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holding that because the first-filed action primarily sought declaratory judgment, priority was given to the second-filed action
Summary of this case from Hilliard v. Credit Suisse First Boston LLCOpinion
CIVIL ACTION NO. 03-11662-GAO
January 21, 2004
MEMORANDUM AND ORDER
New England Cord Blood Bank, Inc. ("NECBB") filed this action against Alpha Cord, Inc. ("Alpha Cord") and David P. Meyers ("Meyers") seeking injunctive relief and damages for alleged breaches of contract, trademark infringement, and unfair competition arising out of a service agreement between the parties. A similar action arising out of the same service agreement is pending between the parties in the Northern District of Georgia. Before this Court are the defendants' motion to stay this action and transfer it to the Northern District of Georgia and NECBB's motion for a preliminary injunction. For the reasons that follow, both motions are denied.
I. Background
NECBB is a Massachusetts corporation which processes, cryopreserves, and stores stem cells collected from the umbilical cords of newborns. Alpha Cord is a Georgia corporation which solicits customers in the market for processing and storage of umbilical cord blood. Meyers is the president of Alpha Cord and is a resident of DeKalb County, Georgia. On or about July 1, 2002, NECBB and Alpha Cord entered into a Service Agreement (the "Agreement"), whereby NECBB agreed to process and store cord blood received from clients solicited by Alpha Cord. The section of the Agreement entitled "Trademarks" states as follows:
11.1 Each Party owns certain trademarks that may appear upon or in connection with the [cord blood extraction] Kits and certain labels, packages, containers and other materials.
11.2 Other than as provided above in Section 11.1, nothing in this Agreement shall be deemed to transfer to or confer upon the other Party any right to use the name of the other Party . . . or any trademark or trade name owned by the other party . . . unless consent is given to do so. Consent is given to [Alpha Cord] to only use [NECBB's] name and or contact information in order to provide full and ethical disclosure of the location of client's or potential client's Cord Blood.
(Verified) Compl., Ex. 1. On its website, Alpha Cord indicates that it has "established the nation's first network of Cord Blood Banks," and that blood banks that are members of this network had to "offer preferred pricing to [Alpha Cord's] expectant parents in order to join the network." (Verified) Compl., Ex. 2. As of July, 2003, Alpha Cord's website listed NECBB as a member of its network of blood banks. After receiving notice of NECBB's objection to the use of its name in this manner, Alpha Cord changed the references to NECBB on its website to "Massachusetts Storage Facility." In solicitations mailed to prospective clients, Alpha Cord continues to list NECBB by name as a "member laboratory" from which Alpha Cord obtains preferred pricing. Cetrulo Aff, Ex. A.
NECBB claims that by referring to NECBB as a member of a "network" of blood banks which offer "preferred pricing," Alpha Cord has breached § 11.2 of the Agreement and is liable for breach of contract, trademark infringement and unfair competition.
NECBB also claims that Alpha Cord has breached the Agreement by failing to provide NECBB with client information, including the mother's date of birth or social security number, mother's address, and/or a copy of the client's contract with respect to approximately sixty of the over two hundred clients received from Alpha Cord.
On August 22, 2003, Alpha Cord and Meyers filed an action against NECBB and its president, John Rizza, in Georgia state court seeking a declaratory judgment, injunctive relief and damages. Approximately two weeks later, NECBB filed the instant action. Simultaneous with filing its complaint, NECBB moved for a preliminary injunction, seeking to enjoin Alpha Cord and Meyers from referring to NECBB or the "Massachusetts Storage Facility" as a member of Alpha Cord's "network" of blood banks, or stating that NECBB offers Alpha Cord's clients preferred pricing. NECBB also asks this Court to direct Alpha Cord to provide NECBB with missing client information.
