Pearson Education, Inc. et al v. C & N Logistics, Inc. et al
Filing
47
MEMORANDUM OPINION OF THE COURT. Signed by District Judge Eli J. Richardson on 12/12/2018. (xc:Pro se party by email.) (DOCKET TEXT SUMMARY ONLY-ATTORNEYS MUST OPEN THE PDF AND READ THE ORDER.)(jw)
IN THE UNITED STATES DISTRICT COURT FOR THE
MIDDLE DISTRICT OF TENNESSEE
NASHVILLE DIVISION
PEARSON EDUCATION, INC. and
)
MCGRAW-HILL GLOBAL EDUCATION )
HOLDINGS, LLC.
)
)
Plaintiffs,
)
)
v.
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C&N LOGISTICS, INC., RUSSELL
)
TODD WHITE, and SHAWN
)
CHADWELL
)
)
)
Defendants.
NO. 3:18-cv-00438
JUDGE RICHARDSON
MEMORANDUM OPINION
Before the Court is Plaintiffs’ Pearson Education, Inc. (“Pearson”) and McGraw-Hill
Global Education Holdings, LLC (“MHE”) Motion to Dismiss Defendants’ Counterclaims (Doc.
No. 26). 1 Defendants have responded in opposition (Doc. Nos. 34, 35), 2 and Plaintiffs have replied
(Doc. No. 37). As explained below, the motion is granted.
1
The Court notes that Plaintiffs filed a Supplemental Memorandum in Support of its Motion to
Dismiss. (Doc. No. 33.) In their supplemental memorandum, Plaintiffs merely state that they filed
an amended complaint (Doc. No. 25), and Defendants C&N Logistics and Russell Todd White
answered the amended complaint and re-filed the same counterclaims against Plaintiffs. Plaintiffs
request that the Court consider their Motion to Dismiss and Memorandum in Support (Doc. Nos.
26, 27) to be their response to Defendants’ re-filed counterclaims. Given that the counterclaims
have not substantively changed, the Court grants Plaintiffs’ request. The Court notes that pro se
Defendant Shawn Chadwell did not file an answer and counterclaims to Plaintiffs’ amended
complaint until November 16, 2018. Defendant Chadwell’s counterclaims do not appear to be
substantively different from his original counterclaims. Accordingly, the Court construes
Plaintiffs’ motion as applying to Defendant Chadwell’s new counterclaims.
2
In Defendant Chadwell’s opposition to Plaintiffs’ motion, he states that “it would appear” that he
has not received the documents the parties reference. (Doc. No. 35 at 2.) According to the filings
in this case, the documents essential to addressing the pending motion—the amended complaint,
Plaintiffs’ motion and memorandum in support, Plaintiffs’ supplemental memorandum in support,
and Defendants C&N and White’s opposition to Plaintiffs’ motion—were served on Defendant
1
FACTUAL BACKGROUND
Plaintiffs bring this action against Defendants C&N Logistics, Inc. (“C&N”), Russell Todd
White, and Shawn Chadwell for copyright and trademark infringement. (Doc. No. 25.) Plaintiffs
are leading education publishers, who develop, market, and sell textbooks. (Id. ¶ 2.) Plaintiffs
claim they are the owners or exclusive licensees of the copyrights and trademarks that appear on
the textbooks at issue. (Id. ¶¶ 18-19.)
Defendants have filed counterclaims against Plaintiffs.
(Doc. Nos. 43, 31.) 3
The
counterclaims allege the following. C&N is in the logistics and freight transportation business and
acts only as a logistics, transportation, and facilitation company connecting buyers with suppliers.
