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Sidem, S.A. v. Aquatech International Corp.

June 23, 2010

SIDEM, S.A. AND ENTROPIE S.A.S., PLAINTIFFS,
v.
AQUATECH INTERNATIONAL CORPORATION AND CHALRES DESPORTES, DEFENDANTS.



The opinion of the court was delivered by: Conti, District Judge

MEMORANDUM OPINION

On May 10, 2010, this court heard oral argument on two motions to dismiss filed by defendants Aquatech International Corp. (―Aquatech‖) and Charles Desportes (―Desportes,‖ and together with Aquatech, ―defendants‖). The motions to dismiss are directed at the amended complaint (Docket No. 18) filed by plaintiffs Sidem, S.A. (―Sidem‖) and Entropie S.A.S. (―Entropie,‖ and together with Sidem, ―plaintiffs‖). The first motion to dismiss was filed on March 26, 2010 pursuant to Federal Rule of Civil Procedure 12(b)(1) for lack of subject-matter jurisdiction (Docket No. 26). The second motion to dismiss was filed on March 27, 2010 pursuant to Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim (Docket No. 28).

At the May 10, 2010 hearing, the court requested that the parties submit supplemental briefing addressing several issues. Among those issues was whether the alleged statements made by defendants misrepresented the nature, characteristics, qualities, or geographic origin of Aquatech's goods, services, or commercial activities as is necessary to establish plaintiffs' false advertising claim under § 43(a)(1)(B) of the Lanham Act, 15 U.S.C. § 1125(a)(1)(B), asserted in count I of the amended complaint. On May 28, 2010, plaintiffs filed a supplemental brief (Docket No. 43) and defendants also filed a supplemental brief (Docket No. 44). On June 17, 2010, the court heard oral argument and made various rulings on the record with respect to the issues presented in the supplemental briefing. This opinion addresses the court's ruling with respect to defendants' motion to dismiss the claim plaintiffs assert pursuant to the Lanham Act.

Background*fn1

Sidem designs and builds large Multi-Effect Desalination (―MED‖) units for use in the water treatment industry. (Am. Compl. (Docket No. 18) ¶ 7.) Entropie became a wholly-owned subsidiary of Sidem in 2005. (Id. ¶¶ 2, 22.) Over a ten-year time span, Sidem successfully developed large-scale MED units with the capacity to treat an amount of water that previously was impossible for MED units to handle. (Id. ¶¶ 11-17.)

Desportes was an Entropie employee from 1984 until August 2007, eventually holding the position of Technical Director. (Id. ¶ 21.) After Entropie became a subsidiary of Sidem, Desportes had access to Sidem trade secret information related to the large MED units. (Id. ¶¶ 23-24.) In September 2007, Aquatech hired Desportes as Director of Thermal Desalinization. (Id. ¶ 27.) Within six months, Aquatech submitted a bid for a project that required the construction of a large-scale MED unit. (Id. at ¶ 30.) No company other than Sidem previously constructed a unit with as large of a capacity as the one proposed by Aquatech in the bid. (Id. ¶¶ 16-17.) Plaintiffs allege that, without access to Sidem's trade secret information, Aquatech would not have been able to handle such a project. (Id. ¶¶ 31-44.)

Plaintiffs allege that Aquatech and Desportes falsely represented to the consumer public that Aquatech had expertise and experience in designing and constructing large MED units, (id. ¶ 46), that Aquatech independently developed and designed large MED units, (id. ¶ 47), and that increasing the size of an MED unit ―is easy and does not require specialized knowledge‖ (id. ¶ 48).

In count I of plaintiffs' amended complaint, plaintiffs assert that, in advertisements used in United States commerce, Aquatech made ―false and misleading representations of fact regarding Aquatech's skill and experience in designing Large MED Units proscribed under Section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a).‖ (Id. ¶¶ 71, 72.) Plaintiffs also assert that ―Aquatech's attempts to pass off Sidem's Trade Secret Information as Aquatech's own design and experience violates Section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a).‖ (Id. at 73.)

Standard of Review

A motion to dismiss tests the legal sufficiency of the complaint. Kost v. Kozakiewicz, 1 F.3d 176, 183 (3d Cir. 1993). In deciding a motion to dismiss, the court is not opining on whether the plaintiff will be likely to prevail on the merits. Rather, when considering a motion to dismiss, the court accepts as true all well-pled factual allegations in the complaint and views them in a light most favorable to the plaintiff. U.S. Express Lines Ltd. v. Higgins, 281 F.3d 383, 388 (3d Cir. 2002). While a complaint does not need detailed factual allegations to survive a Federal Rule of Civil Procedure 12(b)(6) (―Rule 12(b)(6)‖) motion to dismiss, a complaint must provide more than labels and conclusions. Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007). A ―formulaic recitation of the elements of a cause of action will not do.‖ Id. (citing Papasan v. Allain, 478 U.S. 265, 286 (1986)). ―Factual allegations must be enough to raise a right to relief above the speculative level‖ and ―sufficient to state a claim for relief that is plausible on its face.‖ Id. ―A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.‖ Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009) (citing Twombly, 550 U.S. at 556).

The plausibility standard is not akin to a ―probability requirement,‖ but it asks for more than a sheer possibility that a defendant has acted unlawfully.. . . Where a complaint pleads facts that are ―merely consistent with‖ a defendant's liability, it ―stops short of the line between possibility and plausibility of ‗entitlement to relief.'‖

Id. at 1949) (quoting Twombly, 550 U.S. at 556) (internal citations omitted).

Two working principles underlie Twombly. Id. First, with respect to mere conclusory statements, a court need not accept as true all of the allegations contained in a complaint. ―Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.‖ Id. (citing Twombly, 550 U.S. at 555.) Second, to survive a motion to dismiss, a claim must state a plausible claim for relief. Id. at 1950. ―Determining whether a complaint states a plausible claim for relief will . . . be a context-specific task that requires the reviewing court to draw on its judicial experience and common sense.‖ Id. (citing 490 F.3d at 157-58). ―But where the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged -- but it has not ‗show[n] -- that the pleader is entitled to relief.‖' Id. (quoting FED. R. CIV. P. 8(a)(2)). A court considering a motion to dismiss may begin by identifying pleadings that are not entitled to the assumption of truth because they are mere conclusions.

While legal conclusions can provide the framework of the complaint, they must be supported by factual allegations. When there are well-pleaded factual allegations, a court should assume their veracity and then determine ...


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