UNITED STATES OF AMERICA et al v. WILLIAM BOUNDS, LTD., No. 2:2010cv00420 - Document 25 (W.D. Pa. 2010)
Court Description: MEMORANDUM and ORDER granting 12 Motion to Dismiss/Lack of Jurisdiction, without prejudice; Relator FLFMC, LLC. is granted leave to file an amended complaint within thirty (30) days of the entry of this order on the docket. Signed by Chief Judge Gary L. Lancaster on 11/17/10. (map)
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UNITED STATES OF AMERICA et al v. WILLIAM BOUNDS, LTD. Doc. 25 IN THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF PENNSYLVANIA UNITED STATES OF AMERICA, ex. reI. FLFMC, LLC., Plaintiffs, Civil Action No. 10-420 v. WILLIAM BOUNDS, LTD., Defendant. MEMORANDUM Gary L. Lancaster, Chief Judge. This U.S.C. § 1 defendant, is a seq. qui tam action under Relator, FLFMC, LLC. William patent marking Bounds, LTD. in violation of ("section 292"). November 35 U.S.C. § the 2010 Patent Act, 35 ("FLFMC"), alleges that ("Bounds"), section 292 engaged of the in false Patent Act FLFMC alleges that Bounds 292. falsely marked pepper mills that it manufactures and sells with U.S. Patent No. 3,168,256 ("patent 256"), which expired on May 2, 1983. FLFMC contends that Bounds should be held liable under section 292 and seeks one half of any penalty imposed. Bounds has filed a motion to dismiss Federal Rule of Civil Procedure 12 (b) (1) . contends that FLFMC sufficiently plead an lacks standing injury in fact false marking and the alleged harm. because and a [Doc. it pursuant 12]. has to Bounds failed to nexus between the Bounds has also filed its motion to dismiss pursuant to Federal Rules of Civil Procedure Dockets.Justia.com 12 (b) (6) and 9 (b) . [Id.]. Bounds contends that FLFMC has failed to satisfy the pleading requirements of Rule 9(b) because it did not allege with sufficient particularity that Bounds acted with fraudulent intent. FLFMC argues that it has clearly pled an injury in fact and that this injury in fact provides the necessary nexus between the false marking and the harm. Additionally, FLFMC argues that it is not required to plead intent to deceive under section 292 with particularity and its complaint is sufficient to satisfy the pleading standards set forth in Federal Rule of Civil Procedure 8 (a) . For the dismiss will allegations 9(b). be fail reasons granted, to set forth below, without Bounds's motion prejudice, because to FLFMC's satisfy the pleading requirements of Rule FLFMC will be granted leave to file an amended complaint. I. FACTUAL BACKGROUND FLFMC is a the laws of the limited liability company organized under Commonwealth of Pennsylvania. Bounds is a California corporation with its principal place of business in Torrance, California. Bounds sells a variety of products, including the pepper mills at issue. FLFMC manufactured, alleges sold, marked with patent 2 that Bounds, offered to sell, 256, and/or its agents, or advertised pepper mills which expired on May 2, 1983. FLFMC alleges that referring Bounds to patent connection marked 256, with patent its pepper mills and advertised the 256. FLFMC also with peppers asserts phrases mills that in Bounds falsely marked its peppers mills for the purpose of deceiving the public. II. PROCEDURAL BACKGROUND On June 7, 2010, Bounds filed a motion to dismiss, or in the alternative, a motion to stay this case pending a decision by the Court of Appeals for the Federal Circuit in Stauffer v. Brooks Brothers, 619 F.3d 1321 (Fed. Cir. 2010). [Doc. No. 12]. The Court of Appeals for the Federal Circuit was set to determine whether a private party had Article III standing to bring a false marking claim under section 292 when that private party suffered no cognizable injury in fact. economy, Thus, in the interest of judicial we administratively closed this case on July 28, pending a ruling from the court of appeals. On August decision 31, 2010, the in Stauffer holding that court a 2010 [Doc. No. 17]. of appeals violation of issued a section 292 inherently constitutes an injury to the United States, and that the United States' sovereign injury is standing upon not only the United States, assignee in a qui tam action. sufficient to confer but also any partial Id. at 1326-1328. On October 5, 2010, Bounds filed a request for reconsideration of its motion to dismiss filed on June 7, 2010. 