Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

Factory Direct Wholesale, LLC v. Itouchless Housewares & Products, Inc.

United States District Court, N.D. California, San Jose Division

October 23, 2019

FACTORY DIRECT WHOLESALE, LLC, Plaintiff,
v.
ITOUCHLESS HOUSEWARES & PRODUCTS, INC., Defendant.

          ORDER GRANTING IN PART AND DENYING IN PART MOTION TO DISMISS RE: DKT. NO. 31

          LUCY H. KOH, United States District Judge.

         Plaintiff Factory Direct Wholesale (“Plaintiff”) sued Defendant iTouchless Housewares & Products, Inc. (“Defendant”) and alleged false advertising under the Lanham Act, intentional interference with contract, intentional interference with prospective economic advantage, negligent interference with prospective economic advantage, violations of California's Unfair Competition Law, and trademark infringement. Before the Court is Defendant's motion to dismiss. ECF No. 34. Having considered the submissions of the parties, the relevant law, and the record in this case, the Court GRANTS in part and DENIES in part Defendant's motion to dismiss.

         I.BACKGROUND

         A. Factual Background

         As alleged in the First Amended Complaint (“FAC”), Plaintiff and Defendant are competing sellers on the Amazon e-commerce platform. ECF No. 28 ¶ 2 (FAC). Sellers on Amazon are subject to established rules and policies that govern their advertisements (i.e., listings) of their products on the website. Id. ¶ 20. For example, the Amazon Seller Agreement, which governs the seller's access and use of Amazon's online marketplace, requires the seller to represent and warrant that “any information provided . . . to Amazon . . . is at all times accurate and complete.” Id. ¶¶ 20-21. Other policies, such as the Amazon Code of Conduct, requires that sellers “not engage in any ‘unfair behavior' or activities that (a) intentionally damage another seller, including its listings or ratings, or (b) manipulate or game the Amazon.com selling or buying process, including Amazon's search results or sales rankings.” Id. ¶ 24. “Sellers are further prohibited from contributing false, misleading or inauthentic content.” Id. (citation omitted). The FAC alleges that both Plaintiff and Defendant agreed to these terms with Amazon in order to sell their products. Id. ¶¶ 22-23.

         Products on Amazon are identified “through a unique combination of 10 letters and numbers, referred to as an Amazon Standard Identification Number or “ASIN” designation.” Id. ¶ 31. “When a vendor uploads information for a new product for sale, ” “Amazon assigns that new product a unique ASIN, ” which appears in the product's details and can be used to search and find the product. Id. Plaintiff's products have various unique ASIN designations and are advertised on Amazon. Id. ¶¶ 32-33.

         In the “summer of 2018, ” Plaintiff discovered that “false, deceptive, and unauthorized changes were being made” to its product advertisements and listings. Id. ¶¶ 34-35. These alterations included changing product descriptions, providing improper ASIN numbers, and changing the product's listing category (thereby moving the product from Amazon's Home & Kitchen category). Id. Plaintiff learned that a third party was requesting Amazon to make these changes, and as a result of Amazon's actions, Plaintiff's products' ASINs were being merged into other products. Id. ¶ 36.

         Plaintiff reportedly discovered that Defendant was responsible for making these requests and filed suit in the Northern District of Georgia on August 29, 2018 (the “Georgia action”). Id. ¶¶38-42; see also Factory Direct Wholesale, LLC v. iTouchless Housewares & Prods. Inc., No. 1:18-cv-04091-CAP, ECF No. 1 (N.D.Ga. Aug. 29, 2018); ECF No. 31-1 Ex. A. Around October 23, 2018, Plaintiff also discovered that Defendant was utilizing, without authorization or license, Plaintiff's BESTOFFICE trademark to advertise a 13-gallon trash can. FAC ¶ 73. Plaintiff is the owner of the trademark for BESTOFFICE (“Supplemental Mark”) and has used the Supplemental Mark since December 7, 2013. Id. ¶ 65-66. Defendant had used the mark since no later than January 10, 2018 and sought to register the Supplemental Mark on September 10, 2018. Id. ¶¶ 68-69. The United States Patent and Trademark Office (“USPTO”) rejected the registration on December 19, 2018 because the mark was too similar to Plaintiff's Supplemental Mark. Id. ¶ 75.[1] Plaintiff did not bring suit for trademark infringement in the Georgia action.

