Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-3_10-cv-08200/USCOURTS-azd-3_10-cv-08200-0/pdf.json

Nature of Suit Code: 840
Nature of Suit: Trademark
Cause of Action: 15:1125 Trademark Infringement (Lanham Act)

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Imperial submitted with its Response extrinsic evidence outside of the pleadings.

(Doc. 25, Ex. A.) When a court considers extrinsic evidence on a motion to dismiss, the court

typically must treat the motion as one for summary judgment. Fed. R. Civ. P. 12(b); San

Pedro Hotel Co., Inc. v. City of L.A., 159 F.3d 470, 477 (9th Cir. 1998); Hal Roach Studios,

Inc. v. Richard Feiner & Co., 896 F.2d 1542, 1555 n.19 (9th Cir. 1990). Here, because

neither party requested that Southwest’s Motion to Dismiss be converted into a summary

judgment motion, and because the Court does not rely on the materials attached to Imperial’s

Response in deciding Southwest’s Motion, the Court will treat it as a motion to dismiss. 

2

 Neither party requested oral argument related to this Motion to Dismiss. (Docs. 23,

25.) Accordingly, the Court finds the pending motions suitable for decision without oral

argument. See L.R. Civ. 7.2(f).

WO

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

Southwest Windpower, Inc., 

Plaintiff/Counter-Defendant, 

vs.

Imperial Electric, Inc., 

Defendant/Counter-Plaintiff. 

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No. CV-10-8200-SMM

ORDER

Before the Court is Plaintiff/Counter-Defendant Southwest Windpower, Inc.’s

(“Southwest”) Motion to Dismiss Defendant/Counter-Plaintiff Imperial Electric, Inc.’s

(“Imperial”) Counterclaims (Doc. 23). Imperial responded (Doc. 25),1

 Southwest replied

(Doc. 27), and the matter is now fully briefed.2

 

BACKGROUND

Southwest, a manufacturer of wind turbines, brought suit on October 11, 2010 alleging

that Imperial, a seller and installer of wind turbines, falsely represented itself as an authorized

dealer of Southwest’s products as part of a “bait-and-switch scheme” to promote and sell

Case 3:10-cv-08200-SMM Document 32 Filed 02/04/11 Page 1 of 9
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Though Imperial as a Counter-Plaintiff filed counterclaims against Southwest as a

Counter-Defendant, the general terms “plaintiff,” “claims,” and “defendant” are used

throughout this Standards of Review section.

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competing goods and services online and elsewhere. (Doc. 1.) Imperial filed three

counterclaims on December 3, 2010. (Doc. 20.) Counterclaims I and II seek (1) “Declaratory

Judgment of Non-Infringement” and (2) “Declaratory Judgment that Imperial is not Engaging

in Unfair Competition.” (Doc. 20 at 15.) Counterclaim III alleges Unfair Competition under

Lanham Act § 43(a), on grounds that Southwest made false statements regarding Southwest’s

warranty coverage for products not purchased, installed, or serviced by Southwest’s

authorized dealers and also regarding the suitability of using Southwest’s products in

conjunction with products Southwest did not produce. (Doc. 20 at 15-17.)

On December 27, 2010, Southwest filed a Motion to Dismiss Imperial’s three

counterclaims pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. (Doc. 23

at 3.) Southwest also asserts that the heightened pleading requirements of Rule 9(b) provides

grounds for dismissal of Counterclaim III. (Doc. 23 at 3-4.) Imperial contends that it meets

all relevant pleading requirements, and in the alternative, argues that if the Court dismisses

its counterclaims, it should be without prejudice and with leave to amend. (Doc. 25 at 2.) 

STANDARDS OF REVIEW

I. Motion to Dismiss Under Federal Rule of Civil Procedure 12(b)(6)

A pleading that states a claim for relief must contain “a short and plain statement of

the claim showing that the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2). If the

plaintiff3

 fails to state a claim, the defendant may move in a written motion, separate from

the responsive pleading, that the court dismiss the claim for failure to state a claim. Fed. R.