3 [Doc. No. 22]. Bounds avers that the remaining contentions in its motion to dismiss are ripe for consideration Stauffer. in light of the court of appeals decision in We agree. III. LEGAL STANDARD When a court considers a motion to dismiss for lack of subject matter jurisdiction under Rule 12(b) (1) of the Federal Rules of Civil Procedure the first question is whether a I defendant is making a facial or factual jurisdictional attack. CNA v. U,S' 535 F.3d 132 I jurisdictional attack l 139 (3d Cir. 2008). 1 In a facial where a defendant asserts that the allegations of the complaint are insufficient to establish jurisdiction complaint I l the court may only consider the allegations of the and must do so in the light most favorable to the plaintiff. U.S. ex reI. Atkinson v. Pa. Shipbuilding CO' 473 I F.3d 506 1 513 (3d Cir. 2007). In a factual jurisdictional attack l is on a plaintiff to establish jurisdiction. presented with a factual 12(b) (1) motion l the burden of proof Id. Thus I the court need only accept a plaintiff's uncontroverted allegations as true. Sinai Med. Ctr. v. Watkins I 11 F.3d 1573 1 when Cedars- 1583 (Fed. Cir. 1993) (citing Gibbs v. Buck l 307 U.S. 66 1 72 (1939)). To 12 (b) (6) of survive a motion the Federal Rules to of Civil must contain sufficient facts that 4 dismiss l pursuant Procedure I to a if accepted as true Rule complaint l state "a claim to relief Iqbal, v. that is plausible on its 129 S.Ct. 1937, 1949 Twombly, 550 U.S. (2009) 544, 570 face. Ashcroft v. It (quoting Bell Atlantic Corp. (2007)). A claim has facial plausibility when the plaintiff pleads facts that allow the court to "draw the reasonable inference that the defendant is liable for the misconduct alleged." However, the court is '" not bound to accept as true a legal conclusion couched as a factual allegation. ' Iqbal, /I 129 S. Ct. at 1950 (quoting Twombly, 550 U.S. at 555) . Under averments of Federal fraud must Rule be of Civil Procedure 9(b) stated with particularity. all "Rule 9 (b) 's heightened pleading standard gives defendants notice of the claims protection against for their them, provides reputations, an and increased reduces measure the of number of frivolous suits brought solely to extract settlements." In re Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 1418 (3d Cir. 1997) (citations omitted). Rule 9(b) can be satisfied by describing the circumstances of the alleged fraud with precise allegations of date, time, or place, or by using some means of injecting precision and some measure of substantiation into the fraud allegations. Board of Trustees of Teamsters Local 863 Pension Fund v. Foodtown, Inc., 296 F.3d 164, 173 n. 10 (3d Cir. 2002) . 5 Therefore, when deciding a motion to dismiss under Rule 12(b) (6), we apply the following rules. The facts alleged in the complaint, but not the legal conclusions, must be taken as true and all reasonable plaintiff. inferences must be drawn in favor of the Iqbal, 129 S.Ct. at 1949i Twombly, 550 U.S. at 555. We may not dismiss a complaint merely because it appears unlikely or improbable that a plaintiff can prove the facts alleged or will ultimately prevail on the merits. 563 n.S. Twombly, 550 U.S. at 556, Instead, we must ask whether the facts alleged raise a reasonable expectation that discovery will reveal evidence of the necessary elements. Id. at 556. In the end, if, in view of the facts alleged, it can be reasonably conceived that the plaintiff could, upon a trial, establish a case that would entitle him to relief, the motion to dismiss should not be granted. Id. at 563 n.S. IV. DISCUSSION A. Subject Matter Jurisdiction under 12(b) (1) Bounds FLFMC has challenges FLFMC's standing and argues that led to plead an injury in fact to the United States, the public, or itself. Additionally, Bounds contends that FLFMC has failed to plead a nexus between the false marking and the alleged harm. Accordingly, Bounds's jurisdictional challenge is facial, and we must accept all of FLFMC's allegations as true in determining whether we have subject matter jurisdiction. 