(Doc. No. 43 ¶¶ 9, 18; Doc. No. 31 ¶¶ 9, 18.) MBS Textbook Exchange, Inc. (“MBS”), a wholesale
textbook distributor, is one of C&N’s clients. (Doc. No. 43 ¶ 10; Doc. No. 31 ¶ 10.) On April 10,
2017, MBS placed an order for the importation and delivery of 767 copies of fourteen different
textbooks, including one published by MHE and thirteen published by Pearson. (Doc. No. 43 ¶
12; Doc. No. 31 ¶ 12.) C&N confirmed MBS’s order with Aika and visually checked the books
Chadwell by e-mail per an agreement between the parties. (See Doc. No. 25 at 13; Doc. No. 26 at
3; Doc. No. 27 at 19; Doc. No. 33 at 3; Doc. No. 34 at 15.) However, given Defendant Chadwell’s
claim, the Court previously held that it would not be fair to require Defendant Chadwell to “just
do [his] best” and respond to the Plaintiffs’ motion to dismiss his counterclaims without the
relevant documents. (Doc. No. 35 at 2; Doc. No. 39 at 1.) The Court, therefore, directed the Clerk
of Court to immediately serve Defendant Chadwell all documents filed in the case, except those
filed by Defendant Chadwell. (Doc. No. 39 at 1-2.) The Court stated that Defendant Chadwell
may file a supplemental memorandum in opposition to Plaintiffs’ motion by October 17, 2018.
(Id. at 2.) That deadline has now passed, and Defendant Chadwell has failed to file a supplemental
memorandum. Accordingly, the Court addresses the arguments from his original opposition (Doc.
No. 35) herein.
3
Defendant Chadwell’s counterclaims make almost the same allegations as Defendants C&N
Logistics and Russell Todd White’s counterclaims. The Court also notes that the paragraph
citations herein for Document Numbers 31 and 43 refer to the counterclaims and not the answer
contained in the same document.
2
prior to distribution to MBS to determine their authenticity. 4 (Doc. No. 43 ¶ 13; Doc. No. 31 ¶
13.) C&N determined that the books showed no signs of tampering, illegitimacy, or counterfeit.
(Doc. No. 43 ¶ 13; Doc. No. 31 ¶ 13.)
MBS informed C&N that the shipment had been held due to its size and an issue with the
textbooks’ publishers. (Doc. No. 43 ¶ 15; Doc. No. 31 ¶ 15.) Plaintiffs then caused the textbooks
that had been delivered to MBS to be seized. (Doc. No. 43 ¶ 16; Doc. No. 31 ¶ 16.)
On December 15, 2017, Defendant White, C&N’s owner and president, received an e-mail
from Matthew Oppenheim, an attorney who claimed to represent Plaintiffs, which alleged C&N
distributed a pallet of counterfeit textbooks to MBS and demanded C&N to provide, inter alia, the
identity of the book’s suppliers. (Doc. No. 43 ¶ 17; Doc. No. 31 ¶ 17; Doc. No. 25 ¶ 11.) Defendant
White replied around January 11, 2018 to confirm that the books were authentic and originated
from Plaintiffs. (Doc. No. 43 ¶ 18; Doc. No. 31 ¶ 18.) On January 15, 2018, Oppenheim responded
to Defendant White’s e-mail and asserted that the allegedly infringing textbooks sold by C&N to
MBS were counterfeit and again demanded the book supplier’s identity. (Doc. No. 43 ¶ 20; Doc.
No. 31 ¶ 20.) On that same date, Defendant White contacted Aika regarding the issue, and Aika
authorized Defendant White to provide Oppenheim with its contact information. (Doc. No. 43 ¶
21; Doc. No. 31 ¶ 21.) On January 16, 2018, Defendant White sent Oppenheim an e-mail with
Aika’s identity and contact information. (Doc. No. 43 ¶ 22; Doc. No. 31 ¶ 22.)
Based on these allegations, Defendants allege the following counterclaims: (1) Declaratory
Judgment of Noninfringement of Plaintiffs’ Marks; (2) Declaratory Judgment of Noninfringement
4
The Court here refers to Aika without any prior introduction to, or context for understanding the
role of, Aika because this is, oddly, exactly what Defendants did in Paragraph 13 of their
counterclaims. The counterclaims do not provide any information regarding Aika’s business or
other characteristics beyond stating that Aika is located in Amman, Jordan. (Doc. No. 22-4 at 2.)
