Marvellous Day Electric (S.Z.)Co., Ltd. v. Holiday Bright Lights, Inc., et al
Filing
62
MEMORANDUM Opinion and Order Signed by the Honorable John J. Tharp, Jr on 8/27/2013:Mailed notice(air, )
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
MARVELLOUS DAY ELECTRIC
(S.Z.) CO., LTD.,
Plaintiff,
v.
ACE HARDWARE CORPORATION,
Defendant.
MARVELLOUS DAY ELECTRIC
(S.Z.) CO., LTD.,
Plaintiff/Counterdefendant,
and
HSIN-WEI WU
Counterdefendant,
v.
HOLIDAY BRIGHT LIGHTS, INC.
and RICHARD MARTINI,
Defendants/Counterplaintiffs.
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No. 11 C 8756
Judge John J. Tharp
No. 11 C 8768
Judge John J. Tharp
MEMORANDUM OPINION AND ORDER
After the Court previously dismissed all of plaintiff Marvellous Day Electric (S.Z.) Co.,
Ltd.’s (“Marvellous Day”) claims except for its design patent infringement claim, Marvellous
Day repleaded some of the claims that had been dismissed and filed additional claims. See 2d
Am. Cmplt. (Dkt. 74 in 11 C 8756) against defendant Ace Hardware Corp. (“Ace”); Am. Cmplt.
(Dkt. 56 in 11 C 8768) against defendants Holiday Bright Lights, Inc. (“HBL”) and Richard
Martini. The defendants again advance motions to dismiss all of Marvellous Day’s claims other
than its design patent infringement claim (asserted in both cases, and which is currently stayed
pending reexamination by the Patent Office). For the reasons explained below, the Court grants
the motions to dismiss.
BACKGROUND1
According to its complaints,2 Marvellous Day manufactures LED string lights
(“Christmas lights”) pursuant to United States design patent number D27,494 (the “‘494
Patent”), which it owns. Prior to 2011, Marvellous Day sold its patented Christmas lights to
HBL, which imported the lights into the United States. HBL then distributed the Christmas lights
to Ace, which offered them for sale to American consumers. Sometime in 2011, HBL stopped
purchasing Christmas lights from Marvellous Day and began purchasing them from another
manufacturer. HBL then sold these new Christmas lights to Ace, which sold them at retail.
Marvellous Day alleges (Count I in both cases) that these replacement lights violate the ‘494
Patent. Marvellous Day also alleges that HBL and Ace violated a host of other federal and state
laws by selling the allegedly infringing Christmas lights. In 11 C 8756, it alleges that Ace
committed false patent marking in violation of 35 U.S.C. § 292 (Count II); violated the Illinois
Consumer Fraud Act (“CFA”) and Illinois Unfair and Deceptive Trade Practices Act
(“UDTPA”) by using a photograph of Marvellous Day’s Christmas lights in advertisements for
the infringing lights (Counts III and IV); violated the CFA and UDTPA by using the term
“patented” to describe the infringing lights (Counts V and VI); and violated the CFA and
1
This opinion assumes familiarity with the facts as described in the Court’s prior opinions in this
case, Marvellous Day Elec. (S.Z.) Co., Ltd. v. Ace Hardware Corp., 900 F. Supp. 2d 835 (N.D.
Ill. 2012) and Marvellous Day Elec. (S.Z.) Co., Ltd. v. Ace Hardware Corp., 2013 WL 2356008
(N.D. Ill. May 28, 2013).
2
In reviewing the motions to dismiss, the Court accepts Marvellous Day’s well-pleaded factual
allegations as true for the purposes of the motion, and it draws all reasonable inferences in its
favor. Gessert v. United States, 703 F.3d 1028, 1033 (7th Cir. 2013).
2
UDTPA by using the term “always lit” to describe the lights (Counts VII and VIII). Marvellous
Day also alleges in 11 C 8768 that HBL violated the CFA and UDTPA by using the term
“always lit” to describe the lights (Counts II and III).
