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Ivoclar Vivadent, Inc. v. Tri-County Dental Supply

August 21, 2006

IVOCLAR VIVADENT, INC., PLAINTIFF,
v.
TRI-COUNTY DENTAL SUPPLY, INC., DEFENDANT AND COUNTERCLAIMANT,
v.
IVOCLAR VIVADENT, INC, COUNTERDEFENDANT, AND IVOCLAR VIVADENT, A.G. AND PETERSON DENTAL SUPPLY, INC., ADDITIONAL COUNTERDEFENDANTS.



The opinion of the court was delivered by: John T. Elfvin S.U.S.D.J.

MEMORANDUM ORDER*fn1

INTRODUCTION AND BACKGROUND

Plaintiff Ivoclar Vivadent, Inc. ("Ivoclar") commenced this action and three others*fn2 on April 5, 2004 against defendant Tri-County Dental Supply, Inc. ("Tri-County") and the other defendants in those actions, alleging, inter alia, trademark infringement and dilution (15 U.S.C. §§1114 & 1125), unlawful importation (15 U.S.C. §1124 and 19 U.S.C. §1526), misappropriation and unfair competition with regard to certain of its registered and unregistered trademarked dental products.

An Amended Complaint was filed on July 27, 2004 (Dkt. #8) and on December 13, 2004 Tri-County filed its answer*fn3 with counterclaims (Dkt. #13). On March 8, 2005 Ivoclar filed its reply to the counterclaims (Dkt. #19) and on January 19, 2006 an Acceptance of Tri-County's Offer of Judgment was filed which included money damages and a permanent injunction wherein Tri-County will sell only Ivoclar products that originate either directly from Ivoclar or an Ivoclar-authorized distributor (Dkt. #29). The counterclaims remain, and before the Court is Ivoclar's motion pursuant to FRCvP 12(c) to dismiss those counterclaims (Dkt. #24). Also pending before the Court are Tri-County's motion to compel (Dkt. #30) and Ivoclar's motion to stay (Dkt. #35).

The Amended Complaint alleged*fn4 the following. Ivoclar is in the business of marketing, distributing and selling dental products nationally and internationally. Tri-County is a California corporation doing business in New York and also sells and distributes, among other things, dental products. Ivoclar has valid and inherently distinctive trademarks with regard to its dental products and claims a carefully cultivated reputation for excellent product quality, customer service and reliability. Ivoclar claimed that Tri-County unlawfully gained possession of some of Ivoclar's products, as enumerated in the complaint, and imported them into the United States. Tri-County then sold them for profit and distributed them without the high quality advertising and marketing that Ivoclar demands, with insufficient packaging*fn5 , labeling, inspection, quality control or warranties, hence making them materially different from the products as distributed and sold by Ivoclar. As such, Ivoclar claimed that its customers were likely to be misled, confused or deceived as to the source of the products and that the distinctive quality of Ivoclar's trademarks and the integrity of its business reputation were threatened. Ivoclar further alleged that Tri-County refused to stop selling its products or identify its source of supply of such products when so requested by Ivoclar. The complaint sought, inter alia, a permanent injunction, an accounting, constructive trust, treble damages, attorney's fees and costs.

Tri-County's counterclaims seek (1) a judicial declaration under the Declaratory Judgment Act, 28 U.S.C. §2201 et seq. ("the DJA") that Tri-County is not liable to Ivoclar under any of the claims asserted in the complaint and that Ivoclar and the additional named defendants, Ivoclar Vivadent, A.G.(Ivoclar's foreign parent corporation - hereinafter "IvoclarAG") and Peterson Dental Supply (an authorized Ivoclar distributor - hereinafter "Peterson")*fn6 , are liable to Tri-County for the remaining counterclaims contained therein["Count I"]; (2) judgment against the additional defendants for violations of Section 1 of the Sherman Act (15 U.S.C. §1), the Wilson Tariff Act (15 U.S.C. §8) and the New York Donnelly Act(Article 22, section 340 of the New York General Business Law) ["Counts II, III and IV", respectively]; (3) judgment against the counterclaim defendants for tortious interference with prospective and advantageous business relations and civil conspiracy ["Counts V and VI", respectively]; and (4) cancellation of Ivoclar's trademark registrations pursuant to Section 37 of the Lanham Act (15 U.S.C. §1119) ["Count VII"]. The counterclaim defendants have replied to the counterclaims and now move this Court for their dismissal for failure to state a claim upon which relief can be granted.

DISCUSSION

At the outset, the Court will address the impact of the Acceptance of Offer of Judgment (Dkt. #29), referred to, supra, wherein Ivoclar's claims against Tri-County have been resolved. Insomuch as Count I of Tri-County's counterclaims seeks declaratory relief against Ivoclar on the allegations in the complaint, the Acceptance of the Offer of Judgment renders this claim moot and it shall be dismissed. This ruling is in no way to be construed as a finding on the individual merits of Ivoclar's claims against Tri-County, as parties "settle" lawsuits for any number of reasons that have nothing to do with the relative merits of the claims. The Court is mindful, however, that a judgment is not a settlement and shall consider such, if necessary, when examining the remaining claims. Additionally, but not related to the aforementioned Acceptance, to the extent that Count I seeks declaratory relief for the same counterclaims enumerated in the remaining "Counts", it is duplicative and redundant and shall be dismissed as well. See generally, Wilton v. Seven Falls Co., 515 U.S. 277, 282 (1995) ("[D]istrict courts possess discretion in determining whether and when to entertain an action under the Declaratory Judgment Act %%% .") Hence, only Counts II through VII of the counterclaims remain.

