Corker et al v. Costco Wholesale Corporation et al, No. 2:2019cv00290 - Document 155 (W.D. Wash. 2019)
Court Description: ORDER denying Supplier Defendants' 107 Motion to Dismiss for Failure to State a Claim. Signed by Judge Robert S. Lasnik.(MW)
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Corker et al v. Costco Wholesale Corporation et al Doc. 155 1 2 3 4 5 UNITED STATES DISTRICT COURT WESTERN DISTRICT OF WASHINGTON AT SEATTLE 6 7 8 BRUCE CORKER, et al., Plaintiffs, 9 v. 10 11 COSTCO WHOLESALE CORPORATION, et al., 12 NO. C19-0290RSL ORDER DENYING SUPPLIERS’ MOTION TO DISMISS Defendants. 13 14 15 This matter comes before the Court on the “Suppliers’ Motion to Dismiss Under Fed. R. 16 Civ. P. 12(b)(6).” Dkt. # 107.1 The question for the Court on a motion to dismiss is whether the 17 18 19 20 21 22 23 facts alleged in the complaint sufficiently state a “plausible” ground for relief. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). A claim is facially plausible when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged. Plausibility requires pleading facts, as opposed to conclusory allegations or the formulaic recitation of elements of a cause of action, and must rise above the mere conceivability or possibility of unlawful conduct that entitles 24 25 26 27 28 The defendants bringing this motion are Hawaiian Isle Kona Coffee Company, Ltd., L&K Coffee Co. LLC, Mulvadi Corporation, Copper Moon Coffee, LLC, Gold Coffee Roasters, Inc., Cameron’s Coffee and Distribution Company, and Pacific Coffee, Inc. Dkt. # 107 at 6 n.1. Defendant BBC Assets, LLC, d/b/a Boyer’s Coffee Company has joined in the motion. Dkt. # 109. 1 ORDER DENYING SUPPLIERS’ MOTION TO DISMISS - 1 Dockets.Justia.com 1 2 3 4 5 6 7 8 9 the pleader to relief. Factual allegations must be enough to raise a right to relief above the speculative level. Where a complaint pleads facts that are merely consistent with a defendant’s liability, it stops short of the line between possibility and plausibility of entitlement to relief. Nor is it enough that the complaint is factually neutral; rather, it must be factually suggestive. Somers v. Apple, Inc., 729 F.3d 953, 959-60 (9th Cir. 2013) (internal quotation marks and citations omitted). All well-pleaded factual allegations are presumed to be true, with all reasonable inferences drawn in favor of the non-moving party. In re Fitness Holdings Int’l, Inc., 714 F.3d 1141, 1144-45 (9th Cir. 2013). If the complaint fails to state a cognizable legal theory 10 or fails to provide sufficient facts to support a claim, dismissal is appropriate. Shroyer v. New 11 Cingular Wireless Servs., Inc., 622 F.3d 1035, 1041 (9th Cir. 2010). 12 13 14 15 Having reviewed the First Amended Complaint and the memoranda submitted by the parties,2 the Court finds as follows: Plaintiffs are coffee farmers in the Kona District of the Big Island of Hawaii. They allege 16 that moving defendants sell coffee products throughout the United States and that they falsely 17 designate the geographic origin of their coffee as “Kona,” placing the word Kona prominently 18 on their packaging and/or promotional materials. Plaintiffs provide examples of the packaging - 19 20 21 22 and in some instances promotional materials - used by each of the moving defendants and allege that the products carrying the Kona label actually contain little to no coffee from the Kona District. Plaintiffs further allege that the supplier defendants deliberately and intentionally 23 mislead consumers into believing their products contain an appreciable amount of Kona coffee 24 beans in order to use the reputation and goodwill of the Kona name to justify higher prices for 25 26 27 28 This matter can be decided on the papers submitted. The supplier defendants’ request for oral argument is DENIED. 2 ORDER DENYING SUPPLIERS’ MOTION TO DISMISS - 2 1 what is actually ordinary commodity coffee. Plaintiffs complain that the suppliers’ use of the 2 word Kona not only constitutes false designation of geographic origin, it damages the 3 4 5 geographic designation itself and the designation’s value to the farmers of authentic Kona coffee from the Kona District. Plaintiffs have tested packages of the suppli aud - providing an ORDER DENYING SUPPLIERS’ MOTION TO DISMISS - 4 1 image of the packaging and test results confirming the absence of Kona coffee in the packages - 2 does not invalidate or make unclear the allegation that all of L&K’s products marked with the 3 4 5 word Kona contain a false designation of origin.4 The allegations adequately “inform each defendant separately of the allegations surrounding [its] alleged participation in the fraud.” 6 Swartz v. KPMG LLP, 476 F.3d 756, 764-65 (9th Cir. 2007). Plaintiffs have met the Rule 9(b) 7 pleading requirement. 