Minarik Elec. Co. v. Electro Sales Co., Inc.

223 F.Supp.2d 334

MINARIK ELECTRIC COMPANY, d/b/a Minarik Corp., a California Corporation, Plaintiff, v. ELECTRO SALES CO., INC., a Massachusetts Corporation, Defendant.

No. CIV.A.2001-12352-RB¹.

United States District Court, D. Massachusetts.

September 26, 2002.

Shepard M. Remis, Goodwin Procter LLP, Boston, James P. Clark, Michael S. Adler, G. Leland Dutcher, Jr., Gibson Dunn & Crutcher LLP, Los Angelas, CA, for Minarik Electric Co dba Minarik Corporation, Plaintiffs.

Jerry Cohen, Perkins, Smith & Cohen, Margaret A. Lange, Perkins, Smith & Cohen, LLP, Boston, for Electro Sales Company, Inc., a Massachusetts Corporation, Defendant.

MEMORANDUM AND ORDER ON DEFENDANT'S MOTION TO DISMISS THE COMPLAINT (# 9)

COLLINGS, United States Magistrate Judge.

I. Introduction

On December 28, 2001, plaintiff Minarik Electric Company ("Minarik" or the "plaintiff") filed this action alleging that the continued use of the domain name "minarik.com" by the defendant Electro Sales Co., Inc. ("Electro Sales" or the "defendant") constitutes trademark infringement, false designation of origin, cybersquatting, unfair competition, and dilution. (Complaint # 1 at 1, 4) In response, on February 13, 2002, Electro Sales filed a motion to dismiss on the grounds of res judicata (# 9) and a memorandum in support of the motion (# 11). On February 22, 2002, Minarik filed a response in opposition to the motion to dismiss. (# 12) For the reasons discussed below, I will deny the defendant's motion to dismiss.

II. The Facts

Plaintiff has been selling electric motors and related goods under the MINARIK trademark since approximately 1952, and the trademark has been registered since 1966. (# 1 at 6, 7) The trademark registration is still valid on speed controllers for electric motors and parts thereof. (# 12, exh. A at 22) Prior to 1997 Electro Sales was an authorized distributor of Minarik products. (# 12 at 1)² Electro Sales registered the domain name "minarik.com" in October 1995 and had a website posted at that address by February 1996. (# 1 at 2; # 11, exh. 4 at 4) The website was linked to the defendant's own website which also advertised and offered information regarding other companies. (# 12 at 3, 4) Prior to being terminated as an authorized distributor of Minarik products, the defendant afforded the plaintiff company and its products treatment equal to that which it provided for each of its competitors. (Id.)

On November 18, 1996, Minarik filed a complaint against the defendant in the United States District Court for the Central District of California. (# 11, exh. 4 at 1) (hereinafter, the "California Litigation")³ The complaint in the California Litigation consisted of five causes of action focused on potential trademark infringement as a result of the registration and use of "minarik.com" by the defendant. (# 11, exh. 4 at 1) In disputing the plaintiff's allegations of trademark infringement, the defendant argued that the registration and use of the domain name were actions taken in an effort to satisfy the terms of its distribution agreement which required that it "actively promote [Minarik's] products" and "aggressively pursue potential customers." (Id. at 3) The District Court granted summary judgment in favor of Electro Sales. (# 11, exh. 3)

Since 1997, the defendant has ceased to be an authorized distributor for the plaintiff. (# 12 at 1) Yet, the defendant continues to use the domain name "minarik.com." (Id.) The current use is different than the use prior to the termination of the distribution agreement. (Id.) Although the defendant still links "minarik.com" to its own website, it has abandoned the practice of providing product and catalogue information on behalf of the plaintiff company. (Id.) The current "minarik.com" site provides little if any information about Minarik or its products; it simply refers the internet consumer back to the Electro Sales website, where there is information on the products of the plaintiff's competitors. (# 12, exh. A at 4, 5) The defendant claims that the full line of Minarik products is still being marketed through the website; however, the plaintiff company points out that it no longer sells any products through the defendant. (# 12 at 13)

On December 28, 2001, Minarik commenced this action against Electro Sales on the theory that the continued use of "minarik.com" by the defendant subsequent to the termination of the distribution agreement constitutes trademark infringement and unfair competition. (See generally # 1) Of the seven claims in the current suit, five were also brought in the California Litigation.⁴ (# 11, exh. 2) This situation prompted the defendant to move for dismissal of this entire case on the grounds that in this suit the plaintiff is simply advancing the same causes of action and legal theories that were the subject of the final judgment in the California Litigation. (See generally # 9) Plaintiff opposes the dismissal of this suit, arguing that the present case is based on facts and conduct separate from those addressed in the California Litigation. (# 12 at 1, 2) The two primary differences emphasized by the plaintiff are the fact that the defendant is no longer an authorized distributor of the plaintiff's products and that the defendant has changed the manner in which it utilizes "minarik.com." (Id.)

