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VitalGo, Inc. v. Kreg Therapeutics, Inc.

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

December 21, 2017

VITALGO, Inc. and VITALGO SYSTEMS LTD., Plaintiffs,
v.
KREG THERAPEUTICS, INC. and CRAIG POULOS, Defendants.

          MEMORANDUM OPINION AND ORDER

          ROBERT M. DOW, JR. UNITED STATES DISTRICT JUDGE

         Plaintiffs VitalGo, Inc. (“VitalGo”) and VitalGo Systems Ltd. (“Plaintiffs”) bring this action against Defendants Kreg Therapeutics, Inc. (“Kreg”) and Craig Poulos (“Defendants”) alleging copyright and trademark infringement and unfair competition under federal and state law. Currently before the Court is Defendants' combined motion [49] to strike portions of Plaintiffs' First Amended Complaint and to dismiss all claims in the First Amended Complaint with prejudice and Defendants' motion [55] to stay discovery. For the reasons stated below, Defendants' motion [49] is granted and part and denied in part. The Court grants Defendants' motion to strike in part: paragraphs 28-47, 50-53, 55, 64, 77-79, 84-87, 89-91, and 108-09, as well as portions of paragraphs 25 and 113 (25(1)-(10) and 113(1)-(10)), are stricken from the First Amended Complaint as they relate solely to the claims this Court has previously dismissed. Furthermore, the Court grants Defendants' motion to dismiss Count II, Count III, Count V, Count VI, and Count VII, and denies Defendants' motion to dismiss Count I and Count IV. Plaintiffs will be given one final attempt to replead Counts II, III, V, VI, and VII on or before January 22, 2018. Defendants' motion [55] to stay discovery pending the resolution of its motion to strike and to dismiss is denied as moot. This case is set for further status on January 30, 2018 at 10:00 a.m. to discuss a discovery plan.[1] Counsel are directed to confer and submit an updated joint status report no later than January 26, 2018.

         I. Background

         The background of this case, and of the more extensive litigation in which VitalGo and Kreg have been engaged before this Court, is set forth in the Court's previous opinion in this case, knowledge of which is assumed here. [See 41 at 1-7.] Briefly summarized, the parties entered into an agreement pursuant to which Kreg was granted the exclusive right to distribute Plaintiffs' Total Lift Bed product in certain regions of the country. In 2011, VitalGo terminated the parties' agreement, and Kreg thereafter filed suit (the “2011 Lawsuit”) against VitalGo for breach of that agreement. VitalGo counterclaimed that Kreg had violated the parties' agreement by both making unauthorized alterations to the Total Lift Bed without VitalGo's prior written approval and by failing to obtain VitalGo's approval of all advertisements and promotional materials Kreg used to promote and sell Total Lift Beds.[2]

         In May 2016, Plaintiffs filed the instant lawsuit, bringing claims against Defendants for copyright infringement in violation of 17 U.S.C. § 501 (Count I); unfair competition and false designation of origin pursuant to Section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a)(1)(A) (Count II); unfair competition and false advertisement pursuant to Section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a)(1)(B) (Count III); common law trademark infringement (Count IV); common law unfair competition (Count V); violation of the Illinois Uniform Deceptive Trade Practices Act (IUDTPA), 815 Ill. Comp. Stat. 510/1 et seq. (Count VI); and violation of the Illinois Consumer Fraud and Deceptive Business Practices Act (ICFA), 815 Ill. Comp. Stat. 505/1 et seq. (Count VII). [1 ¶ 2.] According to the original complaint, Plaintiffs began using VitalGo and Total Lift Bed marks in the United States in 2008, Plaintiffs began showing the Total Lift Bed in advertising and marketing materials in approximately 2008, and Plaintiffs have filed copyright applications for a brochure and for two digital renderings of the Total Lift Bed. [1 ¶¶ 14, 18.] Plaintiffs alleged that (1) Defendants marketed Plaintiffs' Total Lift Bed as an “Exclusive Kreg Product” or as a “Kreg Bed” and used Plaintiffs' Copyrighted Works in doing so since October 2011; (2) Defendants made modifications to Plaintiffs' Total Lift Beds but continued to advertise them as Total Lift Beds in 2010 or 2011; and (3) Defendants developed the Kreg Catalyst Bed in 2014 to compete with the Total Lift Bed and, until March 2016, they promoted the Catalyst Bed using the Total Lift Bed mark and Plaintiffs' Copyrighted Works. [41 at 7.]