Ace and HBL previously moved to dismiss all of Marvellous Day’s claims except for its
patent infringement claim. The Court granted the defendants’ motions, dismissing each of
Marvellous Day’s non-patent infringement claims with prejudice, except for the false patent
marking claim, which it dismissed without prejudice. Upon Marvellous Day’s motion for
reconsideration, the Court vacated its dismissal with prejudice of Marvellous Day’s CFA and
UDTPA claims, and instead dismissed those claims without prejudice. Marvellous Day then filed
amended complaints against both Ace and HBL asserting the claims at issue here.
DISCUSSION
I.
The Defendants’ Arguments Based on Marvellous Day’s Status as a NonCompetitor Were Previously Rejected.
Ace argues that Marvellous Day’s CFA and UDTPA claims should be dismissed based
on the law of the case because of the Court’s October 2, 2012 order. In that order, the Court
dismissed Marvellous Day’s CFA and UDTPA claims (along with its Lanham Act claims) with
prejudice because Marvellous Day had failed to allege that it competed with Ace or HBL. After
Ace had filed its briefs with respect to the current motion to dismiss, however, the Court vacated
the portions of its prior order that dismissed the CFA and UDTPA claims with prejudice because
the CFA and UDTPA do not require competition between the plaintiff and the defendant. The
Court’s May 28, 2013 order sets forth more fully the reasons for that ruling and the Court will
not address those arguments further in this opinion.
3
II.
Marvellous Day’s False Patent Marking Allegations Fail to State a Plausible Claim.
Turning to the defendants’ substantive arguments for dismissal, the Court first examines
the false patent marking claim against Ace. The Court previously dismissed this claim without
prejudice on the ground that Marvellous Day failed to plausibly allege that Ace intended to
deceive consumers into believing that its advertised Christmas lights were made or sold by
Marvellous Day. Marvellous Day amended the factual allegations in support of its claim, and
Ace again moves to dismiss.
Marvellous Day alleges that during the time when Ace was purchasing Christmas lights
manufactured by Marvellous Day, it truthfully advertised those Christmas lights to consumers as
being “patented.” 2d Am. Cmplt. (Dkt. 74) ¶ 25. After Ace and Marvellous Day terminated their
relationship, Ace continued to advertise its Christmas lights—which were by then being
produced by another manufacturer—as having the “Patented T5 LED bulb.” Id. ¶¶ 29, 36.
According to Marvellous Day, Ace used the word “patented” “with an intent to deceive
customers so that they would continue to purchase such imitation products based on the false
belief that the Imitation T5 LED light string was [Marvellous Day’s] patented product previously
offered and sold by ACE.” Id. ¶ 34. The false patent marking statute states, in relevant part:
Whoever, without the consent of the patentee, . . . uses in advertising in
connection with anything made, used, offered for sale, or sold by such person
within the United States, . . . the name or any imitation of the name of the
patentee, the patent number, or the words “patent,” “patentee,” or the like, with
the intent of counterfeiting or imitating the mark of the patentee, or of deceiving
the public and inducing them to believe that the thing was made, offered for sale,
sold, or imported into the United States by or with the consent of the patentee . . .
Shall be fined not more than $500 for every such offense.
35 U.S.C. § 292(a). In order to state a valid claim for relief, allegations that a party violated the
statute must be pleaded with particularity. In re BP Lubricants USA Inc., 637 F.3d 1307, 1311
(Fed. Cir. 2011).
4
Marvellous Day’s amended false patent marking claim fails for the same reason that its
original claim failed: it has not alleged facts that could plausibly show that by describing its
Christmas lights as “patented,” Ace intended to deceive consumers into believing that
Marvellous Day was the manufacturer. As the Court stated in its previous dismissal of the false
patent marking claim, to survive summary judgment Marvellous Day “must in the § 292 context
provide some objective indication to reasonably infer” that by using the word “patented,” Ace
intended to deceive the public into believing that its Christmas lights were still produced by
Marvellous Day. 900 F. Supp. 2d at 846. It has not done so.