         During the pendency of the Georgia action, Plaintiff alleges that the “knowingly false and deceptive changes” to its listings ceased. However, beginning in February 2019, after the filing of the Georgia action, Defendant allegedly “renewed its conduct in requesting that Amazon make changes to [Plaintiff's] product listings that are knowingly false, deceptive and unauthorized, and that mislead the consuming public by misrepresenting Defendant's advertised products as well as [Plaintiff's] products and listings.” Id. ¶ 46.

         For example, in late February 2019, Defendant allegedly requested unauthorized changes to one of Plaintiff's listings, the “4ZB4 Listing.”[2] As a result of these requests, Amazon altered the 4ZB4 Listing such that it falsely advertised the 4ZB4 product as a “product manufactured and branded by Defendant”. Id. ¶ 49; see Id. ¶ 50 (Defendant “caused Amazon to make changes to the product image, title, and description that falsely and deceptively changed FDW's 4ZB4 Listing from the original 13-gallon trash can to an ‘iTouchless EcoWise Compost Bin Container Dual Deodorizer Activated Carbon Filters, 1.32 Gallon Kitchen Trash Can, Stainless Steel Lid, Odor- Stopping Power White/Cream Buck.'”).

         Plaintiff alleges that during this time period starting in February 2019, Defendant attempted to make additional and similar false and deceptive changes to other product listings belonging to Plaintiff. See Id. ¶¶ 54-64. According to Plaintiff, Defendant “falsely represented to Amazon that [Plaintiff's] 4ZB4 Listing was a duplicate listing that should be merged into [Defendant's] Listing.” Id. ¶ 54. Amazon merged the two listings such that the 4ZB4 Listing “no longer appeared in customer searches on” Amazon. Id. ¶ 55.

         Defendant also allegedly “attempted to falsely and deceptively” merge two of Plaintiff's listings-the “FQWE Listing” and the “JYK7 Listing, ” both of which are unrelated to the 4ZB4 Listing. Id. ¶¶ 59-62. Plaintiff, however, does not allege that Defendant's efforts were successful. Id.. Finally, Plaintiff alleges that Defendant made additional requests to Amazon in 2019, including (1) “[f]alse and deceptive changes to the image(s) in [Plaintiff's] listing; (2) “[f]alse and deceptive changes to the description in [Plaintiff's] listing; (3) “[f]alsely submitted an unfavorable review for [Plaintiff's] listing; (4) [f]alsely and deceptively removing [Plaintiff] from Amazon's vendor control.” Id. ¶ 63.

         B. Procedural History

         1. The Georgia Action

         On August 29, 2018, Plaintiff sued Defendant in the Northern District of Georgia. ECF No. 31-1 Ex. A (the “Georgia complaint”). Plaintiff claimed that Defendant requested unauthorized changes to Plaintiff's listings, including providing improper ASIN variances, but the Complaint did not allege that any of the changes were deceptive or misleading. Id. ¶¶ 8-22. Plaintiff sued pursuant to product listings with ASINs B071KZ91K1, B0727VDHZQ, B072F1WBXW, and B07BTHQMPQ.[3] Id. ¶ 11. Plaintiff sued under the Lanham Act, the Georgia Uniform Deceptive Trade Practices Act, and the Georgia Fair Business Practices Act. Id. ¶¶ 23-36. Plaintiff also alleged Georgia claims for tortious interference with contractual relations and tortious interference with business relations. Id. ¶¶ 37-49. For relief, Plaintiff sought damages, costs, fees, and injunctive relief. Id. at 11-15 ¶¶ A-Z.

         On November 29, 2018, the court in the Georgia action granted Defendant's motion to dismiss all claims with prejudice. ECF No. 31-1 Ex. B (“Georgia Order”). As to the Lanham Act claim, the court held that plaintiff “allege[d] no facts regarding the defendant's advertisements” and “ma[de] no allegation that the changes made by Amazon at the defendant's request deceived or had the capacity to deceive consumers.” Id. at 4. As to the state statutory claims, the court in the Georgia action concluded that the requested changes “d[id] not even hint at deception.” Id. at 5. Specifically, the court determined that the complaint never alleged that the changes resulted in some falsity or misrepresentation to the consuming public, that defendant “misrepresented itself to Amazon as the plaintiff, ” or that the changes defendant requested were false or deceptive. Id. at 5-6. As to the remaining tortious interference claims, the court disposed of them by finding plaintiff did not allege “improper conduct or wrongful actions by the defendant.” Id. at 7.

