Varsity Spirit LLC v. Varsity Tutors, LLC

*This is the unsealed version of a memorandum opinion and order filed under seal on September 17, 2021. For citation purposes, the correct date of the memorandum opinion and order is September 17, 2021.

MEMORANDUM OPINION AND ORDER

SIDNEY A. FITZWATER, SENIOR JUDGE.

In this lawsuit involving federal- and state-law trademark infringement and related claims, defendant moves to dismiss under Fed.R.Civ.P. 12(b)(1) and 12(b)(6), or, alternatively, for a more definite statement under Rule 12(e). For the reasons explained, the court grants defendant's motion to dismiss under Rule 12(b)(1), grants in part and denies in part its Rule 12(b)(6) motion, and denies its motion for a more definite statement under Rule 12(e), and it grants plaintiffs leave to replead.

I

This is an action by plaintiffs Varsity Spirit LLC (“Varsity Spirit”), Varsity Brands, LLC (“Varsity Brands”), and Varsity Spirit Fashions & Supplies, LLC (“Varsity Spirit Fashions”) (collectively, “Varsity, ” unless the context indicates otherwise) against defendant Varsity Tutors, LLC (“Varsity Tutors”). Varsity seeks to recover on the following claims: trademark infringement, under § 32(1) of the Lanham Act, 15 U.S.C. § 1114(1); trademark

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infringement, false designation of origin, passing off, and unfair competition, under § 43(a) of the Lanham Act, 15 U.S.C. § 1125(a); trademark dilution, under § 43(c) of the Lanham Act, 15 U.S.C. § 1125(c); and trademark infringement, unfair competition, dilution, and breach of contract, under Texas law.

Varsity is a company that hosts cheerleading and dance tournaments and camps.^[1] Its annual competitions feature more than one million competitors, and its camp offerings, which include cheer, dance, and band instruction, provide training to over 350, 000 students nationwide, making Varsity the “largest camp operator in the world.” ECF No. 29 at 6, ¶ 17.^[2]In addition to its hosted competitions and camps, Varsity sells apparel to over one million athletes-making it the world's leading designer and manufacturer of cheerleading and dance uniforms. Varsity also provides sports management training through online and in-person seminars to educators, coaches, and gym owners.

Varsity has registered United States trademarks for its “VARSITY” marks and its unique “V” logo. These marks have become “widely recognized by the general consuming public” and “associated exclusively with Varsity.” Id. at 15, ¶ 34. The marks have been used to promote Varsity's brand and feature on all of its advertising materials, and they

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appear at Varsity's events and camps as well.

Before the present litigation started, Varsity objected to Varsity Tutors' use of the “VARSITY TUTORS” mark and “V” logo. To resolve the parties' disagreement, they entered into a settlement agreement (“Settlement Agreement”). The Settlement Agreement defines authorized and unauthorized uses of Varsity Tutors' marks or any other marks it plans to use.^[3] Among its provisions, the Settlement Agreement precludes Varsity Tutors from using a mark with the word “varsity” alone or depicted with only a design, or using a mark that is confusingly similar to Varsity's marks.

Varsity Tutors . . . will not use, register, or seek to register the word “VARSITY” alone or depicted with only a design . . . and will not otherwise use register, or seek to register any term or any other mark confusingly similar to the VARSITY Marks as, or as part of any trade name, corporate name, trademark, service mark domain name, or other designation in connection with the offering, provision, advertisement, promotion, manufacture sale, or distribution of any product and/or service.

ECF No. 29 at 39, ¶ 2.^[4]

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The Settlement Agreement authorizes Varsity Tutors to use any mark where the word “varsity” is followed by “tutors, ” unless the mark is used in relation to athletic or cheerleading apparel, cheerleading camps or competition, or academic graduation.

(a) The VT parties may use, seek to register, or register, or authorize others to use, seek to register, or register the word “VARSITY” only immediately followed by the word “TUTORS” to form a unitary mark, wherein the word “VARSITY” shall appear no larger than the word “TUTORS” and shall not otherwise be emphasized over the word “TUTORS”, whether by font, color, size or stylization; and (b) The VT Parties shall not seek to register or register, or authorize others to use, seek to register, or register any mark containing the word “VARSITY” in connection with goods and services relating to any of the following:

A. athletic team apparel, cheerleading apparel, and/or athletic equipment;

B. cheerleading camps, cheerleading clinics, and/or cheerleading competitions;

C. academic graduation (school/university) regalia and/or related graduation commemorative products, including class rings, jewelry, and/or yearbooks.

