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International Foundation of Employee Benefit Plans, Inc. v. Cottrell

United States District Court, D. Maryland, Northern Division

January 7, 2015

INTERNATIONAL FOUNDATION OF EMPLOYEE BENEFIT PLANS, INC, et al., Plaintiffs,
v.
WENDY J. COTTRELL, Defendant.

MEMORANDUM OPINION

WILLIAM D. QUARLES, Jr., District Judge.

International Foundation of Employee Benefit Plans, Inc., and its subsidiary, Certified Employee Benefit Specialists, Inc., (together, "IFEBP") sued Wendy J. Cottrell, d/b/a HR Vantage, for false advertising, trademark infringement, and other claims. ECF No. 1.[1] Pending is Cottrell's pro se motion to dismiss for failure to state a claim. ECF No. 7. No hearing is necessary. Local Rule 105.6 (D. Md. 2014). For the following reasons, Cottrell's motion will be denied.

I. Background

A. Facts[2]

IFEBP is a Wisconsin nonprofit organization specializing in employee benefits, compensation, and financial literacy education and information. ECF No. 1 ¶ 9. IFEBP trains and certifies professionals in employee benefits and compensation. Id. ¶ 10. IFEBP owns protected U.S. federal trademark registrations for "CEBS®"[3] and "Certified Employee Benefits Specialist®."[4] Id. ¶¶ 11, 31. Cottrell owns and operates HR Vantage, which provides disability retirement counseling to federal employees. ECF No. 7-1 at 1.

Individuals certified by IFEBP may use the CEBS® and Certified Employee Benefits Specialist® designations. ECF No. 1 ¶ 12. Cottrell's website and LinkedIn profile page display both designations; however, Cottrell has never been certified by IFEBP. Id. ¶¶ 13-14, 20.[5] IFEBP does not have any record of Cottrell completing the examinations necessary to become certified. Id. ¶ 15.[6]

Cottrell's use of the CEBS® and Certified Employee Benefits Specialist® designations has caused "lost sales of [IFEBP's] educational and examination fees." Id. ¶ 25. IFEBP's reputation has suffered because Cottrell "is providing sub-standard services, " and "customers receiving such sub-standard services from Cottrell will presume... that [IFEBP has] certified [Cottrell's] sub-standard services." Id. ¶ 26. Cottrell's use of the designations "is willful and intentional, done expressly for the purpose of trading upon the valuable goodwill and public recognition built up by [IFEBP] in its intellectual property." Id. ¶ 37.

B. Procedural History

On April 15, 2014, IFEBP sued Cottrell for false advertising, trademark infringement, false designation, and unfair competition under the Lanham Act, [7] and for common law fraudulent misrepresentation. ECF No. 1.[8] On May 20, 2014, Cottrell moved to dismiss the complaint for failure to state a claim. ECF No. 7. On May 28, 2014, IFEBP opposed the motion. ECF No. 8.

II. Analysis

A. Legal Standard for the Motion to Dismiss

Under Federal Rule of Civil Procedure 12(b)(6), an action may be dismissed for failure to state a claim upon which relief can be granted. Rule 12(b)(6) tests the legal sufficiency of a complaint, but does not "resolve contests surrounding the facts, the merits of a claim, or the applicability of defenses." Presley v. City of Charlottesville, 464 F.3d 480, 483 (4th Cir. 2006).

The Court bears in mind that Rule 8(a)(2) requires only a "short and plain statement of the claim showing that the pleader is entitled to relief." Migdal v. Rowe Price-Fleming Int'l, Inc., 248 F.3d 321, 325-26 (4th Cir. 2001). Although Rule 8's notice-pleading requirements are "not onerous, " the plaintiff must allege facts that support each element of the claim advanced. Bass v. E.I. Dupont de Nemours & Co., 324 F.3d 761, 764-65 (4th Cir. 2003). These facts must be sufficient to "state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007).

