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Redbox Automated Retail LLC v. Xpress Retail LLC

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

February 20, 2018

REDBOX AUTOMATED RETAIL, LLC, Plaintiff/Counter-Defendant,
v.
XPRESS RETAIL LLC, Defendant/Counter-Plaintiff.

          MEMORANDUM OPINION AND ORDER

          GARY FEINERMAN, JUDGE.

         Redbox Automated Retail, LLC brought this suit against Xpress Retail LLC (“DVDXpress”), alleging trademark infringement and false advertising in violation of the Lanham Act, 15 U.S.C. § 1051 et seq., and Illinois law. Doc. 1. DVDXpress answered, asserted nine affirmative defenses, and brought two counterclaims, including one under Illinois law for tortious interference with contract. Doc. 29. Redbox moves to dismiss that counterclaim under Federal Rule of Civil Procedure 12(b)(6) and to strike five of the affirmative defenses under Rule 12(f). Doc. 39. The motion to dismiss is denied, and the motion to strike is granted in part and denied in part.

         Background

         In considering Redbox's Rule 12(b)(6) and 12(f) motions, the court assumes the truth of the counterclaim's and affirmative defenses' factual allegations, though not their legal conclusions, and draws all reasonable inferences in DVDXpress's favor. See Smoke Shop, LLC v. United States, 761 F.3d 779, 785 (7th Cir. 2014); United States v. 416.81 Acres of Land, 514 F.2d 627, 631 (7th Cir. 1975) (Clark, J.). The court must also consider “documents attached to the [counterclaim and affirmative defenses], documents that are critical to the [counterclaim and affirmative defenses] and referred to in [them], and information that is subject to proper judicial notice, ” along with additional facts set forth in DVDXpress's brief opposing dismissal, so long as those facts “are consistent with the pleadings.” Phillips v. Prudential Ins. Co. of Am., 714 F.3d 1017, 1020 (7th Cir. 2013) (internal quotation marks omitted). As required on Rule 12(b)(6) and 12(f) motions, the facts are set forth as favorably to DVDXpress as those materials allow. See Meade v. Moraine Valley Cmty. Coll., 770 F.3d 680, 682 (7th Cir. 2014). In setting forth those facts, the court does not vouch for their accuracy. See Jay E. Hayden Found. v. First Neighbor Bank, N.A., 610 F.3d 382, 384 (7th Cir. 2010).

         Redbox and DVDXpress both operate DVD rental services through automated vending machines called kiosks. Doc. 29 at pp. 1-2, ¶ 1. According to Redbox, the vast majority of its kiosks feature the word mark REDBOX and are branded with distinctive red coloring on their face and sides. Doc. 1 at ¶ 18. Redbox has registered trademarks for its word mark and for the kiosks' color scheme. Docs. 1-1, 1-2, 1-3, 1-4, 1-5.

         Redbox filed this suit on July 31, 2017. Doc. 1. The complaint alleges that DVDXpress recently began using kiosks that are entirely red in color, making them confusingly similar to Redbox's kiosks and infringing its registered trademarks and common law trade dress rights, in violation of 15 U.S.C. §§ 1114(1) and 1125(a), respectively. Id. at ¶¶ 34-35, 72-98. Redbox further alleges that DVDXpress's use of red kiosks violates the Illinois Uniform Deceptive Trade Practices Act (“UDTPA”), 815 ILCS 510/2. Doc. 1 at ¶¶ 126-138. Redbox also alleges that DVDXpress infringed its word mark, in violation of 15 U.S.C. § 1114(1), by including the term “redbox” in the metadata for its website, in an attempt to capture search requests at Redbox's expense. Id. at ¶¶ 69-70, 105. Finally, Redbox alleges that DVDXpress falsely advertises that customers can rent movies through DVDXpress twenty-eight days before the same movies become available through Redbox, in violation of the Lanham Act, 15 U.S.C. § 1125(a), the UDTPA, and the Illinois Consumer Fraud and Deceptive Business Practices Act, 815 ILCS 505/1 et seq. Doc. 1 at ¶¶ 42-63, 114-144.

         DVDXpress's counterclaim alleges that Redbox tortiously interfered with DVDXpress's contractual relationship with Weis Markets, Inc., a retail grocery chain. Doc. 29 at pp. 57-60, ¶¶ 26-61. According to DVDXpress, Weis signed a DVD Rental Kiosk Agreement with DVDXpress in July 2017 and accordingly asked Redbox to remove its kiosks from Weis's stores. Id. at pp. 58-59, ¶¶ 41, 45. The agreement provided that DVDXpress would be Weis's “exclusive provider of DVD rental kiosks” and would “install its kiosks in stores currently containing Redbox kiosks, or other active movie kiosks by September 25.” Doc. 47 at 8. On August 4, 2017, four days after Redbox filed this suit, Redbox's general counsel, Frederick Stein, sent a letter to Weis stating that Redbox would not remove its kiosks “on Weis's requested schedule.” Doc. 29 at p. 59, ¶¶ 49-50. The letter also stated that Redbox was seeking an injunction against DVDXpress and that Redbox “would be concerned if more red DVDXpress kiosks began to appear in the marketplace.” Id. at p. 59, ¶¶ 51-53. Redbox ultimately removed the last of its kiosks from Weis's stores in late October 2017, after DVDXpress filed its counterclaim. Doc. 47 at 8 n.12; Doc. 48 at 3-4.