The complaint offers no factual allegations that would support an inference that the word
“patented” conjures in the minds of consumers any association with Marvellous Day. Since
1836, the U.S. Patent and Trademark Office has issued millions of patents, including over
600,000 design patents. Table of Issue Years and Patent Numbers for Selected Document Types
Issued Since 1836, http://www.uspto.gov/web/offices/ac/ido/oeip/taf/issuyear.htm (last visited
Aug. 21, 2013). Marvellous Day alleges, however, that because Ace first used the term to
describe Marvellous Day’s Christmas lights, its continued use of the term was intended to
deceive consumers into believing that nothing had changed, and that Ace’s Christmas lights were
still manufactured by Marvellous Day. But that allegation is also implausible. Marvellous Day
itself argues in its allegations relating to false patent marking that Ace used the term “patented”
not because it would to cause customers to think that the Christmas lights were manufactured by
Marvellous Day, but “in order to communicate to consumers that the T5 LED light string product
was superior to other light string products and to create further interest in and generate additional
sales of the T5 LED light string product.” 2d Am. Cmplt. (Dkt. 74) ¶ 30. As ACE points out in
its brief, “[t]his is the antithesis of an intent to counterfeit. A motive to make products seem
5
generally innovative does not suggest a motive to have consumers believe that its T5 LED light
string products were authorized by Plaintiff, or fell under Plaintiff’s patent.
To establish a claim under § 292(a), Marvellous Day needs to show more than just that
Ace intended to deceive consumers about the patent status of the product; it must show that Ace
intended to deceive consumers into believing that the Christmas lights were manufactured by
Marvellous Day. Using the word “patented” could not plausibly cause consumers to jump to the
conclusion that the lights were manufactured by Marvellous Day, even though Ace previously
sold patented Christmas lights that actually were manufactured by Marvellous Day, and
Marvellous Day has pleaded no facts that support an inference that any consumers did so.3
Therefore, Marvellous Day has failed to plead facts that would satisfy the heightened pleading
standard that applies to false patent marking claims. See Juniper Networks, Inc. v. Shipley, 643
F.3d 1346, 1350 (Fed. Cir. 2011). Its false patent marking claim is therefore dismissed.
III.
Marvellous Day’s CFA Claims Fail.
A. Marvellous Day Need Not Allege Its Own Reliance To State A CFA Claim.
Next, the defendants move to dismiss all of Marvellous Day’s CFA claims—Counts III,
VI, and VIII in 11 C 8756 and Count III in 11 C 8768—because they do not allege that the
defendants intended for Marvellous Day to rely on any deceptive act or practice. “To prove a
private cause of action under [the CFA], a plaintiff must establish: (1) a deceptive act or practice
3
The complaint contains only the conclusory allegation that “[c]onsumers who associated the
qualities of unique and novel ornamentality with Plaintiff’s T5 LED light string and viewed the
false advertisement touting the “Patented T5 LED bulb” would be deceived as to the actual
source of the goods.” 2d Am. Cmplt. (Dkt. 74) ¶ 36. It does not even allege that there were such
consumers, much less provide a factual basis to permit a plausible inference that consumers
equated the phrase “Patented T5 LED bulb” with Marvellous Day. Perhaps if Ace had combined
the term “patented” with some other reference that would point to its previous relationship with
Marvellous Day—e.g., by using phrases like “Still the Same Patented Design” or “Patented and
Unchanged”—it might plausibly have intended to deceive consumers into believing that it was
still selling lights manufactured by Marvellous Day.
6
by the defendant, (2) the defendant’s intent that the plaintiff rely on the deception, (3) the
occurrence of the deception in the course of conduct involving trade or commerce, and (4) actual
damage to the plaintiff (5) proximately caused by the deception.” Avery v. State Farm Mut. Auto.
Ins. Co., 216 Ill.2d 100, 180, 835 N.E.2d 801, 850 (Ill. 2005). “Claims for violation of the
Consumer Fraud Act are subject to the same heightened pleading standards as other fraud claims;
as such, they must satisfy the particularity requirement of Rule 9(b) of the Federal Rules of Civil
Procedure.” Greenberger v. GEICO General Ins. Co., 631 F.3d 392, 399 (7th Cir. 2011).