         2. The N.D. Cal. Action

         On March 6, 2019, Plaintiff filed a complaint in the instant action. ECF No. 1. After Defendant filed a motion to dismiss on April 16, 2019, ECF No. 20, Plaintiff filed the First Amended Complaint (“FAC”) on May 7, 2019, ECF No. 28. Compared to the complaint in the Georgia action, the FAC in the instant action contains additional detail about Amazon's rules and policies, FAC ¶¶ 20-30, and provides more specific allegations about Defendant's purported actions and how the changes to Plaintiff's listings “falsely advertised” or misrepresented Plaintiff's products as products “manufactured and branded by Defendant” id. ¶ 49; see Id. ¶¶ 50-64.

         For example, Plaintiff alleges that Defendant requested that Amazon make changes to Plaintiff's products and listings to falsely advertise Plaintiff's 4ZB4 product “as a product manufactured and branded by Defendant.” Id. ¶ 49, 52. According to Plaintiff, Defendant also “falsely represented to Amazon that [Plaintiff's] 4ZB4 Listing was a duplicate listing that should be merged into [Defendant's] Listing.” Id. ¶ 54. Amazon merged the two listings such that the 4ZB4 Listing “no longer appeared in customer searches on” Amazon. Id. ¶ 55. “All of the changes requested by Defendant in February 2019 to [Plaintiff's 4ZB4] product listing[] . . . were knowingly false and deceptive because they were not authored by [Plaintiff]; they falsely advertised Defendant's products; and they misrepresented inherent and material qualities and characteristics of [Plaintiff's] products to the consuming public, including the product title, image, brand, manufacturer, and description of the 13-gallon trash can.” Id.¶ 56.

         Additionally, Plaintiff claims that starting in February 2019, Defendant also “attempted to falsely and deceptively” merge Plaintiff's FQWE and JYK7 Listings, but Plaintiff does not allege that Defendant's efforts were successful. Id. ¶ 59-62. Finally, Plaintiff pleads that Defendant made additional requests to Amazon in 2019, including (1) “[f]alse and deceptive changes to the image(s) in [Plaintiff's] listing; (2) “[f]alse and deceptive changes to the description in [Plaintiff's] listing; (3) “[f]alsely submitted an unfavorable review for [Plaintiff's] listing; (4) [f]alsely and deceptively removing [Plaintiff] from Amazon's vendor control.” Id. ¶ 63.

         On this basis, Plaintiff alleges six causes of action against Defendant: (1) violations of the Lanham Act; (2) intentional interference with contract; (3) intentional interference with prospective economic advantage; (4) negligent interference with prospective economic advantage; (5) violations of California' Unfair Competition Law (“UCL”); and (6) trademark infringement. FAC ¶¶ 79-151. For the first five causes of action, Plaintiff purports to only seek recovery for conduct occurring in or after February 2019. Id. ¶¶ 85-86, 98, 111, 125, 138-39.

         On May 21, 2019, Defendant filed a motion to dismiss the FAC. ECF No. 31 (“Mot.”). On June 4, 2019, Plaintiff filed an opposition to Defendant's motion, ECF No. 34 (“Opp.”), and on June 11, 2019, Defendant filed a reply, ECF No. 35 (“Reply”). On June 18, 2019, Plaintiff filed a motion to strike the reply brief for allegedly raising a new argument concerning issue preclusion. ECF No. 37. Defendant responded to the motion to strike on July 2, 2019, ECF No. 42, and Plaintiff filed a reply on July 9, 2019, ECF No. 43. On September 17, 2019, the Court ordered supplemental briefing regarding issue preclusion and denied the motion to strike. ECF No. 45. Plaintiff and Defendant each filed supplemental briefs on September 23, 2019, ECF Nos. 46 and 47, and then filed supplemental replies on September 27, 2019, ECF Nos. 48 and 49. The motion to dismiss is now fully briefed and ripe for adjudication.

         II. LEGAL STANDARD

         A. Motion to Dismiss Under Federal Rule of Civil Procedure 12(b)(6)

         Rule 8(a)(2) of the Federal Rules of Civil Procedure requires a complaint to include “a short and plain statement of the claim showing that the pleader is entitled to relief.” A complaint that fails to meet this standard may be dismissed pursuant to Federal Rule of Civil Procedure 12(b)(6). The U.S. Supreme Court has held that Rule 8(a) requires a plaintiff to plead “enough facts to state a claim to relief that is plausible on its face.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007). “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 (2009). “The plausibility standard is not akin to a probability requirement, but it asks for more than a sheer possibility that a defendant has acted unlawfully.” Id. (internal quotation marks omitted). For purposes of ruling on a Rule 12(b)(6) motion, the Court “accept[s] factual allegations in the complaint as true and construe[s] the pleadings in the light most favorable to the nonmoving party.” Manzarek v. St. Paul Fire & Marine Ins. Co., 519 F.3d 1025, 1031 (9th Cir. 2008).

