The Segerdahl Corp. v. Ferruzza et al

Filing 516

MEMORANDUM Opinion and Order: Segerdahl's motion to dismiss 343 American Litho's Counterclaims is granted. American Litho's Amended Counterclaims are dismissed with prejudice. Signed by the Honorable Sharon Johnson Coleman on 1/10/2019. Mailed notice. (ym, )

UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
THE SEGERDAHL CORP. d/b/a SG 360º,

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Plaintiff/Counter Defendant,
v.
AMERICAN LITHO, INC.,
Defendant/Counter Plaintiff

Case No. 17-cv-3015
Judge Sharon Johnson Coleman

MEMORANDUM OPINION AND ORDER
Defendant/Counter Plaintiff, American Litho, Inc. filed Amended Counterclaims against the
Segerdahl Corp. d/b/a SG360º (“Segerd

ahl”) alleging violations of the Lanham Act, 15 U.S.C. §§

1125(a)(1)(B), 1117, the Illinois Uniform Deceptive Trade Practices Act, 815 ILCS 510/2(a)(5); and
the Illinois Consumer Fraud and Deceptive Business Practices Act, 815 ILCS 505/2. Currently
before the Court is Segerdahl’s Motion to Dismiss [343] American Litho’s Amended Counterclaims
pursuant to Federal Rule of Civil Procedure 12(b)(6). For the reasons explained below, the motion is
granted.
Background
The following facts are summarized from the Amended Counterclaims and are taken as true
for the purpose of this motion. Segerdahl and American Litho are competitors within the direct mail
service market, a subset of the printing and marketing industry. American Litho alleges that
Segerdahl maintains a substantial market share and restrains competition by engaging in unfair and
deceptive business practices. Specifically, American Litho asserts that Segerdahl advertises

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misleading statements to potential customers on its website. American Litho points to the following
statements on Segerdahl’s website:
Our ability to handle your sampling program from start to finish under one roof
means greater security, better quality and shorter turn-time.
We specialize in digital, web and sheetfed offset printing-all housed within our
single campus network to provide a level of flexibility not found anywhere else.
Our integrated campus and end-to-end capabilities allow us to easily maintain
control of your most intricate projects.
We are the only facility that can execute your entire sampling program on one
campus-providing greater security, faster time to market, tighter quality and
inventory control.
Dkt. 302 at 9-10.
American Litho further alleges that Segerdahl made false statements in its contracts with
three of Segerdahl’s customers, R.J. Reynolds Tobacco Co, Leo Burnett Company, Inc., and
American Express Financial Services. According to American Litho, in the Master Supply
Agreements1, Segerdahl agreed to perform all printing services in-house despite subcontracting
portions of the work without their customers’ knowledge. American Litho asserts that by
subcontracting out work after promising in-house services, Segerdahl overstates the services it can
provide.
American Litho claims violations of: the Lanham Act, 15 U.S.C. §§ 1125(a)(1)(B), 1117)
(Count I); the Illinois Uniform Deceptive Trade Practices Act, 815 ILCS 510/2(a)(2), (a)(5)) (Count
II); and § 2 of the Illinois Consumer Fraud and Deceptive Business Practices Act, 815 ILCS 505/2
(Count III).

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Master Supply Agreements are “agreements that set out the terms of the printer’s and customer’s business
relationship.” Dkt. 308 at 6 n.2. American Litho does not attach the Master Supply Agreements or reproduce the exact
language. As such, the analysis will adopt American Litho’s summary of the statements from its Amended
Counterclaims.