Here, Marvellous Day alleges that the defendants committed three deceptive acts. First,
Marvellous Day alleges that Ace used a photo of Marvellous Day’s Christmas lights, which
featured removable and replaceable light bulbs, on its website to advertise for Christmas lights
that were produced by another manufacturer and which do not have the same features. Second,
Marvellous Day claims that Ace advertised the lights produced by the other manufacturer as
“patented” even though they were not actually patented. And third, Marvellous Day alleges that
both Ace and HBL described the other manufacturer’s Christmas lights as “always lit,” even
though the lights did not comport with the definition of that term.
Each of Marvellous Day’s claims are similar in that they allege that the defendants
intended to deceive consumers, customers, or members of the public into believing that the
Christmas lights they were selling possessed attributes that the lights did not actually have.
Marvellous Day does not allege, however, that either defendant intended to deceive Marvellous
Day itself. The defendants argue that the second element of a CFA claim requires that the
defendant intend that the plaintiff rely on its deceptive statements. See Avery, 216 Ill.2d at 180,
835 N.E.2d at 850. If that is truly a requirement to state a CFA claim, then Marvellous Day’s
7
CFA claims must fail because Marvellous Day does not allege that it was the target of Ace’s
deceptive advertisements.
Marvellous Day argues that when “a business . . . is asserting an ICFA action against
another business, the defendant’s intent prong is not required.” Resp. Br. (Dkt. 67) at 10. For this
proposition, Marvellous Day cites Thrasher-Lyon v. Illinois Farmers Ins. Co., 861 F. Supp. 2d
898, 911-12 (N.D. Ill. 2012). But that is not what Thrasher-Lyon says. Rather, it says that nonconsumers like Marvellous Day have standing to bring claims under the CFA so long as they
allege a “consumer nexus”—i.e., they allege deceptive “trade practices addressed to the market
generally” or they “otherwise implicate[] consumer protection concerns.” Id. at 912 (quoting
Bank One Milwaukee v. Sanchez, 336 Ill. App. 3d 319, 322, 783 N.E.2d 217, 220 (2d Dist.
2003)). Here, Marvellous Day alleges that the defendants intended to deceive consumers, and
therefore it has adequately alleged a consumer nexus and it has standing to bring the CFA
claims. The question, however, is whether Marvellous Day can establish the substantive
requirements of a CFA claim even though it does not allege that the defendants intended
Marvellous Day to rely on any of their alleged misrepresentations. Thrasher-Lyon does not
resolve that issue.4
The defendants also rely on Thrasher-Lyon for the proposition that the plaintiff must still
allege “the defendant’s intent that the plaintiff rely on the deception” even where a nonconsumer brings a CFA claim. Id. at 908. But again, Thrasher-Lyon is not directly on point. In
4
In Thrasher-Lyon, the plaintiff, who had been involved in a traffic accident, attempted to assert
CFA claims against the other driver’s insurer which had allegedly sent her deceptive letters
demanding payment. The court found that the plaintiff was not a “consumer” with respect to the
CFA because she did not purchase or seek to purchase anything from the defendant. 861 F. Supp.
2d at 911. Because the plaintiff in Thrasher-Lyon alleged that the insurer sent deceptive letters to
her only, not to any other consumers, the court found that she did not satisfy the “consumer
nexus” test and therefore did not have standing to bring a CFA claim. Id. at 912.
8
that case, the claim was dismissed for failure to establish a consumer nexus, which Marvellous
Day has established here. And the plaintiff in Thrasher-Lyon specifically alleged that the
defendant intended that she rely on the defendant’s deceptive statements. The court did not
discuss the question at issue here: whether a non-consumer plaintiff can state a CFA claim where
the defendant intended that the consuming public, not the plaintiff, rely on the deceptive
statement. Id. at 908, 912. Rather, it merely restated the elements required to state a CFA claim.