Civ. P. 12(b)(6). Even though a claim subject to dismissal for failure to state a claim is not

required to provide “detailed factual allegations,” in order for the plaintiff to meet its burden,

it must present more than labels and conclusions, or a formulaic recitation of the elements

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Prior to Twombly, the standard of review for a Rule 12(b)(6) motion was established

by Conley v. Gibson, 355 U.S. 41 (1957). The Court in Conley held that a complaint may

only be dismissed pursuant to Rule 12(b)(6) if “it appears beyond doubt that the plaintiff can

prove no set of facts in support of his claim which would entitle him to relief.” Id. at 45-46;

Parks Sch. of Bus., Inc. v. Symington, 51 F.3d 1480, 1484 (9th Cir. 1995). After Twombly,

however, it was unclear if the new plausibility standard applied to all civil complaints or only

to antitrust complaints. Recently, the Supreme Court clarified the scope of the Twombly

holding by reiterating that it applied to all civil actions. Ashcroft v. Iqbal, 129 S.Ct. 1937,

1953 (2009) (“Our decision in Twombly expounded the pleading standard for ‘all civil

actions.’”). 

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of the asserted cause of action. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007).4 To

survive a motion to dismiss for failure to state a claim, a plaintiff must state enough facts so

that the claim is plausible on its face. Id. at 570. The Supreme Court does not require a

heightened pleading standard, just enough facts to push the claim across the threshold of

conceivable to plausible. Id.

The court will treat all allegations of material fact in the complaint as true and

construe the complaint in the light most favorable to the plaintiff. W. Mining Council v.

Watt, 643 F.2d 618, 624 (9th Cir. 1981). But “conclusory allegations of law and unwarranted

inferences are insufficient to defeat a motion to dismiss.” Ove v. Gwinn, 264 F.3d 817, 821

(9th Cir. 2001) (citing Associated Gen. Contractors v. Metro. Water Dist. of S. Cal., 159 F.3d

1178, 1187 (9th Cir. 1998)). If the court finds that the plaintiff does not allege enough facts

to support a cognizable legal theory, the court may dismiss the claim. SmileCare Dental

Group v. Delta Dental Plan of Cal., Inc., 88 F.3d 780, 783 (9th Cir. 1996). “Dismissal

without leave to amend is improper unless it is clear, upon de novo review, that the complaint

could not be saved by any amendment.” Polich v. Burlington N., Inc., 942 F.2d 1467, 1472

(9th Cir. 1991) (citing Kelson v. City of Springfield, 767 F.2d 651 (9th Cir. 1985)). When

exercising it discretion to deny leave to amend, “a court must be guided by the underlying

purpose of Rule 15 to facilitate decision on the merits, rather than on the pleadings or

technicalities.” United States v. Webb, 655 F.2d 977, 979 (9th Cir. 1981).

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II. Motion to Dismiss Under Federal Rule of Civil Procedure 9(b)

Fraud claims must meet the heightened pleading standard of Rule 9(b), which requires

that a party “state with particularity the circumstances constituting fraud.” Fed. R. Civ. P.

9(b). The circumstances surrounding the alleged fraud must “be ‘specific enough to give

defendants notice of the particular misconduct . . . so that they can defend against the charge

and not just deny that they have done anything wrong.’” Kearns v. Ford Motor Co., 567 F.3d

1120 (9th Cir. 2009) (quoting Bly-Magee v. California, 236 F.3d 1014, 1019 (9th Cir.

2001)). “Averments of fraud must be accompanied by ‘the who, what, where, and how’ of

the misconduct charged.” Vess v. Ciba-Geigy Corp., 317 F.3d 1097, 1106 (9th Cir. 2003)

(quoting Cooper v. Pickett, 137 F.3d 616, 727 (9th Cir. 1997)). A plaintiff alleging fraud is

required to “‘set forth more than the neutral facts necessary to identify the transaction.’”

Kearns, 567 F.3d at 1124 (quoting In re GlenFed, Inc. Sec. Litig., 42 F.3d 1541, 1548 (9th

Cir. 1994)). Rule 9(b) exists “to deter the filing of complaints as a pretext for the discovery

of unknown wrongs, to protect [defendants] from the harm that comes from being subject to

fraud charges, and to prohibit plaintiffs from unilaterally imposing upon the court, the parties

and society enormous social and economic costs absent some factual basis.” Bly-Magee, 236

F.3d at 1018. Dismissal under Rule 9(b) is the functional equivalent of a Rule 12(b)(6)

dismissal for failure to state a claim. Vess, 317 F.3d at 1107. Accordingly, a plaintiff alleging

fraud must state enough facts so that the claim is plausible on its face. Twombly, 550 U.S.

at 570. 

