P&G Canada delivered to Ianco. Upon information and belief, in late 1994 or early 1995, after leaving the employment of Ianco, Alam used waste products she had received from Ianco to manufacture bastard products that looked like Head & Shoulders hair shampoo. They were bottled in white containers shaped like the Head & Shoulders 15 oz. bottles.
Alam manufactured several thousand 15 oz. bottles of Head & Shoulders-type products, and sold them to A. Gruda Products ("Gruda"), a company in the Toronto area. The 15 oz. bottles were then sold to an individual who called himself Frank Pandullo, whose real identity and residence remain a mystery. Apparently, the 15 oz. bottles were then labeled as Head & Shoulders and sold to Zoeller International Trading, Inc., which sold them to Rapid Air & Ocean, Inc. and Southern Trading International, Inc. in Florida, which in turn sold them to Omni, a Florida corporation. Omni sold these products to Quality King, which is distributor of health and beauty aid products. Quality King is a New York corporation having its principal place of business in Suffolk County, N.Y. After receiving the counterfeit products from Omni, Quality King sold them to its wholesaler and retailer customers around the United States, including the Kroger Co., which operates approximately 1,200 supermarkets.
On August 3, 1995, P&G filed the complaint against Quality King. The complaint has since been amended twice to add numerous parties, including Omni, and to add other claims. In its Second Amended Complaint, P&G seeks, pursuant to the Trade-Mark Counterfeiting Act of 1984, 15 U.S.C. §§ 1116-17, the seizure of counterfeit Head & Shoulders, the equipment used to manufacture the counterfeit Head & Shoulders, and the records documenting the manufacture, sale, or receipt of the counterfeit Head & Shoulders, as well as treble damages, costs and attorney fees. P&G additionally sought injunctive and monetary relief for false descriptions and representations in commerce under Section 43 of the Lanham Trade-Mark Act, 15 U.S.C. § 1125, for trademark infringement in violation of Sections 32 and 43 of the Lanham Trade-Mark Act, 15 U.S.C. §§ 1114 and 1125, for injury to business reputation and dilution of mark in violation of N.Y. General Business Law § 368-d, for unfair competition in violation of New York common law and for contempt of court in connection with the violation of a prior court order.
In addition to the filing of the complaint: (1) P&G's Chief Executive Officer, John E. Pepper, sent a letter dated August 11, 1995 to retailers (the "Letter"); (2) P&G issued a press release dated August 11, 1995 (the "Press Release"); and (3) P&G distributed a nationwide advertisement (the "Advertisement"). The Advertisement warned the public of the potentially harmful counterfeit shampoo. In addition to warning the public, the Letter and the Press Release also stated that P&G had initiated an action against Quality King for selling counterfeit goods, as well as for trademark and package design infringement.
Two of the defendants, Omni and Quality King, filed counterclaims against the P&G companies. Quality King asserted the following four claims against P&G: (1) trade libel; (2) prima facie tort; (3) tortious interference with business relations; and (4) unfair competition. In addition, Quality King alleges the following three claims against the P&G companies: (1) breach of express warranty; (2) deceptive trade practices; and (3) contributory infringement. In its counterclaim, Omni reiterated three of those claims: (1) breach of express warranty; (2) deceptive trade practices; and (3) contributory infringement. The P&G companies now move to dismiss all counterclaims, pursuant to Fed. R. Civ. P. 12(b)(6) and 9(g).