On September 26, 2003, NECBB removed the Georgia action to federal court in the Northern District of Georgia and filed a motion to dismiss in that court. That same day, Alpha Cord and Meyers filed their own motion for a preliminary injunction in the Georgia action. Alpha Cord and Meyers filed an answer and counterclaim to NECBB's complaint in the instant action on September 29, 2003. On October 3, 2003, Alpha Cord and Meyers filed a motion to stay the proceedings in this Court and transfer this action to the Northern District of Georgia. Oral arguments were presented on the motion to stay and transfer and NECBB's motion for a preliminary injunction.
II. Defendants' Motion to Stay and Transfer
Alpha Cord and Meyers seek to stay the action in this Court and transfer it to the Northern District of Georgia, pursuant to 28 U.S.C. § 1406(a). Section 1406 allows a federal court to transfer a case, in the interests of justice, if venue is wrongly or improperly laid. 28 U.S.C. § 1406(a). Section 1406 is unavailable if venue is proper. Having already admitted that venue is proper in this district, see Defs.' Answer ¶ 8, the defendants cannot now claim that venue is wrong. Moreover, by filing an answer to NECBB's complaint prior to filing its motion to stay and transfer, the defendants have waived their objection to venue. See Manchester Knitted Fashions. Inc. v. Amalgamated Cotton Garment and Allied Indus. Fund, 967 F.2d 688, 691-92 (1st Cir. 1992) ("[I]t is clear under [Rule 12] that defendants wishing to raise [a defense of improper venue] must do so in their first defensive move, be it a Rule 12 motion or a responsive pleading.") (quoting Glater v. Eli Lilly Co. 712 F.2d 735, 738 (1st Cir. 1983)). The defendants' motion could be denied on these bases alone. Nevertheless, the Court finds that venue is proper in this district.
Venue in trademark and unfair competition cases is proper in the jurisdictions where infringement is alleged to have occurred. Woodke v. Dahm, 70 F.3d 983, 985 (8th Cir. 1995); Cottman Transmission Svs., Inc. v. Martino, 36 F.3d 291, 294 (3d Cir. 1994); Pilates, Inc. v. Pilates Inst. Inc., M 891 F. Supp. 175, 182 (S.D.N.Y. 1995). NECBB alleges that Alpha Cord is misusing NECBB 's trade name and mark by, inter alia, M falsely designating, on both its website and in printed materials, that NECBB is a member of Alpha Cord's network of blood banks, and offers preferred pricing to Alpha Cord and its customers. Without resolving whether statements made on Alpha Cord's website are directed towards Massachusetts residents, it is at least apparent that Alpha Cord sends the allegedly infringing printed promotional materials to persons in this district. See Cetrulo Aff.M ¶¶ 2, 3. Accordingly, a substantial part of the events giving rise to NECBB's claims occurred here. 28 U.S.C. § 1391(b); see also Pilates, 891 F. Supp. at 183 (finding venue was proper in district defendant allegedly targeted through advertising and direct-mail solicitation).
As venue is proper in this district, § 1406 is unavailable. The defendants do not argue that the case should be transferred pursuant to § 1404 for the convenience of parties and witnesses. Instead, the defendants rely primarily on the "first filed" rule, which states that when parties file similar actions, the first filed action is generally preferred. Cianbro Corp. v. Curran-Lavoie. Inc., 814 F.2d 7, 11 (1st Cir. 1987). While this is the general preference, the balance of conveniences weighs in favor of the second action here. See Nortek, Inc. v. Molnar, 36 F. Supp.2d 63, 69-70 (D.R.I. 1999) ("[T]he forum where an action is first filed is given priority over subsequent actions, unless there is a showing of balance of convenience in favor of the second action or there are special circumstances which justify giving priority to the second.") (citation and internal quotations omitted). The first filed action in Georgia primarily seeks a declaratory judgment that Alpha Cord has not breached the Agreement and that NECBB is required to continue to perform its contractual obligations. In the second filed action in this Court, NECBB alleges affirmative breach of contract, trademark infringement and unfair competition. In addition, the Agreement provides for the application of Massachusetts law to this dispute. For all the foregoing reasons, the defendants' motion to stay and transfer is DENIED.
