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Serta, Inc. v. Oleg Cassini

June 28, 2012

SERTA, INC. PLAINTIFF,
v.
OLEG CASSINI, INC.,
DEFENDANT.



The opinion of the court was delivered by: Judge Robert M. Dow, Jr.

MEMORANDUM OPINION AND ORDER

Plaintiff Serta, Inc., filed a complaint against Defendant Oleg Cassini, Inc. ("OCI"), for a declaratory judgment that Serta has not infringed any valid trademark rights of OCI. Before the Court is OCI's motion [18] to dismiss Serta's complaint pursuant to Federal Rule of Civil Procedure 12(b)(6) or, in the alternative, to transfer the case to the Southern District of New York pursuant to 28 U.S.C. § 1404.*fn1 For the reasons stated below, the motion [18] is respectfully denied.

I. Background*fn2

Serta, one of the world's largest manufacturers of mattresses, is a Delaware corporation with its principal place of business near Chicago. Recently, Serta's line of mattresses included a model called the "Perfect Day Cassini." This model was sold exclusively at J.C. Penney stores.

On September 13, 2011, Serta received a letter from OCI, a New York corporation with its principal place of business in New York City. The letter noted that Serta had not secured permission to use the "Cassini" trademark on its mattresses and requested a response. On September 23, Serta's counsel responded to OCI, claiming that the mark "Cassini" is widely used, making it difficult to believe that consumers would confuse Serta's mattress with OCI's products, which include clothing and perfume. Nevertheless, Serta stated that it intended to phase out the "Cassini" model in the first quarter of 2012.

On October 6, counsel for OCI sent a lengthy cease-and-desist letter to Serta's counsel. In the letter, OCI asserted that Serta's use of "Cassini" constituted trademark infringement and unfair competition under the Lanham Act. OCI demanded, among other things, that Serta immediate cease selling the "Cassini" mattresses and that Serta provide OCI with a detailed accounting of the allegedly offending products. OCI stated that if "an appropriate immediate response" was not received, the company would "take further action under the law * * * including, but not limited to, commencing [litigation]."

On October 14, Serta's counsel responded that, although Serta saw no basis for OCI's claims, it discontinued its "Cassini" mattress a few days earlier; the remaining floor samples would be sold within the next two weeks. Serta therefore considered the matter closed. Nevertheless, on October 17, OCI's counsel responded that the matter was not closed. Rather, OCI demanded that: (1) no floor samples be sold; (2) Serta contact search engines to remove content regarding the "Cassini" mattresses; and (3) Serta provide a full accounting as directed in OCI's previous letter. OCI concluded that if it did not receive the accounting, it would "proceed to file suit." OCI sent a similar letter to J.C. Penney on November 1.

Also on November 1, counsel for OCI and Serta spoke over the phone. Serta made a monetary demand, but the dispute was not resolved. Then, on November 10, Serta's counsel sent a letter to OCI's counsel. Serta explained that it was "shocked" by OCI's demand of $100,000, which was greater than Serta's gross wholesale sales of the "Cassini" mattresses. Serta reiterated that it had discontinued all sales of the "Cassini" model, although it stood by its use of the mark. Serta attached its filed declaratory judgment complaint to the letter, stating that it was withholding service in the hopes that OCI would withdraw its additional demands. The parties, however, were unable to settle their dispute.

On December 1, OCI filed a complaint against Serta, J.C. Penney, and National Bedding Company (a licensee and majority shareholder of Serta) in the Southern District of New York, Case No. 11 Civ. 8751, alleging trademark infringement (the "New York Action"). Shortly thereafter, Serta served OCI with its complaint in this action. On January 5, 2012, Serta moved to dismiss the New York Action pursuant to the Second Circuit's "first-filed" rule. See generally Research Automation, Inc. v. Schrader-Bridgeport Int'l, Inc., 626 F.3d 973, 981-82 (7th Cir. 2010) (summarizing the various circuits' approaches to the first-to-file rule). The next day, OCI filed its motion in this case.

On March 13, Serta's motion was granted, and the New York Action was dismissed. Among other things, the Judge Engelmeyer found that: (1) Serta's Illinois complaint did not constitute an improper anticipatory finding; and (2) OCI had not shown that the balance of conveniences weighed in favor of a New York-as opposed to an Illinois-venue. [See 24.]

II. Analysis

A. Motion to Dismiss

The only issue regarding the motion to dismiss is whether Serta's declaratory judgment complaint constitutes an impermissible anticipatory filing. Generally, when two similar actions are filed, district courts dismiss, stay, or transfer the second-filed suit. See Schwarz v. Nat'l Van Lines, Inc.,317 F. Supp. 2d 829, 832-33 (N.D. Ill. 2004). But the Seventh Circuit "does not rigidly adhere to a first-to-file rule." Research Automation, Inc., 626 F.3d at 980. Rather, the second-filed action may proceed where, among other things, the first-filed action constitutes an "improper anticipatory filing" made under threat of an imminent suit. Schwarz, 317 F. Supp. 2d at 833. Under these circumstances, retaining jurisdiction of the first-filed suit is inconsistent with the purposes of the Declaratory Judgment Act. See id. ("The Declaratory Judgment Act is not a tool with which potential litigants may secure a delay or choose the forum.").

OCI argues that Serta's action is an anticipatory filing because it was "aimed to deprive OCI of its rights as a 'natural' plaintiff to file an infringement action in the venue of its choice." [19 at 8.] The Court disagrees. The facts previously described indicate that, for two months, the parties exchanged correspondence but were unable to settle their differences. After receiving OCI's cease-and-desist letter, Serta responded twice that it discontinued the "Cassini" model but that it would not acquiesce to OCI's additional demands. In turn, OCI threatened litigation but did not specify a forum, provide a deadline before it would file suit, or otherwise indicate that a lawsuit was imminent. Indeed, after twice referencing potential litigation, OCI engaged in further discussions with Serta. Under similar circumstances, at least one court in this district has found that the first filing was not ...


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