The counterclaim defendants have sought a judgment on the pleadings. Judgment on the pleadings pursuant to FRCvP 12(c) is appropriate "where material facts are undisputed and where a judgment on the merits is possible merely by considering the contents of the pleadings." Sellers v. M.C. Floor Crafters, Inc., 842 F.2d 639, 642 (2d Cir. 1988). The standard for granting a Rule 12(c) motion is the same as that of a Rule 12(b)(6) motion for failure to state a claim, in that the district court must accept the allegations in the complaint (or counterclaim, as the case may be) as true and draw all inferences in the non-moving party's favor. Patel v. Contemporary Classics of Beverly Hills, 259 F.3d 123, 126 (2d Cir. 2001)(citing Irish Lesbian & Gay Org. v. Giuliani, 143 F.3d 638, 644 (2d Cir.1998), Sheppard v. Beerman, 18 F.3d 147, 150 (2d Cir.1994) and Ad-Hoc Comm. of Baruch Black & Hispanic Alumni Ass'n v. Bernard M. Baruch Coll., 835 F.2d 980, 982 (2d Cir.1987)). In other words, the Court is required to read a complaint generously, accepting the material facts alleged therein as true and drawing all reasonable inferences from the complainant's allegations. California Motor Transp. Co. v. Trucking Unlimited, 404 U.S. 508, 515 (1972); Frasier v. Gen. Elec. Co., 930 F.2d 1004, 1007 (2d Cir. 1991).

The material facts*fn7 which form the underpinning of the remaining Counts in Tri-County's counterclaims are as follows. Tri-County sells genuine Ivoclar Vivadent products at lower prices than the same products sold by Ivoclar and its authorized distributors, including Peterson. Tri-County gets these products from its supplier, Cargus International, Inc., a New York based importer and distributor of dental supply products*fn8 . The products Cargus sells to Tri-County are manufactured by IvoclarAG outside of the United States. They are obtained outside of the United States either from IvoclarAG directly or from one of IvoclarAG's authorized distributors, then imported into the States by Cargus. The cost of the products when purchased in this manner is substantially lower than their cost when purchased inside of the States from Ivoclar. Tri-County is therefore able to offer and sell them to its customers at competitive prices. The Ivoclar Vivadent products Tri-County sells are the same as the products Ivoclar and Peterson sell in that they are all manufactured by IvoclarAG. Tri-County admits, however, that prior to the filing of the instant suit, the products were sold and distributed without the Material Safety Data Sheets or any warranty. Since the filing of suit, it began to include the Data Sheets, a disclaimer of association with Ivoclar and its own warranty on the products. The only difference remaining in the products are minor differences in the labeling and packaging. When Peterson discovered that Tri-County was marketing Ivoclar Vivadent trademarked products to between 4,000 and 5,000 dentists in southern California at discounted prices, it placed an order for same and, upon receipt, sent the products to Ivoclar. When Ivoclar determined that the products had not been purchased from either Ivoclar or Peterson, it informed Tri-County that it did not have permission to sell the trademarked products, demanded that Tri-County immediately stop their sale and disclose its supplier information. Ivoclar did not indicate to Tri-County that the products it was selling were not genuine or commercially fit for distribution in the United States, or that they were materially different from the products sold here through Ivoclar. Ivoclar stated that if Tri-County did not stop selling the unauthorized product, legal action would be taken. When Tri-County did not comply, Ivoclar filed the instant suit*fn9 . Less than one month after Ivoclar filed this suit, Tri-County informed Ivoclar that it considered the suit to be baseless and requested that it be discontinued. At the same time, Tri-County offered to provide disclaimer information to all who purchase the Ivoclar Vivadent products from it indicating that it had no affiliation with Ivoclar and were not authorized to sell its product. Tri-County, also, stated that it would include the Material Safety Data Sheets when shipping the items to the consumers. Ivoclar responded that the disclaimer was insufficient and nevertheless declined to withdraw the suit but again asked for information regarding Tri-County's supplier.

The portion of the Sherman Act, alleged to have been violated in counterclaim Count II, states that "[e]very contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal." 15 U.S.C. §1.

The portion of the Wilson Tariff Act, alleged to have been violated in counterclaim Count III, states that

"every combination, conspiracy, trust, agreement, or contract is declared to be contrary to public policy, illegal, and void when the same is made by or between two or more persons or corporations, either of whom, as agent or principal, is engaged in importing any article from any foreign country into the United States, and when such combination, conspiracy, trust, agreement, or contract is intended to operate in restraint of lawful trade, or free competition in lawful trade or commerce, or to increase the market price in any part of the United States of any article or articles imported or intended to be imported into the United States, or of any manufacture into which such imported article enters or is intended to enter." 15 U.S.C. §8.

Section 340 of New York's General Business Law, alleged to have been violated in counterclaim Count ...


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