DISCUSSION 

I. Motion to Dismiss Imperial’s Declaratory Judgment Counterclaims (I and II)

In its Motion to Dismiss, Southwest contends that Imperial’s Declaratory Judgment

counterclaims are improper because they allege matters already pending before the Court.

(Doc. 23 at 4.) Imperial responds that its Declaratory Judgment counterclaims are necessary

to ensure the resolution of all issues raised in Southwest’s Complaint (Doc. 1). (Doc. 25 at

11-12.) 

The Declaratory Judgment Act provides courts with discretion to either grant or

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dismiss a counterclaim for declaratory judgment. See Wilton v. Seven Falls Co., 515 U.S.

277, 288 (1995); Gov’t Emps. Ins. Co. v. Dizol, 133 F.3d 1220, 1223 (9th Cir. 1998) (“The

[Declaratory Judgment] Act ‘gave the federal courts competence to make a declaration of

rights; it did not impose a duty to do so.’”) (quoting Pub. Affairs Assocs., Inc. v. Rickover,

369 U.S. 111, 112 (1962)). Several district courts within the Ninth Circuit have found that

counterclaims for declaratory relief are improper if “‘repetitious of issues already before the

court via the complaint o[r] affirmative defenses.’” Infa-Lab, Inc. v. KDS Nail Int’l, No. 07-

01270, 2008 WL 4793305, at *3 (E.D. Cal. Oct. 24, 2008) (quoting Berger v. Seyfarth Shaw,

LLP, No. 07-05279, 2008 WL 2468478, at *2 (N.D. Cal. June 17, 2008)). Courts in other

jurisdictions have also concluded that if the factual and legal issues in the claim and

counterclaim are the same, it is appropriate to dismiss the counterclaim. See Knights

Armament Co. v. Optical Sys. Tech., Inc., 568 F. Supp. 2d 1369, 1375 (M.D. Fla. 2008)

(“Because the parties’ rights with respect to trademarks will be decided by the infringement

claims at hand, there is no need for [defendant’s counterclaims for] declaratory judgment.”

Pettrey v. Enter. Title Agency, Inc., No. 05-1504, 2006 WL 3342633, at *3 (N.D. Ohio Nov.

17, 2006) (citing Aldens, Inc. v. Packel, 524 F.2d 38, 51-52 (3d Cir. 1975); United States v.

Zanfei, 353 F. Supp. 2d 962, 964 (N.D. Ill. 2005)).

Imperial seeks a declaration from the Court that it: (1) “has not infringed and is not

infringing any valid and enforceable trademark rights of [Southwest] in violation of § 32 of

the Lanham Act, 15 U.S.C. § 1114” (Doc. 20 ¶ 46) and (2) “has not engaged in, and is not

engaging in, unfair competition with respect to [Southwest’s] trademark rights and with

respect to designation of origin, descriptions, and representations of fact in connection with

its goods or services in violation of § 43(a) of the Lanham Act, 15 U.S.C. § 1125(a) (Doc.

20 ¶ 48).” Meanwhile, Southwest alleges in its Complaint: (1) trademark infringement under

§ 32 of the Lanham Act, 15 U.S.C. § 1114 and (2) unfair competition under § 43(a) of the

Lanham Act, 15 U.S.C. § 1125(a). (Doc. 1 at 6-7.) It is clear from this comparison of

Southwest’s claims and Imperial’s counterclaims that Imperial’s counterclaims are

“‘repetitious of issues already before the [C]ourt via the complaint’” that will necessarily be

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disposed of by Southwest’s claims. Infa-Lab, Inc., 2008 WL 4793305, at *3 (quoting Berger,

2008 WL 2468478, at *2. Therefore, the Court will exercise its discretion to dismiss

Counterclaims I and II with prejudice.