A. Fed. R. Civ. P. 12(b)(6) standard
On a motion to dismiss for failure to state a claim, "the court should not dismiss the complaint pursuant to Rule 12(b)(6) unless it appears 'beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief'". Goldman v. Belden, 754 F.2d 1059, 1065 (2d Cir. 1985) (quoting Conley v. Gibson, 355 U.S. 41, 45-46, 2 L. Ed. 2d 80, 78 S. Ct. 99 (1957)); see also IUE AFL-CIO Pension Fund v. Herrmann, 9 F.3d 1049, 1052-53 (2d Cir. 1993), cert. denied, 513 U.S. 822, 115 S. Ct. 86, 130 L. Ed. 2d 38 (1994). The Second Circuit stated that in deciding a Rule 12(b)(6) motion, a court may consider "only the facts alleged in the pleadings, documents attached as exhibits or incorporated by reference in the pleadings and matters of which judicial notice may be taken." Samuels v. Air Transport Local 504, 992 F.2d 12, 15 (2d Cir. 1993); see also Paulemon v. Tobin, 30 F.3d 307, 308-09 (2d Cir. 1994); Rent Stabilization Ass'n of the City of New York v. Dinkins, 5 F.3d 591, 593-94 (2d Cir. 1993) (citing Samuels, 992 F.2d at 15).
It is not the Court's function to weight the evidence that might be presented at a trial; the Court must merely determine whether the counterclaim itself is legally sufficient, see Goldman, 754 F.2d at 1067, and in doing so, it is well settled that the Court must accept the allegations of the counterclaims as true, see Leeds v. Meltz, 85 F.3d 51 (2d Cir. 1996); LaBounty v. Adler, 933 F.2d 121, 123 (2d Cir. 1991); Procter & Gamble Co. v. Big Apple Indus. Bldgs., Inc., 879 F.2d 10, 14 (2d Cir. 1989), cert. denied, 493 U.S. 1022, 110 S. Ct. 723, 107 L. Ed. 2d 743 (1990), and construe all reasonable inferences in favor of the counterclaim plaintiff. See Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S. Ct. 1683, 40 L. Ed. 2d 90 (1974); Leeds, supra, 85 F.3d at 51; Bankers Trust Co. v. Rhoades, 859 F.2d 1096, 1099 (2d Cir. 1988), cert. denied, 490 U.S. 1007, 109 S. Ct. 1642, 104 L. Ed. 2d 158 (1989).
The Court is mindful that under the modern rules of pleading, a counterclaim plaintiff need only provide "a short and plain statement of the claim showing that the pleader is entitled to relief", Fed. R. Civ. P. 8(a)(2), and that "all pleadings shall be so construed as to do substantial justice," Fed. R. Civ. P. 8(f).
The issue before the Court on a Rule 12(b)(6) motion "is not whether a plaintiff will ultimately prevail, but whether the claimant is entitled to offer evidence to support the claim." Villager Pond, Inc. v. Town of Darien, 56 F.3d 375, 378 (2d Cir. 1995), cert. denied, U.S. , 117 S. Ct. 50, 136 L. Ed. 2d 14 (1996) (citing Scheuer, supra, 416 U.S. at 235-36). Recovery may appear remote and unlikely on the face of the pleading, but that is not the test for dismissal under Rule 12(b)(6). Gant v. Wallingford Bd. of Educ., 69 F.3d 669, 673 (2d Cir. 1995) (citing Scheuer, 416 U.S. at 236).
Initially, the Court notes that the parties have submitted additional evidence including excerpts of deposition testimony which are outside the scope of the pleadings. Quality King requests that the Court convert the P&G companies' motion to dismiss into a motion for summary judgment. The Court may do so upon notice to all parties. See Fed. R. Civ. P. 12(c). However, since the Court has not given the parties advance notice of such conversion, the Court declines to convert this motion to dismiss into a motion for summary judgment. The Court will take into consideration any documents which were incorporated by reference upon which Quality King and Omni relies or which were integral to the counterclaims. See International Audiotext Network, Inc. v. AT&T, 62 F.3d 69, 72 (2d Cir. 1995). Hence, the Court will only take into its consideration the Press Release, the Advertisement and the Letter. See Quality King Distributors, Inc.'s Answer to Second Amended Complaint, Counterclaims and Crossclaims ("Quality King's Counterclaim") PP 52, 56-57, 59; Omnisource International, Inc.'s Counterclaims ("Omni's Counterclaim") PP 27, 28. Pursuant to the above standard, the Court will not consider the Contact Detail Reports submitted by Quality King. The Court notes that it is not constrained to accept the allegations in the counterclaims with respect to the Press Release, the Advertisement and the Letter which are presently before the Court. See id. However, the Court will resolve any ambiguities in Quality King and Omni's favor. See id.