3
of Plaintiffs’ Copyrights; (3) Intentional Interference with Contract; and (4) Intentional
Interference with Business Relationship. (Doc. No. 43 ¶¶ 27-47; Doc. No. 31 ¶¶ 30-50.) Plaintiffs
now move to dismiss all of these counterclaims.
LEGAL STANDARD
For purposes of a motion to dismiss, the Court must take all the factual allegations in the
complaint, or in this case the counterclaim, as true. See Ashcroft v. Iqbal, 556 U.S. 662, 678
(2009). To survive a motion to dismiss, a complaint must contain sufficient factual matter,
accepted as true, to state a claim to relief that is plausible on its face. Id. A claim has facial
plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable
inference that the defendant is liable for the misconduct alleged. Id. Threadbare recitals of the
elements of a cause of action, supported by mere conclusory statements, do not suffice. Id. When
there are well-pleaded factual allegations, a court should assume their veracity and then determine
whether they plausibly give rise to an entitlement to relief. Id. at 679. A legal conclusion,
including one couched as a factual allegation, need not be accepted as true on a motion to dismiss,
nor are mere recitations of the elements of a cause of action sufficient. Id. at 678; Fritz v. Charter
Township of Comstock, 592 F.3d 718, 722 (6th Cir. 2010). Moreover, factual allegations that are
merely consistent with the defendant’s liability do not satisfy the claimant’s burden, as mere
consistency does not establish plausibility of entitlement to relief even if it supports the possibility
of relief. Iqbal, 556 U.S. at 678.
In determining whether a complaint is sufficient under the standards of Iqbal and its
predecessor and complementary case, Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007), it
may be appropriate to “begin [the] analysis by identifying the allegations in the complaint that are
not entitled to the assumption of truth.” Iqbal, 556 U.S. at 680. Identifying and setting aside such
4
allegations is crucial because they simply do not count toward the plaintiff’s goal of showing
plausibility of entitlement to relief.
As suggested above, such allegations include “bare
assertions,” formulaic recitation of the elements, and “conclusory” or “bald” allegations. Id. at
681. The question is whether the remaining factual allegations plausibly suggest an entitlement to
relief. Id. If not, the pleading fails to meet the standard of Rule 8 and thus must be dismissed
pursuant to Rule 12(b)(6). Id. at 683.
DISCUSSION
A. First and Second Counterclaims, for Declaratory Judgment
1. Whether Defendants’ Claims are Redundant of Plaintiffs’ Claims or Otherwise
Fail to State a Claim Upon Which Relief Can Be Granted
Plaintiffs move to dismiss the First and Second Counterclaims against them because they
are redundant, mirror-images of their claims or otherwise fail to state a claim upon which relief
can be granted. “A court should dismiss a redundant counterclaim when it is clear . . . a complete
identity of factual and legal issues between the complaint and the counterclaim [exists].” Emma,
Inc. v. Microstrategy, Inc., No. 3-11-0926, 2012 WL 90405, at *1 (M.D. Tenn. Jan. 11, 2012); see,
e.g., Malibu Media, LLC v. Ricupero, 705 F. App’x 402, 406-07 (6th Cir. 2017) (affirming district
court’s dismissal of declaratory judgment counterclaim for non-infringement of plaintiff’s
copyright where the resolution of plaintiff’s infringement claim would render the counterclaim
moot); Mawdsley v. Kirkland’s, Inc., No. 3-13-0462, 2013 WL 5754947, at *2 (M.D. Tenn. Oct.
23, 2013) (dismissing defendant’s counterclaim seeking a declaratory judgment for noninfringement because it was the mirror image of the plaintiff’s claim for copyright infringement);
Emma, 2012 WL 90405, at *1 (dismissing defendant’s counterclaim for declaratory judgment that
defendant is not infringing plaintiff’s mark because the adjudication of plaintiff’s claims would
render it moot).
