Republic Technologies (NA), LLC et al v. BBK Tobacco & Foods, LLP d/b/a HBI International

Filing 22

Enter MEMORANDUM Opinion and Order Signed by the Honorable Elaine E. Bucklo on 7/7/2016. Mailed notice (jdh)

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION

REPUBLIC TECHNOLOGIES (NA),
LLC and REPUBLIC TOBACCO, L.P.,

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)
)
)
)
)
)
)
)
)
)
)

Plaintiffs,
v.
BBK TOBACCO & FOODS, LLC d/b/a
HBI INTERNATIONAL,
Defendant.

No. 16 C 3401

MEMORANDUM OPINION AND ORDER
Plaintiffs

Republic

Technologies

(NA),

LLC

and

Republic

Tobacco, L.P. (together, “Republic”) filed this action pursuant
to the Declaratory Judgment Act (DJA), 28 U.S.C. § 2201 et seq.,
seeking a declaration that defendant BBK Tobacco & Foods LLP,
d/b/a

HBI

interest

International
in

its

trade

(“HBI”),
dress,

or

does

not

own

a

protectable

in

the

alternative,

that

Republic has not infringed any trade dress rights that HBI may
possess. HBI has moved to dismiss the complaint pursuant to Fed.
R.

Civ.

P.

12(b)(1),

alleging

that

there

is

no

“actual

controversy” between the parties as required for subject matter
jurisdiction under the DJA. For the reasons below, the motion is
granted, but without prejudice to Republic’s right to file an
amended complaint containing factual allegations sufficient to

demonstrate the existence of an actual controversy between the
parties.
I.
Republic and HBI are competing makers of cigarette rolling
papers. Republic markets its rolling papers under the trademark
“OCB”;

HBI

Although

markets

the

its

parties

papers

each

make

under

the

several

trademark

different

“RAW.”

kinds

of

cigarette rolling papers, the dispute here centers specifically
on

the

packaging

used

for

the

parties’

organic

hemp

rolling

papers.
The complaint alleges that in August 2014, around the time
that Republic first introduced its hemp rolling papers, HBI’s
president, Josh Kessleman (“Kessleman”), contacted Republic and
demanded that it change the color of the “OCB” mark appearing on
the

cover

of

its

packaging.

Republic

claims

that

Kessleman

threatened legal action, and that Republic subsequently changed
the color of the OCB lettering from red to brown. According to
the

complaint,

HBI

did

not

object

to

any

other

elements

of

Republic’s packaging at that time.
On February 19, 2016, HBI’s outside counsel sent a letter
(“the February 2016 Letter”) to Republic’s outside intellectual
property counsel. Republic describes the letter as a cease-anddesist letter; HBI describes it as an “invitation letter.” The
letter stated that HBI was concerned that similarities between

2

its

packaging

and

Republic’s

packaging

had

caused

(or

were

likely to cause) consumer confusion over whether the rolling
papers originated from the same source. The letter goes on to
describe

several

respects

in

which

it

believes

Republic’s

packaging is similar to HBI’s. It also refers to a recent survey
that it claimed indicated consumer confusion between the two
brands.

In

closing,

the

letter

states

that

HBI

“wishes

to

discuss with Republic its willingness to make changes to the OCB
Organic Hemp package design that will eliminate and [sic] the
substantial

similarity

between

the

package

designs

and

any

consumer confusion.” Compl. Ex. B at 4. The letter concludes by
saying, “Please let me know by March 4, 2016, if you, or anyone
else from Republic, is interested and available to engage in
that discussion. I hope to hear from you soon.” Id.
In addition to sending the letter to Republic’s outside
counsel, HBI also sent a copy of the letter to one of Republic’s
main customers, Vanilla LA. Republic characterizes HBI’s actions
as an attempt to intimidate Republic’s customers by suggesting
that

they

risk

being

sued

Republic’s

hemp

rolling

by

HBI

papers.

if

they

According

continue

to

to

Republic,

sell
HBI’s

actions have caused it to lose profits, customers, and goodwill.
II.
Rule 12(b)(1)

3

The

standard

to

be

applied

in

deciding

a

Rule

12(b)(1)

motion depends on the type of challenge the motion raises to
subject matter jurisdiction. See, e.g., Apex Digital, Inc. v.
Sears, Roebuck & Co., 572 F.3d 440, 443 (7th Cir. 2009). Where a
12(b)(1) motion raises a facial challenge to jurisdiction -i.e., where it challenges the sufficiency of the complaint’s
allegations
pleaded

factual

inferences
presents

for

in

a

jurisdiction
allegations

favor

factual

of

-as

the

I

must

true

and

plaintiff.”

challenge

--

i.e.,

“accept[]

all

draw

reasonable

Id.
where

all

Where
it

the

well-

motion

disputes

the

truth of the allegations on which jurisdiction is premised -- I
“may properly look beyond the jurisdictional allegations of the
complaint and view whatever evidence has been submitted on the
issue to determine whether in fact subject matter jurisdiction
exists.” Id. at 444. (brackets and quotation marks omitted).
Neither
whether

of

HBI’s

the

parties

challenge

is

has

facial

addressed
or

the

factual.

question

The

matter

of
is

complicated slightly by the fact that both parties freely make
factual assertions in their briefing that go well beyond those
of

the

complaint.