Illinois state courts, on the other hand, have addressed this issue and have approved CFA
claims by non-consumers where the plaintiff alleges that the defendant intended to deceive
consumers, not the plaintiff itself. In Imperial Apparel, Ltd. v. Cosmo’s Designer Direct, Inc.,
367 Ill. App. 3d 48, 61, 853 N.E.2d 770, 782 (1st Dist. 2006), rev’d in part on other grounds,
227 Ill.2d 381, 882 N.E.2d 1011 (Ill. 2008), the Illinois Appellate Court squarely addressed
whether a plaintiff could bring a CFA claim on the theory that it suffered damages when a rival
company intended to deceive consumers. In Imperial Apparel, the plaintiff alleged that the
defendant ran an advertisement that falsely disparaged the plaintiff’s business. Id. at 49-50. The
plaintiff alleged that the false advertisement was intended to deceive consumers, and the
defendant moved to dismiss on the ground that the complaint “contain[ed] no allegation that [the
plaintiff] was in anyway [sic] deceived by its ad.” Id. at 60. After the trial court dismissed the
plaintiff’s complaint, the Illinois Appellate Court reversed, finding that “nothing in the
Consumer Fraud Act requires that a competitor-plaintiff be deceived by the false representation.”
Id. at 61. The court held that the case was “readily distinguishable” from cases stating that the
CFA requires intent to deceive the plaintiff because those cases were brought by consumers
while Imperial Apparel was brought “by a business whose goods were disparaged.” Id.
9
Similarly, in Empire Home Servs., Inc. v. Carpet Am., Inc., 274 Ill. App. 3d 666, 653
N.E.2d 852, (1st Dist. 1995), the appellate court reversed the lower court’s dismissal of a CFA
claim where the plaintiff alleged that the defendant intended to deceive consumers into believing
that its goods and services were actually being provided by the plaintiff. The plaintiff alleged that
the defendant held itself out to consumers as the plaintiff and deceived consumers into believing
that they were actually purchasing goods and services from the plaintiff. Id. at 659. Although the
defendant’s deception was obviously aimed at consumers, not at the plaintiff itself, the court
found that the plaintiff had alleged sufficient facts to state a cause of action under the CFA. Id.
Allowing a CFA action by a plaintiff who has been damaged by a defendant’s attempt to
deceive consumers furthers the Illinois legislature’s purpose in passing the CFA, which was to
“protect[] consumers and others against fraud, unfair methods of competition, and unfair or
deceptive acts or practices in the conduct of any form of trade or commerce.” Price v. Philip
Morris, Inc., 219 Ill.2d 182, 233-34, 848 N.E.2d 1, 32 (Ill. 2005) (emphasis added); see also
DOD Techs. v. Mesirow Ins. Servs., Inc., 381 Ill. App. 3d 1042, 1051, 887 N.E.2d 1, 9 (1st Dist.
2008) (“The Consumer Fraud Act is to be liberally construed to effectuate its purpose.”). The
defendants have not provided a compelling reason why Marvellous Day’s CFA claims should be
dismissed. There seems to be no logical reason why a plaintiff who is damaged by a deceptive
act should not be able to state a CFA claim merely because the deception was directed towards
consumers, rather than directed at the plaintiff itself. The cases, including Avery, stating that the
CFA requires an allegation that the defendant intended to deceive the plaintiff involve the usual
situation in which a plaintiff is harmed when the defendant attempts to deceive it.5 But those
5
The defendants cite to Wafra Leasing Corp. 1999-A-1 v. Prime Capital Corp., 204 F. Supp. 2d
1120, 1124-25 (N.D. Ill. 2002), where the court dismissed a CFA claim on the ground that the
complaint failed to allege that the defendant intended to deceive the plaintiff specifically. In
10
cases do not mean that a defendant is free under the CFA to use deceptive practices so long as
the party deceived (in this case, consumers) is different than the party harmed (in this case,
Marvellous Day). Therefore, the Court will not dismiss the CFA claims on the ground that Ace
and HBL intended to deceive consumers, not Marvellous Day.
B. Marvellous Day Has Not Adequately Alleged “Materiality.”
The defendants also move to dismiss Marvellous Day’s CFA claims on the ground that
Marvellous Day has failed to allege materiality. The Court previously dismissed these claims
(along with Marvellous Day’s UDTPA claims) without prejudice on that basis, but Marvellous
Day’s amended complaints attempt to remedy the prior deficiencies in the materiality
allegations. Under the CFA, “materiality is tested with a reasonable person standard—i.e.,
whether the omission ‘concerned the type of information upon which a buyer would be expected
to rely in making a decision whether to purchase.’” Kitzes v. Home Depot, U.S.A., Inc., 374 Ill.
