UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK
October 24, 2012
LUV N' CARE LTD. AND ADMAR INTERNATIONAL, INC., PLAINTIFFS,
TOYS "R" US, INC. AND MUNCHKIN, INC., DEFENDANTS.
The opinion of the court was delivered by: Shira A. Scheindlin, U.S.D.J.
OPINION AND ORDER
Plaintiffs Luf n' Care, Ltd. and Admar International, Inc. (collectively "LNC") bring this action against defendants Toys "R" Us, Inc. ("TRU") and Munchkin, Inc. Plaintiffs assert six causes of action for patent infringement, trade dress infringement and unfair competition under the Lanham Act, and for unfair competition and trade dress dilution under New York law. Pursuant to Federal Rule of Civil Procedure 12(b)(6), defendants now movee to dismiss three of these counts. For the following reasons, defendants' motion to dismiss is granted, but plaintiffs are granted leave to amend.
Luv n' Care is a company, organized and operating under the laws of
Louisiana,*fn2 that designs and sells baby
products.*fn3 Admar is an affiliate of Luv n'
Care,*fn4 and is the owner of the trademarks and trade
dress associated with Luv n' Care's products.*fn5 Luv
n' Care owns two design patents which disclose, respectively, a
child's cup and a child's cup top.*fn6 LNC has
incorporated these patents into a line of soft-top children's drinking
cups.*fn7 On June 22, 2009, LNC settled a suit against
Royal King ("RK"), a Thai manufacturer of baby products, relating to
RK's alleged infringement of LNC's intellectual property.*fn8
terms of the settlement, RK agreed to stop selling and manufacturing
products likely to cause confusion with LNC's products.*fn9
TRU is a domestic corporation that distributes and sells baby products in the United States, both directly and under the name Babies R' Us.*fn10 The Complaint alleges, inter alia, that TRU infringed on LNC's intellectual property by buying and selling knock-offs of LNC's products.*fn11 Through the instant motion, defendants moved to dismiss Counts Three (federal trademark dilution), Five (violation of New York General Business Law Section 360-1), and Six (contributory infringement) of the Complaint.*fn12 Following an adverse ruling in a parallel federal proceeding, LNC has voluntarily withdrawn Counts Three and Five.*fn13
Count Six, styled "contributory infringement," alleges that TRU was aware of LNC's settlement agreement with RK, but nevertheless deliberately and knowingly chose to sell products infringing on LNC's rights under the agreement.*fn14
Count Six further alleges that this conduct "constitutes contributory infringement of [LNC's] rights as set forth under its settlement agreement, and constitutes unfair competition, in violation of the Lanham Act and New York Law."*fn15 Finally, LNC alleges that it has been harmed, and requests a broad spectrum of legal and equitable relief.*fn16
III. APPLICABLE LAW
A. Rule 12(b)(6) Motion to Dismiss
A pleading must contain "a short and plain statement of the claim showing that the pleader is entitled to relief."*fn17 "Such a statement must  'give the defendant fair notice of what the plaintiff's claim is and the grounds upon which it rests.'"*fn18 In deciding a motion to dismiss pursuant to Rule 12(b)(6), the court "must accept all non-conclusory factual allegations as true and draw all reasonable inferences in the plaintiff's favor."*fn19 For the purposes of such motion, ". . . a district court may consider the facts alleged in the complaint, documents attached to the complaint as exhibits, and documents incorporated by reference in the complaint."*fn20
However, the court may also consider a document that is not incorporated by reference, "where the complaint 'relies heavily upon its terms and effect,' thereby rendering the document 'integral' to the complaint."*fn21
The court evaluates the sufficiency of the complaint under the "two-pronged approach" suggested by the Supreme Court in Ashcroft v. Iqbal.*fn22 Under the first prong, a court "'can . . . identify pleadings that, because they are no more than conclusions, are not entitled to the assumption of truth.'"*fn23 Thus, "[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice" to withstand a motion to dismiss.*fn24 Under the second prong of Iqbal, "[w]hen there are well-pleaded factual allegations, a court should assume their veracity and then determine whether they plausibly give rise to an entitlement for relief."*fn25 A claim is plausible "when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged."*fn26 Plausibility "is not akin to a probability requirement;" rather, plausibility requires "more than a sheer possibility that a defendant has acted unlawfully."*fn27
B. Leave to Amend
Whether to permit a plaintiff to amend its complaint is a matter committed to a court's "sound discretion."*fn28 Rule 15(a) provides that leave to amend a complaint "shall be freely given when justice so requires."*fn29 "When a motion to dismiss is granted, the usual practice is to grant leave to amend the complaint."*fn30 Leave to amend should be denied, however, where the proposed amendment would be futile.*fn31
Count Six is deficient for two reasons. First, it is too vague to give defendants fair notice of the cause of action that is being asserted against them. Second, to the extent that it seeks to assert a tortious interference with contract claim, insufficient facts are alleged to meet the Iqbal standard.
