Switch, Ltd. v. Uptime Inst., LLC

• Decision Date: 03 December 2019
• Docket Number: Case No.: 2:19-cv-00631-GMN-NJK
• Citation: 426 F.Supp.3d 636
• Parties: SWITCH, LTD., Plaintiff, v. UPTIME INSTITUTE, LLC ; and Uptime Institute Professional Services, LLC, Defendants.
• Court: U.S. District Court — District of Nevada

426 F.Supp.3d 636

SWITCH, LTD., Plaintiff,

v.UPTIME INSTITUTE, LLC ; and Uptime Institute Professional Services, LLC, Defendants.

Case No.: 2:19-cv-00631-GMN-NJK

United States District Court, D. Nevada.

Signed December 3, 2019

Jessica M. Lujan, Joanna M. Myers, James D. Boyle, Holley Driggs Walch Fine Wray Puzey & Thompson, Samuel D. Castor, Switch, Ltd., Las Vegas, NV, for Plaintiff.

Chad R. Fears, Joshua Cools, Evans Fears & Schuttert LLP, Las Vegas, NV, Jennifer Insley-Pruitt, Pro Hac Vice, Dechert LLP, New York, NY, Luke Michael Reilly, Pro Hac Vice, Diane Siegel Danoff, Pro Hac Vice, Dechert LLP, Philadelphia, PA, for Defendants.

ORDER

Gloria M. Navarro, District Judge

Pending before the Court is the Partial Motion to Dismiss ("Motion to Dismiss"), (ECF No. 19), filed by Defendants Uptime Institute, LLC ("Uptime") and Uptime Institute Professional Services, LLC ("Uptime IPS") (collectively, "Defendants"). Plaintiff Switch, Ltd. ("Plaintiff") filed a Response, (ECF No. 30), and Defendants filed a Reply, (ECF No. 31). For the reasons discussed below, the Partial Motion to Dismiss is GRANTED in part and DENIED in part .

I. BACKGROUND

This case arises from Defendants' allegedly fraudulent representations in connection with their data center certification business. Defendant Uptime, through its affiliate Defendant Uptime IPS, offers data center certification services. (First Am. Compl. ("FAC") ¶¶ 22–23, ECF No. 15). Defendants employ an allegedly proprietary four-"tier" classification standard to certify the quality of the design, construction, and/or operations of their customers' data centers. (Id. ¶¶ 23–27). The United States Patent and Trademark Office ("USPTO") awarded Defendants federal service mark registrations for the "tiers" of certification that Defendants issue to their customers.¹ (Id. ¶¶ 15, 54–55, 71–77). Defendants represent that their certifications provide substantial value. (Id. ¶¶ 28–30, 33).

Plaintiff is a corporation that primarily designs, constructs, and operates data centers. (Id. ¶ 16). Based on Defendants' representations, Plaintiff paid Defendants over $225,000 to certify its SuperNap 8 Data Center's operations and over $260,000 to certify its SuperNap 9 Data Center's design, facility, and operations. (Id. ¶¶ 34–38). Despite receiving Defendants' highest "Tier IV" design, "Tier IV" facility, and "Tier IV Gold" certifications, Plaintiff alleges that the certifications have provided little value because Defendants' classification system misleads consumers shopping for data center services. (Id. ¶¶ 39–53).

Plaintiff argues that Defendants' certification scheme is inherently misleading. (Id. ) The First Amended Complaint explains that Defendants certify a data center's design before the client builds the data center. (Id. ¶ 43). As a result of this certification scheme, Plaintiff alleges that some of Defendants' clients have received Tier IV design certifications like Plaintiff, but, unlike Plaintiff, they have built their data centers to plans of lower quality than the plans Defendants certified.² (Id. ¶¶ 43, 45–46). Although these customers would not receive Tier IV facilities or operations certifications, they tout themselves as certified Tier IV data centers. (Id. ) Compounding the confusion, Defendants' website allegedly promotes its customers' design certifications in a manner that leads consumers to believe that the value of design certifications is akin to that of facilities or operations certifications. (Id. ¶ 44). Despite Plaintiff's repeated complaints to Defendants that Defendants' customers were misleading consumers by passing off their design certifications as facilities or operations certifications that they had not earned, Defendants took no action to police their service marks. (Id. ¶¶ 45–48, 50).

Plaintiff alleges that Defendants damaged Plaintiff's business by misleading Plaintiff's customers into believing there is no distinction between Defendants' design, facilities, and operations certifications. (Id. ¶¶ 47, 50). To that end, Plaintiff argues that Defendants' certification scheme has deprived Plaintiff of business by causing its prospective consumers to believe competitors with inferior data center operations and facilities offer services of equal quality. (Id. ¶ 51). Relatedly, Plaintiff alleges that its customers demand lower prices because its competitors who pass themselves off as equally certified offer lower rates. (Id. ¶ 52).

Accordingly, the First Amended Complaint asserts claims for: (1) breach of contract; (2) deceptive trade practices; (3) fraudulent procurement of Defendants' service marks; (4) abandonment of Defendants' service marks; and (5) a declaratory judgment that it has not infringed Defendants' marks.³ (Id. ¶¶ 95–133). Pursuant to its claims for relief, Plaintiff seeks damages and cancellation of Defendants' marks. (Id. 26:4–26:20).