II. Motion to Dismiss Imperial’s Lanham Act Counterclaim (III)

A. Whether Counterclaim III Is “Grounded in Fraud”

Southwest argues for dismissal of Imperial’s Counterclaim III because the allegations

contained therein are based on fraud but fail to meet the heightened pleading requirements

of Federal Rule of Civil Procedure 9(b). (Doc. 23 at 6-7.) Imperial disputes that Counterclaim

III is required to meet Rule 9(b)’s heightened pleading. (Doc. 25 at 4.) As noted above, Rule

9(b) provides: “[i]n alleging fraud or mistake, a party must state with particularity the

circumstances constituting fraud or mistake.” Fed. R. Civ. P. 9(b). The Ninth Circuit has

examined Rule 9(b) and held:

In cases where fraud is not a necessary element of a claim, a plaintiff may

choose nonetheless to allege in the complaint that the defendant has engaged

in fraudulent conduct. In some cases, the plaintiff may allege a unified course

of fraudulent conduct and rely entirely on that course of conduct as the basis

of a claim. In that event, the claim is said to be ‘grounded in fraud’ or to

‘sound in fraud,’ and the pleading of that claim as a whole must satisfy the

particularity requirement of Rule 9(b).

In other cases, however, a plaintiff may choose not to allege a unified course

of fraudulent conduct in support of a claim, but rather to allege some

fraudulent and non-fraudulent conduct. In such cases, only the allegations of

fraud are subject to Rule 9(b)’s heightened pleading standards.

Vess, 317 F.3d 1097, 1103-04 (9th Cir. 2003). To establish a fraud claim in Arizona “a

plaintiff must show that the defendant made a false, material representation that he knew was

false or was ignorant of its truth, with the intention that the hearer of the representation act

on it in a manner reasonably contemplated, that the hearer was ignorant of the

representation’s falsity, rightfully relied on the truth of the representation, and sustained

consequent and proximate damage.” Haisch v. Allstate Ins. Co., 5 P.3d 940, 944 (Ariz. Ct.

App. 2000) (citing Echols v. Beauty Built Homes, Inc., 647 P.2d 629, 631 (Ariz. 1982)).

Several district courts in the Ninth Circuit have held that allegations under Lanham

Act § 43 can be grounded in fraud. See Pestube Sys., Inc. v. Hometeam Pest Def., No. 05-

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2382, 2006 WL 1441014, at *4-5 (D. Ariz. May 24, 2006) (applying Rule 9(b) to plaintiff’s

Lanham Act claim that was “grounded in fraud”); Collegenet, Inc. v. Xap Corp., No. 03-

1229, 2004 WL 2303506, at *5-6 (D. Or. Oct. 12, 2004), adopted as modified, 2005 WL

708406 (D. Or. 2005) (Lanham Act unfair competition claim grounded in fraud as

“allegations are such that plaintiff is alleging a unified course of fraudulent conduct and

relies entirely on that course of conduct as the basis of the claim.”). Here, Counterclaim III

encompass the elements of fraud under Arizona law. See Haisch, 5 P.3d at 944. Specifically,

Imperial alleges that Southwest: (1) “in bad faith” (2) “made false or misleading descriptions

and representations of fact” (3) “likely to cause confusion, or to cause [a] mistake, or to

deceive” others (4) in order to “influence purchasing decisions,” (5) thereby harming

Imperial. (Doc. 20 ¶¶ 50-55, 59.) These allegations set forth a unified course of alleged

fraudulent conduct that form the basis of Counterclaim III. (Doc. 20 ¶¶ 49-60.); see Vess,

317 F.3d at 1103-04. The Court therefore finds that Counterclaim III is “grounded in fraud”

and that Rule 9(b)’s particularity requirement applies. See Vess, 317 F.3d at 1103-04. 