Specifically,

Republic

makes

additional

allegations accusing HBI of engaging in a two-year campaign of
“innuendo,

threats,

false

advertising

and

interference

with

Republic’s customers, all implying or stating that OCB papers
are a ‘copy’ of HBI’s RAW rolling papers and infringe on the RAW

4

trademarks and trade dress.” Pl.’s Resp. Br. at 1. For its part,
HBI discusses a March 2016 letter that it allegedly received
from Republic in response to its February 2016 Letter. According
to HBI, Republic attached a courtesy copy of the complaint in
this action and asked that HBI confirm either that no further
changes needed to be made to its packaging or that it wished to
proceed with this suit. HBI claims that Republic never waited
for a response and filed the action the same day.
Despite

these

additional

factual

assertions,

HBI’s

challenge is ultimately a facial one. HBI does not challenge the
truth of any of the complaint’s factual allegations but instead
contends that the allegations, even if true, are insufficient to
demonstrate the existence of an “actual controversy” within the
meaning

of

the

DJA.

Thus,

while

Republic

has

attached

an

affidavit and other exhibits to its response brief, I have not
considered

these

for

purposes

of

deciding

this

motion.

See,

e.g., Citizens Against Longwall Mining v. Colt LLC, No. 05-3279,
2006

WL

1989888,

jurisdictional
attached

to

at

*7

(C.D.

allegations
plaintiff’s

Ill.

failed
response

July

on

13,

their

would

not

2006)

face,
be

(because

affidavits

considered);

Carter v. Soc. Sec. Field Office, No. 02 C 5526, 2004 WL 609316,
at

*3

n.5

substantial

(N.D.

Ill.

documentary

Mar.

22,

evidence

5

2004)

(declining

attached

to

to

consider

defendant’s

Rule

12(b)(1) motion because these were presented for informational
purposes, not as factual support for the motion).
The Declaratory Judgment Act
The Declaratory Judgment Act (DJA) provides that, “[i]n a
case of actual controversy within its jurisdiction . . . any
court of the United States . . . may declare the rights and
other

legal

relations

of

any

interested

party

seeking

such

declaration.” 28 U.S.C. § 2201(a). The Supreme Court has held
that the DJA’s “actual controversy” requirement is coterminous
with Article III’s case-or-controversy requirement. See, e.g.,
MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118, 127 (2007). In
MedImmune, the Supreme Court articulated the standard to be used
in

determining

whether

a

dispute

constitutes

an

“actual

controversy” for purposes of the DJA: “Basically, the question
in

each

case

circumstances,

is

whether

show

that

the

facts

there

alleged,

is

substantial

a

under

all

the

controversy,

between parties having adverse legal interests, of sufficient
immediacy and reality to warrant the issuance of a declaratory
judgment.” Id.

(quotation

marks

omitted).

In

fashioning

this

standard, the Court expressly rejected the standard previously
advanced by the Federal Circuit, which required the declaratory
judgment plaintiff to show a “reasonable apprehension of suit.”
Id. at 132 n.11

6

HBI argues that Republic has failed to allege a controversy
between the parties of “sufficient immediacy and reality.” I
agree

--

though

not

on

the

basis

of

HBI’s

arguments.

HBI’s

central contention is that, “[f]ollowing MedImmune, the weight
of

authority

insufficient

has
to

held

that

create

‘an

a

cease

actual

and

desist

controversy

of

letter

is

sufficient

immediacy’ if it makes no mention of litigation, and maintains a
cordial,

non-threatening

tone.”

Def.’s

Summ.

J.

Mem.

at

8.

HBI’s statement of the law is incorrect. As the Federal Circuit
has stated:
The purpose of a declaratory judgment action cannot be
defeated simply by the stratagem of a correspondence
that avoids the magic words such as “litigation” or
“infringement.” Of course, if a party has actually
been charged with infringement of the patent, there
is, necessarily, a case or controversy adequate to
support [declaratory judgment] jurisdiction. But it is
implausible (especially after MedImmune and several
post MedImmune decisions from this court) to expect
that a competent lawyer drafting such correspondence
for a patent owner would identify specific claims,
present
claim
charts,
and
explicitly
allege
infringement.
Hewlett-Packard Co. v. Acceleron LLC, 587 F.3d 1358, 1362 (Fed.
Cir. 2009) (citations, quotation marks, and brackets omitted).
Courts

have

likewise

held

that

an

actual

controversy

may

be

present even where the parties’ relationship or communications
can

be

described

as

“cordial.”