6 To establish Article III standing, FLFMC must show: (1) that [it] has suffered an injury in fact, an invasion of a legally protected interest that is (a) concrete and particularized, and (b) actual and imminent, not conjectural or hypothetical, (2) that there is a causal connection between the injury and the conduct complained of, and (3) that the injury is likely to be redressed by a favorable decision. Stauffer, 619 F. 3d at 1325 (citations and internal quotations omi tted) . In Stauffer, the Court of Appeals for the Federal Circuit held that a plaintiff is not required to plead that it suffered an injury because the gui tarn provision in section 292 statutorily assigns the United States' Thus, rights to a plaintiff. a plaintiff has standing by asserting any injury in fact suffered by the United States. Id. The court of appeals further held that a violation of section 292 constitutes an injury in fact to the United States. Id. (citing Vermont Agency of Natural Resources v. U.S. ex reI. Stevens, 529 U.S. 765, 774 (2000)). FLFMC alleges that Bounds marked its pepper mills with expired patent 256 in violation of section 292, which, if true, would constitute an injury in fact to the United States. FLFMC also alleges that the injury was caused by Bounds marking its pepper mills with expired patent 256, which, if true, shows a causal connection between the injury and the conduct of Bounds. Finally, 7 the alleged injury to the United States could be redressed by a favorable decision requiring payment of statutory fines by Bounds. FLFMC has adequately alleged an injury in fact to the United States and a causal connection between the false marking and the allegations, alleged taken as harm. true, Thus, are we sufficient find FLFMC's confer to that subject matter jurisdiction upon this court. B. Rules 12 (b) (6) and 9 (b): 35 U.S.C. § 292 Bounds has also filed its motion to dismiss pursuant to Rule 12 (b) (6) and argues that FLFMC has failed to plead fraud with particularity as required by Rule 9(b). FLFMC argues that it is not required to plead intent to deceive under section 292 with particularity and that its complaint is sufficient to satisfy the pleading standards set forth in Rule 8(a}. To state a claim for false marking under section 292, a plaintiff must show two elements: article i and BIC Corp., Aug. 1295, 25, (2) 1300 marking an unpatented intent to deceive the publ ic . Nos. 2010) " (1) 09-860, 10-01, 2010 WL 3360568, (citing Forest Group v. (Fed. Cir. 2009); Brinkmeier v. II at *6 (D. Del. Bon Tool Co., 590 F.3d Clontech Labs. Inc. v. Invitrogen Corp., 406 F.3d 1347, 1352 (Fed. Cir. 2005». FLFMC's complaint alleges mills with expired patent 256, that Bounds marked and that Bounds "did so for the purpose of deceiving the public." [Doc. No. I, 12]. complaint alleges nothing further about intent to deceive. 8 pepper FLFMC's FLFMC argues that this allegation sufficiently states intent to deceive under Rule 8 (a) . FLFMC asserts in support of its argument that in an analogous case, U.S. ex reI. FLFMC v. Ace Hardware Corp., No. 10229, 2010 WL 1904023 (W.D. Pa. May 7, 2010), the motion to dismiss was denied because the allegations satisfied Rule 8(a). In FLFMC v. Ace, the district court held that the allegations made were sufficient under the pleading standards set forth in Twombly and Iqbal. Id. at *3. However, in FLFMC v. Ace, the district court did not address whether a plaintiff is required to plead a claim under section 292 with sufficient particularity to satisfy the pleading requirements of Rule 9(b). The Court of Appeals for the Federal Circui t has not addressed whether claims under section 292 require a plaintiff to show intent to deceive under the heightened pleading requirements of Rule 9 (b) . Circuit have However, recently several district held that courts false marking in the Third claims under section 292 are subject to the heightened pleading standards of Rule 9(b). Hollander 2813015, 9 See Brinkmeier v. BIC Corp., 2010 WL 3360568, at *6; v. at Etymotic *7 (E.D. Research, Pa. July 14, Inc., 2010) No. i 10 526, Hollander v. 2010 WL Ortho- McNeil-Janssen Pharmaceuticals, Inc., No. 10-836, 2010 WL 4159265 (E.D. Pa. Oct. 21, 2010).1 A claim for false marking is actionable only when there is intent to deceive; based in therefore, fraud and requirements of Rule 3360568, at (citations omitted) Wal-Mart Stores, *8 are claims under section 292 are subject 9 (b) . Inc., 575 to the Brinkmeier v. F.3d i heightened pleading BIC Corp., 2010 WL see also Exergen Corp. 1312, 1328 (Fed. Cir. v. 2009) (holding that a claim of inequitable conduct in a patent case, which includes the element of intent to deceive, requires a plaintiff to plead with requisite particularity to satisfy the pleading standards of Rule 9(b». We agree with the great majority of district courts and find that the false marking statute sounds in