Valley Forge Military Acad. Found. v. Valley Forge Old Guard, Inc.

24 F.Supp.3d 451

VALLEY FORGE MILITARY ACADEMY FOUNDATION, et al.

v.VALLEY FORGE OLD GUARD, INC., et al.

Civil Action No. 09–2373.

United States District Court, E.D. Pennsylvania.

Signed June 2, 2014.

Michael C. Petock, Michael F. Petock, Petock & Petock, LLC, Valley Forge, PA, for Valley Forge Military Academy Foundation, et al.

David J. Shannon, Marshall Dennehey Warner Coleman & Goggin, Philadelphia, PA, for Valley Forge Old Guard, Inc., et al.

MEMORANDUM

SURRICK, District Judge.

Presently before the Court is Defendants' Motion to Dismiss. (ECF No. 4.) For the following reasons, the Motion will be denied.

I. BACKGROUND

Plaintiff Valley Forge Military Academy Foundation (“Foundation”), a Pennsylvania non-profit corporation, operates the Valley Forge Military Academy and College (“Academy”), which includes a college-preparatory boarding school and a two-year college. (Compl. ¶ 13, ECF No. 1.) The Foundation and Plaintiff Valley Forge Military Academy and College Alumni Association (“Alumni Association”) are the owner and licensee, respectively, of certain federally-registered and common-law service marks, including “Valley Forge Military Academy,” “Valley Forge Military College,” “Valley Forge Military Academy & College,” “Valley Forge Military Academy & College Alumni Association,” and “Valley Forge Experience.” (Id. at ¶ 16.) In addition, the Foundation has acquired significant goodwill and public recognition of marks such as “Lieutenant General Milton G. Baker Founder's Society,” “Baker Founder's Society,” and “Founder's Society” (collectively the “marks”). (Id. at ¶ 54.) Plaintiffs have used these marks to promote their services and to fundraise for the Academy. (Id. at ¶¶ 17, 19, 55, 57.)

Defendant Valley Forge Old Guard (“Old Guard”) is a Pennsylvania non-profit corporation that has been critical of Plaintiffs over the last several years. (See id. at ¶ 25.) Plaintiffs allege that the Old Guard and its officers, Defendants Pete Robinson, Arthur Houston, Michael Kinslow, and Alistair Crosbie, have unlawfully used Plaintiffs' marks to pass off the Old Guard as the official alumni association of the Academy. (Id. at ¶ 24.) Plaintiffs allege that Defendants use Plaintiffs' marks to solicit funds from parents and alumni through their website, e-mail campaigns, and media releases. (See id. at Ex. B.) The mission statements of the Old Guard and the Alumni Association are similar.¹

Plaintiffs submit two letters from parents of students at the Academy that evidence actual confusion regarding the distinction between the Old Guard and the Alumni Association. (Compl. Ex. E.)

In response to a cease-and-desist letter sent by Plaintiffs, the Old Guard changed its name from the Valley Forge Old Guard to the Founder's Old Guard. (Id. at ¶¶ 46–48.) The Old Guard also changed its website from www.valleyforge oldguard.org to www.foundersoldguard.org (id. at ¶¶ 48–49), and added a disclaimer that disavowed any affiliation between the Old Guard and the Alumni Association. Notwithstanding these changes, Plaintiffs allege that Defendants continue to unlawfully use their marks and continue to pass themselves off as the official alumni association of the Academy. Plaintiffs take issue with Defendants' used of the term “Founder's” in its new name, specifically claiming “Founder's” has obvious meaning associated with Plaintiffs. (Id. at ¶ 52.)

Plaintiffs filed a Complaint, which includes federal claims under the Lanham Act, 15 U.S.C. §§ 1051 et seq., for trademark infringement (Count I), false designation and unfair competition (Count II), dilution (Count III), false advertising (Count IV), and parallel state-law causes of action (Counts V–VII). Defendants now move to dismiss. (Defs.' Mot., ECF No. 4; Defs.' Mem., ECF No. 5.) Plaintiffs responded to Defendants' Motion. (Pls.' Resp.) Defendants have filed a reply. (Defs.' Reply, ECF No. 9.)

II. LEGAL STANDARD

Federal Rule of Civil Procedure 12(b)(6) provides that a complaint may be dismissed for “failure to state a claim upon which relief can be granted.” “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.’ ” Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) ). A complaint that merely alleges entitlement to relief, without alleging facts that show entitlement, must be dismissed. See Fowler v. UPMC Shadyside, 578 F.3d 203, 211 (3d Cir.2009). This “ ‘does not impose a probability requirement at the pleading stage,’ but instead ‘simply calls for enough facts to raise a reasonable expectation that discovery will reveal evidence of’ the necessary elements.” Phillips v. Cnty. of Allegheny, 515 F.3d 224, 234 (3d Cir.2008) (quoting Twombly, 550 U.S. at 556, 127 S.Ct. 1955 ). “A complaint may not be dismissed because it appears unlikely that the plaintiff can prove those facts or will ultimately prevail on the merits.” McTernan v. City of York, 564 F.3d 636, 646 (3d Cir.2009).