III. Plaintiffs Motion for Preliminary Injunction
The First Circuit has outlined four factors for district courts to consider in determining whether to grant a preliminary injunction. They are: "(1) the movant's probability of success on the merits, (2) the likelihood of irreparable harm absent preliminary injunctive relief, (3) a comparison between the harm to the movant if no injunction issues and the harm to the objectors if one does issue, and (4) how the granting or denial of an injunction will interact with the public interest." New Comm Wireless Servs., Inc. v. Sprintcom. Inc., M 287 F.3d 1, 8-9 (1st Cir. 2002).
NECBB alleges that Alpha Cord engaged in trademark infringement and unfair competition in violation of § 43(a) of the Lanham Act, the common law, and chapters 93A and HOB of the Massachusetts General Laws. NECBB also asserts a cause of action for breach of contract, arising, in part, out of Alpha Cord's alleged misuse of NECBB's trade name and mark.
A. Trademark Infringement and Unfair Competition Claims
NECBB's Lanham Act claims arise out of an alleged false designation of origin under § 43(a)(1)(A). Specifically, NECBB alleges that Alpha Cord's use of NECBB's trade name or mark is likely to cause confusion, to cause mistake, or to deceive members of the public as to the affiliation, connection, or association of Alpha Cord with NECBB, and the origin, sponsorship, or approval of Alpha Cord's services with those of NECBB. See 15 U.S.C. § 1125(a)(1)(A).
It appears from the complaint that NECBB has not asserted a claim for false advertising under § 1125(a)(1)(B). See generally. Int'l Ass'n. of Machinists and Aerospace Workers ("IAM") v. Winship Green Nursing Ctr., M 103 F.3d 196, 208-09 (1st Cir. 1996) (Saris, Dist. J., concurring) (discussing the different protections under prongs (A) and (B) of § 1125(a)(1)).
Alpha Cord and Meyers argue that there can be no false designation of origin because the statements made regarding the parties' relationship are literally true. The defendants maintain that NECBB is one of a number of blood banks in Alpha Cord's "hub and spoke network," which resembles an HMO's network of medical providers. Also, NECBB offers Alpha Cord and its clients "preferred pricing" by providing its services to Alpha Cord at a "reduced rate" in accordance with the terms of the Agreement. Assuming, without deciding, that the defendants' representations are true, that is not the end of the inquiry. Section 43(a) is not confined to literal falsehoods, and applies to false or misleading descriptions or representations of fact. 15 U.S.C. § 1125(a)(1); 4 J. Thomas McCarthy, McCarthy on Trademarks and Unfair Competition, § 27:53 (4th ed. 2003). As with false advertising claims, a plaintiff can succeed on a trademark infringement claim if it can demonstrate that the defendant's representations, while literally true, are misleading and likely to cause confusion. See e.g., Clorox Co. Puerto Rico v. Proctor Gamble Commercial Co., 228 F.3d 24, 33 (1st Cir. 2000) ("A plaintiff can succeed on a false advertising claim by proving either that an advertisement is false on its face or that the advertisement is literally true or ambiguous but likely to mislead and confuse consumers."); King v. Innovation Books, 976 F.2d 824, 828 (2d Cir. 1992) ("[A] false reference to the origin of a [good or service], or a reference which, while not literally false, is misleading or likely to confuse, may form the basis of a claim under section 43(a) of the Lanham Act.").
The court typically considers eight factors in assessing likelihood of confusion: "(1) the similarity of the marks; (2) the similarity of the goods [or services]; (3) the relationship between the parties' channels of trade; (4) the relationship between the parties' advertising; (5) the classes of prospective purchasers; (6) evidence of actual confusion; (7) the defendant's intent in adopting the mark; and (8) the strength of the plaintiff's mark." I.P. Lund Trading v. Kohler Co., M 163 F.3d 27, 43 (1st Cir. 1998). The factors are non-exclusive, and the particular facts of a case may render certain factors irrelevant or difficult to apply. IAM, M 103 F.3d at 203.
(1) Similarity of the marks.