B. Whether Imperial Has Met Rule 9(b)’s Heightened Pleading Standard

As noted, “[a]verments of fraud must be accompanied by ‘the who, what, when,

where, and how’ of the misconduct charged.” Vess, 317 F.3d at 1106 (quoting Cooper, 137

F.3d at 727). Imperial contends that it has satisfied these Rule 9(b) requirements and cites

an excerpt, incorporated by reference into Counterclaim III, alleging that “SWWP stated in

a 2008 communication to Imperial that SWWP can ‘void all warranties on all Imperial

Electric’s sales and installations of Southwest Windpower’s products if we need.” (Doc. 25

at 4-5 (quoting Doc. 20 ¶ 27).) Imperial asserts that this statement satisfies Rule 9(b) because

it “identified who made the statement (SWWP), to whom it was made (Imperial)

approximately when it was made (2008), and how (a communication).” (Doc. 25 at 4-5.)

Imperial further asserts that the remainder of Counterclaim III also meets Rule 9(b)’s

heightened pleading standard. (Doc. 25 at 5.) 

Imperial’s allegation quoted above and the remainder of Counterclaim III do not

satisfy Rule 9(b). First, Imperial’s identification of Southwest as the source of

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misrepresentations communicated to Imperial (Doc. 20 ¶ 37) along with other “dealers,

customers, and the relevant market (Doc. 20 ¶ 51)” are insufficiently specific to comply with

the “who” requirement of Rule 9(b). See Segal Co. v. Amazon.com, 280 F. Supp. 2d 1229,

1231 (W.D. Wash. 2003) (granting motion to dismiss in part because reference to

defendant’s “representatives” fails to identify alleged wrongdoers); Knights v. Crystal

Dynamics, 983 F. Supp. 1303, 1315 (N.D. Cal. 1997) (granting motion to dismiss in part

because general allegation listing all defendants is insufficient). Second, Imperial’s vague

reference to only two time periods in its rather lengthy list of allegations: (1) “2008” as the

year that Southwest allegedly communicated to Imperial that Southwest could void

warranties related to Imperial’s sales and (2) “for at least 3 months in 2009” as the period

Southwest allegedly included unspecified false or misleading information related to its

warranties (Doc. 20 ¶¶ 27, 30) are insufficient as to “when” because references to an entire

year or a period of months do not sufficiently identify the time of the alleged wrongdoing.

Atl. Richfield Co. v. Ramirez, 176 F.3d 481 (9th Cir. 1999) (“[A]lthough the complaint

suggests that the misrepresentations occurred in ‘late 1990’ or ‘early 1991’ merely

identifying a period spanning several months does not adequately identity the time of the

misrepresentations.”); U.S. Concord, Inc. v. Harris Graphics Corp., 757 F. Supp. 1053 (N.D.

Cal. 1991) (“Allegations such as ‘[d]uring the course of discussions in 1986 and 1987,’ ‘in

or about May through December 1987,’ and ‘May 1987 and thereafter’ do not make the

grade.”). Third, Imperial’s failure to identify the nature of the communication in which

Southwest allegedly stated that it could void all warranties on Southwest’s sales and

installations is insufficient as to “where” and “how” under Rule 9(b). (Doc. 20 ¶ 27.)

The remainder of Counterclaim III includes nothing that could satisfy “‘the who,

what, when, where, and how’ of the misconduct charged” required under Rule 9(b). Vess,

317 F.3d at 1106 (quoting Cooper, 137 F.3d at 727). Because Imperial has failed to “state

with particularity the circumstances constituting fraud,” the Court will dismiss Counterclaim

III. Fed. R. Civ. P. 9(b). However, Imperial will be given leave to amend, as its conceivable

that Imperial possesses facts that could be alleged with the level of specificity required by

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Rule 9(b). See Vess, 317 F.3d at 1107-08 (“[D]ismissals for failure to comply with Rule 9(b)

should ordinarily be without prejudice. Leave to amend should be granted if it appears at all

possible that the plaintiff can correct the defect.”)

CONCLUSION

IT IS HEREBY ORDERED GRANTING Southwest’s Motion to Dismiss (Doc.

23).

IT IS FURTHER ORDERED DISMISSING WITH PREJUDICE Imperial’s

Counterclaim I (Declaratory Judgment of Non-Infringement) and Counterclaim II

(Declaratory Judgment that Imperial is not Engaging in Unfair Competition).

IT IS FURTHER ORDERED DISMISSING WITHOUT PREJUDICE Imperial’s

Counterclaim III (Unfair Competition – Lanham Act § 43(a)).

DATED this 4th day of February, 2011.

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