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Leonetti's Frozen Foods, Inc. v. American Kitchen Delights

April 4, 2012

LEONETTI'S FROZEN FOODS, INC.
v.
AMERICAN KITCHEN DELIGHTS, INC.



The opinion of the court was delivered by: O'neill, J.

MEMORANDUM

Now before me is the motion of defendant American Kitchen Delights, Inc. to dismiss the amended complaint of plaintiff Leonetti's Frozen Foods, Inc. for lack of subject matter jurisdiction under Rule 12(b)(1) of the Federal Rules of Civil Procedure and for failure to state a claim upon which relief can be granted pursuant to Rule 12(b)(6). For the reasons that follow, I will deny American Kitchen's motion.

BACKGROUND

Leonetti's*fn1 manufactures and sells stromboli to food service and retail customers throughout the mid-Atlantic region. Am. Compl. ¶¶ 6-7. From January 1, 2000 to October 2007, Leonetti's "manufactured stromboli products using its proprietary recipes and formulas for Maglio Fresh Food d/b/a Maglio Sausage Company." Id. ¶ 12.

American Kitchen*fn2 manufactures ready to eat meals, salads and sandwiches. Id. ¶ 2. Its products are marketed as private label or store brand versions of national brand products. Id. ¶¶ 11, 13. As of October or November 2007, American Kitchen "began manufacturing all of Maglio's stromboli products, both retail and food service, pursuant to a private label manufacturing agreement." Id. ¶ 13. After manufacturing its stromboli products, American Kitchen packages and ships them to Maglio's warehouse in Philadelphia. Id. ¶ 14. Maglio distributes American Kitchen's stromboli products "to food service and retail customers throughout the mid-Atlantic region." Id. ¶ 15. Leonetti's alleges that when compared to the stromboli manufactured for Maglio by Leonetti's the stromboli products developed by American Kitchen "have different ingredients and nutrition facts," "are folded differently" and "are "substantially different in appearance," and "are made using less meat and less expensive ingredients." Id. ¶¶ 17-19. American Kitchen "never advised any customers of the changes that were made to the stromboli products." Id. ¶ 38.

Leonetti's contends that in or around June, 2010, it discovered that American Kitchen was distributing American Kitchen manufactured stromboli using the same packaging that Leonetti's had used to distribute Leonetti's stromboli under the Maglio brand. American Kitchen "never advised any customers . . . that the stromboli it was putting inside the boxes did not match the label." Id. ¶ 38. Leonetti's asserts that it "never gave Maglio or [American Kitchen] permission to use the images of Leonetti's hand-made stromboli to market and sell the new stromboli products developed by American Kitchen." Id. ¶ 21. Leonetti's also contends that American Kitchen "did not file any applications with the USDA to obtain temporary approval to use the boxes Leonetti's previously used to distribute stromboli under the Maglio Brand." Id. ¶ 26. American Kitchen's "conduct of using pictures, ingredients, and nutrition facts of stromboli previously manufactured by Leonetti's" on boxes of American Kitchen's stromboli is alleged to have "prevented customers from learning that the stromboli had changed" and allowed American Kitchen to "continue[ ] to benefit from the good-will created as a result of Leonetti's having previously manufactured a premium, hand-made stromboli for Maglio." Id. ¶ 35-36. Leonetti's alleges that American Kitchen's "conduct had the effect of misleading and causing confusion among retail and food service customers." Id. ¶ 37.

Leonetti's alleges that "in late 2007 or early 2008, [American Kitchen] learned that some food service customers were complaining about the new stromboli products." Id. ¶ 39. Sysco Foods, a food service customer, requested stromboli samples from American Kitchen and from Leonetti's. Id. ¶ 40-41. Leonetti's asserts that American Kitchen obtained samples of Leonetti's stromboli to use as a model for the stromboli that American Kitchen provided to Sysco. The samples manufactured for Sysco by American Kitchen allegedly "contained more ingredients, were made by hand and were folded differently than the stromboli [American Kitchen] actually manufactures and intended to manufacture for Sysco." Id. ¶ 45. Leonetti's contends that American Kitchen "had no intention of making these samples in production and [they] were only submitted for purposes of maintaining the [Sysco] account." Id. ¶ 44. Leonetti's asserts that "[b]ut for [American Kitchen's] deception, Leonetti's would have obtained the Sysco account." Id. ¶ 47. Leonetti's further contends, upon information and belief, that American Kitchen "submitted phony samples to other food service customers including US Foods and Aramark in an effort to either maintain or obtain business." Id. ¶ 48.