App. 3d 1053, 1061, 872 N.E.2d 53, 60-61 (1st Dist. 2007) (quoting Connick v. Suzuki Motor
Co., Ltd., 174 Ill.2d 482, 505, 675 N.E.2d 584 (Ill. 1996)).
The Court looks first at Marvellous Day’s claims regarding Ace’s use of the term
“patented.” In its prior opinion, the Court dismissed Marvellous Day’s CFA and UDTPA claims
Wafra, the plaintiff alleged that defendant KPMG had made deceptive statements in an opinion
letter. Id. at 1124. However, the letter itself stated that it was “intended solely for the use of the
addressees,” which did not include the plaintiff, and that it “should not be used by” anyone other
than the addressees. Id. at 1124-25. The court held that “no reasonable reading of the letter
shows that [the plaintiff] was intended to rely on it,” and dismissed the CFA claim. Id. at 1125.
Wafra is distinguishable. There, the plaintiff alleged that it was damaged by a deception that the
defendant plainly did not intend—i.e., because the defendant did not intend for the plaintiff to
rely on the letter, the plaintiff could not bring a CFA claim for damages even if it was, in fact,
deceived. Here, on the other hand, Marvellous Day alleges that it suffered damages from
deceptive acts that the defendants plainly intended consumers to rely upon. According to
Marvellous Day’s complaints, the defendants intended to deceive consumers, and they were
successful in achieving that goal, to Marvellous Day’s detriment.
11
relating to the term “patented” because Marvellous Day argued only that the Christmas lights’
patent status was an inherent quality that was presumptively material. 900 F. Supp. 2d at 845.
The opinion went on to state that “it is highly unlikely (and hence, implausible) that consumers
take into account Christmas light bulbs’ patent status when making their purchasing decisions.”
Id.
To remedy the complete absence of any materiality allegation relating to this term in the
prior complaint, Marvellous Day now alleges that “the ‘patented’ statement is material to a
consumer’s buying decision because consumers would prefer a product being claimed to have
superior patented design qualities and consumers would associate the product and its source with
such patented bulb shape and design qualities.” 2d. Am. Cmplt. (Dkt. 74) ¶¶ 86, 101. This
allegation still falls well short of plausibly alleging that use of the term “patented” is material to
consumers purchasing strings of holiday lights. Marvellous Day argues, correctly, that the Court
must draw all reasonable inferences in its favor, but a complaint must supply sufficient facts on
which to base reasonable inferences. Here, the second amended complaint supplies the
inference—i.e., a conclusion that consumers take the patent status of the bulbs used in strings of
holiday lights into account when choosing which light strings to purchase—but no facts at all to
support it. Marvellous Day argues in its brief that “the existence of a patent could cause a
consumer to believe that the product is of superior quality to other products on the market
without a patent mark, and thus increase the consumer’s willingness to buy the patented
product,” Dkt. 76 at 4, but the possibility that the term “patented” is material to consumers is not
enough to state a claim; “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.” Ashcroft v. Iqbal,
556 U.S. 662, 678 (2009). Plaintiff’s second amended complaint provides no facts whatsoever to
12
support an inference that any consumers actually were, rather than possibly could have been,
influenced in their purchasing decisions by use of the term “patented” on defendants’ marketing
materials.
Marvellous Day’s allegations relating to Ace and HBL’s description of their Christmas
lights as “always lit” suffer from the same defect. The Court dismissed Marvellous Day’s initial
claim based on the defendants’ use of this term, noting that Marvellous Day had made “no
allegations whatsoever that the term ‘always lit’ actually influences any purchasing decision. It
fails to offer any qualitative, quantitative, or even anecdotal evidence that might provide some
basis to support its conclusory claim that the ‘always lit’ phrase is material to consumer
purchasing decisions.” 900 F. Supp. 2d at 842. Marvellous Day has done nothing to fill that void
other than to assert that the term is material because consumers prefer Christmas lights that claim
to have this feature, 2d Am. Cmplt. (Dkt. 74) ¶¶ 113, 124, and to add “by consumers” to its
averment that the term “was understood [“by consumers”] to mean that if an individual bulb in a
string of lights was damaged, or ‘burned out’, the remaining lights in a string of lights would
remain lit and the individual bulb could be replaced without extinguishing the remaining lights.”
