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dismissing the plaintiff's claim under the UTPCPL because he did not allege "that he purchased or leased any goods or services from the defendants, nor that, if any such purchase or lease was made, it was made for personal, family or household use"
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No. 02-7817
December 27, 2002
MEMORANDUM AND ORDER
Plaintiff Nicholas Reinhart asserts claims under the Copyright Act of 1976, 17 U.S.C. § 101 et seq., the Pennsylvania Unfair Trade Practices and Consumer Protection Law ("UTPCPL"), 73 Pa.C.S. § 201 et seq., and common law against defendants Fleetway Chrysler, Fleetway Leasing Company, Colonial Nissan, Inc. and Colonial Cadillac/Hyundai. Reinhart alleges, in essence, that the defendants appropriated original images from one of his advertising campaigns for their own use, in violation of the Copyright Act, and used the name of one of his businesses, East Coast Auto Liquidators, Inc., for their own profit without his knowledge or permission, in violation of the UTPCPL and common law. Defendants Fleetway Chrysler and Fleetway Leasing Company now move to dismiss counts II and III of Reinhart's complaint, which assert claims under the UTPCPL and common law, on the ground that the only private right of action provided by that statute is for persons who purchase or lease goods for personal, family or household purposes. We agree with defendants and dismiss counts II and III of the plaintiffs complaint to the extent they rely on the UTPCPL. We do not dismiss Count II of the complaint to the extent it alleges the common law tort of unfair business competition by common law infringement or passing off.
I. STATEMENT OF JURISDICTION
We have jurisdiction to hear claims alleging violations of the Copyright Act under our federal question jurisdiction, 28 U.S.C. § 1331. The plaintiffs state law claims arise out of the same transaction and occurrence, and we have jurisdiction to hear them under 28 U.S.C. § 1367(a).
II. STANDARD OF REVIEW
Federal Rule of Civil Procedure 12(b)(6) allows a court to dismiss a complaint in whole or in part "for failure to state a claim upon which relief can be granted." In reviewing a motion to dismiss under Rule 12(b)(6), "all allegations in the complaint and all reasonable inferences that can be drawn therefrom must be accepted as true and viewed in the light most favorable to the non-moving party." Sturm v. Clark, 835 F.2d 1009, 1011 (3d Cir. 1987). A complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts which would entitle him or her to relief. Scheuer v. Rhodes, 416 U.S. 232, 94 S.Ct. 1683, 40 L.Ed.2d 90 (1974); D.P. Enterprises v. Bucks County Community College, 725 F.2d 943, 944 (3d Cir. 1984).
III. FACTUAL BACKGROUND
Reinhart owns several car dealerships in Pennsylvania. On February 11, 2001, he incorporated the entity East Coast Auto Liquidators, Inc. in the Commonwealth of Pennsylvania. During the winter of 2001, Reinhart created a written advertising program to promote sales events at his various auto dealerships under the name of the East Coast Auto Liquidators, Inc. entity. He used this program throughout the winter of 2001 and the spring and summer of 2002 in both print and radio media. At some point, he submitted the advertising campaign to the Uinited States Copyright Office.
The plaintiffs complaint does not provide the date of the submission for copyright protection.
On September 5, 2002, the plaintiff became aware that defendants were using a similar promotional campaign to his own, advertising a "$69.00 acquisition sale" under the same business name, East Coast Auto Liquidators, Inc. In addition, the defendants appeared to be using a very similar print advertisement to the one Reinhart had developed. Reinhart had not given permission to use either the advertising campaign he had developed or the name of his business entity to the defendants. After requesting that the defendants discontinue the use of both the campaign and the business name, Reinhart commenced this action on October 10, 2002. Defendants Fleetway Chrysler and Fleetway Leasing Company moved to dismiss Counts II and III of the complaint on December 11, 2002. Presently before the court is the Defendants' Motion to Dismiss Counts II and III Within Plaintiffs Complaint Pursuant to Fed.R.C.P. 12(b)(6) and accompanying Memorandum of Law and the Plaintiffs Response to Defendant Fleetway's Motion to Dismiss Counts II and III of Complaint Under F.R.C.P. 12(b)(6), filed December 18, 2002.
