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Manley v. Boat/U.S., Inc.

United States District Court, N.D. Illinois, Eastern Division

December 12, 2014

JOHN J. MANLEY d/b/a/ CHICAGO MARINE TOWING, Plaintiff,
v.
BOAT/U.S., INC. et al., Defendants

Page 849

For Chicago Marine Towing, Plaintiff: Garry L Wills, Freeborn & Peters, Chicago, IL; Jason Ryan Klinowski, Freeborn & Peters LLP, Chicago, IL.

For Boat/U.S., Inc., Defendant: Peter K. Moroh, Law Offices of Peter K. Moroh, Chicago, IL.

For Great Lakes Repair, Inc. d/b/a Great Lakes Towing & Repair, Richard N. Lenardson, Defendants: Joseph W. Barber, LEAD ATTORNEY, Howard and Howard, Chicago, IL.

Page 850

MEMORANDUM OPINION AND ORDER

Robert M. Dow, Jr., United States District Judge.

This matter is before the Court on a motion to dismiss [35] pursuant to Federal Rule of Civil Procedure 12(b)(6) filed by Plaintiff/Counter-Defendant Chicago Marine Towing. Counter-Defendant seeks to dismiss Count I (breach of contract) and Counts III through IX (trademark infringement, dilution, and unfair competition under state and federal law) of the first amended counterclaim filed by Defendant/Counter-Plaintiff Boat/U.S., Inc. For the reasons set forth below, the Court grants the motion to dismiss [35] with respect to Count IX for trademark dilution under the Illinois Trademark Registration and Protection Act, 765 ILSC 1036/65 and denies the motion with respect to all of the other counts.

Page 851

I. Factual Background[1]

Plaintiff/Counter-Defendant John J. Manley d/b/a/ Chicago Marine Towing (" Chicago Marine" ) is an Illinois business that provides marine towing and salvage services to boats on Lake Michigan and its tributary waters. Defendant/Counter-Plaintiff Boat/U.S., Inc. (" Boat U.S." ) is a Virginia corporation that provides water towing services, 24-hours dispatch services, and insurance coverage for recreational boaters. Boat U.S. has provided boating services since 1966 and has more than half a million members. [34], Am. Counterclaim at ¶ 4. It owns multiple registrations for trademarks, including " BoatU.S." and " TowBoatU.S." Id. at ¶ 5. Boat U.S. contends that these marks are " famous" within the meaning of the Lanham Act and are widely recognized by the general consuming public. See id. at ¶ ¶ 7, 37.

In February 2009, Chicago Marine entered into a license/service agreement (the " Agreement" ) with Boat U.S. Under the Agreement, Chicago Marine was a Boat U.S.-authorized towing company, with an area of exclusive operation in and around specified ports on Lake Michigan. Chicago Marine also was licensed and authorized to display the Boat U.S. trademarks on its vessels to show its affiliation with Boat U.S., while the Agreement was in effect. Id. at ¶ 10. Chicago Marine agreed to cease all use of the trademarks upon termination of the Agreement for any reason. Id. at ¶ 12.

Boat U.S. alleges that, while the Agreement was in force, Chicago Marine displayed the Boat U.S. trademarks--including " BoatU.S.," " TowBoatU.S.," " www.TowBoatUS.com," " Boat USA," and " the design of a Buoy" --on its motor vehicles, boats, website, signage, letterhead, paperwork, and clothing to promote its affiliation with Boat U.S. See id. at ¶ 11. On July 23, 2012, Boat U.S. terminated the Agreement due to Chicago Marine's purported breaches of four items in the Agreement. Boat U.S. alleges that after the termination, Chicago Marine continued to display the trademarks on its motor vehicle, boats, website, signage, letterhead, paperwork and clothing to falsely and improperly suggest an authorized affiliation with Boat U.S. Id. at ¶ 15. Boat U.S. asserts eight counts that relate to the alleged unauthorized use of the trademarks: breach of contract (Count I); trademark infringement under the Lanham Act, 15 U.S.C. § 1114 (Count III) and under common law (Count VI); trademark dilution under 15 U.S.C. § 1125(c) (Count IV) and under the Illinois Trademark Registration and Protection Act, 765 ILCS 1036/65 (Count IX); false designation of origin under 15 U.S.C. § 1125(a) (Count V); unfair competition (Count VII); and (6) a violation of the Illinois Uniform Deceptive Trade Practices Act, 815 ILCS 510/1 et seq. (Count VIII). Boat U.S. also alleges that Chicago Marine breached the implied covenant of good faith and fair dealing by acting inappropriately during a July 2012 salvage operation that resulted in termination of the Agreement (Count II).