Compare Cmplt. (Dkt. 1) ¶ 9 with 2d Am. Cmplt. (Dkt. 74) ¶ 11.
These modest additions add nothing to the plausibility of the plaintiff’s claims; the
second amended complaint still fails to supply any factual information to support these claims
despite the Court’s invitation to supply some sort of “qualitative, quantitative, or even anecdotal
evidence” relating to materiality. To say that a characteristic is material because consumers
prefer products with that characteristic is a tautology; it provides no basis to assess the
plausibility of the major premise. And a claim about what “consumers” understand a term to
mean cannot be taken at face value; it requires some factual foundation. The assessment of
13
plausibility is context specific, and the Court is required to “draw on its judicial experience and
common sense” in assessing plausibility, Iqbal, 556 U.S. at 679, but how can the Court assess
the plausibility of the claim about what consumers understand the term “always lit” to mean
when the complaint provides no factual information with which to make the assessment? It
cannot: “where the well-pleaded facts do not permit the court to infer more than the mere
possibility of misconduct, the complaint has alleged—but it has not shown—that the pleader is
entitled to relief.” Id. (internal quotations omitted).
Finally, Marvellous Day’s new allegations relating to Ace’s alleged use of a photograph
of Marvellous Day’s “always lit” bulbs in advertisements for non-Marvellous Day bulbs also fail
for the same reason. Marvellous Day alleges that Ace’s photographs showed replaceable bulbs,
but that the Christmas lights Ace actually sold did not contain replaceable bulbs. 2d Am. Cmplt.
(Dkt. 74) ¶ 54. Marvellous Day has not alleged facts sufficient to show that replaceable bulbs
(i.e., the “always lit” features) are material to consumers, so there is plainly no basis to infer that
photographs showing that the bulbs are replaceable are material. Marvellous Day’s other
allegations relating to the photographs are even more conclusory and far-fetched. It alleges that
the photograph would have “induc[ed] members of the public to believe that [Ace’s] light strings
were made” by Marvellous Day. Id. ¶ 47; see also id. ¶¶ 48, 52-53. But it is implausible to
believe, without any factual allegations, that consumers would recognize the Christmas lights in
the photograph as being produced by Marvellous Day, or that even if the consumers did
recognize them as Marvellous Day lights, that they would be more likely to buy them.
Marvellous Day has not alleged any facts that showing that it has any brand recognition among
consumers, much less that consumers (or a subset thereof) seek out Christmas lights
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manufactured by Marvellous Day. Therefore, Marvellous Day’s claims relating to Ace’s
photographs also fail for lack of materiality.6
C. Marvellous Day Has Not Sufficiently Alleged “Causation.”
The defendants next argue that Marvellous Day’s CFA (and UDTPA) claims should be
dismissed because it has not adequately alleged that their actions caused it damages. The Court’s
previous dismissal of Marvellous Day’s CFA and UDTPA claims without prejudice was due in
part, to Marvellous Day’s failure to allege “that it lost (or was likely to lose) sales because of the
defendants’ [wrongful conduct], much less provide factual allegations that would make such a
claim plausible.” 900 F. Supp. 2d at 843. Marvellous Day now alleges that the defendants’
deceptive conduct causes consumers to purchase competing Christmas lights, which “diminishes
the demand for [Marvellous Day’s Christmas lights] by consumers who would otherwise
purchase T5 LED light strings manufactured by [Marvellous Day], as sold by its US distributors
and retailers.” 2d Am. Cmplt. (Dkt. 74) ¶¶ 56, 69, 82, 98, 108, 121. Marvellous Day further
alleges that during the time when the defendants engaged in their allegedly wrongful conduct,
Marvellous Day’s sales of its Christmas lights “to U.S. customers dropped by approximately
65%.” Id. ¶¶ 86, 101, 113, 124.