A. Count Six Is Vague
Although Count Six is labeled "contributory infringement," it is
apparently not a claim of contributory infringement. Instead, LNC
alleges, the claim sounds in unfair competition and the label
"contributory infringement" was used only because TRU "contributed to
[RK]'s infringement of the settlement agreement."*fn32
This is curious, given that Count Four already asserts a New York
unfair competition claim.*fn33 Nevertheless,
plaintiffs assert that they meant to plead
either tortious interference with the settlement contract, or some
amorphous, generalized form of unfair competition.*fn34
Apparently, LNC concluded that because tortious interference
with contract is a form of unfair competition, TRU had sufficient
notice of the true nature of their claim.
Count Six also purports to arise under an unspecified portion of the Lanham Act,*fn35 but plaintiffs deny that they meant to make a claim of contributory infringement under the Lanham Act.*fn36 Instead, as LNC explained in their brief, "TRU's wrongdoing alleged in Count VI is  actionable as a form of unfair competition under the Lanham Act."*fn37 However, Count Two alleges a claim of unfair competition under the Lanham Act.*fn38
The pleading standards of the Federal Rules of Civil Procedure are liberal. However, they do require that a litigant give "fair notice of what the . . . claim is and the grounds upon which it rests."*fn39 As TRU points out, it has no way of knowing whether LNC intends to assert a tortious interference claim, a general unfair competition claim, or some variety of Lanham Act claim.*fn40 Because Count Six fails to apprise TRU of the true nature of the claim against it, it is dismissed.*fn41
B. The Complaint Fails to Plausibly Allege that Defendants Tortiously Interfered with LNC's Settlement Agreement with RK Assuming, arguendo, that LNC is seeking to assert a tortious interference with contract claim, such claim is dismissed on the independent basis that the factual allegations found in the Complaint are too conclusory to meet the Iqbal standard. In New York, the elements of tortious interference with contractual relations are: "(1) a valid contract exists; (2) defendant had knowledge of the contract; (3) defendant intentionally and improperly procured the breach of the contract; and (4) the breach resulted in damage to plaintiff."*fn42
To plead a tortious interference claim, then, LNC must allege facts that make it plausible that TRU, with knowledge of the settlement agreement, intentionally and improperly induced RK to breach the settlement agreement. The present Complaint lacks such allegations. LNC presents only conclusory allegations to show that TRU was aware of the RK settlement agreement.*fn43 Further, LNC has not alleged that TRU induced RK to violate the settlement agreement. It is equally plausible that RK offered to sell TRU the allegedly infringing products.*fn44
In fact, it appears that LNC is laboring under the misapprehension that TRU's sales of RK products could somehow "contribute" to RK's "infringement" of the settlement agreement, despite the fact that TRU is a stranger to the agreement.*fn45
Finally, the Complaint fails to allege that RK in fact breached the
agreement by selling products to TRU. The Complaint alleges that TRU
bought and sold infringing products manufactured by RK,*fn46
but there are no allegations that show
that TRU obtained these products in violation of the settlement
agreement. It is equally plausible that TRU obtained the products
prior to the signing of the agreement, or during the thirty days
accorded to RK to sell off its infringing inventory after the
signing.*fn47 In light of these infirmities, Count Six
must be dismissed even if it provided clear notice to TRU that it was
intended as a tortious interference claim.
C. Leave to Amend
It is too early to decide whether an amendment to Count Six would be futile. Accordingly, plaintiffs are granted leave to amend their Complaint in order to provide notice to the defendants of precisely what they are alleging, and to provide sufficient factual grounds to comply with Iqbal's plausibility standard. Plaintiffs may file an amended complaint within thirty (30) days of the date of this Order. A conference is scheduled for December 5, at 4:30 p.m.
For the foregoing reasons, defendants' motion to dismiss is granted. The Clerk of Court is directed to close this motion (docket No. 11).