In determining whether dismissal is appropriate, courts use a two-part analysis. Fowler, 578 F.3d at 210. First, courts separate the factual and legal elements of the claim and accept all of the complaint's well-pleaded facts as true. Id. at 210–11. Next, courts determine whether the facts alleged in the complaint are sufficient to show that the plaintiff has a “ ‘plausible claim for relief.’ ” Id. at 211 (quoting Iqbal, 556 U.S. at 679, 129 S.Ct. 1937 ). Given the nature of the two-part analysis, “[d]etermining whether a complaint states a plausible claim is context-specific, requiring the reviewing court to draw on its experience and common sense.” Iqbal, 556 U.S. at 663–64, 129 S.Ct. 1937 (citing Twombly, 550 U.S. at 556, 127 S.Ct. 1955 ).

III. DISCUSSION

A. Lanham Act Claims

Plaintiffs brings four claims under the Lanham Act. Defendants' contend that all of these claims must be dismissed because Defendants' statements are protected by the First Amendment to the United States Constitution. Essentially, Defendants argue that the initiation of this lawsuit is a thinly veiled attempt to suppress the speech of a small group of outspoken individuals. Defendants' argument centers on the contention that their speech is not “commercial” and thus does not fall within the regulations of the Lanham Act.

The Lanham Act regulates only commercial speech. Taubman Co. v. Webfeats, 319 F.3d 770, 775 (6th Cir.2003) (citing Cent. Hudson Gas & Elec. Corp. v. Pub. Serv. Comm'n of N.Y., 447 U.S. 557, 563, 100 S.Ct. 2343, 65 L.Ed.2d 341 (1980) ). The Third Circuit has enumerated three factors that must be considered in deciding whether speech is commercial: “(1) is the speech an advertisement; (2) does the speech refer to a specific product or service; and (3) does the speaker have an economic motivation for the speech.” Facenda v. N.F.L. Films, Inc., 542 F.3d 1007, 1017 (3d Cir.2008). “An affirmative answer to all three questions provides strong support for the conclusion that the speech is commercial.” Id. (quotations omitted). “Stated succinctly, the commercial speech doctrine rests heavily on the common sense distinction between speech proposing a commercial transaction ... and other varieties of speech.” U.S. Healthcare, Inc. v. Blue Cross of Greater Phila., 898 F.2d 914, 933 (3d Cir.1990) (internal quotation marks omitted).

Plaintiffs have alleged that Defendants' speech was commercial in nature. Plaintiffs allege that Defendants compete with the Alumni Association for fundraising and alumni services. Plaintiffs further allege that Defendants used Plaintiffs' marks in an advertisement that refers to a specific service, thus satisfying the first two factors that are to be considered in determining if something qualifies as commercial speech. Specifically, Defendants transmitted an e-mail to 4,000 individuals that promoted Defendants' alumni services. (Compl. ¶ 33 & Ex. B.) The third factor is also satisfied because Defendants were economically motivated to send the e-mail because the e-mail explicitly solicited funds for Defendants' alumni services. (Id. ) Based upon these facts, Plaintiffs have plausibly alleged that Defendants' statements proposed a commercial transaction as opposed to some other type of speech. Since Plaintiffs have pled that Defendants' speech is commercial, it does fall under the Lanham Act. Consequently, Defendants' First Amendment arguments must fail. The alleged appropriation of Plaintiffs' marks for commercial purposes is not protected by the First Amendment. Facenda, 542 F.3d at 1018 (“[T]he Lanham Act customarily avoids violating the First Amendment, in part by enforcing a trademark only when consumers are likely to be misled or confused by the alleged infringer's use.”); see also Taubman Co., 319 F.3d at 775 (noting that the misleading commercial speech that the Lanham Act deals with is not entitled to First Amendment protection).

In addition to their First Amendment argument, Defendants raise a number of other arguments as to why Plaintiffs' individual Lanham Act claims fail. We will address each argument.

1. Trademark Infringement and Unfair Competition

The Lanham Act applies to the use of a mark “in commerce ... in connection with the sale, offering for sale, distribution, or advertising of any goods or services [if] ... such use is likely to cause confusion ....” 15 U.S.C. § 1114(1)(a).² Initially, Defendants argue that Plaintiffs' claim fails because Defendants do not use Plaintiffs' marks to sell goods or services. Plaintiffs rebut Defendants' argument claiming that they have alleged that the Defendants use Plaintiffs' marks to provide alumni association services and to solicit funds for such services, which does constitute providing services within the Lanham Act. Plaintiffs are correct. The term “services” as used in the Lanham Act has been interpreted broadly. United We Stand Am.,...