Icon Health & Fitness v. Beachbody

Filing 15

ORDER AND MEMORANDUM DECISION granting 5 Motion to Dismiss. Signed by Judge Tena Campbell on 5/19/11 (alt)

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF UTAH
NORTHERN DIVISION

ICON HEALTH AND FITNESS, INC.,
Plaintiff,

ORDER AND
MEMORANDUM DECISION

vs.

BEACHBODY, LLC,

Case No. 1:11-CV-00024-TC
Defendant.

Plaintiff ICON Health and Fitness, Inc. (ICON) brings this action seeking declaratory
relief against Beachbody, LLC (Beachbody). Before the court is Beachbody’s motion to dismiss
or transfer venue (Dkt. No. 5). Having fully reviewed the parties’ briefs, the court finds that
ICON’s declaratory judgment action is an improper anticipatory filing. Accordingly,
Beachbody’s motion to dismiss is granted, and the case is dismissed.
BACKGROUND
ICON and Beachbody promote and sell competing home fitness programs -- ICON’s
Rip:60™ program and Beachbody’s P90X® and Insanity® programs. On February 1, 2011, legal
counsel for Beachbody sent a demand letter to ICON notifying ICON that it was making false
and unsubstantiated advertising claims disparaging to Beachbody’s products, P90X® and
Insanity®. The letter specifically identified which ICON advertising claims Beachbody objected
to and informed ICON that its “false and misleading claims [are] likely to cause injury to
Beachbody, LLC, and give rise to liability under the federal Lanham Act, FTC regulations, and

analogous state false advertising laws.” (Ex. A to Chad Hummel Decl. [Dkt. No. 7-1].)
Beachbody demanded that ICON substantiate its claims or stop disseminating them by 5:00 p.m.
on February 4, 2011. Beachbody stated that it “hopes to resolve this matter amicably. However, if
we do not hear from you by then, we will take all necessary and appropriate actions . . . to protect
Beachbody, LLC’s rights.” (Id.)
ICON responded to Beachbody’s letter and asked for additional time, which Beachbody
allowed. Three days later, on February 4, ICON filed this declaratory relief action seeking a
declaration that it had not engaged in actionable false advertising. But ICON did not immediately
serve the complaint. Rather, on February 8, ICON requested that Beachbody enter into a
confidentiality agreement in order to protect itself before producing the demanded substantiation.
After some confusion over who was the real party involved, Beachbody sent an executed
confidentiality agreement on March 1. In the meantime, Beachbody had sent a second letter to
ICON demanding that it provide the requested substantiation by March 1, which ICON did on
March 2, after Beachbody executed the confidentiality agreement.
After reviewing the substantiation materials, Beachbody felt that ICON had failed to
provide legally sufficient substantiation for its advertising claims. Accordingly, Beachbody sent
another letter to ICON demanding that ICON take action by March 4, or at least that it promise
by March 4 that it would take action. ICON responded that the one-day deadline was
unacceptable and that it would respond to the demands as soon as practically possible. With no
further response from ICON, Beachbody filed its false advertising complaint, captioned
Beachbody, LLC v. ICON Health & Fitness, Inc., No. 2:11-cv-02984, in the United States
District Court for the Central District of California on March 8, and served the complaint on

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ICON. One day later, on March 9, ICON served its declaratory judgment complaint on
Beachbody.
Beachbody contends that ICON’s declaratory judgment action was improperly filed in
anticipation of Beachbody’s later-filed suit for damages and should be dismissed as an exception
to the first-to-file rule.
ANALYSIS
A court may decline to exercise jurisdiction to hear a declaratory judgment action. 28
U.S.C. § 2201. The District of Utah has adopted the following factors to determine whether a
court should exercise jurisdiction:
(1) whether the declaratory action would settle the controversy; (2) whether the
declaratory action would serve a useful purpose in clarifying the legal relations in
issue; (3) whether the declaratory remedy is being used merely for the purpose of
‘procedural fencing’ or ‘to provide an arena for a race to res judicata’; (4) whether
the use of a declaratory action would increase friction between our federal and state
courts and improperly encroach upon state jurisdiction; and (5) whether there is an
alternative remedy which is better or more effective.
Republic Ins. Co. v. Sinclair Oil Corp., 791 F. Supp. 278, 280 (D. Utah 1992) (quoting Grand
Truck W.R.R. v. Consol. Rail Corp., 746 F.2d 323, 326 (6th Cir. 1984)).
Here, the fourth factor is irrelevant because there is not a case pending in state court. And
the court finds the first, second, and fifth factors to be neutral and weigh in neither party’s favor.
Under the first factor, the court is uncertain whether this action will settle the controversy.
ICON’s declaratory judgment complaint seeks a declaration that ICON’s actions “do not give rise
to liability under the federal Lanham Act, FTC regulations, state false advertising laws, or any
other applicable laws” generally. (Compl. ¶ 18 (emphasis added).) But Beachbody’s false
advertising complaint specifically alleges violations of California Unfair Competition Law and