5
The non-infringement claims in Defendants’ First Counterclaim are redundant of
Plaintiffs’ trademark infringement claims. Defendants claim they are “entitled to a declaration
that its use of Plaintiffs’ Marks does not and will not infringe Plaintiffs’ Marks or otherwise violate
state or federal statutory or common law.” (Doc. No. 43 ¶ 31; Doc. No. 31 ¶ 34.) This is a mirror
image of Plaintiffs’ third and fourth claims in the amended complaint, in which Plaintiffs assert
Defendants have infringed Plaintiffs’ marks under the Lanham Act. Specifically, Plaintiffs allege
that without their authorization, “Defendants are marketing, offering for sale, and selling in
commerce counterfeits of Plaintiffs’ Books bearing unauthorized reproductions of Plaintiffs’
Marks.” (Doc. No. 25 ¶ 47.) Defendants’ counterclaim alleges just the opposite. (See Doc. No.
43 ¶ 28; Doc. No. 31 ¶ 31) (“Defendants do not market, offer for sale, or sell in commerce any
goods bearing unauthorized reproductions of Plaintiffs’ Marks.”) (emphasis added). In addition,
Plaintiffs allege that Defendants’ “uses of Plaintiffs marks have caused and are likely to continue
to cause confusion, mistake, and/or deception as to the source or origin of Defendants’ goods.”
(Doc. No. 25 ¶ 48.) Defendants again allege just the opposite—that their use of “Plaintiffs’ Marks
does not and will not cause confusion or mistake or deceive the public in violation of the Lanham
Act.” (Doc. No. 43 ¶ 30; Doc. No. 31 ¶ 33.) (emphasis added). Therefore, a complete identity of
factual and legal issues between the complaint and the counterclaim allegations related to
trademark infringement exists. Accordingly, the declaratory judgment claim related to trademark
infringement will be dismissed with prejudice.
Defendants’ First Counterclaim also alleges that Defendants’ use of Plaintiffs’ marks does
not constitute unfair competition, false designation of origin, or trademark dilution in violation of
the Lanham Act or any related state law claims. It is unclear from Defendants’ counterclaims
whether they also seek a declaratory judgment that their acts do not give rise to violations of these
6
claims, and Defendants do not address this issue in their response. To the extent Defendants’ seek
a declaratory judgment on these issues, these claims also will be dismissed with prejudice for the
reasons discussed directly below.
Defendants’ declaratory judgment claim related to unfair competition and false designation
of origin will be dismissed because these claims involve the same factual and legal issues as
Plaintiffs’ trademark infringement claim. See Audi AG v. D’Amato, 469 F.3d 534, 542 (6th Cir.
2006) (“Under the Lanham Act . . . we use the same test to decide whether there has been trademark
infringement, unfair competition, or false designation of origin: the likelihood of confusion
between the two marks.”). Defendants’ declaratory judgment claim related to trademark dilution
will be dismissed because Defendants have failed to plausibly allege it. A dilution claim involves
the issues of whether a mark is famous and distinctive. See Kellogg Co. v. Toucan Golf, Inc., 337
F.3d 616, 628 (6th Cir. 2003). None of Defendants’ factual allegations address this issue, and it
is axiomatic that conclusory allegations cannot survive a motion to dismiss. See Iqbal, 556 U.S.
at 681. Furthermore, all parallel claims under state law also will be dismissed for the same reasons
the federal claims will be dismissed.
The non-infringement claims in Defendants’ Second Counterclaim are redundant of
Plaintiffs’ copyright infringement claims and therefore also will be dismissed. Defendants claim
that they are “entitled to a declaration that [they are] not infringing nor will infringe Plaintiffs’
Copyrights or otherwise violate federal copyright law with respect to [their] facilitation of
purchasing and importation of Plaintiffs’ textbooks lawfully made and sold abroad.” (Doc. No.
43 ¶ 36; Doc. No. 31 ¶ 39.) This is a mirror image of Plaintiffs’ first and second claims in the
amended complaint, in which Plaintiffs assert Defendants have infringed Plaintiffs’ copyrights
under the Copyright Act. Specifically, Plaintiffs copyright infringement claims are based on
7
Defendants’ importation and distribution of unauthorized counterfeits of Plaintiffs’ textbooks.
