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Delivermed Holdings, LLC, et al v. Medicate Pharmacy

February 1, 2012

DELIVERMED HOLDINGS, LLC, ET AL., PLAINTIFFS/COUNTER-DEFENDANTS,
v.
MEDICATE PHARMACY, INC. ET AL., DEFENDANTS/COUNTERCLAIMANTS. MARK A. SWIFT,
PLAINTIFF,
v.
MEDICATE PHARMACY, INC. ET AL., DEFENDANTS.



The opinion of the court was delivered by: J. Phil Gilbert United States District Judge

MEMORANDUM AND ORDER

This matter comes before the Court on the motion of defendants Medicate Pharmacy, Inc. ("Medicate"), Michael Schaltenbrand and Joe Siddle to dismiss the claims in Case No. 10-cv-684-JPG-DGW ("DeliverMed action") for lack of subject matter jurisdiction and to strike the jury and prejudgment interest demands for some counts (Doc. 152). Plaintiffs DeliverMed Holdings, LLC ("DeliverMed") and Mark A. Swift have responded to the motion (Doc. 165). The Court assumes familiarity with the basic disputes in this case as set forth in prior orders.

I. Motion to Dismiss

The defendants ask the Court to dismiss Count I, a claim under the Copyright Act, 17 U.S.C. § 501, for copyright infringement based on the defendants' use of the "house and pestle" logo on Medicate's business materials, Count II, a claim purportedly under § 43(a) of the Lanham Act, 15 U.S.C. § 1125(a) for trademark and servicemark infringement based on the defendants' use of the "DeliverMed" name, the "Right at Home" tagline and the "house and pestle" logo, and Count III, another claim purportedly under § 43 of the Lanham Act for unfair competition based on the defendants' use of the "DeliverMed" name, the "Right at Home" tagline and the "house and pestle" logo. The defendants also ask the Court to decline to exercise supplemental jurisdiction over Counts IV-V, the other claims in the DeliverMed Action, pursuant to 28 U.S.C. § 1367(c)(3).

Challenges to the Court's subject matter jurisdiction are considered under Federal Rule of Civil Procedure 12(b)(1). Under that rule, a defendant can challenge a court's subject matter jurisdiction in two ways. He may make a facial challenge to the sufficiency of the complaint's jurisdictional allegations as a matter of law, in which case, as with a Rule 12(b)(6) motion, all well-pleaded factual allegations are accepted as true and construed in the light most favorable to the plaintiff. United Phosphorus, Ltd. v. Angus Chem. Co., 322 F.3d 942, 946 (7th Cir. 2003). Alternatively, where a complaint is facially sufficient, a defendant may challenge the actual facts establishing jurisdiction, in which case the plaintiff is not entitled to have his allegations taken as true or to have any inferences drawn in his favor. Id. at 946; Sapperstein v. Hager, 188 F.3d 852, 855-56 (7th Cir. 1999). To resolve a challenge to the facts, a court may receive and weigh evidence outside the allegations in the complaint to determine if it has subject matter jurisdiction over the case. United Phosphorus, 322 F.3d at 946. In any case, the plaintiff has the burden of proving that subject matter jurisdiction exists. Id. In the case at bar, the defendant challenges the actual facts on which the plaintiff relies to establish subject matter jurisdiction.

The defendants argue that Counts I-III are really contract claims over what rights, if any, DeliverMed and Swift conveyed in a 2008 joint venture agreement and do not involve any copyright or trademark federal question, a theory explained in the Court's May 27, 2011, order (Doc. 103). See International Armor & Limousine Co. v. Moloney Coachbuilders, Inc., 272 F.3d 912 (7th Cir. 2001); Airoom LLC v. Demi & Cooper, Inc., No. 09 C 4205, 2011 WL 37836 (N.D. Ill. 2011); Mindy's Restaurant, Inc. v. Watters, No. 08-C 5448, 2009 WL 1606982 (N.D. Ill. 2009). The plaintiffs claim the defendants are simply seeking reconsideration of the Court's May 27, 2011, order and are advancing arguments they have waived by not raising them in response to prior pleadings.

As a preliminary matter, the plaintiffs are wrong to assert that the defendants have waived objection to the Court's subject matter jurisdiction. It is well-established that parties cannot waive challenges to the Court's subject matter jurisdiction, which can be raised at any time. See Weaver v. Hollywood Casino-Aurora, Inc., 255 F.3d 379, 381 (7th Cir. 2001).