III. The Standard

The applicable standard when deciding a motion to dismiss under Rule 12(b)(6), Fed.R.Civ.P., is firmly established. It is the responsibility of the Court to "accept the complaint's allegations as true, indulging all reasonable inferences in favor of [the plaintiff]." Kiely v. Raytheon Co., 105 F.3d 734, 735 (1 Cir., 1997); Hogan v. Eastern Enterprises/Boston Gas, 165 F.Supp.2d 55, 57 (D.Mass., 2001). For nearly a half century the Supreme Court has taken the position that "a complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of [its] claim that would entitle [it] to relief." Conley v. Gibson, 355 U.S. 41, 45-6, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957) (footnote omitted). In the face of that judicial paradigm, there remains the exception that "bald assertions,...subjective characterizations, optimistic predictions, or problematic suppositions" need not be recognized in a court of law. United States v. AVX Corp., 962 F.2d 108, 115 (1 Cir., 1992) (internal quotations omitted).

IV. Analysis of Applicable Law

The defendant in this case has moved to have this case dismissed on res judicata grounds. Although some debate remains, most federal district courts view res judicata as being synonymous with claim preclusion. Some jurisdictions include issue preclusion along with claim preclusion under a res judicata umbrella. However, the current tendency of the courts is to use the term res judicata to refer solely to the doctrine of claim preclusion.⁵ In an effort to follow well-established precedent, this Court will also take the narrow view of and examine only the issue of claim preclusion in this case.⁶

To determine whether res judicata applies, the Court must analyze "whether a particular legal theory, form of relief, or defense is part of the same claim asserted in the prior action such that it could and should have been raised in the prior action." 18 Moore's Federal Practice 3d § 131.20[1] (2000) (emphasis in original). This Court utilizes a three-pronged approach to make this determination. For a finding of claim preclusion, the Court must find that the following elements are satisfied: (1) a final judgment on the merits in an earlier suit; (2) sufficient identicality between the causes of action in the two suits; and (3) sufficient identicality between the parties in the two suits. Apparel Art Int'l, Inc. v. Amertex Enterprises, Ltd., 48 F.3d 576, 583 (1 Cir., 1995); see also Gonzalez v. Banco Cent. Corp., 27 F.3d 751, 755 (1 Cir., 1994). In the present case there is no need to examine the first and third prongs of the analysis because there is no doubt that there was a previous final judgment on the merits and that the two current parties were in fact the litigants in the California Litigation.⁷ Therefore, in order to determine whether res judicata should apply in the instant case, this Court, through an analysis of the two suits, need only determine whether the second element is established. That is, is there "sufficient identicality" between the causes of action in the instant case and those in the California Litigation?

In Apparel Art, the Court reemphasized its commitment to "the methodology of The Restatement (Second) of Judgments in defining what constitutes a cause of action for res judicata purposes." Apparel Art, 48 F.3d at 583; see also Davignon v. Clemmey, 176 F.Supp.2d 77, 92 (D.Mass., 2001). A "cause of action is defined as a set of facts which can be characterized as a single transaction or a series of related transactions. The cause of action, therefore, is a transaction that is identified by a common nucleus of operative fact." Apparel Art, 48 F.3d at 583.

There are several factors which are useful in determining whether a party has advanced claims in multiple litigations which derive from the same nucleus of operative facts. Id. Specifically, section 24 of the Restatement (Second) of Judgments provides that:

(1) When a valid final judgment rendered in an action extinguishes the plaintiff's claim pursuant to the rules of merger or bar..., the claim extinguished includes all rights of the plaintiff to remedies against the defendant with respect to all or any part of the transaction, or series of connected transactions, out of which the action arose.

(2) What factual grouping constitutes a "transaction", and what groupings constitute a "series", are to be determined pragmatically, giving weight to such considerations as whether the facts are related in time, space, origin, or motivation, whether they form a convenient trial unit, and...