.N.Y. 1994)).) In order for representations to constitute "commercial advertising or promotion" under § 1125(a)(1)(B), theymust be: "(1) commercial speech; (2) by a defendant in commercial competition with the plaintiff;3 (3) for the purpose of influencing customers to buy the defendant's goods or services; and (4) disseminated sufficiently to the relevant purchasing public to constitute advertising or promotion within the industry." Danielson, 2015 WL 381332, at *13 (quoting Gordon & Breach Sci. Publishers, 859 F. Supp. at 1537). To determine whether speech is commercial, courts consider the following factors: "(1) is the speech an advertisement; (2) does the speech refer to a specific product or service; and (3) does the speaker have an economic motivation for the speech." U.S. Healthcare, Inc., v. Blue Cross of Greater Phila., 898 F. 2d 914, 933 (3d Cir. 1990) (citing Bolger v. Youngs Drugs Prods. Corp., 463 U.S. 60, 66-67 (1983)).
As noted above, the Complaint alleges that Defendants falsely criticized Plaintiffs' goods and services in a publication in an effort to promote the businesses of NYM's competitors, for the benefit of Defendants. (See Compl. ¶¶ 16-19, 38.) Thus, in accepting the allegations as true, Plaintiffs have sufficiently pled that these statements are commercial speech made in commercial advertising or promotion. See Phillips, 515 F.3d at 231.
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