United States District Court, N.D. Illinois, Eastern Division
October 4, 2005.
GIL GOLD and TAMIR LEVY, individually and d/b/a GOLD & LEVY, Plaintiffs,
GOLDEN G.T., LLC, an Illinois Limited Liability Company; AER SERVICES, INC., an Illinois Corporation, SHLOMOH BEN-DAVID, an individual, and TOMER LAKS, an individual. Defendants.
The opinion of the court was delivered by: MARK FILIP, District Judge
MEMORANDUM OPINION AND ORDER
Plaintiffs, Gil Gold ("Gold") and Tamir Levy ("Levy"),
individually and d/b/a/ Gold & Levy (collectively, "Plaintiffs"
or "Gold & Levy"), filed a Second Amended Complaint ("Complaint")
on April 21, 2005, against Golden G.T., LLC ("Golden G.T." or
"Defendant"), AER Services, Inc. ("AER Services"), and Shlomoh
Ben-David ("Ben-David") (collectively, "Defendants"). (D.E.
58.)*fn1 The Complaint alleged the following claims against
Defendants: violations of the Lanham Act for trademark
infringement (Count I) and false designation of origin (Count II)
under 5 U.S.C. § 1125(a); violation of the Illinois Uniform
Deceptive Trade Practices Act, 815 ILCS 510/2 ("UDTPA"), and
Illinois Consumer Fraud and Deceptive Business Practices Act,
815 ILCS 505/10(a) ("CFDBPA") (Count III); breach of
contract/rescission (Count IV); and design patent infringement
under 35 U.S.C. § 271 (Count V).
The case is before the Court on Golden G.T.'s motion to dismiss
Count III of the Plaintiffs' Complaint (which implicates only Golden G.T.) on the
grounds that (1) Gold & Levy failed to state a claim upon which
relief can be granted, see Fed.R.Civ.P. 12(b)(6), and (2)
Gold & Levy failed to plead its claim with the requisite
particularity, see Fed.R.Civ.P. 9(b). (D.E. 62.) For the
reasons stated below, the Court respectfully denies the motion to
Gold & Levy have been in the business of developing, designing,
marketing, manufacturing, importing, and selling various
houseware products throughout the world since 1996. (D.E. 58 ¶¶
5, 10.) In 2001, Gold & Levy developed a unique cereal dispenser
designed for home use, and determined that the United States
market was their best product launch opportunity. (Id. ¶ 18.)
In 2002, Gold & Levy incorporated under the name Golden G.T.,
Ltd., (Id. ¶ 11), and in January 2003, they displayed their
cereal dispenser at trade shows in the United States bearing the
EASY MORNING trademark, including in Chicago. (Id. ¶ 20.)
According to the Complaint, Gold & Levy met defendant Ben-David
at a San Francisco, California trade show around May 2003 and
discussed launching a U.S. business to market the cereal
dispenser. (Id. ¶¶ 23, 24.) In June 2003, Plaintiffs entered
into a written agreement ("Agreement") with AER Services which
was operated by Ben-David, its majority owner to "initiate the
development of a new corporation for the distribution of cookware
and home goods." (Id. ¶¶ 7-8, 26.) To gain the goodwill
connected with Gold & Levy's past experience, the new company
purported to be associated with Golden G.T. Gold & Levy gave
Defendants permission to use their website and the domain name,
www.goldengt.com; the new company also used existing Gold & Levy marketing documents to publish its
own marketing brochures which touted the "exceptional
international reputation" of Gold, Levy, and Golden G.T., so as
to help sell products for the new company. (Id. at ¶¶ 34, 35.)
Gold & Levy worked hard to launch the EASY MORNING cereal
dispenser and watched sales grow from zero to approximately $1
million from October 2003 to April 2004. (Id. ¶ 37.) According
to the Complaint, Defendants' response to the success of the EASY
MORNING cereal dispenser was to demand that the terms of the
agreement with Gold & Levy be changed. (Id. ¶ 38.) When Gold &
Levy refused, the Complaint states that Defendants initiated
actions to "force plaintiffs out of the company." (Id. ¶ 39.)
Defendants discontinued Gold & Levy's salary payments and
threatened to charge them with, inter alia, "criminal trespass
proceedings." (Id.) Thereafter, Defendants recognized a
potential conflict in ownership of the trade name Golden G.T. and
re-branded the cereal dispenser under the new company name
"Zevro." (Id.) Defendants, however, continued to use the EASY
MORNING trademark which Plaintiffs "have spent a considerable
amount of money" establishing "on or in connection with . . .
goods in interstate commerce and within the State of Illinois."