         The Court, however, need not accept as true allegations contradicted by judicially noticeable facts, see Schwarz v. United States, 234 F.3d 428, 435 (9th Cir. 2000), and it “may look beyond the plaintiff's complaint to matters of public record” without converting the Rule 12(b)(6) motion into a motion for summary judgment, Shaw v. Hahn, 56 F.3d 1128, 1129 n.1 (9th Cir. 1995). Nor must the Court “assume the truth of legal conclusions merely because they are cast in the form of factual allegations.” Fayer v. Vaughn, 649 F.3d 1061, 1064 (9th Cir. 2011) (per curiam) (internal quotation marks omitted). Mere “conclusory allegations of law and unwarranted inferences are insufficient to defeat a motion to dismiss.” Adams v. Johnson, 355 F.3d 1179, 1183 (9th Cir. 2004).

         B. Motion to Dismiss Under Federal Rule of Civil Procedure 9(b)

         Claims sounding in fraud are subject to the heightened pleading requirements of Federal Rule of Civil Procedure 9(b). Bly-Magee v. California, 236 F.3d 1014, 1018 (9th Cir. 2001). Under the federal rules, a plaintiff alleging fraud “must state with particularity the circumstances constituting fraud.” Fed.R.Civ.P. 9(b). To satisfy this standard, the allegations must be “specific enough to give defendants notice of the particular misconduct which is alleged to constitute the fraud charged so that they can defend against the charge and not just deny that they have done anything wrong.” Semegen v. Weidner, 780 F.2d 727, 731 (9th Cir. 1985). Thus, claims sounding in fraud must allege “an account of the time, place, and specific content of the false representations as well as the identities of the parties to the misrepresentations.” Swartz v. KPMG LLP, 476 F.3d 756, 764 (9th Cir. 2007). In other words, “[a]verments of fraud must be accompanied by ‘the who, what, when, where, and how' of the misconduct charged.” Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1106 (9th Cir. 2003) (citation omitted). The plaintiff must also plead facts explaining why the statement was false when it was made. See In re GlenFed, Inc. Sec. Litig., 42 F.3d 1541, 1549 (9th Cir. 1994) (en banc), superseded by statute on other grounds as stated in Marksman Partners, L.P. v. Chantal Pharm. Corp., 927 F.Supp. 1297 (C.D. Cal. 1996).

         “When an entire complaint . . . is grounded in fraud and its allegations fail to satisfy the heightened pleading requirements of Rule 9(b), a district court may dismiss the complaint . . . .” Vess, 317 F.3d at 1107. A motion to dismiss a complaint “under Rule 9(b) for failure to plead with particularity is the functional equivalent of a motion to dismiss under Rule 12(b)(6) for failure to state a claim.” Id.

         C. Leave to Amend

         If the Court determines that a complaint should be dismissed, it must then decide whether to grant leave to amend. Under Rule 15(a) of the Federal Rules of Civil Procedure, leave to amend “shall be freely given when justice so requires, ” bearing in mind “the underlying purpose of Rule 15 to facilitate decisions on the merits, rather than on the pleadings or technicalities.” Lopez v. Smith, 203 F.3d 1122, 1127 (9th Cir. 2000) (en banc) (alterations and internal quotation marks omitted). When dismissing a complaint for failure to state a claim, “a district court should grant leave to amend even if no request to amend the pleading was made, unless it determines that the pleading could not possibly be cured by the allegation of other facts.” Id. at 1130 (internal quotation marks omitted). Accordingly, leave to amend generally shall be denied only if allowing amendment would unduly prejudice the opposing party, cause undue delay, or be futile, or if the moving party has acted in bad faith. Leadsinger, Inc. v. BMG Music Publ'g, 512 F.3d 522, 532 (9th Cir. 2008).

         III.DISCUSSION

         Defendant seeks to dismiss the FAC on three grounds. First, Defendant argues that claim preclusion bars this action. Second, Defendant contends that if claim preclusion does not apply, issue preclusion does and requires dismissal.[4] Finally, Defendant asserts that the claims fail on the merits. The Court addresses each argument in turn.

         A. ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.