fraud and a District courts from other circuits have also recently held that false marking claims under section 292 are subject to the heightened pleading standards of Rule 9(b). U.S. ex rel. Hallstrom v. Aqua Flora, Inc., No. 10-1459, 2010 WL 4054243, at *5 (E.D. Cal. Oct. 15, 2010) (citing Juniper Networks v. Shipley, 2009 WL 1381873, at *4 (N.D. Cal. May 14, 2010}) i Simonian v. Cisco Systems, Inc., No. 10-1306, 2010 WL 2523211, at *3 (N.D. Ill. June 17, 2010)i The N.C. Farmers' Assistance Fund, Inc. v. Monsanto Co., No. 08-409, 2010 WL 3817349, at *9 (M.D. N.C. Sept. 27, 2010}i Josephs v. Federal-Mogul Corp., No. 10 10617, 2010 WL 3803779, at *2 (E.D. Mich. Sept. 23, 2010). But see Brinkmeier v. Graco Children's Products Inc., 684 F. Supp. 2d 548, 553 (D. Del. 2010) (declining to decide whether the heightened pleading requirements of Rule 9 (b) applied to section 292 because the plaintiff failed to sufficiently plead intent to deceive under the pleading standards of Rule 8(a» i Simonian v. Edgecraft Corp., No. 10-1263, 2010 WL 3781262, at *2 (N.D. Ill. Sept. 20, 2010). 10 plaintiff must meet the heightened pleading standards of Rule 9(b) to show intent to deceive. Before analyzing FLFMC's allegations, we note that the Court of Appeals for the Third Circuit allows district courts to apply a relaxed Rule 9(b) standard when all essential information is in a defendant's control. Litig. , 114 F.3d 1410, In re Burlington Coat Factory Sec. 1418 (3d Cir. 1997) . However, "boilerplate and conclusory allegations will not suffice" and a plaintiff must allegations "accompany that plausible." Id. make their their legal theory with theoretically factual viable claim (citing Shapiro v. UJB Fin. Corp., 964 F.2d 272, 284-285 (3d Cir. 1992)). Section Clontech, 292 is not 406 F. 3d at 1352. showing "by a a Thus, preponderance of party did not have a properly marked." strict liability FLFMC bears the evidence, statute. the burden of that the accused reasonable belief that the articles were Id. at 1352-1353. FLFMC's only allegation regarding Bounds's intent to deceive is a conclusory statement that Bounds marked the pepper mills with expired patent 256 "for the purpose of deceiving the public." [Doc. No. 1, broad not and conclusory allegation does meet the 12]. This heightened pleading standards of Rule 9(b), even when viewing the allegation from a relaxed standard. 2d. 548, 553 11 See Brinkmeier v. Graco, (D. Del. 2010) 684 F. Supp. (holding that plaintiff's conclusory allegation that defendant marked products with expired patents "for the purpose of deceiving the public" was insufficient to satisfy even the liberal pleading standards of 8(a».2 FLFMC has pled no facts attempted to deceive the public. that Bounds intentionally FLFMC argues in their brief in opposition to the motion to dismiss that the length of time that patent 256 was expired is sufficient to show that Bounds intended to deceive alleged the public. conduct alone deceive the public. The length of Bounds's We disagree. does not show that Bounds intended to FLFMC cannot rest on their single conclusory allegation regarding intent to deceive to satisfy the pleading requirements of Rule 9(b). Based Bounds's on the foregoing, motion to dismiss the we will complaint grant without defendant prej udice. FLFMC will be granted leave to file an amended complaint. An appropriate order follows. In contrast, the district court found in the same case, with respect to other patents that the plaintiff claimed were falsely marked, that the pleadings were sufficient under Rule 9(b) to find an intent to deceive because the plaintiff alleged the defendant had been sued 3 times since the patent at issue expired, yet the defendant continued to mark its products with the expired patent. Brinkmeier v. Graco, 684 F. Supp. 2d. 548, 553 (D. Del. 2010). 12 • IN THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF PENNSYLVANIA UNITED STATES OF AMERICA, ex. reI. FLFMC, LLC., Plaintiffs, Ci I Action No. 10-0420 v. WILLIAM BOUNDS, LTD., Defendant. AND NOW, this ORDER fA day of November, ORDERED that defendant William Bounds, 2010, IT IS HEREBY LTD.'s motion to dismiss [Doc. No. 12] is GRANTED without prejudice. IT granted leave IS to FURTHER file days of the entry of an ORDERED that relator amended complaint s order on the docket. COURT: cc: All Counsel of Record FLFMC, within LLC. thirty is (30)
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