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General Electric Co. v. Feuz Manufacturing

May 15, 2008

GENERAL ELECTRIC COMPANY, PLAINTIFF,
v.
FEUZ MANUFACTURING, INC., GARY A. FEUZ (INDIVIDUALLY), WESLEY FEUZ (INDIVIDUALLY), AND OTHER OFFICERS, DIRECTORS, AND SHAREHOLDERS OF FEUZ MANUFACTURING, INC. WHOSE IDENTITIES ARE CURRENTLY UNKNOWN DEFENDANTS.



MEMORANDUM-DECISION AND ORDER*fn1

Presently before the Court is a Motion to dismiss brought by Defendants Feuz Manufacturing, Inc. ("FMI") and Gary and Wesley Feuz (collectively "Defendants"). Dkt. No. 7. Defendants argue that Plaintiff General Electric Company ("Plaintiff" or "GE") has failed to state a claim under the Lanham Act, 15 U.S.C. § 1125(a)(1), that without the Lanham Act claim, this Court lacks subject matter jurisdiction over the state law claims, that the Complaint should be dismissed as against Wesley Feuz, that the Court should strike certain allegations from the Complaint, and that the Court should issue sanctions against Plaintiff pursuant to Fed. R. Civ. P. Rule 11. Def's Mem. (Dkt. No. 9).

I. Background Facts

GE's Complaint, filed on September 25, 2007, asserts a violation of the Lanham Act, 15 U.S.C. § 1125(a)(1), and state law claims for unfair competition, breach of contract, fraud, conversion, and theft of trade secrets, all based on alleged misappropriation of GE's intellectual property by FMI. Complaint at ¶¶ 39-57 (Dkt No. 1).

FMI is a former manufacturer of precision parts for GE and others. Id. at ¶ 13. GE alleges that Gary and Wesley Feuz were "key employees" during the time when FMI misappropriated GE's intellectual property. Id. at ¶ 4. As part of the commercial course of dealings between GE and FMI, GE periodically sent FMI engineering drawings and specifications containing proprietary and unique design information for parts FMI was manufacturing and selling to GE. Id. at ¶ 17. In 2004, GE learned that FMI was using GE's proprietary engineering drawings, specifications, and designs to manufacture and sell parts to GE's competitors. Id. at ¶ 26. In addition, GE discovered invoices which showed that FMI was selling parts to GE competitors that FMI had identified using GE's own part numbers. Id. at ¶ 29. GE also discovered an invoice from FMI to a GE competitor that attached a GE proprietary engineering drawing. Id. at ¶ 30. GE then confronted Gary Feuz and required FMI to, inter alia, correspond with its non-GE customers stating that FMI had agreed to "immediately cease and desist using GE's IP to assist in the manufacture of parts/products for Feuz's non-GE customers." Id. at ¶ 34, Exhibit F. FMI complied with GE's requirements and stated to GE in an email that they "will never again engage in the misuse of GE's property or use it in any unauthorized manner whatsoever." Complaint at ¶ 32, Exhibit E. GE ultimately terminated its business relationship with FMI. Complaint at ¶ 33.

In their Motion to dismiss, Defendants argue that GE's Lanham Act claim should be dismissed because it does not involve "goods or services" and there was no false designation of origin. Def's Mem. at 6-11 (Dkt. No. 9). These arguments are extended in the Defendants' Reply to argue that GE has not alleged any consumer confusion, that GE's attachments to its Complaint contradict the Complaint and thus negate a finding of consumer confusion, and that the Lanham Act claim should be dismissed because the claim is in essence a breach of contract claim. Def's Reply Mem. at 1-5 (Dkt. No. 12).

Defendants also argue in their Motion to dismiss that without the Lanham Act claim, this Court lacks subject matter jurisdiction. Def's Mem. at 12 (Dkt. No. 9). Next, Defendants argue that the Complaint should be dismissed as against Wesley Feuz, in support of which Defendants attach an affidavit from Wesley Feuz stating that he was not a corporate officer, director or shareholder and further stating that he was not involved in any wrongdoing. Def's Mem. at 13-15. Defendants then seek to have the Court strike Paragraph 35 of the Complaint as irrelevant and immaterial. Def's Mem. at 16-17. Finally, Defendants request that the Court issue sanctions pursuant to Fed. R. Civ. P. Rule 11. Def's Mem. at 18.

II. Discussion

A. Standard of Review

For the purposes of a Rule 12(b)(6) motion to dismiss for failure to state a claim, all factual allegations in the Complaint are accepted as true, and all inferences are drawn in favor of the pleader. Mills v. Polar Molecular Corp., 12 F.3d 1170, 1174 (2d Cir.1993). The issue "is not whether a plaintiff will ultimately prevail but whether the claimant is entitled to offer evidence to support the claims." Villager Pond, Inc. v. Town of Darien, 56 F.3d 375, 378 (2d Cir.1995) (quoting Scheuer v. Rhodes, 416 U.S. 232, 235-36 (1974)). Accordingly, a motion to dismiss under Rule 12(b)(6) must be denied "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." Cohen v. Koenig, 25 F.3d 1168, 1172 (2d Cir. 1994) (internal quotations omitted).

Defendants have submitted an affidavit by Wesley Feuz in support of their argument that the Complaint should be dismissed as against him. Dkt. No. 7-2. Rule 12(b) of the Federal Rules of Civil Procedure requires that if matters "outside the pleadings are presented to and not excluded by the court, the motion shall be treated as one for summary judgment and disposed of as provided in Rule 56." Fed. R. Civ. P. 12(b). However, if a court excludes extrinsic evidence submitted to it from its considerations, motions brought under Rule 12(b) do not need to be converted to motions for summary judgment. See Chambers v. Time Warner, Inc., 282 F.3d 147, 154 (2d Cir. 2002). On a motion to dismiss, a necessary prerequisite to a court's consideration of a document, other than the complaint, is a plaintiff's reliance on the terms and effect of that document in drafting the complaint. Chambers, 282 F.3d at 153. Defendants rely on Wesley Feuz's affidavit to the extent it asserts that he was not an officer, director or shareholder of FMI. However, Plaintiffs never alleged that Wesley was an officer, director or shareholder of FMI. In reaching its decision, the Court only considered the facts as presented in Plaintiff's Complaint and its attached exhibits, and has not considered Wesley's affidavit because there is no factual dispute that Wesley Feuz was not an officer, director, or shareholder of FMI.*fn2 Accordingly, Defendants' Motion will not be considered as a Motion for summary judgment.

B. The Lanham Act Claim

The Lanham Act makes it unlawful for any person, in connection with goods, services, or containers for goods, to use in commerce "any word, term, name, symbol, or device, or any combination thereof, or any false designation of origin . . . which . . . is likely to cause confusion . . . as to the origin, sponsorship, or approval" of the goods, services, or commercial activity. 15 U.S.C. § 1125(a)(1). "The hallmark of infringement in violation of this section is likelihood of confusion." Federal Exp. Corp. v. Federal Espresso, Inc., 201 F.3d 168, 174 (2d Cir. 2000).

1. Goods or Services

Initially, Defendants argue that the "instant controversy does not involve the misuse or misidentification of 'goods or services', as contemplated by statute." Def's Mem. at 6 (Dkt. No. 9). The Complaint, however, alleges that FMI falsely designated the origin of drawings and turbine parts that it sold to third ...


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