(See Doc. No. 25 ¶ 33). Defendants allege just the opposite in their counterclaim. (See Doc. No.
43 ¶ 33; Doc. No. 31 ¶ 36) (“Defendants have neither imported unauthorized copies of works
embodying Plaintiffs’ Copyrights nor distributed unauthorized copies to the public by sale or other
transfer of ownership.”) Plaintiffs also allege that Defendants “indirectly infringed Plaintiffs’
copyrights by encouraging, causing, and materially contributing to infringing conduct by others”
and further “engaged in, supervised, and/or controlled the importation and/or distribution of” the
counterfeits at issue. (Doc. No. 25 ¶¶ 40-41.) Defendants’ counterclaim, again, alleges the
opposite—that they have not “encouraged, caused, materially contributed to, knowingly engaged
in, supervised, nor controlled the importation and/or distribution” of the counterfeits at issue. (See
Doc. No. 43 ¶ 34; Doc. No. 31 ¶ 37.) Accordingly, because identity of factual and legal issues
between the complaint and the counterclaim allegations related to copyright infringement exists,
the declaratory judgment claim related to copyright infringement will be dismissed with prejudice.
Even if, assuming arguendo, the mirror-image rule does not apply, the Court will still
dismiss the First and Second Counterclaims based on its discretion under the Declaratory Judgment
Act. The Declaratory Judgment Act states that in a case of actual controversy within its
jurisdiction, a court may declare the rights and other legal relations of any interested party seeking
such declaration. 28 U.S.C. § 2201. “[D]istrict courts possess discretion in determining whether
and when to entertain an action under the Declaratory Judgment Act.” Wilton v. Seven Falls
Co., 515 U.S. 277, 282 (1995). This is true “even when the suit otherwise satisfies subject matter
jurisdictional prerequisites,” which as discussed herein, has not occurred here. Id.; see State of
Mich. v. Meese, 853 F.2d 395, 397 (6th Cir. 1988) (holding that if there is no case or controversy,
then the court lacks subject matter jurisdiction). The Sixth Circuit has adopted a five-factor test to
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determine when a district court should exercise jurisdiction over a declaratory judgment: (1)
whether the judgment would settle the controversy; (2) whether the declaratory judgment action
would serve a useful purpose in clarifying the legal relations at issue; (3) whether the declaratory
remedy is being used merely for the purpose of “procedural fencing” or “to provide an arena for a
race for res judicata”; (4) whether the use of a declaratory action would increase the friction
between our federal and state courts and improperly encroach on state jurisdiction; and (5) whether
there is an alternative remedy that is better or more effective. AmSouth Bank v. Dale, 386 F.3d
763, 785 (6th Cir. 2004). The Court finds that these factors, particularly the presence of the first
and second, weigh in favor of dismissing the First and Second Counterclaims. The judgment would
not settle a controversy that is not already at issue and would not serve a useful purpose in
clarifying the legal relations at issue. “[T]his is not a situation in which a declaratory plaintiff will
suffer injury unless legal relations are clarified; the [Defendants] do not currently ‘act at their
peril.’” Id. at 786. Accordingly, the Court will dismiss the First and Second Counterclaims.
Defendants present three arguments against the Court’s dismissal of its First and Second
Counterclaims, none of which are persuasive. First, they argue that their counterclaims serve the
useful purpose of preserving an award of attorney’s fees if Plaintiffs withdraw their complaint
without prejudice. However, the Sixth Circuit and another court in this district have rejected this
argument. See Malibu Media, LLC v. Ricupero, 705 F. App’x 402, 407 (6th Cir. 2017) (rejecting
argument that defendant’s counterclaim was not redundant of plaintiff’s claim because it provided
an additional avenue for securing an award of attorney’s fees); Mawdsley v. Kirkland’s, Inc., No.
3-13-0462, 2013 WL 5754947, at *2 (M.D. Tenn. Oct. 23, 2013) (dismissing defendant’s
declaratory judgment claim for non-infringement of plaintiff’s copyright and stating that 17 U.S.C.