(Id. ¶¶ 46, 53.)
The Complaint further alleges that the Golden G.T. acted
willfully and with reckless disregard by misrepresenting to the
public that "[s]ince 1996, ZEVRO has brought customers . . .
products for the home." (Id. ¶¶ 42, 72, 74.) Further,
Plaintiffs allege that Defendants distributed printed sales
literature indicating that Golden G.T. is the source of the EASY
MORNING cereal dispenser. (Id. ¶ 50.) These statements were
made in Golden G.T.'s "distribution of printed marketing
materials and its interactive web site, and [were] intended to
induce consumers and other purchasers to rely on those
representations in the purchase of [Golden G.T.'s] products."
(Id. ¶ 72.) Gold & Levy allege that together, Defendants' trade practices have caused actual confusion among consumers as to the
source of the cereal dispenser, (id. ¶ 59 (referencing print
ads, forms, and sales literature)), and are likely to "cause
confusion or mistake or deceive product buyers and consumers as
to the source and origin of their goods." (Id. ¶ 55; see also
id. ¶ 73 (discussing false implications that Defendant's goods
originate from and are sponsored by Gold & Levy).) The Complaint
further alleges that the goodwill associated with the EASY
MORNING mark will be diminished because the Plaintiffs are unable
to control the quality of goods supplied by the Defendant. (Id.
The purpose of the motion to dismiss under Rule 12(b)(6) is to
test the sufficiency of the complaint not to determine whether
the plaintiffs will ultimately prevail, but whether they are
entitled to present evidence supporting their claim. Gibson v.
City of Chicago, 910 F.2d 1510, 1520 (7th Cir. 1990). The court
must accept the plaintiff's allegations as true and draw all
reasonable inferences in the plaintiff's favor. Bressner v.
Ambroziak, 379 F.3d 478, 480 (7th Cir. 2004); accord Jang v.
A.M. Miller & Assocs., 122 F.3d 480, 483 (7th Cir. 1997). In
considering the motion, the court is generally limited to the
pleadings, which include the complaint, any exhibits attached
thereto, and any supporting briefs. Thompson v. Ill. Dept. of
Prof'l Regulation, 300 F.3d 750, 753 (7th Cir. 2002). The court,
however, is "neither bound to the plaintiff's legal
characterization of the facts, nor required to ignore facts set
forth in the complaint that undermine the plaintiff's claims."
Avlon Indus. v. Robinson, No. 01 C 3615, 2003 WL 22025004, at
*1 (N.D. Ill. Aug. 27, 2003) (citing Scott v. O'Grady,
975 F.2d 366, 368 (7th Cir. 1992)). Only where "`it appears beyond doubt
that the plaintiff can prove no set of facts in support of his
claim which would entitle him to relief'" is dismissal for
failure to state a claim appropriate. Lee v. City of Chicago,
330 F.3d 456, 459 (7th Cir. 2003) (quoting Conley v. Gibson, 355 U.S. 41, 45-46 (1957)).
Generally, a pleading need only contain a "short and plain
statement of the claim showing that the pleader is entitled to
relief," Fed.R.Civ.P. 8(a)(2), such that it provides fair
notice of the nature of the plaintiff's claim and the grounds
upon which it rests. See Leatherman v. Tarrant County Narcotics
Intelligence and Coordination Unit, 507 U.S. 163, 168 (1993);
accord Scott v. City of Chicago, 195 F.3d 950, 951 (7th Cir.
1999). A charge of fraud, however, must be pled with
particularity in federal court. See Fed.R.Civ.P. 9(b). The
Seventh Circuit instructs that the complaint must allege "`the
identity of the person making the misrepresentation, the time,
place, and content of the misrepresentation, and the method by
which the misrepresentation was communicated to the plaintiff.'"
Kennedy v. Venrock Assocs., 348 F.3d 584, 593 (7th Cir. 2003)
(quoting Sears v. Likens, 912 F.2d 889, 893 (7th Cir. 1990)).
In Count III of the Complaint, Gold & Levy allege that the
Defendants' unauthorized use of the EASY MORNING mark and false
representations made to consumers violate the Illinois Uniform
Deceptive Trade Practices Act ("UDTPA"), 815 ILCS 510/2.
Plaintiffs also allege that this misconduct likewise constitutes
a violation of the Illinois Consumer Fraud and Deceptive
Practices Act ("CFDBPA"), 815 ILCS 505/2.