This requires that the plaintiff do more than "plead[] facts that are merely consistent with a defendant's liability;'" the facts pled must "allow[] the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) ( quoting Twombly, 550 U.S. at 557). The complaint must not only allege but also "show" that the plaintiff is entitled to relief. Id. at 679 (internal quotation marks omitted). "Whe[n] the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged - but it has not shown - that the pleader is entitled to relief." Id. (internal quotation marks and alteration omitted).

B. Cottrell's Motion[9]

Cottrell contends that IFEBP's Lanham Act claims fail because IFEBP has not established that her alleged use of its trademarks has caused - or is likely to cause - confusion or harm. ECF No. 7-1 at 3. Cottrell further contends that IFEBP's claims fail because Cottrell and IFEBP are not competitors.[10]

The Lanham Act "protect[s] persons engaged in such commerce against unfair competition." 15 U.S.C. § 1127. Under 15 U.S.C. § 1125(a),

(1) any person who... uses in commerce any word, term, name, symbol, or device, ... or any false designations of origin, false or misleading description of fact, or false or misleading representation of fact, which...
(A) is likely to cause confusion, or to cause mistake, or to deceive... as to the origin, sponsorship, or approval of his or her goods, services, or commercial activities by another person, or
(B) in commercial advertising or promotion, misrepresents the nature, characteristics, qualities, or geographic origin of his or her or another person's goods, services, or commercial activities.

Section 1125(a) provides two grounds for asserting unfair competition claims: 15 U.S.C. § 1125(a)(1)(A) protects against false designation; 15 U.S.C. § 1125(a)(1)(B) protects against false advertising. See Lexmark Int'l, Inc. v. Static Control Components, Inc., 134 S.Ct. 1377, 1384 (2014). Because Cottrell's competition-based argument applies to both claims, the Court will address that argument first.

1. Direct Competition

Although the U.S. Supreme Court recently held that noncompetitors may bring a false advertising claim, it did not address false designation. See Lexmark Int'l, Inc., 134 S.Ct. at 1393 ("We thus hold that a plaintiff suing under § 1125(a) ordinarily must show economic or reputational injury flowing directly from the deception wrought by the defendant's advertising ....") (emphasis added).[11] There, Lexmark, a printer manufacturer that sells toner cartridges for its printers, sued Static Control, which makes and sells components for remanufacturing Lexmark cartridges, under the Copyright Act of 1976, [12] and the Digital Millennium Copyright Act.[13] Id. at 1383. Static Control counterclaimed under the Lanham Act, alleging false advertising. Id. Lexmark and Static Control are not competitors; rather, Lexmark competes with remanufacturers - companies supplied by Static Control - that "acquire used Lexmark toner cartridges, refurbish them, and sell them in competition with new and refurbished cartridges sold by Lexmark." Id. at 1383.

Although Static Control sued under the Lanham Act's false advertising provision, the Supreme Court broadly framed the standing issue as whether "the cause of action in § 1125(a) extend[s] to plaintiffs like Static Control?, " and noted that "[t]he statute authorizes suit by any person.'" Id. at 1388 (citing 15 U.S.C. § 1125(a)(1)). Although declining to equate § 1125(a) standing with the "minimum requirements of Article III" standing, the Supreme Court limited § 1125(a)(1) standing to plaintiffs "alleg[ing] an injury to a commercial interest in reputation or sales." Id. at 1390. In reaching its conclusion, the Supreme Court relied on the Lanham Act's purpose, id. at 1389, which is replete with references to "commerce."[14] Because the Act's purpose applies to all its provisions, there is no reason to think the Supreme Court would apply different standing requirements to a false designation claim. In fact, that Court observed that "[m]ost of the enumerated purposes are relevant to false-association cases, " see id., which, like false designation, would be brought under § 1125(a) (1) (A).[15] In light of Lexmark Int'l, Inc., the Court concludes that direct competition is not a prerequisite to bringing a false designation claim under 15 U.S.C. § 1125(a)(1)(A).[16] Accordingly, Cottrell is not entitled to dismissal on the ground that she and IFEBP are not direct competitors.