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California False Advertising Law, in addition to violations of the Lanham Act. (Ex. C to Chad
Hummel Decl. [Dkt. No. 7-3].) Similarly, under the second factor, the declaratory action could
clarify some legal relations, but potentially not all without consideration of California law. And
under the fifth factor, there is an alternative remedy: the action for damages pending in the
Central District of California.
The third factor -- whether ICON is using this action for procedural fencing -- is the most
significant factor to the court. The Tenth Circuit generally applies the first-to-file rule, which
provides that when duplicative lawsuits are pending in separate federal courts, the entire action
should be decided by the court in which the action was first filed. Buzas Baseball, Inc. v. Bd. of
Regents of the Univ. of Ga., No. 98-4098, 1999 WL 682883, at *2 (10th Cir. Sept. 2, 1999)
(unpublished). But a district court “may decline to follow the first-to-file rule and dismiss a
declaratory judgment action if that action was filed for the purpose of anticipating a trial of the
same issues in a court of coordinate jurisdiction.” Id. at *3; see, e.g., Guthy-Renker Fitness LLC
v. Icon Health & Fitness, Inc., 179 F.R.D. 264, 271 (C.D. Cal. 1998) (implying that the first-tofile rule does not carry the same force in situations when the first-filed suit is deemed
anticipatory because the first-to-file rule should not encourage a “race to the courthouse door in
an attempt to preempt a later suit in another forum”); Ontel Prods., Inc. v. Project Strategies
Corp., 899 F. Supp. 1144, 1150 (S.D.N.Y. 1995) (“[O]ne exception [to the first-to-file rule]
exists where the first-filed suit constitutes an ‘improper anticipatory filing.’”). And district courts
are afforded discretion when deciding whether the first-to-file rule or an exception to that rule
applies to the case at hand. MedSpring Grp., Inc. v. Atl. Healthcare Grp., Inc., No. 1:05-cv-115,
2006 WL 581018, at *3 (D. Utah March 7, 2006) (unpublished).

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Importantly, ICON filed a declaratory action. As the court in Ontel pointed out, improper
anticipatory filings, “by necessity, often take the form of declaratory judgments.” Ontel, 899 F.
Supp. at 1151. Accordingly, a declaratory suit “is immediately suspect as an improper
anticipatory filing because a declaratory action, generally speaking, is essentially the prosecution
of an affirmative defense.” MedSpring, 2006 WL 581018 at *4. Although not determinative, the
fact that ICON filed a declaratory action weighs in favor of the conclusion that its complaint was
an improper anticipatory filing.
Further, the court is persuaded that Beachbody delayed filing the California action in a
good faith attempt to pursue settlement negotiations. Although Beachbody did not attach a draft
complaint to its original demand letter, it did state that the “dissemination by ICON of false and
misleading claims is likely to cause serious injury to Beachbody, LLC, and give rise to liability
under the federal Lanham Act, FTC regulations, and analogous state false advertising laws,” and
that if ICON failed to respond by February 4, 2011, Beachbody would “take all necessary and
appropriate actions . . . to protect Beachbody, LLC’s rights.” (Ex. A to Chad Hummel Decl. [Dkt.
No. 7-1].) ICON’s complaint makes clear that it filed the declaratory judgment action in
anticipation of Beachbody’s threatened action. ICON, by its own admission, understood
Beachbody’s February 1 letter as “rais[ing] a reasonable apprehension of the filing of a lawsuit
against ICON.” (Compl. ¶ 2.) And, significantly, ICON filed its complaint on February 4, the
original deadline that Beachbody gave it to respond to the demand letter. See Nacogdoches Oil &
Gas, LLC v. Leading Solutions, Inc., No. 06-2551, 2007 WL 2402723, at *3 (D. Kan. Aug. 17,
2007) (unpublished) (finding the fact that plaintiff filed its declaratory judgment action on the
deadline defendant had given it to respond to the demand letter a significant factor weighing in

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favor of the conclusion that the action was an anticipatory filing).
Finally, the court notes that ICON did not serve its declaratory judgment complaint on
Beachbody until March 9, one day after Beachbody filed its false advertising complaint. ICON’s
delay in serving Beachbody, combined with the other factors discussed above, have persuaded
the court that this action is an anticipatory filing.
Because ICON’s first-filed suit is an anticipatory declaratory action arising out of the
same incident and concerning the same issues of liability, the court concludes that the first-to-file
rule is not applicable. “Courts have demonstrated reluctance to entertain declaratory judgment
actions which have been filed in anticipation of another lawsuit and in an attempt to forum
shop.” Republic Ins., 791 F. Supp. at 280 (citing Tempco Elec. Heater Corp. v. Omega Eng’g,
Inc., 819 F.2d 746 (7th Cir. 1987); Ven-Fuel v. Dep’t of the Treasury, 673 F.2d 1194, 1195 (11th
Cir. 1982)). Accordingly, the court declines to hear this action and grants Beachbody’s motion to
dismiss.
ORDER
For the foregoing reasons, Beachbody’s motion to dismiss or, in the alternative, to
transfer (Dkt. NO. 5) is GRANTED and ICON’s claims for declaratory relief are DISMISSED.
Accordingly, the court STRIKES the hearing set for August 10, 2011, and directs the Clerk of
Court to close the case.
DATED this 19th day of May, 2011.
BY THE COURT:

______________________________
TENA CAMPBELL
United States District Judge
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