The Southern District of Ohio found that, although the plaintiff had properly alleged the technical elements of its trademark infringement and related claims, its factual allegations were insufficient under Bell Atlantic v. Twombly and the complaint failed to state a claim as a matter of law. The court disapproved of the plaintiff’s nonspecific allegations against “Defendants” collectively, its failure to allege a legal relationship between the two defendants, and its failure to allege that the defendants owned or controlled the allegedly infringing domain names where the relief sought was injunctive relief related to the domain names.
Plaintiff DSW, Inc. (“DSW”) is a discount shoe retailer. Defendant Zappos.com, Inc. (“Zappos”) is an on-line retailer of shoes and a competitor of DSW. Defendant Commission Junction, ("Commission Junction") provides affiliate marketing services to clients on the Internet. The complaint alleged that DSW’s registered trademarks were being infringed through their unauthorized use on various websites and that Commission Junction was providing affiliate links for Zappos to Internet websites at the domain names dswreview.com, dsw-shoes.net and dswshoesreview.com. DSW brought suit against Zappos and Commission Junction for, inter alia, trademark infringement and false designation of origin. Each cause of action and nearly all of the factual allegations in the complaint were asserted against “Defendants” generally, without any distinction between them. DSW sought to enjoin the defendants from using trademarks belonging to DSW and to have the offending domain names transferred to DSW.
Zappos moved to dismiss the complaint under Fed. R. Civ. P. 12(b)(6) for failure to state a claim and under Fed. R. Civ. P. 12(b)(7) for failure to join the owners of the domain names in question. Zappos argued that the complaint failed to allege any facts that could support a finding of liability; that it does not own or control the domain names in question; that there was no allegation or proof of agency between Zappos, Commission Junction, and the affiliates; and that the owners of the domain names were not parties.
The court began by reciting the standards of Fed. R. Civ. P. 8(a)(2) and the Supreme Court’s recent decision in Bell Atlantic Corp. v. Twombly, 127 S. Ct. 1955 (2007). In that decision, the Supreme Court explained that the Rule 8(a)(2) language requiring that a complaint contain “a short and plain statement of the claim showing that the pleader is entitled to relief” requires a plaintiff to “provide the grounds of his entitlement to relief [with] more than labels and conclusions, and a formulaic recitation of the elements of a cause of action . . . .” The court highlighted that the Supreme Court specifically disavowed the more lenient “no set of facts” standard derived from Conley v. Gibson, 355 U.S. 41 (1957).
The court accepted that DSW’s complaint set out the elements of its claims, but found that such bare pleading was not sufficient under the Twombly standard. The court noted that DSW’s complaint contained only one allegation specific to Zappos while the remainder of DSW’s substantive allegations referred to “Defendants” jointly.
The court also found fault with DSW’s allegations as to the relationship between the defendants. The complaint did not include allegations that Zappos directed Commission Junction’s activities, that Zappos controlled (or even knew about) the content of Commission Junction’s clients’ or affiliates’ sites, or that there was a legal relationship between Zappos and Commission Junction.
Finally, the court found that the complaint’s allegations did not support the requested relief. DSW had requested that the court enjoin Zappos from using or infringing DSW's marks and order Zappos to transfer the offending domain names to DSW. Without an allegation that Zappos owned or controlled the websites, the court found that this relief was not cognizable, explaining that if Zappos did not own, control, or even know of any potentially infringing material on the Internet, a judgment against Zappos will provide no relief to DSW. Thus, the court concluded that the complaint created no more than a “suspicion of a legally cognizable right of action” and failed to state a claim as a matter of law.
Despite these findings, the court denied without prejudice Zappos’s motion to dismiss. DSW, in conjunction with its opposition to the motion to dismiss, also requested leave to amend its complaint to add new factual allegations supporting its claims for relief against Zappos. Pursuant to Fed. R. Civ. P. 15, the court found that justice required that DSW be granted leave to amend the complaint to add “concrete facts” in support of its claims against Zappos.
Zappos also moved the court to order joinder of necessary parties, namely, the owners of the allegedly offending domain names, and, in the alternative, sought dismissal of DSW's complaint for failure to join such necessary parties. The court denied these requests without prejudice in light of its ruling on Zappos's motion to dismiss and DSW's motion for leave to amend. The court held that, in the event DSW could state a properly supported claim for infringement against Zappos in an amended pleading, joinder of additional necessary parties would be evaluated at that time. CONCLUSION
The court made clear that merely reciting the elements of trademark infringement without tying those elements to specific allegations of conduct by a defendant may not pass muster under the enhanced pleading standards of Bell Atlantic v. Twombly. The court insisted that factual allegations be sufficiently specific as to each defendant, explain the relationship between defendants, and exhibit that the relief sought is available. The decision also highlights the value of moving to amend an allegedly deficient complaint in conjunction with responding to a motion to dismiss that is based on insufficient pleadings.