I. Plaintiffs State a Claim under the UDTPA and CFDBPA
In its motion to dismiss, Golden G.T. first argues that
Plaintiffs have failed to allege that they are a consumer of
Defendants' product or that a sufficient consumer nexus exists to
implicate consumer protection concerns, as is required to state a
claim under the CFDBPA. (D.E. 62 at 3.) Defendant also argues
that where the Plaintiffs have not alleged a sufficient consumer
nexus, the "UDTPA component of Plaintiffs' [CFDBPA] claim must
also fail." (D.E. 62 at 4.) This Court respectfully disagrees with both arguments.
First, although conduct prohibited by the UDTPA also violates
the CFDBPA, the "two acts are not co-extensive." Pain Prevention
Lab, Inc. v. Waveform, 657 F. Supp. 1486, 1493 (N.D. Ill. 1987).
While the "same operative facts may sustain a cause of action
under either" the CFDBPA or the UDTPA, Native Am. Arts, Inc. v.
Vill. Originals, Inc., 25 F. Supp. 2d 876, 882 (N.D. Ill. 1998),
the CFDBPA is the only statute in Count III which requires a
consumer nexus. See Avlon v. Robinson, No. 01 C 3615, 2003 WL
22025004, at *3 (N.D. Ill. Aug. 27, 2003). The Plaintiffs
satisfactorily stated the UDTPA claim by alleging that the
Defendants misrepresented Plaintiffs product, confused the public
as to the source or sponsors of that product, and damaged the
Plaintiffs' goodwill and reputation with these deceptive
practices. "Under Illinois law, proof of a trademark infringement
is sufficient to establish a violation of the Illinois Uniform
Deceptive Trade Practices Act and constitutes unfair competition
under Illinois common law." Pirelli Armstrong Tire Corp. v.
Titan Tire Corp., 4 F. Supp. 2d 794, 799 (C.D. Ill. 1998)
(collecting federal and state appellate caselaw, including TMT
N. Am., Inc. v. Magic Touch GmbH, 124 F.3d 876, 881 (7th Cir.
1997)). Plaintiffs allege that they have a valid trademark and
that infringement has occurred. See Pirelli,
4 F. Supp. 2d at 799 (citing Echo Travel, Inc. v. Travel Assoc., Inc.
870 F.2d 1264, 1266 (7th Cir. 1989); see also D.E. 58 ¶¶ 46-49, 52-64,
68, 70-71.) On the facts as pleaded, the UDTPA portion of the
count survives.*fn3 As a result, the best Defendants can hope for is the dismissal
of the CFDBPA claim from Count III. See Avlon Indus., 2003 WL
22025004 at *1, 3. For the reasons stated below, Golden G.T.'s
motion to dismiss the CFDBPA claim is also denied.
The CFDBPA prohibits the
employment of any deception, fraud, false pretense,
false promise, misrepresentation or the concealment,
suppression or omission of any material fact, with
intent that others rely upon the concealment,
suppression or omission of such material fact, or the
use or employment of any practice described in
Section 2 of the "Uniform Deceptive Trade Practices
Act" . . . in the conduct of any trade or commerce.
815 ILCS 505/2. The CFDBPA is "`primarily concerned with
protecting the consumers'" Nakajima All Co. Ltd. v. SL Ventures,
Corp., No. 00 C 6594, 2001 WL 641415, at *2 (N.D. Ill. June 4,
2001) (quoting Indus. Specialty Chems. v. Cummins Engine Co.,
902 F. Supp. 805, 811 (N.D. Ill. 1995)), which it defines as "any
person who purchases or contracts for the purchase of merchandise
not for resale in the ordinary course of his trade or business
but for his use or that of a member of his household."
815 ILCS 505/1(e). The CFDBPA, however, also seeks to protect businesses
from "fraud and unfair competition," Mitsubishi Elec. Corp. v.
IMS Tech., Inc., 1997 WL 630187, at *10 (N.D. Ill. Sept. 30,
1997) (Williams, J.), thus allowing business entities to be
considered "persons" under the CFDBPA, 815 ILCS 505/1(c); accord
Sullivan's Wholesale Drug Co. v. Faryl's Pharmacy, Inc.,
573 N.E.2d 1370
, 1376 (Ill.App.Ct. 1991), and to bring suit as a
"representative of the consumer interest." Speakers of Sport,
Inc. v. ProServ, Inc., 178 F.3d 862
, 868 (7th Cir. 1999).
To state a claim under the CFDBPA, a pleading must allege that:
(1) the defendant committed a deceptive act; (2) the defendant
intended to induce consumer reliance on the deception; and (3)
that the deception occurred during trade or commerce. See Siegel
v. Levy Organization Dev. Co., 607 N.E.2d 194, 198 (Ill. 1992);
accord MidAmerican Energy Co. v. Util. Res. Corp., No. 03 C 2313, 2003 WL 22359526, at *5 (N.D.