When this dispute arose, Alpha Cord had been using NECBB's exact trade name on its website in connection with the promotion of both Alpha Cord and NECBB's services. Alpha Cord has since changed the online reference to identify only a "Massachusetts Storage Facility." However, Alpha Cord continues to distribute printed promotional materials that use NECBB's trade name. See Cetrulo Aff. Ex. A.
(2) Similarity of the services.
Pursuant to the Agreement, the parties offer different services to persons interested in the preservation of cord blood. Alpha Cord solicits customers in the market for processing and storage of cord blood, and NECBB provides the processing and storage services. A customer may contract directly with NECBB and need not go through Alpha Cord. The Agreement, however, creates a relationship aimed at working together to generate business for both parties.
(3)-(5) Channels of trade; Advertising; Classes of prospective purchasers. The court will examine these three factors together. IAM 103 F.3d at 204. The parties are generally interested in the same class of prospective purchasers and, in a sense, target the same channels of trade. Indeed, the Agreement represents a coordinated effort to work together to target prospective purchasers interested in the processing and storage of cord blood. NECBB' s advertising is not in issue in this action, but Alpha Cord's is. It is Alpha Cord's use of NECBB's trade name or mark to promote the parties' services which gives rise to the alleged confusion as to the parties' affiliation.
(6) Evidence of actual confusion.
NECBB generally avers that "several members of the public have made inquiry regarding the relationship between NECBB and Alpha Cord, and questioned NECBB concerning the statements made in Alpha Cord's website." (Verified) Compl. ¶ 15. Besides this statement, there is no evidence of actual confusion.
(7) Defendant's intent in adopting the mark.
NECBB has presented no evidence that Alpha Cord intended to mislead consumers as to the parties' affiliation, connection, or association. Alpha Cord's use of NECBB's trade name or mark appears to be done with the intent of generating business for both Alpha Cord and NECBB, as contemplated by the Agreement. On its website and in its printed materials, Alpha Cord provides detailed information about the services that NECBB provides for prospective customers, including processing and storage of cord blood. Alpha Cord does not purport to offer those services itself. It's characterization of NECBB as part of a "network of member laboratories" which offer "preferred pricing" to Alpha Cord or its customers was not likely intended to be misleading.
(8) Strength of the mark.
In December 2002, NECBB filed an application for registration of its trademark, which remains pending. (Verified) Compl. ¶ 13. As NECBB's trade name or mark is unregistered, it is not entitled to a legal presumption of validity. Equine Techs., Inc. v. Equitech., Inc., 68 F.3d 542, 544-45 (1st Cir. 1995). The record is otherwise inadequate to make a finding with respect to the strength of NECBB's mark. NECBB offers no evidence, for example, regarding the length of time its mark has been used, the strength of the mark in NECBB's field of business, or NECBB's action in promoting the mark. See id. 68 F.3d at 547.
Without a copy of the Agreement in front of her, the ordinary consumer is not likely to know the exact nature of the business relationship between NECBB and Alpha Cord. But, after considering all the relevant factors as they apply to the circumstances of this case, I find no basis for a likelihood of confusion as to the parties' affiliation, connection, or association, or the origin, sponsorship or approval of the parties' services. Because NECBB cannot demonstrate a likelihood of confusion, it cannot show a likelihood of success on the merits of its statutory and common law trademark and unfair competition claims.
B. Contract Claims
If NECBB were to ultimately succeed on its breach of contract claims, the remedy of an injunction would likely be available. Injunctive relief requiring performance of a contract may be granted (if other prerequisites are met) if monetary damages will not afford complete relief, or if the harm caused by a breach is impossible to measure accurately. Ocean Spray Cranberries. Inc. v. Pepsico. Inc., M 160 F.3d 58, 61 (1st Cir. 1998). However, NECBB has not demonstrated that it is likely to succeed on the merits of its contract claims.