IV. DISCUSSION
A. Claims Under the Unfair Trade Practices and Consumer Protection Law
Counts II and III of the plaintiffs complaint allege that the defendants' use of the East Coast Auto Liquidators, Inc. corporate name in the course of their advertising campaign constituted an "unfair or deceptive act" (Count II) and an "unfair method of competition" (Count III) under the UTPCPL. The statute in question is a remedial statute designed to protect consumers from deceptive acts or practices. Com. by Creamer v. Monumental Props., Inc., 459 Pa. 450, 329 A.2d 812, 816, (Pa. 1974). It provides that the Attorney General or District Attorney may, if she deems it to be in the public interest, bring an action to enjoin any act or practice defined as unlawful under the statute. 73 Pa.C.S. § 201-4; Com. by Packer v. Ziomek, 352 A.2d 235, 238 (Pa.Cmwlth. 1976). The UTPCPL provides for a private right of action in only one situation:
Any person who purchases or leases goods or services primarily for personal, family or household purposes and thereby suffers any ascertainable loss of money or property, real or personal, as a result of the use or employment by any person of a method, act or practice declared unlawful by section 3 of this act, may bring a private action to recover actual damages. . . . The court may provide such additional relief as it deems necessary or proper.
73 Pa.C.S. § 201-9.2(a).
It is well-settled that this section allows a private right of action only for consumers who have purchased a product sold by unfair or deceptive means for their personal, family or household use. Valley Forge Towers v. Ron-Ike Foam Insulators, Inc., 574 A.2d 641, 645 (Pa.Super. 1990) ("[A] claimant under 73 P.S. § 201-9.2(a) must be a person who makes a purchase for personal, family or household use [and] suffers an ascertainable loss as a result of an unlawful, unfair or deceptive practice."); Pennsylvania Medical Soc'y Liability Ins. Co. v. Commonwealth, 804 A.2d 1267, 1272 (Pa.Cmwlth. 2002); Lauer v. McKean Corp., 2 Pa. D. C. 4th 394, 396-97 (Pa.Com.Pl. 1989); Springboro Volunteer Fire Dept. and Relief Ass'n v. J.C. Moore Industries Sales Corporation, 50 Pa. D. C. 3d 479, 481 (Pa.Com.Pl. 1988); Balderston v. Medtronic Sofamor Danek, Inc., 285 F.3d 238, 241 (3d Cir. 2002);Granite States Ins. Co. v. AAMCO Transmissions, Inc., 57 F.3d 316, 320 n. 3 (3d Cir. 1995); Katz v. Aetna Cas. Sur. Co., 972 F.2d 53, 55 (3d Cir. 1992) ("As we have noted, the statute unambiguously permits only persons who have purchased or leased goods or services to sue . . . Had the Pennsylvania legislature wanted to create a cause of action for those not involved in a sale or lease, it would have done so."); Klitzner Indus. v. H.K. James Co., Inc., 535 F. Supp. 1249, 1258 (E.D.Pa. 1982); Permagrain Prods., Inc. v. U.S. Mat Rubber Co., Inc., 489 F. Supp. 108, 111 (E.D.Pa. 1980). Reinhart has not alleged that he purchased or leased any goods or services from the defendants, nor that, if any such purchase or lease was made, it was made for personal, family or household use. He therefore cannot make use of the private right of action provided by the UTPCPL. We dismiss Count III in its entirety. We also dismiss Count II to the extent that it relies on the UTPCPL.
B. Claims Under the Common Law of Unfair Business Competition
It appears that Count II of the plaintiffs complaint is based on both the common law and the UTPCPL. We are unclear on this matter for several reasons. First, although this count is titled "Count II — Unfair Trade Practices — Common Law," nowhere does it specify upon what branch of the common law of unfair trade practices it is founded. Second, Count II alleges that "defendants' conduct constitutes an unfair or deceptive act or practice" and cites the UTPCPL, not the common law. Third, the plaintiff does not allege, in the count itself, any of the elements required to prove a common law claim. Finally, the plaintiff makes only marginal reference to a common law basis for his claim, and this only because he appears to misunderstand the defendants' argument as to why his UTPCPL claims should be dismissed. Nevertheless, because pleadings must be liberally construed, Richardson v. Pennsylvania Dept. of Health, 561 F.2d 489, 492 (3d Cir. 1977), we will assume that plaintiff did intend to raise a common law claim based on the allegation that the defendants appropriated the name of his business entity.