The alleged circumstances of Boat U.S.'s termination of the Agreement are set forth fully in a previous memorandum opinion. See Manley v. Boat/U.S. Inc., 2014 WL 1647117, at *1-2 (N.D. Ill. Apr. 23, 2014). They need not be repeated here for purposes

Page 852

of deciding the instant motion. In short, Boat U.S. terminated the Agreement after it received complaints about Chicago Marine's actions during a July 1, 2012 salvage operation to assist a boat that had run aground. Chicago Marine subsequently filed suit against Boat U.S. for wrongful termination. Chicago Marine also asserted defamation claims against Boat U.S. and against the company that replaced Chicago Marine after Boat U.S. terminated the Agreement. Defendants filed motions to dismiss the complaint, which the Court denied. See Manley, 2014 WL 1647117, at * 6. Boat U.S. filed an answer and counterclaim thereafter [24], followed by its first amended answer and counterclaim [34], which is at issue now.

II. Legal Standard

Chicago Marine moves to dismiss Boat U.S.'s amended counterclaim under Federal Rule of Civil Procedure 12(b)(6). To survive a motion to dismiss pursuant to Rule 12(b)(6), a counterclaim must " state a claim to relief that is plausible on its face." Bell A. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007); see also Cozzi Iron & Metal, Inc., 250 F.3d at 574 (applying Rule 12(b)(6) standard to motion to dismiss counterclaims). " A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). Additionally, when considering motions to dismiss, " [the Seventh Circuit] accept[s] all well-pleaded factual allegations as true and view[s] them in the light most favorable to the plaintiff." Lavalais v. Vill. of Melrose Park, 734 F.3d 629, 632 (7th Cir. 2013) (citing Luevano v. Wal-- Mart Stores, Inc., 722 F.3d 1014, 1027 (7th Cir. 2013)). At the same time, however, " allegations in the form of legal conclusions are insufficient to survive a Rule 12(b)(6) motion." McReynolds v. Merrill Lynch & Co., Inc., 694 F.3d 873, 885 (7th Cir. 2012) (citing Iqbal, 556 U.S. at 678). As such, " [t]hreadbare recitals of the elements of the cause of action, supported by mere conclusory statements, do not suffice." Iqbal, 556 U.S. at 678. Although, " [s]pecific facts are not necessary," the counterclaim must " give the defendant fair notice of what the * * * claim is and the grounds upon which it rests." Erickson v. Pardus, 551 U.S. 89, 93, 127 S.Ct. 2197, 167 L.Ed.2d 1081 (2007) (citing Twombly, 550 U.S. at 555) (ellipsis in original). The Court reads the counterclaim and assesses its plausibility as a whole. See Atkins v. City of Chi., 631 F.3d 823, 832 (7th Cir. 2011).

III. Analysis

Chicago Marine moves to dismiss Count I and Counts III through IX of Boat U.S.'s amended counterclaim, all of which are premised on Chicago Marine's alleged use of Boat U.S.'s trademarks following termination of the Agreement. With respect to all eight of the counts, Chicago Marine argues that the counterclaim fails to allege sufficient facts regarding the use of the trademarks. With respect to Counts IV and IX for trademark dilution, Chicago Marine makes two additional arguments in support of dismissal: that the dilution claims fail because the parties are competitors and that the trademarks are not " famous" under the relevant dilution statutes. Each of these arguments is addressed below.

A. Counts III and V through VIII for trademark infringement and unfair ...


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