There is no dispute that there is a contract. NECBB alleges that Alpha Cord breached the Agreement by: (a) infringing upon NECBB's trade name and mark; (b) failing to provide critical client information; (c) failing to provide NECBB with a certificate of insurance; and (d) failing to properly account for, and pay storage fees to NECBB. (Verified) Compl. ¶ 52. NECBB does not seek injunctive relief related to (c) or (d). With respect to (a), NECBB seeks to enjoin Alpha Cord from "using the designation or words New England Cord Blood Bank or otherwise falsely representing that Alpha Cord has a continuing affiliation with a 'Massachusetts Storage Facility' (or any other designated facility or provider) that is likely to be confused with NECBB." Pl.'s Mot. for Prelim. Inj. at 3. With respect to (b), NECBB seeks an injunction requiring Alpha Cord to "immediately provide NECBB with contracts, addresses, and/or dates of birth or social security numbers, for each Alpha Cord client that is missing this information." Id.
NECBB's trademark related contract claim is separate from its trademark infringement and unfair competition claims. The Agreement gives Alpha Cord limited consent to use NECBB's name "in order to provide full and ethical disclosure of the location of client's or potential client's Cord Blood." (Verified) Compl., Ex. 1, § 11.2. NECBB claims that the representations made by Alpha Cord regarding the parties' affiliation exceeded the scope of this consent, and thereby breached the contract. Though Alpha Cord appears to go beyond the scope of consent, NECBB has not shown that this apparent breach is likely to be damaging to NECBB. The representations, perhaps inaccurately, refer to NECBB as part of a network of blood banks which offer preferred pricing, but they also contain complimentary statements that suggest that NECBB has a "proven history of quality service" and is one of "the most trusted names in Cord Blood Preservation." Taken as a whole, these are hardly the kinds of statements which would tend to harm NECBB's goodwill.
NECBB is also unlikely to succeed on its claim that Alpha Cord is in breach of the Agreement for having failed to provide all of the required client information to NECBB. Though it appears Alpha Cord failed to ensure that all of the cord blood it transported to NECBB was "accompanied by" the required client information, pursuant to § 3.1.2 of the Agreement, Alpha Cord appears to have cured its breaches by sending NECBB the requested information within thirty days after receiving proper written notice of the breaches, pursuant to § 5.3.1 of the Agreement. Furthermore, were I to give NECBB the benefit of the doubt and find Alpha Cord's breaches remain uncured, NECBB's damages are merely speculative, as explained more fully in Part Ill(C), below.
C. Irreparable Harm
Without a showing of damages, NECBB is unlikely to succeed on the merits of its contract claims. Inability to show a likelihood of success on the merits is alone enough to deny the motion for a preliminary injunction. Nonetheless, it follows that NECBB also cannot show the irreparable harm required for an injunction to issue. First, the disputed representations made by Alpha Cord on its website and its promotional materials are designed to generate more business for NECBB, and contain complimentary statements that suggest that NECBB has a "proven history of quality service" and is one of "the most trusted names in Cord Blood Preservation." As previously stated, these are not the kinds of statements which would tend to harm NECBB's goodwill. Second, "a preliminary injunction is not warranted by a tenuous or overly speculative forecast of anticipated harm." Ross-Simons of Warwick. Inc. v. Baccarat. Inc., M 102 F.3d 12, 19 (1st Cir. 1996): see also In re Rare Coin Galleries of America. Inc., M 862 F.2d 896, 902 (1st Cir. 1988) ("Speculation or unsubstantiated fears of what may happen in the future cannot provide the basis for a preliminary injunction."). Thus, NECBB's contention that it will suffer harm to its goodwill "in the event NECBB cannot identify a cord blood sample when needed by distraught parents hoping to treat or cure a future medical condition affecting a member of their family," Pl's Mem. Supp. Mot. Prelim. Inj. at 10, does not support a finding of irreparable harm.
IV. Conclusion
As the defendants waived their objection to venue, and venue is proper in this district, the defendants' motion to stay and transfer is DENIED. Because the plaintiff is unable to demonstrate a probability of success on the merits of its claims, or the likelihood of irreparable harm absent preliminary injunctive relief, its motion for a preliminary injunction is DENIED.
It is SO ORDERED.