See 18 Summ. Pa. Jur.2d Commercial Law § 18.1 et seq. (listing the various forms of unfair trade practices recognized at common law)
The plaintiff asserts that the defendants base their position on the Sears-Compco doctrine, which states, in essence, that state regulation of unfair competition is preempted as to all matters falling under the purview of the copyright clause of the United States Constitution. See Sears, Roebuck Co. v. Stiffel Co., 276 U.S. 225 (1964); Compco Corp. v. Day-Bright Lighting, Inc., 376 U.S. 234 (1964). In fact, the defendants base their position on the plain language of the UTPCPL which clearly does not provide a private right of action to plaintiffs in Reinhart's position. On this point, as we have discussedsupra, we agree with defendants.
The defendants do mention, in passing, that the plaintiffs state-law copyright claims are preempted under the Sears-Compco doctrine. Plaintiff appears to concede that the portion of his state-law claims that arise out of the defendants' alleged copying of his written advertising campaign are, indeed, preempted. See Plaintiffs Response to Defendant Fleetway's Motion to Dismiss Counts II and II of Complaint Under F.R.C.P. 12(b)(6). He contends, however, that his allegation that the defendants appropriated the name of his business entity for their profit is not covered by federal copyright laws and is therefore not preempted. We discuss this contention infra.
As we have noted, the plaintiff has made no attempt to distinguish what kind of common law claim, if any, he intends to raise. We understand Count II to be an attempt to allege some kind of misrepresentation, and the facts of this case suggest that the closest match to the plaintiffs apparent intent is that of "Palming or Passing Off," which describes the practice by one vendor of representing their own goods as being those of a rival, or common law trademark infringement, the use without permission of another's well-known mark. 18 Summ. Pa. Jur.2d Commercial Law § 18.13, 18.2.
Defendants have argued that the plaintiffs state law copyright claims are preempted under the Sears-Compco doctrine. See supra note 3. We agree that, to the extent the plaintiff alleges in Count II that the defendants committed the common law business tort of appropriation by copying and using his written advertising campaign, such an allegation is preempted by Count I of his complaint because it "falls within the broad confines of the copyright clause of the United States Constitution." Triangle Publications, Inc. v. Sports Eye, Inc., 415 F. Supp. 682, 683 (E.D.Pa. 1976). However, Count II also appears to allege that the use by the defendants of the entity name East Coast Auto Liquidators was an unfair business practice at common law.
The use of another's business entity name is not protected under the copyright clause, and we agree with the plaintiff that such a common law claim is not barred by the Sears-Compco doctrine. Trademarks are protected under the Lanham Act, 15 U.S.C. § 1125(a), the basis of which is Congress's authority to regulate interstate commerce, not the copyright clause. See Lyon v. Quality Courts United, Inc., 249 F.2d 790, 795 (6th Cir. 1957). The Lanham Act therefore does not preclude common law actions for the appropriation of a mark under Sears-Compco. Indeed, the action for unfair competition "exists today separate and apart from any statutory rights which the owner of the trademark possesses." House of Westmore, Inc. v. Denney, 151 F.2d 261, 265 (3d Cir. 1945); Le Chemise Lacoste v. Alligator Co., Inc., 506 F.2d 339, 346 (3d Cir. 1974) ("[T]he Lanham Act generally does not preempt state regulation of trademarks, statutory or common law.");Colligan v. Activities Club of New York, Ltd., 442 F.2d 686, 691-92 (3d Cir. 1971) ("[T]he consumer protection explosion and the wholesale displacement (though not preemption) of traditional state statutory and common law remedies — matters pregnant with manifold consequences of great importance — were never considered or foreseen by Congress prior to the enactment of § 43(a)"); see, e.g., Lucent Information Management, Inc. v. Lucent Technologies, Inc., 186 F.3d 311 (3d Cir. 1999) (involving both common law and Lanham Act trademark infringement claims); Inter Medical Supplies, Ltd. v. EBI Medical Systems, Inc., 181 F.3d 446 (3d Cir. 1999) (same); see also Mariniello v. Shell Oil Co., 511 F.2d 853, 857-59 (holding that New Jersey law protecting franchisees from the termination of franchise contracts is not preempted by the Lanham Act under general federal preemption doctrine).