2. False Designation of Origin

In Count II, IFEBP asserts false designation of origin, unfair competition, and trademark infringement claims. ECF No. 1 at 6. Although trademark infringement is often brought under 15 U.S.C. § 1114, [17] IFEBP has brought its claims under 15 U.S.C. § 1125(a).[18] Generally speaking, "[t]he federal courts are in agreement that § 43(a) [of the Lanham Act] creates a federal cause of action for trademark... infringement claims." Two Pesos, Inc. v. Taco Cabana, Inc., 505 U.S. 763, 780 (1992) (Stevens, J., concurring)("Whether we call the violation infringement, unfair competition or false designation of origin, the test is identical - is there a likelihood of confusion?") (internal quotation marks and citation omitted).

To state a claim for false designation of origin, IFEBP must show:

(1) that it possesses a mark; (2) that the defendant used the mark; (3) that the defendant's use of the mark occurred "in commerce"; (4) that the defendant used the mark "in connection with the sale, offering for sale, distribution, or advertising" of goods or services; and (5) that the defendant used the mark in a manner likely to confuse consumers.

People for Ethical Treatment of Animals, 263 F.3d at 364.

As noted above, Cottrell asserts that IFEBP has not established the fifth element - confusion. ECF No. 7-1 at 3. IFEBP contends that it has sufficiently alleged sponsorship confusion. ECF No. 8 at 3-5. Likelihood of confusion includes confusion about source and sponsorship. Lone Star, 43 F.3d at 933.

IFEBP has alleged that Cottrell's unauthorized use of its trademarks will deceive or confuse customers into thinking that it "certified [Cottrell's] sub-standard services" or otherwise sponsored or approved her services. ECF No. ¶¶ 26, 33-34. At this stage, IFEBP has plausibly alleged a likelihood of confusion. See Dallas Cowboys Cheerleaders, Inc. v. Pussycat Cinema, Ltd., 604 F.2d 200, 202 (2d Cir. 1979) (confusion requirement satisfied when film title and plot, "to the extent that there is one, " may confuse the public into believing plaintiff sponsored the film "Debbie Does Dallas"). Accordingly, Cottrell is not entitled to dismissal of IFEBP's false designation claim.

3. False Advertising

To state a claim for false advertising, IFEBP must show:

(1) the defendant made a false or misleading description of fact or representation of fact in a commercial advertisement about his own or another's product; (2) the misrepresentation is material, in that it is likely to influence the purchasing decision; (3) the misrepresentation actually deceives or has the tendency to deceive a substantial segment of its audience; (4) the defendant placed the false or misleading statement in interstate commerce; and (5) the plaintiff has been or is likely to be injured as a result of the misrepresentation, either by direct diversion of sales or by a lessening of goodwill associated with its products.

PBM Prods., LLC v. Mead Johnson & Co., 639 F.3d 111, 120 (4th Cir. 2011) ( quoting Scotts Co. v. United Industries, 315 F.3d 264, 272 (4th Cir. 2002)).[19]

IFEBP correctly contends that confusion is not a necessary element of its false advertising claim. ECF No. 8 at 5-7. It is well settled that when the contested representation "is literally false, a violation may be established without evidence of consumer deception." PBM Prods., LLC, 639 F.3d at 120 ( quoting Cashmere & Camel Hair Mfrs. Inst. v. Saks Fifth Ave., 284 F.3d 302, 311 (1st Cir. 2002)).[20]

Here, IFEBP alleges that Cottrell displayed the CEBS® and Certified Employee Benefits Specialist® designation - indicating IFEBP certification - when Cottrell was not certified. ECF No. 1 ¶¶ 12-15. Thus, IFEBP has sufficiently alleged falsity, and need not allege facts establishing deception. See C.B. Fleet Co., 131 F.3d at 434.[21]

Further, IFEBP has alleged economic and reputational injury, because Cottrell displayed its certification without paying "educational and examination fees, " and because customers will believe that IFEBP "certified [Cottrell's] sub-standard services." ECF No. 1 ¶¶ 25-26. Accordingly, Cottrell is not entitled to dismissal of IFEBP's false advertising claim.

III. Conclusion

For the reasons stated above, Cottrell's motion to dismiss will be denied.


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