As for subject matter jurisdiction itself, for the reasons in the Court's May 27, 2011, order, the Court finds that Counts II and III do not present federal questions over which this Court has oroginal subject matter jurisdiction. The plaintiffs have attempted to artfully plead them in the Second Amended Consolidated Complaint, but at heart they remain disputes over whether DeliverMed and Swift conveyed to Medicate the right to use the "DeliverMed" name, the "Right at Home" tagline and the "house and pestle" logo in the 2008 joint venture agreement. As the Court noted in its prior order, whichever side has the right to use the marks under the 2008 joint venture agreement may use them, and whichever side does not risks violating the Lanham Act. The resolution of Counts II and III, however, turns on what was conveyed by contract.

Count I is different. Plaintiff Linda Deeter claims her April 2011 copyright (which she has assigned to DeliverMed) on the "house and pestle" logo is valid, that Schaltenbrand's October 2009 copyright on the same logo is invalid, and that therefore the defendants' use of the logo infringes on her copyright. Schaltenbrand claims ownership of the copyright not by virtue of the 2008 joint venture agreement but by authorship of the work. See 17 U.S.C. § 201(a). Deeter also claims to be the author of the work. Thus, the question of the copyright ownership of the logo presents a question of copyright law -- who is the author of the logo -- and does not turn on the terms of the 2008 joint venture agreement. See Gaiman v. McFarlane, 360 F.3d 644, 652-53 (7th Cir. 2004); Scandinavian Satellite Sys., AS v. Prime TV Ltd., 291 F.3d 839, 845 (D.C. Cir. 2002). Count I, therefore, appears to present a question over which this Court has original jurisdiction under 28 U.S.C. § 1338(a).

Accordingly, the Court will deny the defendants' motion to dismiss based on lack of subject matter jurisdiction. The Court has original jurisdiction over Count I under 28 U.S.C. § 1338 and supplemental jurisdiction over Counts II-V under 28 U.S.C. § 1367(a).

II. Motion to Strike Jury Demand

The defendants also ask the Court to strike the plaintiffs' jury demand for Counts II-V, X and XII on the grounds that they are claims in equity. The plaintiffs note that they have made a general jury demand and argue that the issue of what claims should go to the jury should be decided at the jury instruction conference during trial. However, waiting until trial to decide this issue will only complicate the progression of the already complex trial.

Motions to strike are governed by Federal Rule of Civil Procedure 12(f). Under Rule 12(f), upon a motion or upon its own initiative, "[t]he court may strike from a pleading an insufficient defense or any redundant, immaterial, impertinent, or scandalous matter." Motions to strike, however, are generally disfavored because they are often employed for the sole purpose of causing delay. See Heller Fin., Inc. v. Midwhey Powder Co., 883 F.2d 1286, 1294 (7th Cir. 1989). However, when a motion to strike will expedite the case, such as, for example, by disposing of an unwarranted jury demand, it can be useful. See Kremers v. Coca-Cola Co., 714 F. Supp. 2d 912, 915 (S.D. Ill. 2009). The burden on a motion to strike is upon the moving party. See Vakharia v. Little Co. of Mary Hosp. & Health Care Ctrs., 2 F. Supp. 2d 1028 (N.D. Ill. 1998). The pending motion to strike, if meritorious, may expedite the case by removing unwarranted jury demands.

When a case is in federal court, federal law determines whether there is a right to a jury trial, see Simler v. Conner, 372 U.S. 221, 222 (1963), and under federal law, a plaintiff is entitled to a jury trial "[i]n Suits at common law, where the value in controversy shall exceed twenty dollars." U.S. Const. amend. VII; see also Fed. R. Civ. P. 38(a) ("The right of trial by jury as declared by the Seventh Amendment to the Constitution -- or as provided by a federal statute -- is preserved to the parties inviolate."). The United States Supreme Court has construed the federal right to a jury trial to extend to suits involving legal rights, as opposed to suits seeking purely equitable remedies. Chauffeurs, Teamsters & Helpers, Local No. 391 v. Terry, 494 U.S. 558, 564 (1990) (citing Parsons v. Bedford, 28 U.S. (3 Pet.) 433, 447 (1830)). If a statute creates legal rights and remedies enforceable by an action for damages, ...


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