§ 505 allows an attorney’s fee award to “the prevailing party, whether or not a counterclaim is
9
asserted . . . If Plaintiff’s claim for infringement is denied, Defendant could be the prevailing party
without having asserted a counterclaim. Moreover, Defendant’s speculation that Plaintiff could
withdraw her claim to avoid a finding of non-infringement is just that, speculation”). This Court
does the same.
Second, Defendants argue that their counterclaims differ from the usual infringement
claim—where the parties solely dispute whether the product was infringing—because they deny
both that the product was infringing and committing the infringing acts. (Doc. No. 34 at 5-6.)
However, as Plaintiffs aptly assert, infringement claims necessarily address whether the defendant
engaged in the infringing act and therefore Plaintiffs’ claims will resolve this issue. See NCR
Corp. v. Korala Assocs., Ltd., 512 F.3d 807, 814 (6th Cir. 2008).
Third, Defendants argue that the holding in Dominion Elec. Mfg. Co v. Edwin L. Wiegand
Co., 126 F.2d 172 (6th Cir. 1942) is controlling here and sets forth “a direct exception to the
‘mirror-image’ counterclaim rule” for “[i]ntellectual property claims.” (Doc. No. 34 at 6.) 5 In
Dominion, the Sixth Circuit reversed the district court’s dismissal of the defendant’s counterclaim
for a declaratory judgment that the trademark at issue be held invalid or restricted and noninfringed, even though Plaintiff’s suit appeared to assert the opposite. Id. at 173. The Sixth Circuit
stated, inter alia, that in patent or trademark infringement suits, courts may find the defendant
innocent of infringement and thus “deem[ ] it unnecessary to determine issues of title, validity, or
the scope of the patent claims.” Id. at 174. While “[o]ne defendant exonerated of infringement
may be content with such adjudication—another may not . . . [Such a defendant’s] activities are
still circumscribed by the monopoly based upon the patent grant.” Id. at 174-75. The latter kind
5
The Court notes that although Defendants cite Dominion to support this assertion, the pages
Defendants cite from Dominion do not support the proposition that there is a direct exception to
the mirror-image counterclaim rule for all intellectual property claims, including copyright claims.
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of defendant may wish “to be freed from the restrictions of an invalid patent or trademark, and he
represents not only himself, but, in a sense, also the public which is likewise excluded from the
field of monopoly. The Declaratory Judgment Act furnishes him with the means of escape.” Id.
at 175. However, the facts in Dominion are distinguishable from the present case because the
counterclaims in Dominion specifically raised the issue of title, validity, and scope, whereas the
counterclaims here do not. Furthermore, for its finding that the district court abused its discretion
in dismissing the counterclaim for declaratory judgment, Dominion relied on the fact that it was
“impossible to determine, except by inference, the grounds upon which the counterclaim for
declaratory judgment was dismissed.” Id. at 175. By contrast, here the Court has outlined above
its reasons for dismissal.
2. Whether Defendants’ Counterclaims Seek in Part Declaratory Relief Not Based
on an Actual Controversy
In addition to seeking dismissal of the First and Second Counterclaims in their entirety,
Plaintiffs alternatively argue for partial dismissal of these counterclaims, i.e., dismissal to the
extent that these counterclaims seek declaratory relief concerning Defendants’ prospective
conduct. (Doc. No. 27 at 7-8.) Specifically, Defendants First and Second Counterclaims seek a
declaratory judgment stating that its use of Plaintiffs’ marks “does not and will not” infringe
Plaintiffs’ marks (Doc. No. 43 ¶ 31; Doc. No. 31 ¶ 34) (emphasis added), and that “it is not
infringing nor will infringe Plaintiffs’ Copyrights” (Doc. No. 43 ¶ 36; Doc. No. 31 ¶ 39) (emphasis
added). The Declaratory Judgment Act requires an “actual controversy.” 28 U.S.C. § 2201(a).