         Defendants moved to dismiss [18] Plaintiffs' complaint in July 2016. To support their motion, Defendants argued that (1) Plaintiffs were judicially estopped from asserting their claims; (2) Plaintiffs' claims could not be alleged in an independent lawsuit because they constituted impermissible claim splitting; (3) no factual allegations demonstrated Defendant Poulos's personal liability; (4) the doctrine of laches barred Plaintiffs' Lanham Act claims; (5) Plaintiffs did not allege actual consumer reliance on Defendants' alleged misleading advertisements as necessary to support its Lanham Act claims; and (6) Plaintiffs could not seek attorneys' fees under the Copyright Act. On March 29, 2017, the Court granted in part and denied in part Defendants' motion. [See 41.] The Court held that the doctrine of claim splitting precluded Plaintiffs from bringing claims against Defendants relating to Defendants' modifications to the Total Lift Bed and to Defendants' allegedly infringing marketing and promotional materials for the Total Lift Bed because those claims were based on the same set of operative facts underlying VitalGo's counterclaim in the 2011 Lawsuit. [41 at 9-18.] The Court also held that Plaintiffs could proceed with their claims to the extent these claims are based on Defendants' alleged marketing of their Catalyst Bed using Plaintiffs' intellectual property because the underlying facts on which these allegations are based are separate and distinct from those underlying Plaintiff VitalGo's counterclaims in the 2011 Lawsuit. [41 at 18-19.] The Court also dismissed Plaintiffs' claims for attorneys' fees pursuant to § 505 of the Copyright Act. [41 at 27.]

         Plaintiffs then filed their First Amended Complaint on May 3, 2017. [See 43.] Defendants responded on May 31, 2017 by filing the instant motion [49] to strike various allegations from the First Amended Complaint concerning the Total Lift Bed pursuant to Federal Rule of Civil Procedure (“Rule”) 12(f) and to dismiss the remaining claims in the First Amended Complaint pursuant to Rule 12(b)(6).

         II. Defendants' Rule 12(f) Motion to Strike

         A. Legal Standard

         Under Rule 12(f), “[t]he court may strike from a pleading an insufficient defense or any redundant, immaterial, impertinent, or scandalous matter.” Fed.R.Civ.P. 12(f). Motions to strike are generally disfavored but may be used to expedite a case by “remov[ing] unnecessary clutter.” Heller Fin., Inc. v. Midwhey Powder Co., Inc., 883 F.2d 1286, 1294 (7th Cir. 1989); see also NewNet Commc'n Techs., LLC v. VI E-Cell Tropical Telecom, Ltd., 85 F.Supp.3d 988, 993 (N.D. Ill. 2015) (“But where a defendant's asserted [affirmative defenses] are both legion and mostly frivolous, a motion to strike can aid the parties in resolving the case by removing irrelevant issues from consideration.”). When seeking to strike specific allegations, “the movant must show that the allegations being challenged are so unrelated to plaintiff's claim as to be void of merit and unworthy of any consideration and that the allegations are unduly prejudicial.” Cumis Ins. Soc'y, Inc. v. Peters, 983 F.Supp. 787, 798 (N.D. Ill. 1997) (internal quotation marks and citation omitted); see also Manuel v. Lucenti, 2004 WL 2608355, at *2 (N.D. Ill. Nov. 16, 2004) (“To prevail on a motion to strike under Rule 12(f), defendants must demonstrate that the material at issue does not bear on the subject matter of the litigation and will prejudice the defendants.”). A district court has “considerable discretion” in striking redundant, immaterial, impertinent, or scandalous matter. Delta Consulting Grp., Inc. v. R. Randle Constr., Inc., 554 F.3d 1133, 1141 (7th Cir. 2009).

         B. Analysis

         Defendants argue that the vast majority of the factual allegations contained in Plaintiffs' First Amended Complaint must be stricken because they only relate to the previously dismissed claims (regarding Defendants' modifications to the Total Lift Bed and to Defendants' allegedly infringing marketing and promotional materials for the Total Lift Bed) and, as such, are irrelevant to the Catalyst Bed-related claims that remain in the case. Specifically, Defendants request that the Court strike paragraphs 20-23, 25-66, 69-79, 84-87, 89-91, 108-09, and 116- 28 in their entirety and portions of paragraphs 25 and 113 from the First Amended Complaint. Defendants argue that it would be highly prejudicial for these factual allegations to remain in the First Amended Complaint-thus “reviving” the previously-dismissed claims-because then Defendants would not reap the benefit of their successful motion to dismiss.

         The Court concludes that at least some of the allegations in the First Amended Complaint must be stricken because they have no apparent relevance to the Catalyst Bed-related claims that remain in the litigation. A court may strike particular allegations if “[t]he Court unequivocally dismissed Plaintiff's claims based on these allegations with prejudice, thereby precluding Plaintiff from raising them again” in an amended complaint. Wei Liang v. Frontline Asset Strategies, LLC, 2017 WL 1365604, at *2 (N.D. Ill. Apr. 14, 2017) (striking several paragraphs from Plaintiffs amended complaint and rejecting the plaintiff's argument that these facts were still relevant to his remaining claims); see also Simons v. Ditto Trade, Inc., 2015 WL 1918617, at *5-6 (N.D. Ill. Apr. 28, 2015) (striking a counterclaim's allegations regarding the plaintiff's relationship to another because “none” of the amended counterclaims were about that relationship); Hickman v. Wells Fargo Bank NA, 2010 WL 3833669, at *7 (N.D. Ill. May 11, 2010) (striking disputed language from amended complaint because “the Court has already held that Plaintiff has failed to state a claim * * * in this regard”); David v. Vill. of Oak Lawn, 1996 WL 494268, at *2 (N.D. Ill. Aug. 27, 1996) (striking references to a conspiracy in plaintiffs amended complaint because the court had previously dismissed the conspiracy counts). Here, several of the factual allegations in the First Amended Complaint relate solely to the two theories that the Court has previously dismissed because they cannot be brought in a lawsuit separate from the 2011 Lawsuit: (1) that Defendants marketed the Total Lift Bed as an “Exclusive Kreg Product” or as a “Kreg Bed” using Plaintiff's Copyrighted Works, and (2) that Defendants made modifications to Plaintiffs' Total Lift Beds but continued to advertise them as Total Lift Beds. These allegations are without any relevance to the Catalyst Bed claims.[3] Keeping such allegations in the operative complaint would have the effect of “confusing the issues” and thus causing prejudice to Defendants in that respect. Cumis Ins. Soc'y, 983 F.Supp. at 798.