8 The supplier defendants’ second argument is that plaintiffs have failed to allege a 9 plausible claim of false association under Section 43(a)(1)(A) because there is no indication that 10 11 12 defendants falsely linked their products with the plaintiff farmers or their businesses. Claims arising under Section 43(a)(1)(A) are generically described as “false association” claims (see 13 Lexmark Int’l, Inc. v. Static Control Components, Inc., 572 U.S. 118, 122 (2014)), but the plain 14 language of the subsection prohibits more than just a false association with a particular producer 15 or manufacturer. Section 43(a)(1)(A) provides a federal cause of action when a person’s use of a 16 17 18 19 20 21 22 word or symbol in commerce is likely to cause confusion “as to the . . . association of such At one point in the sixty-four page First Amended Complaint, plaintiffs allege that “[s]ampling has shown that nearly every product labeled ‘Kona’ in [the supplier defendants’] product lines misrepresents the origin of the coffee beans contained in the package.” Dkt. # 81 at ¶ 61. Defendants latch onto this sentence, arguing that plaintiffs are not challenging every product labeled “Kona” and defendants therefore have no way of knowing what products are at issue in this case. The following sentences make clear, however, that plaintiffs are alleging a consistent practice of false designation of origin, even if a few Kona beans made their way into an individual package. 4 23 24 25 26 27 28 Id. Given the scarcity of authentic Kona coffee (remember that Kona coffee represents on 0.01% of the worldwide supply of coffee) and the high profitability of marketing commodity coffee as if it were Kona coffee, it is no surprise that any defendant that is willing to engage in such deceptive practices would consistently practice their deception across all product lines. An unscrupulous merchant selling counterfeit Rolex watches on a street corner tends not to mix a real Rolex into inventory every once in a while. ORDER DENYING SUPPLIERS’ MOTION TO DISMISS - 5 1 person with another person, or as to the origin . . . of his goods . . . .” 15 U.S.C. § 1125(a)(1)(A) 2 (emphasis added). The suppliers conflate the two by omitting the word “or” and arguing that 3 4 5 Section 43(a)(1)(A) requires a showing of confusion regarding the association of their goods with plaintiffs, as opposed to confusion regarding the association of the goods with a particular 6 locality or region. Correcting the error shows, however, that this provision applies where a 7 person’s use of a word or symbol would likely cause consumer confusion regarding the origin of 8 the goods. “Origin,” in this context, has long been understood to include the geographic origin of 9 the good or service. See Dastar Corp. v. Twentieth Century Fox Film Corp., 539 U.S. 23, 29-30 10 11 12 (2003). The supplier defendants further argue that a trademark infringement claim under Section 13 43(a)(1)(A) requires a protectable ownership interest in the mark and that plaintiffs concede that 14 “Kona” is not a protectable mark. It is undoubtedly true that, in order to allege infringement of a 15 trademark, a plaintiff must have a protectable interest in the mark. Plaintiffs, however, are using 16 17 18 19 20 21 22 23 24 25 26 27 28 Section 43(a) to challenge what they consider unfair competition, namely the false designation of geographic origin. The Supreme Court has expressly held that Section 43(a) of the Lanham Act goes beyond trademark protection and makes actionable unfair competition claims such as that brought by plaintiffs. The Lanham Act was intended to make “actionable the deceptive and misleading use of marks,” and “to protect persons engaged in ... commerce against unfair competition.” 15 U.S.C. § 1127. While much of the Lanham Act addresses the registration, use, and infringement of trademarks and related marks, § 43(a), 15 U.S.C. § 1125(a) is one of the few provisions that goes beyond trademark protection. As originally enacted, § 43(a) created a federal remedy against a person who used in commerce either “a false designation of origin, or any false description or representation” in connection with “any goods or services.” 60 Stat. ORDER DENYING SUPPLIERS’ MOTION TO DISMISS - 6 1 2 3 4 5 6 7 8 9 10 441. . . . Although a case can be made that a proper reading of § 43(a), as originally enacted, would treat the word “origin” as referring only “to the geographic location in which the goods originated,” Two Pesos, Inc. v. Taco Cabana, Inc., 505 U.S. 763, 777 (1992) (STEVENS, J., concurring in judgment), the Courts of Appeals considering the issue, beginning with the Sixth Circuit, unanimously concluded that it “does not merely refer to geographical origin, but also to origin of source or manufacture,” Federal–Mogul–Bower Bearings, Inc. v. Azoff, 313 F.2d 405, 408 (6th Cir. 1963), thereby creating a federal cause of action for traditional trademark infringement of unregistered marks. See 4 McCarthy § 27:14; Two Pesos, supra, at 768. . . . The Trademark Law Revision Act of 1988 made clear that § 43(a) covers origin of production as well as geographic origin. 