It is within this framework that the Court addresses the present motion to dismiss.
B. Quality King's counterclaim of trade libel
Quality King alleges that it was libeled by the statements contained in the Letter, the Advertisement and the Press release concerning the lawsuit brought by P&G against Quality King for selling contaminated, counterfeit Head & Shoulders shampoo. As a threshold matter, the Court notes that the Advertisement does not contain any reference to Quality King or to any law suit. Therefore, Quality King's counterclaim of trade libel arising from the Advertisement fails to state a cause of action. See Fetler v. Houghton Mifflin Co., 364 F.2d 650, 653 (2d Cir. 1966) (plaintiffs must establish that any alleged defamatory statement is "of and concerning" them). With regard to the Letter and the Press Release, the Court finds that the statements made by P&G are privileged. Therefore, this counterclaim must be dismissed for failure state a cause of action.
Section 74 of the New York Civil Rights Law provides, in relevant part, that "[a] civil action cannot be maintained against any person, firm or corporation, for the publication of a fair and true report of any judicial proceedings . . . ." N.Y. Civ. Rights L. § 74 (McKinney 1992). "Under New York law, statements that arise during the course of a judicial proceeding are absolutely immune from prosecution for defamation so long as they are reasonably related to that proceeding." Lehman Bros. Commercial Corp. v. China Int'l United Petroleum and Chemicals Co., Ltd., 1995 U.S. Dist. LEXIS 15196, No. 94 Civ. 8304, 1995 WL 608313, at *5 (S.D.N.Y. Oct. 16, 1995). "The test is whether the published account of the proceeding would have a different effect on the reader's mind than the actual truth, if published . . . . If the published account, along with the rest of the article, suggests more serious conduct than that actually suggested in the official proceeding, then the privilege does not attach, as a matter of law." Daniel Goldreyer, Ltd. v. Van de Wetering, 217 A.D.2d 434, 630 N.Y.S.2d 18, 22 (1st Dep't 1995) (citations omitted). "It is for the Court, in the first instance, to decide whether a publication is protected under section 74 as a fair report of [court] documents." Karp v. Hill & Knowlton, Inc., 631 F. Supp. 360, 363 (S.D.N.Y. 1986) (citations omitted).
The Court finds that the present case is analogous to the one presented in El Greco Leather Prods. Co., Inc. v. Shoe World, Inc., 623 F. Supp. 1038 (E.D.N.Y. 1985), rev'd in part on other grounds, 806 F.2d 392 (2d Cir. 1986), cert. denied, 484 U.S. 817, 108 S. Ct. 71, 98 L. Ed. 2d 34 (1987). In El Greco, the holder of the CANDIES trademark brought a trademark infringement claim against the seller of counterfeit CANDIES shoes. One week after the filing of the complaint, an article appeared in a trade publication which contained "statements to the effect that . . . [the retailer] was engaged in counterfeiting and other unfair trade practices." Id. at 1041. In dismissing the counterclaims for defamation and trade libel, the court stated that, "when determining whether an article constitutes a 'fair and true' report, the language used therein should not be dissected and analyzed with a lexicographer's precision." El Greco, 623 F. Supp. at 1043 (quoting Holy Spirit Ass'n v. New York Times Co., 49 N.Y.2d 63, 68, 399 N.E.2d 1185, 1187, 424 N.Y.S.2d 165, 167 (1979)). The article need only be a "substantially accurate" rendering of the allegations of the complaint. Id.
In the present case, the Letter makes the following reference to Quality King:
Your Procter & Gamble Account Executive will be working with the appropriate people in our organization to provide any assistance we can in dealing with this situation. In return, we need your assistance in identifying the sources of this counterfeit product in the event you should have any of it. Procter & Gamble has already filed suit against one known distributor of this production, Quality King, and will promptly take any additional legal action against those who have produced and distributed this counterfeit product.