         Plaintiffs argue that the allegations Defendants seek to have stricken are necessary to support and provide context to Plaintiffs' claims and clearly bear on the subject matter of the litigation. The Court disagrees that all of the allegations Plaintiffs have included in their First Amended Complaint perform such functions. Allegations in a complaint need not bear directly on the subject matter of a claim, and thus need not be stricken from the complaint, as long as they bear some relationship to the parties' or the Court's understanding of the actual claims in the case. See Extra Equipamentos E Exportacao Ltda. v. Case Corp., 2005 WL 843297, at *13-14 (N.D. Ill. Jan. 20, 2005) (allegations should not be stricken if they “might serve to achieve a better understanding of the claim or perform some other useful purpose in the just disposition of the litigation”) (internal alterations omitted); Vakharia v. Little Co. of Mary Hosp. & Health Care Ctrs., 2 F.Supp.2d 1028, 1033 (N.D. Ill. 1998) (refusing to strike allegations where they were “so general in nature” that they “very well” could relate to the viable claims in a case). But here, many of the disputed paragraphs that Defendants seek to strike from the First Amended Complaint are not general background information regarding the parties' relationship but specific facts that relate to the previously dismissed claims. As such, they are irrelevant to the subject matter of the litigation.

         Nevertheless, Defendants' motion has painted with too broad of a brush. Some of the paragraphs that Defendants seek to have stricken provide context regarding the parties' relationship, what the Total Lift Bed marks and Plaintiffs' Copyrighted Works are, and the alleged personal liability of Defendant Poulos. See, e.g., [43 ¶ 20] (“In 2011, Defendant Kreg stated that Plaintiffs' ‘Total Lift Bed is the only hospital-grade bed that can elevate someone from a lying to a fully standing position, with zero lifting on the part of the caregiver.'”); [id. ¶ 66] (“Defendants intentionally used Plaintiffs' TOTAL LIFT BED mark so as to create consumer confusion and traffic off of Plaintiffs' reputation and goodwill under the TOTAL LIFT BED mark.”); [id. ¶ 87] (“In the Prior Litigation, Defendant Poulos testified during his deposition that he focuses all of his time on behalf of Defendant Kreg to sales and marketing.”). Leaving these paragraphs in the First Amended Complaint would not prejudice Defendants and therefore they do not need to be stricken. Other paragraphs that Defendants move to strike arguably relate to Plaintiffs' claims regarding the Catalyst Bed because they refer generally to Defendants' hospital beds. See, e.g., [43 ¶ 56] (“Defendants are not authorized to use Plaintiffs' TOTAL LIFT BED mark in association with hospital beds.”); [id. ¶ 59] (“Defendants' use of Plaintiffs' TOTAL LIFT BED mark falsely suggests that * * * Defendants' hospital beds originate from Plaintiffs.”); [id. ¶ 64] (“Defendants' use of Plaintiffs' TOTAL LIFT BED mark is likely to cause, has caused, and is causing actual consumer confusion in the marketplace as to * * * Plaintiffs' affiliation with Defendants and Defendants' hospital beds.”). Considering the close relationship between Defendants' Rule 12(f) and Rule 12(b)(6) motions, and considering the need to draw all reasonable inferences in Plaintiff's favor at the motion to dismiss stage, Killingsworth v. HSBC Bank Nevada, N.A., 507 F.3d 614, 618 (7th Cir. 2007), the Court will not strike allegations as immaterial that could refer to Plaintiffs' Catalyst Bed claims. These paragraphs may remain in the First Amended Complaint, but only as they relate to the Catalyst Bed.

         The Court will therefore grant in part and deny in part Defendants' motion to strike as follows. Paragraphs 28-47, 50-53, 55, 64, 77-79, 84-87, 89-91, and 108-09, as well as the portions of paragraphs 25 and 113 that relate exclusively to the dismissed claims (25(1)-(10) and 113(1)-(10)), are stricken from the First Amended Complaint as they relate solely to the claims this Court has previously dismissed. The Court declines to strike the remaining paragraphs that Defendants have identified on the understanding that these paragraphs are offered as background or support for Plaintiffs' Catalyst Bed theory only.

         III. Defendants' Rule ...


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