On or about November 1, 2010, the USDA began an investigation of American Kitchen to determine whether American Kitchen used accurate and properly approved labels for the stromboli it manufactured for Maglio. Id. ¶ 49. Upon concluding its investigation on or about February 2, 2011, the USDA found that American Kitchen "did not have proper approval for any of the labels, both food service and retail, that it had been using to manufacture Maglio Brand stromboli products since 2007." Id. ¶ 50. Finding twelve separate labeling violations, "[t]he USDA rescinded approval for both the retail and food service labels and refused to grant temporary label approval to [American Kitchen], finding that the continued use of these label[s] without modification would be misleading and could result in severe economic advantage in the market place." Id. ¶¶ 51, 52. Leonetti's alleges that American Kitchen "made at least three (3) shipments of retail stromboli using rescinded labels after learning of the February 2, 2011 Directive from USDA." Id. ¶ 54. Leonetti's further contends that American Kitchen "never stopped manufacturing and shipping food service stromboli to Maglio using the rescinded labels." Id. ¶ 55.

In early October, 2011, after having obtained new label approval from the USDA in early September 2011, American Kitchen began using new boxes to distribute frozen stromboli to customers. Id. ¶¶ 56, 59. Leonetti's contends that "[t]he new boxes contain representations and pictures that are substantially different than the products inside the boxes." Id. ¶ 60. Leonetti's alleges that American Kitchen "submitted 'special stromboli samples' to a photographer" for photographs for the "new 16oz and 20oz stromboli boxes" and that the "'special stromboli' contained additional ingredients and were folded differently than the stromboli" that American Kitchen actually manufactures, packages, and ships to Maglio. Id. ¶¶ 57-58. Leonetti's asserts that it "continues to be harmed as a direct result of the false and deceptive packaging used by [American Kitchen] to manufacture and distribute its products to customers." Id. ¶ 61. Leonetti's contends that both the old and new packaging used by American Kitchen "have the purpose and effect of confusing customers, and increasing sales, to the detriment of Leonetti's." Id. ¶ 62.

As a result of American Kitchen's actions, Leonetti's asserts that it has sustained damages, including but not limited to, lost sales and business opportunities, as well as damage to its reputation, good-will, and brand quality." Id. ¶¶ 76, 87.

DISCUSSION

I. Motion to Dismiss Pursuant to Rule 12(b)(1)

American Kitchen moves to dismiss Leonetti's amended complaint pursuant to Federal Rule of Civil Procedure 12(b)(1), which authorizes dismissal of a complaint for lack of subject matter jurisdiction. "A motion under Rule 12(b)(1) may be treated as either a facial attack on the complaint or a factual challenge to the court's subject matter jurisdiction." Gould Elecs., Inc. v. United States, 220 F.3d 169, 176 (3d Cir. 2000). Because American Kitchen's motion presents a facial attack on plaintiff's amended complaint, I will assume that the allegations of the amended complaint are true and will consider whether "the pleadings fail to present an action or claim within the court's jurisdiction." Hall v. Easton Area Sch. Dist., No. 10-7603, 2012 WL 526287, at *2 (E.D. Pa. Feb. 17, 2012), citing Mortenson v. First Fed. Sav. & Loan Ass'n, 549 F.2d 884, 891 (3d Cir. 1977). Plaintiff bears the burden of persuasion when subject matter jurisdiction is challenged. Kehr Packages v. Fidelcor, Inc., 926 F.2d 1406, 1409 (3d Cir. 1991).

American Kitchen asserts that Leonetti's Frozen Foods, Inc. does not exist and argues that the amended complaint must be dismissed for lack of subject matter jurisdiction under Rule 12(b)(1) because it fails to assert facts to show that Leonetti's Frozen Foods, Inc. is the real party in interest in this case with standing to bring this action against American Kitchen. A lawsuit "must be prosecuted in the name of the real party in interest." Fed. R. Civ. P. 17(a)(1). In support of its argument, American Kitchen contends that it was unable to locate "Leonetti's Frozen Foods, Inc." or "Leonetti's Frozen Foods" when it conducted a search on the Pennsylvania Corporations Bureau website.

Responding to American Kitchen's argument, Leonetti's contends that Leonetti Food Distributors, Inc. is doing business as Leonetti's Frozen Foods, Inc. Leonetti Food Distributors, Inc. is a registered Pennsylvania corporation with its principal place of business at the same address as Leonetti Frozen Food, Inc. Under Pennsylvania law, a corporation may register to conduct business under a fictitious name, as well as maintain suit under that fictitious name. See 54 Pa. Cons. Stat. ยง 331. Although it had not done so prior to filing this action, Leonetti Food ...


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