6
Ace further argues that Counts III and IV of Marvellous Day’s Second Amended Complaint in
11 C 8756 were improperly filed without leave of court and they should therefore be dismissed.
Ace notes that the Court’s October 2, 2012 order, which dismissed all of Marvellous Day’s
claims except for its design patent infringement claim, granted Marvellous Day leave to amend
only its false patent marking claim. 900 F. Supp. 2d at 846. When Marvellous Day filed its
amended complaint, however, in addition to amending that claim it also added two brand-new
CFA and UDTPA claims alleging that Ace improperly used a photo of Marvellous Day’s
Christmas lights to advertise for the sale of Christmas lights produced by a different
manufacturer. Although these new claims were technically filed without leave of Court, the
Court addresses them on their merits and dismisses them for failure to sufficiently plead
materiality and causation.
15
These allegations satisfy the first part of the court’s prior prescription: they allege that
Marvellous Day lost sales because of the defendants’ wrongful conduct. But the allegations still
fail to supply the second element: “factual allegations that would make such a claim plausible.”
The allegation that plaintiff’s sales dropped by 65 percent does not suffice in this regard. The
complaint alleges no facts from which one can plausibly infer that the drop in sales reflected (in
whole or part) the deception of any consumers; for all we know, that drop in sales was due
entirely to the fact that the defendants moved to another supplier and stopped buying Marvellous
Day’s light strings.7 In that case, the loss would have occurred whether or not the defendants had
engaged in any wrongful conduct. See Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 557-58
(2007) (mere possibility of loss causation is insufficient to state a claim) (citing Dura
Pharmaceuticals, Inc. v. Broudo, 544 U.S. 336, 347 (2005)). The loss the plaintiff claims is, at
best, consistent with the defendants’ liability, but that is not enough: “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.” Iqbal, 556 U.S. at 678 (internal quotations
omitted). Accordingly, the plaintiffs’ CFA claims must be dismissed on this basis as well.
IV.
Marvellous Day's UDTPA Claims Also Fail.
The defendants also move to dismiss Marvellous Day’s UDTPA claims relating to their
use of the terms “patented” and “always lit.” The defendants’ substantive arguments related to
the UDTPA are the same as the Court has just accepted in the CFA context: the defendants claim
that Marvellous Day failed to adequately allege that the statements were material to consumers
7
This point also highlights again the fact that Marvellous Day and the defendants operate at
different levels of the distribution chain. See 900 F. Supp. 3d at 841-42. Marvellous Day did not
sell directly to retail consumers, so an inference that the drop in its sales was caused by consumer
deception seems particularly unwarranted in the absence of an evidentiary foundation.
16
purchasing decisions and that they caused Marvellous Day to suffer damages. The heightened
pleading standard of Rule 9(b) applies to UDTPA claims as well. See, e.g., Schwebe v. AGC Flat
Glass N. Am., Inc., No. 12 C 9873, 2013 WL 2151551, *3 (N.D. Ill. May 16, 2013); CardioNet,
Inc. v. Lifewatch Corp., No. 07 C 6625, 2008 WL 567031, *2 (N.D. Ill. Feb. 27, 2008); Gold v.
Golden G.T., LLC, No. 05 C 288, 2005 WL 2465815, *6 (N.D. Ill. Oct. 4, 2005); Nakajima All
Co., Ltd. v. SL Ventures Corp., No. 00 C 6594, 2001 WL 641415, *4 n. 6 (N.D. Ill. June 4,
2001). The Court therefore dismisses the UDTPA claims on the basis of the same pleading
deficiencies.
*
*
*
For the reasons stated above, the Court grants the motions to dismiss of both Ace and
HBL. In view of Marvellous Day’s failure to cure the deficiencies that the Court previously
identified, and the heightened pleading standard applicable to the plaintiff’s CFA and UDTPA
claims, the dismissal is with prejudice. Marvellous Day’s failure to add any meaningful factual
support for its claims despite a clear roadmap compels the conclusion that it has no facts to
allege that would make its claims plausible.
Entered: August 27, 2013
____________________________________
John J. Tharp, Jr.
United States District Judge
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