         Discussion

         I. Motion to Dismiss the Tortious Interference Counterclaim

         “To state a claim under Illinois law for tortious interference with contract[], a plaintiff must demonstrate: (1) the existence of a valid and enforceable contract between the plaintiff and another; (2) the defendant's awareness of this contractual relation; (3) the defendant's intentional and unjustified inducement of a breach of the contract; (4) a subsequent breach by the other, caused by the defendant's wrongful conduct; and (5) damages.” Healy v. Metro. Pier & Exposition Auth., 804 F.3d 836, 842 (7th Cir. 2015). While “a subsequent breach by the other” would appear to require an allegation that the tortious interference plaintiff's contractual counterparty breached the contract, the breach element also “encompasses the situation in which the defendant prevents the plaintiff from performing the contract” by making performance impossible. Havoco of Am., Ltd. v. Sumitomo Corp. of Am., 971 F.2d 1332, 1344 (7th Cir. 1992) (quoting Scholwin v. Johnson, 498 N.E.2d 249, 255 ( Ill. App. 1986)).

         Redbox contends that the counterclaim should be dismissed because it fails to allege that Weis breached its contract with DVDXpress or that Redbox made DVDXpress's performance impossible. Doc. 41 at 3-5; Doc. 48 at 2-6. Redbox's contention fails to persuade. True, the counterclaim does not explicitly allege that Redbox's delay in removing its kiosks from Weis's stores caused Weis to breach the contract or made it impossible for DVDXpress to perform. But such an explicit allegation is unnecessary. “[T]he Federal Rules of Civil Procedure … require[] plaintiffs to plead claims rather than facts corresponding to the elements of a legal theory.” Chapman v. Yellow Cab Coop., 875 F.3d 846, 848 (7th Cir. 2017). “It is enough to plead a plausible claim, after which ‘a plaintiff receives the benefit of imagination, so long as the hypotheses are consistent with the complaint.'” Ibid. (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 563 (2007)). “Because complaints need not identify the applicable law, it is manifestly inappropriate for a district court to demand that complaints contain all legal elements (or factors) plus facts corresponding to each.” Ibid. (citations omitted).

         It is, at the very least, plausible that the continued presence of Redbox's kiosks at Weis's stores through late October caused Weis to breach the contract or made it impossible for DVDXpress to perform. DVDXpress identifies two provisions of the contract that allegedly were breached. First, by leaving its kiosks in place, Redbox may have caused Weis to breach the contract's provision that DVDXpress would be Weis's “exclusive provider of DVD rental kiosks.” Doc. 47 at 8. And, second, Redbox may have made it impossible for DVDXpress “to install its kiosks in stores currently containing Redbox kiosks, or other active movie kiosks by September 25.” Ibid.

         Of course, as Redbox points out, it is theoretically possible that kiosks from different vendors can coexist in the same store. Doc. 48 at 3. Drawing all inferences in DVDXpress's favor, however, it would appear that Weis was transitioning from one “exclusive provider” of DVD-rental kiosks to another. Doc. 29 at p. 59, ¶ 47; Doc. 47 at 8. Thus, it is plausible that the Redbox machines already occupied all (or most) available positions for DVD-rental kiosks in Weis's stores. If there was nowhere for DVDXpress to put its machines other than the locations occupied by Redbox's kiosks, then the continued presence of Redbox's kiosks after September 25 made it impossible for DVDXpress to install its kiosks as the contract required. This would be true impossibility-there was simply nowhere for DVDXpress to install its kiosks-not mere “impossibility of performance as intended.” PECO Pallet, Inc. v. Nw. Pallet Supply Co., 2016 WL 5405107, at *13 (N.D. Ill. Sept. 28, 2016) (internal quotation marks omitted).

         Redbox also suggests that it cannot plausibly be inferred from the counterclaim's allegations that Redbox's conduct was wrongful or unjustified. Doc. 48 at 5. In support, Redbox emphasizes that DVDXpress alleges that Stein informed Weis that Redbox “would not remove [its] DVD rental kiosks on Weis's requested schedule, ” not that Redbox refused to ever remove its kiosks. Doc. 29 at p. 59, ¶ 50. But the fact that Stein promised delay rather than total noncompliance does not make it implausible that Redbox's action was motivated by a desire to harm DVDXpress. Intentional delay can be just as malicious as outright refusal. And in any event, the counterclaim alleges facts-specifically, that Stein informed Weis that Redbox was seeking an injunction against DVDXpress and “would be concerned if more red DVDXpress kiosks began to appear in the marketplace, ” id. at p. 59, ΒΆ ...


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