Ill. Oct. 15, 2003). Further, the plaintiff must either allege it
was a consumer of the defendant or allege a nexus with Illinois
consumers. See, e.g., Ivanhoe Fin., Inc. v. Highland Banc
Corp., No. 03 C 7336, 2005 WL 1498878, at *2 (N.D. Ill. June 9,
2005) (citation omitted). Golden G.T. does not argue that
Plaintiffs have failed to allege any of the first three elements
of a CFDBPA claim. Rather, Golden G.T. argues that Plaintiffs
have failed to allege the necessary consumer nexus. In response
to Golden G.T.' argument, Plaintiffs do not claim to be a
consumer of Defendants, but maintain they have made allegations
sufficient to satisfy the "consumer nexus" pleading requirement.
The Court respectfully rejects Golden G.T.'s argument that
Plaintiffs' have failed to meet the threshold pleading
requirement. To plead a consumer nexus successfully, a plaintiff
need only allege that the conduct complained of "involves trade
practices directed to the market generally or otherwise
implicates consumer protection concerns." Athey Prods. Corp. v.
Harris Bank Roselle, 89 F.3d 430, 437 (7th Cir. 1996)
(collecting cases). To state a claim as a non-consumer, a
business plaintiff can allege that the defendant undertook trade
practices directed to the market generally. Misrepresentations
made by the defendant that are likely to cause confusion, mistake
or deception as to the affiliation or association with the
plaintiff may satisfy this requirement if they are directed to
"consumers," as opposed to simply "customers" of the business
plaintiff. Compare Nakajima, 2001 WL 641415, at *3 (allegations
that defendant's actions would mislead its "customers" failed to
plead a cause of action under the CFDBPA because its customers
were distributors and retailers and therefore did "not constitute
the required connection to consumers"), with Pain Prevention
Lab, 657 F. Supp. at 1493 (allegations that defendant made
alleged misrepresentations "in the marketplace and to actual
and/or prospective customers" sufficient to state a claim). Beyond the
alleged consumer connection, a plaintiff need not plead "any
special damages other than damages to reputation, business, or
prestige." Gadson v. Newman, 807 F. Supp. 1412, 1421 (C.D. Ill.
1992) (citing Downers Grove Volkswagen v. Wigglesworth Imports,
Inc., 546 N.E.2d 33, 41 (Ill.App.Ct. 1989)) (internal
quotation omitted). Alternatively, a business plaintiff can
successfully plead a consumer nexus by alleging the defendant's
actions implicate consumer protection concerns.*fn4
Assuming all alleged facts to be true and drawing all
reasonable inferences for the Plaintiffs, this Court finds that
Gold & Levy have sufficiently alleged that Defendants'
misrepresentations were directed at the market generally, which
satisfies the requisite consumer nexus. The Complaint
specifically alleges that Defendants' website, advertising,
forms, and packaging which use the Plaintiffs' EASY MORNING mark and
represent to the "consuming public" that its products are the
result of experience "since 1996" leads "consumers . . . to
believe that defendant's goods originate from, or are associated
with, sponsored by, or approved by, the plaintiffs." (D.E. 58 ¶¶
50, 72, 73.) Plaintiff allege that "[t]he use of the EASY MORNING
MARK by the defendants in their print advertising, forms and
literature has caused actual confusion and mistake and deception
of consumers as to the source of origin of their services."
(Id. ¶ 59.) Further, Plaintiffs allege that Defendants'
misrepresentations "hamper efforts . . . to continue to protect
their outstanding reputation for high quality goods, resulting in
the loss of the considerable expenditures plaintiffs made to
develop and sell their goods." (Id. ¶ 67.) The alleged
misrepresentations, when construed in the light most favorable to
Plaintiffs, are directed toward both customers of the parties
(i.e. retail sellers of the cereal dispensers) and consumers
(i.e. direct purchasers of the cereal dispensers). There is
nothing in Plaintiff's allegations which would indicate that the
misrepresentations are directed toward anything but the market
Furthermore, Plaintiffs allege that Golden G.T. and the other
defendants have "hijacked their [Plaintiffs'] web address,
`www.goldengt.com' and have since then converted it to Zevro."