In their Partial Motion to Dismiss, Defendants request that the Court dismiss all of Plaintiff's claims, excluding the breach of contract claim. (Partial Mot. to Dismiss ("MTD") 1:3–5, ECF No. 19). Defendants allege that: (1) Plaintiff has not pleaded its deceptive trade practices and fraudulent procurement of service mark claims with particularity as required under Federal Rule of Civil Procedure ("FRCP") 9(b) ; (2) the Court does not have subject matter jurisdiction over Plaintiff's claim for cancellation due to abandonment; and (3) Plaintiff cannot sufficiently plead a claim for declaratory judgment because there is no actual controversy or immediate threat of injury since Defendants have not brought an action for infringement. (Id. 4:7–19).

II. LEGAL STANDARD

A. 12(b)(6)

A court may dismiss a plaintiff's complaint for "failure to state a claim upon which relief can be granted." Fed. R. Civ. P. 12(b)(6). A properly pled complaint must provide "a short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2) ; Bell Atlantic Corp. v. Twombly , 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). While Rule 8 does not require detailed factual allegations, it demands "more than labels and conclusions" or a "formulaic recitation of the elements of a cause of action." Twombly , 550 U.S. at 555, 127 S.Ct. 1955. In assessing the sufficiency of a complaint, a district court must accept as true all well-pled factual allegations in the complaint; however, legal conclusions are not entitled to the assumption of truth. Ashcroft v. Iqbal , 556 U.S. 662, 679, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). The court must then consider whether the factual allegations in the complaint allege a plausible claim for relief. Id. When the claims in a complaint have not crossed the line from conceivable to plausible, plaintiff's complaint must be dismissed. Twombly , 550 U.S. at 570, 127 S.Ct. 1955.

Additionally, "[i]n alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake." Fed. R. Civ. P. 9(b). The rule requires that claims of fraud be accompanied by the "who, what, when, where, and how" of the conduct charged, Vess v. Ciba-Geigy Corp., USA , 317 F.3d 1097, 1106 (9th Cir. 2003) (quoting Cooper v. Pickett , 137 F.3d 616, 627 (9th Cir. 1997) ), so that the complaint may not simply "lump multiple defendants together." Destfino v. Reiswig , 630 F.3d 952, 958 (9th Cir. 2011). In other words, the complaint "must include ‘an account of the time, place, and specific content of the false representations as well as the identities of the parties to the misrepresentations.’ " Depot, Inc. v. Caring for Montanans, Inc. , 915 F.3d 643, 668 (9th Cir. 2019) (quoting Swartz v. KPMG, LLP , 476 F.3d 756, 764 (9th Cir. 2007) (per curiam)) (internal quotations omitted). Rule 9(b)'s particularity requirement ensures that the defendants are on "notice of the particular misconduct ... so that they can defend against the charge and not just deny that they have done anything wrong." Vess , 317 F.3d at 1106 (internal quotations omitted).

B. 12(b)(1)

Rule 12(b)(1) of the Federal Rules of Civil Procedure ("FRCP" or "Rules") permits motions to dismiss for lack of subject matter jurisdiction. Fed. R. Civ. P. 12(b)(1). When subject matter jurisdiction is challenged, the burden of proof is placed on the party asserting that jurisdiction exists. Scott v. Breeland , 792 F.2d 925, 927 (9th Cir. 1986) (holding that "[t]he party seeking to invoke the court's jurisdiction bears the burden of establishing that jurisdiction exists"). Accordingly, the court will presume lack of subject matter jurisdiction until the plaintiff proves otherwise in response to the motion to dismiss. Kokkonen v. Guardian Life Ins. Co. of Am. , 511 U.S. 375, 377, 114 S.Ct. 1673, 128 L.Ed.2d 391 (1994).

III. DISCUSSION

The Court's below discussion addresses whether Plaintiff's allegations support each of its claims at issue in the Motion to Dismiss, beginning with Plaintiff's claim for deceptive trade practices.

A. Deceptive Trade Practices

Plaintiff alleges that Defendants have engaged in deceptive trade practices under the Nevada Deceptive Trade Practices Act ("NDTPA"), Nev. Rev. Stats. 598 et seq. (FAC ¶¶ 28–53, 101–110). The Court finds that Plaintiff has stated a claim with sufficient particularity to survive Defendants' Motion to Dismiss.

In relevant part, the NDTPA defines deceptive trade practices to include: "knowingly mak[ing] a false representation as to the ... source ... or certification of ... services for sale;" and "represent[ing] that ... services for sale ... are of a particular standard, quality, or grade ... if he or she knows or should know that they are of another standard, quality, grade, style or model." Nev. Rev. Stat. 598.0915(2), (7). To state a private right of action under the NDTPA, a plaintiff must allege: (1) defendant violated the NDTPA, (2) causing plaintiff, (3) damages. See Picus v. Wal-Mart Stores, Inc. , 256 F.R.D. 651, 657–58 (D. Nev. 2009) ; see also Nev. Rev....