ECF No. 29 at 39-40, ¶ 3.

Finally, in the Settlement Agreement Varsity Tutors expressly warrants that it does not own any domain names or pending applications that are not in compliance with specified

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provisions of the Settlement Agreement.

Varsity Tutors hereby warrants, and represents to the best of its knowledge the following:

* * *

(b) that it does not own any domain names that are not in compliance with Paragraphs 2 through 5 of this Agreement;

(c) that it does not own any pending applications or registrations of marks that are not in compliance with Paragraphs 2 through 6 of this agreement, except for the Registration.

* * *

ECF No. 29 at 41-42, ¶ 8.

Varsity alleges that Varsity Tutors breached the Settlement Agreement and that its unauthorized uses of the mark violate federal and state trademark law. It asserts that Varsity Tutors breached this agreement by violating the express warranties it made relating to trademark applications and domain names and offering sports management training and dance classes.^[5] Varsity avers that Varsity Tutors' affiliate company's use of a “V” logo for

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its company violates the terms of the Settlement Agreement. Based on these alleged breaches, Varsity sent demand letters to Varsity Tutors demanding compliance with the Settlement Agreement.

When Varsity Tutors failed to comply after receiving the demand letters, Varsity Spirit filed this suit.^[6] Varsity Tutors moved to dismiss, relying on many of the grounds that it asserts in its present motion. Varsity Spirit then amended its complaint, adding Varsity Brands and Varsity Spirit Fashions as plaintiffs.

Varsity Tutors now moves under Rules 12(b)(1) and 12(b)(6) to dismiss Varsity's first amended complaint, contending that Varsity has failed to state a claim on which relief can be granted. Alternatively, Varsity Tutors moves for a more definite statement under Rule 12(e). Varsity opposes the motions. The court is deciding the motions on the briefing.

II

Varsity Tutors moves to dismiss under Rule 12(b)(1) on the ground that the court lacks subject matter jurisdiction over some of the claims of Varsity Brands and Varsity Spirit Fashions for lack of standing.^[7]

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A

“Federal courts are courts of limited jurisdiction, and absent jurisdiction conferred by statute, lack the power to adjudicate claims.” Stockman v. Fed. Election Comm'n, 138 F.3d 144, 151 (5th Cir. 1998). A Rule 12(b)(1) motion can mount either a facial or factual challenge. See, e.g., Hunter v. Branch Banking & Tr. Co., 2013 WL 607151, at *2 (N.D. Tex. Feb. 19, 2013) (Fitzwater, C.J.) (citing Paterson v. Weinberger, 644 F.2d 521, 523 (5th Cir. May 1981)). When a party makes a Rule 12(b)(1) motion without including evidence, the challenge to subject matter jurisdiction is facial. Id. The court assesses a facial challenge as it does a Rule 12(b)(6) motion in that it “looks only at the sufficiency of the allegations in the pleading and assumes them to be true. If the allegations are sufficient to allege jurisdiction, the court must deny the motion.” Id. (citation omitted) (citing Paterson, 644 F.2d at 523). “The burden of proof for a Rule 12(b)(1) motion to dismiss is on the party asserting jurisdiction. Accordingly, the plaintiff constantly bears the burden of proof that jurisdiction does in fact exist.” Ramming, 281 F.3d at 161 (citations omitted).

B

Varsity Tutors contends that the court lacks subject matter jurisdiction over Varsity Brands's and Varsity Spirit Fashions' claims under 15 U.S.C. § 1114(1) (count one), 15 U.S.C. § 1125(c) (count four), and trademark infringement, unfair competition, and trademark dilution under Texas law (counts three and five) for lack of standing. Varsity Tutors posits that, despite what Varsity alleges in its first amended complaint, the public record shows that Varsity Brands and Varsity Spirit Fashions do not own the trademarks in

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question. Varsity Tutors requests that the court take judicial notice of the United States Patent and Trademark Office (“USPTO”) registration records. Varsity Tutors also maintains in its reply brief that Varsity has conceded this argument by not responding to it.

Varsity responds that Varsity Tutors' motion has not raised a valid concern over Varsity's trademark infringement and dilution claims. Varsity maintains that “[a]t the very least, the Court has subject matter jurisdiction over [Varsity Spirit's] trademark infringement and dilution claims . . . because [Varsity Spirit] owns the VARSITY Marks at issue.” Ps. Br. at 23. Varsity also contends that the specific relationship among all of the Varsity plaintiffs is “a matter for discovery.” Id.

C

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A plaintiff must establish ownership...