(Id. ¶ 40.) Plaintiffs also state that language on the
resultant Zevro website, which misleadingly suggests Plaintiffs'
approval and involvement with the Zevro product, is aimed at
direct consumers and not to retailers or distributors. (See
D.E. 78 at 4 (citing Complaint, Ex. L (citing language which
states that "Zevro specializes in the development . . . of . . .
kitchenware products designed to make your [i.e., not "your
customers'] life easier")).) Defendants, in reply, suggest that
the web language Gold & Levy cites does "not necessitate drawing
the conclusion that the website is targeted to consumers." (D.E.
79 at 4.) Given the language of the website, however, the inference Plaintiffs propose is a reasonable one
even if not the only conceivable one. That is enough to survive a
motion to dismiss. See, e.g., Avlon, 2003 WL 22025004 at *3.
Thus, Plaintiffs have appropriately pled a consumer nexus by
alleging that Defendants' trade practices were directed at the
market generally and further alleging a reputational and
financial harm. See Pain Prevention Lab, 657 F. Supp. at 1493
(allegations of misrepresentations concerning approval of a
device by the FDA and the existence of a patent which were made
"in the marketplace and to actual and/or prospective customers"
were sufficient to state a claim under the CFDBPA). Although
Defendant is free to raise its arguments upon development of a
full factual record, the Court concludes that Plaintiffs have
sufficiently stated a claim at this stage of the proceedings.
II. Plaintiff Pled with Particularity Pursuant to Rule 9(b)
Golden G.T. also moved to dismiss Count III on the grounds that
Gold & Levy failed to state its statutory fraud claims pursuant
to the CFDBPA and the UDTPA with the requisite particularity.
See Fed.R.Civ.P. 9(b). Gold & Levy acknowledge the
applicability of Rule 9(b), but argue that the Complaint meets
the particularity requirement.
To satisfy Rule 9(b), a plaintiff must allege "the identity of
the person making the misrepresentation, the time, place, and
content of the misrepresentation, and the method by which the
misrepresentation was communicated to the plaintiff." Venrock
Assocs., 348 F.3d at 593 (collecting cases) (internal quotation
omitted). The plaintiff is not required to plead facts
conclusively establishing that the alleged misrepresentation is
false, see Bankers Trust Co. v. Republic Ins. Co.,
959 F.2d 677, 683 (7th Cir. 1993), but instead must state "some specific
act, series of acts, or omission by the defendant from which the
court could plainly infer fraudulent conduct." DeLeon v.
Beneficial Const. Co., 55 F. Supp.2d 819, 826 (N.D. Ill. 1999)
This Court finds that Plaintiffs' amended complaint satisfies
the particularity pleading requirements. Gold & Levy did not make
mere conclusory allegations of Defendants' misrepresentations or
any reasonable analog to it. Rather, as precedent requires, Gold
& Levy specified:
where in sales literature, including internet
advertising, and forms and in sales of products
bearing the EASY MORNING MARK at a Carson Pirie Scott
store in Chicago, Illinois;
when in an ongoing fashion, and in the least, on
December 28, 2004 (see D.E. 58, Ex. J, L)); and
what made false and misleading representations
regarding ZEVRO's affiliation with products bearing
the EASY MORNING mark, including that ZEVRO (as
opposed to Gold & Levy) has been bringing customers
home products since 1996, with the intention of
inducing consumers and other purchasers to rely on
those misrepresentations and to falsely believe that
Defendant's goods originate from or are sponsored by
Gold & Levy.
Gold & Levy provided these particulars regarding Defendants'
alleged deceptive use of the EASY MORNING mark and the
accompanying misrepresentations that allegedly are likely to
cause consumer confusion as to the source of the cereal
dispenser. (See, e.g., D.E. 58 ¶¶ 42, 45, 50, 54, 59, 72-73.)
See generally Uni*Quality, Inc. v. Infotronx Inc.,
974 F.2d 918
, 923 (7th Cir. 1992) (under Rule 9(b), "plaintiff must plead
the `who, what, when, and where' of the alleged fraud").
Plaintiffs also specifically explained why, in their view, the
statements were false, misleading, and fraudulent. (See, e.g., D.E. 58 ¶¶ 40-42, 55,
59, 71, 72-74.)
Golden G.T.'s argument that Plaintiffs failed to plead with
specificity because they "patch[ed] together references to the
Complaint's exhibits without directly pleading the information"
is unsupported. The Plaintiffs referenced exhibits only add
content to the stated allegations by referring to the actual
website, advertisements, and packaging that displayed the alleged
misrepresentations. For all of these reasons, Plaintiffs'
pleadings are sufficient under Rule 9(b).
For the reasons stated above, the Court respectfully denies the
Motion to Dismiss Count III (D.E. 62).
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