We express no opinion as to whether the plaintiff could, on the basis of the allegations in his complaint, maintain an action under the Lanham Act. We make reference to the Lanham Act only to demonstrate that common law claims of unfair business practices based on the appropriation of a mark are not precluded by the Sears-Compco doctrine.
The only argument defendants put forward as to why the plaintiffs common law claims should be dismissed is that they are precluded by the Sears-Compco doctrine. Because we disagree with this contention with respect to the plaintiffs claim that the defendants' alleged use of the name East Coast Auto Liquidators was an unfair trade practice at common law, we will not dismiss Count II insofar as it states that claim.
We note that the plaintiff has not directly alleged the elements necessary to state a claim for unfair competition by common law infringement. Primarily, a plaintiff in Pennsylvania is required to demonstrate the probability or likelihood of confusion in the public's mind as to the source of goods sold by the defendants. Surgical Supply Services, Inc. v. Adler, 321 F.2d 536, 539 (3d Cir. 1963). We believe that, drawing every inference in favor of the plaintiff as the non-moving party, the allegations incorporated by reference in Count II that defendants sold goods to the public between September 5 and 9, 2002, when the plaintiff knew of the alleged advertising campaign using his business entity's name, and that they sold goods to the public prior to that date as a result of their use of the plaintiffs business entity's name, are sufficient to infer the allegation that the public was confused as to the source of goods sold by the defendants. We believe, therefore, that the defendant has alleged sufficient facts to allow his unfair competition by common law infringement or passing off claim to survive a motion to dismiss.
V. CONCLUSION
The plaintiff cannot utilize the private right of action contained in the UTPCPL. We therefore dismiss Count III in its entirety and that portion of Count II that alleges a violation of the UTPCPL. We also dismiss that portion of Count II that alleges a violation of the common law with respect to the copying of the plaintiffs written advertising campaign. However, because common law infringement and passing off actions coexist with federal statutory trademark protections, we deny the defendants' motion to dismiss with regard to that portion of Count II that alleges unfair business practices at common law based on the defendants' use of the plaintiffs business entity's name. An appropriate order follows.ORDER
AND NOW, this 27th day of December, 2002, upon consideration of the Defendant's Motion to Dismiss Counts II and III Within Plaintiffs Complaint Pursuant to Fed.R.C.P. 12(b)(6) and accompanying Memorandum of Law, filed December 11, 2002, and the Plaintiffs Response to Defendant Fleetway's Motion to Dismiss Counts II and III of Complaint Under F.R.C.P. 12(b)(6), filed December 18, 2002, it is hereby ORDERED that:
1. The Defendant's Motion to Dismiss is GRANTED as to Count II of the plaintiffs complaint insofar as it alleges violations of the Pennsylvania Unfair Trade Practices and Consumer Protection Law and of the common law of unfair trade practices based on the defendants' alleged use of the advertising materials developed by the plaintiff. These claims are dismissed with prejudice
2. The Defendants' Motion to Dismiss is GRANTED as to Count III of the plaintiffs complaint. Count III is dismissed with prejudice.
3. The defendants' Motion to Dismiss is DENIED as to Count II insofar as it alleges a violation of the common law of unfair trade practices based on the defendants' alleged use of the plaintiffs business entity's name. This portion of the defendants' motion is denied without prejudice to defendants' right to move for summary judgment when all discovery is complete.
Although only two of the four defendants in this case moved for dismissal, because there is no possible validity to these portions of Count II, and in the interests of judicial economy, we will dismiss these portions of Count II as to all defendants.
As with those portions of Count II that we dismiss, in the interests of judicial economy and because there is no possible validity to Count III as against any defendant, we will dismiss Count III as against all defendants.