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Legal Standard
A motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6) tests the legal
sufficiency of the complaint, not the merits of the allegations. To overcome a motion to dismiss, a
complaint must contain sufficient factual allegations to state a claim for relief that is plausible on its
face, Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S. Ct. 1937, 173 L. Ed. 2d 868 (2009), and raises the right
to relief above a speculative level, Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S. Ct. 1955, 167 L.
Ed. 2d 929 (2007). When ruling on a motion to dismiss, the Court must accept all well-pleaded factual
allegations in the complaint as true and draw all reasonable inferences in the plaintiff’s favor. Park v.
Ind. Univ. Sch. of Dentistry, 692 F.3d 828, 830 (7th Cir. 2012).
Discussion
As a preliminary matter, the Court notes, and the parties agree, that the claims under Illinois
law rise and fall with the Lanham Act claim. See Neuros Co., Ltd. v. KTurbo, Inc., 698 F.3d 514, 523
(7th Cir. 2012) (Stating that the Illinois Uniform Deceptive Trade Practices Act, 815 ILCS 510/1 is
“a statute generally thought indistinguishable from the Lanham Act except of course in its
geographical scope”) (collecting cases); Muzikowski v. Paramount Pictures Corp., 477 F.3d 899, 907 (7th
Cir. 2007).
Segerdahl moves to dismiss all three Counts for failure to state a claim under 12(b)(6).2 To
state a claim for false advertising under the Lanham Act, the plaintiff must demonstrate that the
defendant (1) made a statement that was false or misleading, (2) that either deceives or is likely to

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Segerdahl alternatively moves to dismiss the claims for failure to meet the heightened pleading standard of Federal
Rule of Civil Procedure 9(b). Because the claim is resolved as a matter of law, the Court need not address the pleading
standard that applies to unfair competition claims under the Lanham Act.