11 12 Dastar Corp. v. Twentieth Century Fox Film Corp., 539 U.S. 23, 28-30 (2003) (internal 13 footnotes omitted). Thus, Section 43(a) provides a federal remedy for “a false designation of 14 origin” - a phrase that has always been construed as encompassing false statements regarding the 15 geographic origin of the product - without regard to the existence of a protectable trademark. See 16 17 18 19 20 21 22 23 24 25 26 27 28 also Belmora LLC v. Bayer Consumer Care AG, 819 F.3d 697, 706 (4th Cir. 2016) (“Significantly, the plain language of § 43(a) does not require that a plaintiff possess or have used a trademark in U.S. commerce as an element of the cause of action.”). Finally, the suppliers argue that, whatever the original interpretation of “origin” was, it no longer applies. Prior to 1989, Section 43(a) of the Lanham Act prohibited “false designation[s] of origin” generally. Pub L. No. 79-489, § 43, 60 Stat. 427, 441 (1946). See also 5 McCarthy on Trademarks §§ 27:6, 27:7 (5th ed.). In that context, courts found that the object of the legislation was to codify the traditional protections afforded to persons and businesses in a specific locality or region against outsiders who falsely designated the origins of their products as the same ORDER DENYING SUPPLIERS’ MOTION TO DISMISS - 7 1 geographical area. Black Hills Jewelry Mfg. Co. v. Gold Rush, Inc., 633 F.2d 746, 750 (8th Cir. 2 1980). In 1989, Congress amended the statute to create two separate subsections, the first of 3 4 5 which covers false designations of origin that cause consumer confusion and the second of which covers false designations of geographic origin in advertising. The modifier “geographic” 6 was added before “origin” in the false advertising subsection, 15 U.S.C. § 1125(a)(1)(B). 7 Defendants argue that because a misrepresentation of “geographical origin” in advertising or 8 promotion is specifically prohibited by Section 43(a)(1)(B), a claim based on false designations 9 of geographical origin cannot be brought under Section 43(a)(1)(A) even if plaintiffs are able to 10 11 12 show a likelihood of consumer confusion and satisfy the other elements of that claim. While it is true that Section 43(a)(1)(B) focuses specifically on statements that are false 13 with regard to geographic origin, that does not necessarily mean that the more general term, 14 “origin,” excludes claims based on geography. Two Supreme Court opinions, both of which 15 were written after Congress separated Section 43(a)(1) into two subsections and both of which 16 17 18 19 involved claims under Section 43(a)(1)(A), note that courts have long understood the term “origin” to include geographic origin (in fact, it was the only type of origin deemed protected when the Lanham Act was first enacted). Dastar Corp. v. Twentieth Century Fox Film Corp., 20 539 U.S. 23, 28 (2003); Two Pesos, Inc. v. Taco Cabana, Inc., 505 U.S. 763, 779 (1992). See 21 also Kehoe Component Sales, Inc. v. Best Lighting Prods., Inc., 796 F.3d 576, 587 (6th Cir. 22 2015) (“As Dastar makes plain, an entity makes a false designation of origin sufficient to support 23 24 25 26 27 28 a reverse passing off claim [under Section 43(a)(1)(A)] only where it falsely represents the product’s geographic origin or represents that it has manufactured the tangible product that is sold in the marketplace when it did not in fact do so.”). Congress is presumed to be familiar with ORDER DENYING SUPPLIERS’ MOTION TO DISMISS - 8 1 the judicial interpretation of its acts and yet made no effort to legislatively overturn this 2 interpretation or to restrict the meaning of “origin” as used in Section 43(a)(1)(A). See Lorillard 3 4 5 6 v. Pons, 434 U.S. 575, 580-81 (1978). The Court will not ignore binding precedent to reinterpret the word “origin” when Congress failed to make clear such an intent. Defendants have identified only one case in which a Section 43(a)(1)(A) claim based on a 7 false designation of geographic origin was disregarded in favor of a Section 43(a)(1)(B) claim. 8 Sugai Prods., Inc. v. Kona Kai Farms, Inc., 1997 WL 824022, at * 11 (D. Haw. Nov. 19, 1997). 9 In the context of a motion for class certification, the Sugai court found that plaintiff’s claim for 10 11 12 false designation of geographic origin was properly asserted only under Section 43(a)(1)(B) and evaluated plaintiff’s standing under that subsection. The finding is not supported by textual or 13 legislative analysis, however, and the cited authorities do not stand for the proposition that 14 geographical origin is excluded from the more general term “origin” or is otherwise not a 15 cognizable basis for a claim under Section 43(a)(1)(A). The Court declines to follow Sugai: it is 16 17 18 not bound by the decision, is not persuaded by its reasoning, and notes that no other court has adopted Sugai’s holding in the twenty-plus years since it was decided. 19 20 21 For all of the foregoing reasons, the supplier defendants’ motion to dismiss plaintiff’s false association claim under Section 43(a)(1)(A) (Dkt. # 107) is DENIED. 22 23 Dated this 12th day of November, 2019. A 24 Robert S. Lasnik United States District Judge 25 26 27 28 ORDER DENYING SUPPLIERS’ MOTION TO DISMISS - 9
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