To determine whether there is an actual controversy, “the question in each case is whether the facts
alleged, under all the circumstances, show that there is a substantial controversy, between parties
having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of
a declaratory judgment.” MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118, 127 (2007). The
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answer in this case is no. Defendants’ claims for a declaratory judgment absolving them of
wrongdoing associated with unspecified future conduct are not a substantial controversy of
sufficient immediacy and reality to warrant the issuance of a declaratory judgment. There are no
allegations in the counterclaims that Defendants continue to import and deliver textbooks
published by Plaintiffs. Defendants have not presented an argument against this conclusion. These
claims, therefore, are dismissed with prejudice.
Plaintiffs also move to dismiss the first and second counterclaim because the allegations of
Defendants’ involvement with “legitimate textbooks” and “textbooks lawfully made and sold
abroad” are not based on an actual controversy. (Doc. No. 27 at 8-9.) According to the parties,
these allegations relate to the first sale doctrine, which the Supreme Court extended to copyrighted
works lawfully manufactured outside the United States in Kirtsaeng v. John Wiley & Sons, Inc.,
568 U.S. 519 (2013). The first sale doctrine is a defense to infringement. See Brilliance Audio,
Inc. v. Haights Cross Commc’ns, Inc., 474 F.3d 365, 369 (6th Cir. 2007) (“It is true that trademark
law contains a ‘first sale’ exception that provides a defense to claims of infringement.”); Raymond
J. Dowd, Copyright Litigation Handbook § 13:31 (2d ed. 2017) (section titled “Defenses
commonly arising in copyright litigation—First sale doctrine”); Kinney & Lange, P.A., Intell.
Prop. L. Bus. Law. § 8:25 (2017-2018 ed.) (“The first sale doctrine may be asserted as a defense
to infringement of the exclusive distribution right.”). Therefore, Plaintiffs’ infringement claims
will necessarily resolve the first sale doctrine issue, if Defendants choose to raise it as a defense.
Accordingly, these allegations will be dismissed with prejudice based on the previously discussed
12
authority related to mirror-image counterclaims. In light of the foregoing, the First and Second
Counterclaims will be dismissed with prejudice. 6
B. Third Counterclaim, for Intentional Interference with Contract
To establish a claim for intentional interference with contract under Tennessee law, a
plaintiff must establish that: (1) a legal contract existed; (2) the wrongdoer knew of the contract’s
existence; (3) the wrongdoer intended to induce a breach of that contract; (4) the wrongdoer acted
maliciously; (5) the contract was actually breached; (6) the act complained of was the proximate
cause of the breach; and (7) damages resulted from the breach. Jones v. LeMoyne-Owen Coll.,
308 S.W.3d 894, 908 (Tenn. Ct. App. 2009). Defendants’ intentional interference with contract
claim is based on the Plaintiffs’ alleged physical seizure of textbooks and their intentional
misrepresentation of the nature of the textbooks to MBS. (Doc. No. 34 at 12.)
Plaintiffs move to dismiss Defendants’ counterclaim for intentional inference with contract
because Defendants have not sufficiently alleged that Plaintiffs had knowledge of the contract
between Defendants and MBS at the time of the alleged breach. See Sophia’s Cure Inc. v. AveXis,
Inc., No. 2:16-CV-865, 2017 WL 4541449, at *7 (S.D. Ohio Oct. 10, 2017) (“To be liable for
tortious interference, a tortfeasor must not only have knowledge of the contract, he must have
knowledge of the contract at the time of, or before, the alleged breach.”); Restatement (Second) of
Torts § 766 cmt. i (stating that even if the tortfeasor’s “conduct is in fact the cause of another’s
failure to perform . . . the actor does not induce or otherwise intentionally cause that failure if he
has no knowledge of the contract”). Defendants’ counterclaims allege that “Plaintiffs were aware
of the contract between C&N and MBS at least by and through their counsel.” (Doc. No. 43 ¶ 39;
6
Because the Court dismisses the First and Second Counterclaims on the aforementioned grounds,
it declines to address whether an actual case or controversy exists with regards to the “Kirtsaeng
issue.”