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deceive a sizeable portion of the advertisement’s audience, (3) was material, (4) promoted goods in
interstate commerce, and (5) resulted in injury to the plaintiff. LG Electronics U.S.A., Inc. v. Whirlpool
Corp., 661 F. Supp. 2d 940, 947-48 (N.D. Ill. 2009) (St. Eve, J.) (citing B. Sanfield, Inc. v. Finlay Fine
Jewelry Corp., 168 F.3d 967, 971 (7th Cir. 1999)). The Seventh Circuit has explained that advertising
or promotion is “promotion to anonymous recipients, as distinguished [from] face-to-face
communication.” First Health Group Corp. v. BCE Emergis Corp., 269 F.3d 800, 803-04 (7th Cir. 2001).
Again, American Litho contends that Segerdahl is liable for its statements made (1) within its Master
Supply Agreements with specific customers and (2) on its website. The Court will analyze the
statements in turn.
1. Statements in Master Supply Agreements
Segerdahl argues that American Litho’s allegation regarding statements in the Master Supply
Agreements fail to state a claim. False or misleading letters sent to existing customers are not
actionable under the Lanham Act, as the Lanham Act is limited to “‘commercial advertising or
promotion’ and does not cover all deceitful business practices.” ISI Intern., Inc. v. Borden Ladner
Gervais LLP, 316 F.3d 731, 733 (7th Cir. 2003) (citing First Health Group Corp., 269 F.3d 800).
Similarly, false or misleading statements communicated to a customer in the context of negotiating a
transaction is not actionable under the Lanham Act because it is neither advertising or promotion.
Johnson Controls, Inc., v. Exide Corp., 152 F. Supp. 2d 1075, 1081-82 (N.D. Ill. 2001) (Shadur, J.)
In this case, the Court finds that Segerdahl’s statements made within its Master Supply
Agreements are outside of the scope of “commercial advertising or promotion” and thus not
actionable under the Lanham Act. The Seventh Circuit has established that communication sent to
current customers are not actionable under the Lanham Act because those statements are not
communicated for promotional purposes. See ISI Intern., Inc., 316 F.3d at 733. Here, R.J. Reynolds
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Tobacco Co, Leo Burnett Company, Inc., and American Express Financial Services were already
customers of Segerdahl, and any alleged false statement made within their respective contracts with
Segerdahl is not actionable. See Johnson Controls, Inc. v., 152 F. Supp. 2d at 1081-82 (finding that
misrepresentations made in defendant’s contract with customer do not fall under the Lanham Act).
Even construing the pleadings in a light most favorable to American Litho, as the Court must do at
this stage, American Litho fails to state a claim. The motion to dismiss as it relates to the
representations in the Master Supply Agreements is granted.
2. Statements on Segerdahl’s Website
Segerdahl argues that the statements on their website are not statements of fact and
therefore not actionable under the Lanham Act. An advertisement that makes exaggerated,
grandiose claims about its product or service is considered “puffery” and not statements of fact.
Martin v. Wendy’s International, Inc., 183 F. Supp. 3d 925, 935 (N.D. Ill. 2016) (internal citation
omitted) (Alonso, J.), aff’d, 714 Fed. Appx. 590, 592 (7th Cir. 2018). District courts can determine
whether a representation is puffery as a matter of law. Saltzman v. Pella Corp., No. 06 C 4481, 2007
WL 844883 at *4 (N.D. Ill. Mar. 20, 2007) (Zagel, J.) (internal citation omitted).
American Litho alleges that the statements on Segerdahl’s website mislead potential
customers to believe that all printing jobs are handled on-site, to the detriment of its competitors.
When viewing each of the statements in context, however, the Court finds that the statements are
either exaggerated puffery or so vague that they cannot be proven or disproven. For ease of
reference, the Court will repeat the statements from Segerdahl’s website that are at issue:
Our ability to handle your sampling program from start to finish under one roof
means greater security, better quality and shorter turn-time.
We specialize in digital, web and sheetfed offset printing-all housed within our
single campus network to provide a level of flexibility not found anywhere else.
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Our integrated campus and end-to-end capabilities allow us to easily maintain
control of your most intricate projects.
We are the only facility that can execute your entire sampling program on one
campus-providing greater security, faster time to market, tighter quality and
inventory control.
Dkt. 302 at 9-10.
While American Litho focuses on the phrase “from start to finish under one roof,” the
Court finds that the entire statement merely brags on Segerdahl’s “ability” to handle printing jobs
that results in “greater security, better quality and shorter-turn time.” Next, American Litho
highlights “all housed within our single campus network,” but, again, that phrase is tied to the claim
that Segardahl is capable of providing a level of flexibility “not found anywhere else.” Does
American Litho suppose that customers are comparing with all industry rivals to verify whether
Segerdahl truly offers “a level of flexibility not found anywhere else?” The Court is doubtful.
American Litho highlights Segerdahl’s mention of “end-to-end” capabilities. That statement,
however, is no more an actionable statement of fact than a company advertising “from start to
finish” capabilities. One would expect these types of subjective nonquantifiable statements to be
posted on a company’s website. That is the very purpose of advertisement. Similarly, Segerdahl
advertising that it can provide “greater security, faster time to market, or tighter quality” than their
competitors is nonactionable puffery.
Clearly, the statements at issue are overexaggerated marketing claims about Segerdahl’s
quality of services that buyers cannot reasonably be expected to rely on. See e.g., Saltzman, 2007 WL
844883 at * 4 (granting a 12(b)(6) motion because defendant’s statement that its products were
“durable, manufactured to high quality standards” and “maintenance free” were subjective
“nonquantifiable” puffery); Rosenthal Collins Group, LLC v. Trading Technologies Intern., Inc., No. 05 C
4088, 2005 WL 3557947 *10 (granting a 12(b)(6) motion after finding that defendant’s
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representations of its products being “innovative” and “leveling the playing field” were puffery
statements) (citing Southland Sod Farms v. Stover Seed Co., 108 F.3d 1134, 1145 (9th Cir. 1997) (finding
that “product superiority claims that are vague or highly subjective” are nonactionable puffery). The
statements on Segerdahl’s website plainly communicate nonactionable highly subjective claims about
its services. The Court finds that there is no relief for American Litho’s claims under the Lanham
Act. American Litho, consequently, fails to state a claim under the Lanham Act and similar Illinois
statutes. Accordingly, Segerdahl’s motion to dismiss American Litho’s Counterclaims is granted.
CONCLUSION
For the reasons explained above, Segerdahl’s motion to dismiss [343] American Litho’s
Counterclaims is granted. American Litho’s Amended Counterclaims are dismissed with prejudice.
IT IS SO ORDERED.
Date: 1/10/2019
Entered: _____________________________
SHARON JOHNSON COLEMAN
United States District Judge

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