See,

e.g.,

Classic

Liquor

Importers, Ltd. v. Spirits Int’l B.V., No. 15 CIV. 6503 (JSR),
2015 WL 9487886, at *4 (S.D.N.Y. Dec. 29, 2015) (“Although [the

7

parties]

may

finding

a

have

had

a

‘controversy’

cordial
for

relationship,

jurisdictional

the

test

purposes

for

is

a

pragmatic one and cannot turn on whether the parties use polite
terms in dealing with one another or engage in more bellicose
saber rattling.”) (brackets and quotation marks omitted).
But to show that an actual controversy may be established
in the absence of an express reference to litigation in parties’
correspondence is not to show that the facts alleged in this
case demonstrate the existence of an actual controversy. Even if
the specific arguments advanced by HBI are unpersuasive, the
underlying concern raised by its motion is significant. As the
party with the burden of establishing the existence of subject
matter

jurisdiction,

see,

e.g.,

Ctr.

for

Dermatology

&

Skin

Cancer, Ltd. v. Burwell, 770 F.3d 586, 588-89 (7th Cir. 2014),
Republic must affirmatively allege facts sufficient to show that
its dispute with HBI is of “sufficient immediacy and reality to
warrant the issuance of a declaratory judgment.” Moreover, the
court has an independent obligation of its own to ensure that
the requirements for subject matter jurisdiction are present.
See, e.g., Wernsing v. Thompson, 423 F.3d 732, 743 (7th Cir.
2005).
The facts alleged in Republic’s complaint do not establish
the

presence

of

an

“actual

controversy”

between

the

parties

here. The complaint contains only three allegations that would

8

potentially support such a conclusion: (1) the HBI’s February
2016

Letter;

Republic

(2)

with

the

fact

litigation

that

based

HBI

on

the

previously
purported

threatened
similarities

between the packaging of its organic hemp rolling papers and
Republic’s

packaging;

and

(3)

that

HBI

sent

a

copy

of

the

February 2016 Letter to one of Republic’s customers. However,
Republic

makes

no

attempt

to

show

that

these

amount

to

an

“actual controversy” within the meaning of the JDA.
The

sole

case

that

Republic

cites

in

support

of

its

position, Serta, Inc. v. Oleg Cassini, Inc., No. 11-CV-8004,
2012 WL 2503959 (N.D. Ill. June 28, 2012), is inapposite. The
parties in Serta had engaged in correspondence for a period of
two months. Id. at *1. The defendant had expressly threatened
litigation, and after unsuccessful settlement discussions, both
parties filed suit. Id. Indeed, the question at issue in Serta
was

not

whether

whether
Serta’s

an

actual

controversy

declaratory

judgment

had

action

been
was

alleged
an

but

improper

anticipatory filing. Id. at *2.
To be sure, the factors alleged by Republic have been found
by

some

courts

to

be

inquiry.

For

example,

attempts

to

intimidate

“actual

controversy”

relevant
courts
a

to

have

party’s

requirement.

the

“actual

found

controversy”

that

competitor’s

customers
See,

e.g.,

a

may

satisfy

Field

the

Container

Co., L.P. v. Somerville Packaging Corp., 842 F. Supp. 338, 341

9

(N.D.

Ill.

1994).

sufficient

to

But

confer

where

such

conduct

jurisdiction

under

has

been

the

found

JDA,

the

interference was either combined with other significant factors
or went well beyond sending a customer a copy of a letter such
as

the

one

HBI

sent

to

Vanilla

LA.

See,

e.g.,

Infection

Prevention Techs., LLC v. UVAS, LLC, No. 10-CV-12371, 2011 WL
4360007, at *19 (E.D. Mich. July 25, 2011) (defendants contacted
plaintiff’s

customers

directly

and

threatened

them

with

litigation; defendants also sent letter to plaintiff demanding
explanation

as

to

why

its

product

did

not

infringe

their

patent).
Similarly, a prior history of litigation between parties
may be used to prove the existence of an actual controversy
under the JDA. But the prior litigation in these cases was more
extensive

than,

as

is

alleged

here,

a

single

threat

of

litigation that never resulted in an actual lawsuit and that
occurred nearly two years ago. See, e.g., Wm. Wrigley Jr. Co. v.
Cadbury Adams USA LLC, No. 04 C 0346, 2004 WL 2616300, at *2
(N.D. Ill. Nov. 17, 2004) (“[B]eing competitors and engaging in
prior litigation, without more, does not establish the existence
of a case or controversy.”).
In short, while successfully refuting the specific argument
asserted by HBI in support of its motion to dismiss, Republic
has

failed

to

allege

a

substantial

10

controversy

with

HBI

“of

sufficient immediacy and reality to warrant the issuance of a
declaratory judgment.” MedImmune, 549, U.S. at 127. I therefore
grant HBI’s motion to dismiss. However, the dismissal is without
prejudice
containing

to

Republic’s
additional

right

to

factual

file

an

amended

allegations

complaint

sufficient

to

demonstrate the existence of an actual controversy between the
parties.
III.
For the reasons discussed above, HBI’s motion to dismiss
Republic’s complaint is granted without prejudice.

ENTER ORDER

_____________________________
Elaine E. Bucklo
United States District Judge
Dated: July 7, 2016

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