13
Doc. No. 31 ¶ 42). However, there are no allegations detailing that Plaintiffs became aware of the
contract, through their counsel or otherwise, prior to the alleged acts of interference. Accordingly,
the Third Counterclaim will be dismissed with prejudice. 7
C. Fourth Counterclaim, for Intentional Interference with Business Relationship
The Tennessee Supreme Court has defined the elements of the tort of intentional
interference with business relationships as follows: (1) an existing or prospective business
relationship with specific or identifiable third persons; (2) the alleged interfering party knew of the
existing or prospective business relationship; (3) this party intended to cause a breach or
termination of the business relationship or business prospect; (4) that the interfering party used
improper motive or means; and (5) the party seeking relief suffered damages. Tennison Bros. v.
Thomas, No. W2013-01835-COA-R3CV, 2014 WL 3845122, at *10 (Tenn. Ct. App. Aug. 6,
2014) (citing Trau-Med of America, Inc. v. Allstate Ins. Co., 71 S.W.3d 691, 701 (Tenn. 2002)).
Concerning the fourth element of “improper motive or means,” the plaintiff must demonstrate that
the defendant’s predominant purpose was to injure the plaintiff. Trau-Med, 71 S.W.3d at 701 n.
5. “Improper means” of interference includes:
those means that are illegal or independently tortious, such as
violations of statutes, regulations, or recognized common-law rules
. . . violence, threats or intimidation, bribery, unfounded litigation,
fraud, misrepresentation or deceit, defamation, duress, undue
influence, misuse of inside or confidential information, or breach of
a fiduciary relationship . . . and those methods that violate an
established standard of a trade or profession, or otherwise involve
unethical conduct, such as sharp dealing, overreaching, or unfair
competition.
Id. (internal citations omitted).
7
Because Defendants’ Third Counterclaim will be dismissed on the aforementioned basis,
Plaintiffs’ additional arguments regarding the existence of a legal contract, breach, malice, and the
Noerr-Pennington Doctrine need not be addressed.
14
Defendants’ Fourth Counterclaim will be dismissed because Defendants have failed to
plausibly allege that Plaintiffs used an improper motive or means. In regard to improper motive,
the counterclaims allege:
Plaintiffs were motivated to prevent the importation and resale of
cheaper, lawful textbooks . . . to maintain their anticompetitive
prices and economic advantage in the U.S. textbook market . . . By
preventing . . . C&N and MBS from importing and/or facilitating the
importation and resale of cheaper textbooks made lawfully abroad,
Plaintiffs seek to reduce supply of lawful textbooks in the U.S.
market and eliminate the secondary textbook market . . . to bolster
their position as the only source for Plaintiffs’ textbooks.
(Doc. No. 43 ¶ 47; Doc. No. 31 ¶ 50). Thus, Defendants allege that Plaintiffs were motivated by
a concern over U.S. book prices and the secondary book market, not by a principal desire to injure
Defendants. Defendants have failed to assert any other facts which would support a determination
that Plaintiffs predominant motive was to injure them. In addition, Defendants’ counterclaims
contains no allegations of improper means. Rather, the counterclaims allege that Plaintiffs caused
the shipment of textbooks that had been delivered to MBS to be seized because they believed the
textbooks were counterfeit. (See Doc. No. 43 ¶¶ 15-17; Doc. No. 31 ¶¶ 15-17). In other words,
these allegations support the notion that Plaintiffs seized the textbooks through proper means.
Accordingly, Defendants’ Fourth Counterclaim will be dismissed with prejudice. 8
8
Because Defendants’ Fourth Counterclaim will be dismissed on the aforementioned basis,
Plaintiffs’ additional arguments regarding knowledge and the Noerr-Pennington Doctrine need not
be addressed.
15
CONCLUSION
For the foregoing reasons, Plaintiffs’ Motion to Dismiss (Doc. No. 26) will be GRANTED.
Defendants’ counterclaims will be DISMISSED WITH PREJUDICE.
An appropriate order will be entered.
____________________________________
ELI RICHARDSON
UNITED STATES DISTRICT JUDGE
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