JOAN N. ERICKSEN, District Judge.
Plaintiff Select Comfort Corporation ("Select Comfort") brought this action against Defendant The Sleep Better Store, LLC ("Sleep Better"), alleging various unfair competition and trademark infringement claims. In its Answer, Sleep Better alleged a counterclaim of tortious interference with contract (Count II), based upon a cease-and-desist letter that Select Comfort sent to third-party Overstock.com. Now before the Court is Select Comfort's 12(b)(6) Motion to Dismiss Count II of Defendant's Amended Answer and Counterclaim.
Select Comfort sells adjustable air beds under the Sleep Number® and Select Comfort® trademarks. Sleep Better, which recently changed its name to Dream Number, also sells adjustable air beds. Sleep Better contracted with Overstock.com to sell Sleep Better's beds on the Overstock.com website. On June 30, 2011, Select Comfort sent a cease-and-desist letter to Overstock.com. The letter stated, in relevant part:
Sleep Number has not registered the phrases "Number Air Mattress" or "Number Bed" with the U.S. Patent and Trademark Office. Nevertheless, in response to the cease-and-desist letter, Overstock.com agreed to stop using the phrase on its website. Although Select Comfort did not specifically request that Overstock.com remove any products from its website, Overstock.com also chose to remove Sleep Better's beds from sale on its website.
Sleep Better contends that Select Comfort's cease-and-desist letter constituted tortious interference with Sleep Better's contract with Overstock.com. In its Answer to First Amended Complaint and Counterclaim, Sleep Better alleged that Select Comfort's cease-and-desist letter was an improper and unjustified demand, which "intentionally procured the breach of Sleep Better's contract with Overstock.com because Plaintiff's conduct resulted in Overstock, corn's removal of Sleep Better's Number Beds from sale on Overstock.com's website." Answer to First Am. Comp. & Countercl. ¶¶ 13, 15. Select Comfort argues that the Court should dismiss the counterclaim because: (1) Sleep Better failed to plead the element that Select Comfort's demand letter procured an actual breach of contract between Sleep Better and Overstock.com; (2) Select Comfort was justified in sending the demand letter to protect its federally registered Sleep Number® trademarks; (3) the Noerr-Pennington doctrine immunizes the pre-suit demand letter from tort liability; and (4) Minnesota's anti-SLAPP statutes
When ruling on a motion to dismiss for failure to state a claim pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure, a court must accept the facts alleged in the complaint as true and grant all reasonable inferences in favor of the plaintiff. Mulvenon v. Greenwood, 643 F.3d 653, 656 (8th Cir.2011). Although a pleading is not required to contain detailed factual allegations, "[a] pleading that offers `labels and conclusions' or `a formulaic recitation of the elements of a cause of action will not do.'" Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868(2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)). "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.'" Id. (quoting Twombly, 550 U.S. at 570, 127 S.Ct. 1955). "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." Id. The court "generally may not consider materials outside the pleadings," but "[i]t may ... consider some public records, materials that do not contradict the complaint, or materials that are `necessarily embraced by the pleadings.'" Noble Sys. Corp. v. Alorica Cent., LLC, 543 F.3d 978, 982 (8th Cir.2008) (quoting Porous Media Corp. v. Pall Corp., 186 F.3d 1077, 1079 (8th Cir.1999)). The cease-and-desist letter was attached to the Answer to the First Amended Complaint and Counterclaim, and thus may be considered. See, e.g., Bradford v. Huckabee, 394 F.3d 1012, 1015 (8th Cir.2005) (considering exhibits attached to the complaint as part of the complaint).
Under Minnesota law, a cause of action for tortious interference with contract requires Sleep Better to prove: (1) the existence of a contract between Sleep Better and a third party; (2) Select Comfort's knowledge of the contract; (3) Select Comfort intentionally procured the breach of Sleep Better's contract; (4) Select Comfort's procurement was without justification; and (5) resulting damages. Kallok v. Medtronic, Inc., 573 N.W.2d 356, 362 (Minn.1998). Select Comfort asserts that Sleep Better failed to plead the essential element that Select Comfort's demand letter procured an actual breach of contract between Sleep Better and third-party Overstock.com. Select Comfort further asserts that it was justified in sending a letter to Overstock.com to protect its federally registered and incontestable Sleep Number® trademarks.
Select Comfort argues that Sleep Better merely alleges that after Select Comfort sent its cease-and-desist letter, Overstock.com removed Defendant's products from sale on its website — but Sleep Better "does not claim, or even suggest, that Overstock.com's decision to `remove' its products was a breach of contract." Pl.'s Mem. Supp. 6. Select Comfort suggests that Overstock.com may have had the unilateral right to remove Sleep Better's products from its website, and so there may not have even been a breach of contract at all. Although Sleep Better's pleading does not directly allege that Overstock.com breached its contract with Sleep Better, it does allege that Select Comfort "intentionally procured the breach of Sleep Better's contract with Overstock.com because Plaintiff's conduct resulted in Overstock.com's
Select Comfort asserts that it was justified in sending a letter to Overstock.com to protect its federally registered and incontestable Sleep Number® trademarks. Although justification is an affirmative defense, under certain circumstances it may nevertheless provide the basis for a dismissal pursuant to Rule 12(b)(6). Noble Sys. Corp. v. Alorica Central LLC, 543 F.3d 978, 982-83 (8th Cir. 2008). "If an affirmative defense such as a privilege is apparent on the face of the complaint ... that privilege can provide the basis for dismissal under Rule 12(b)(6)." Id. at 983. "[T]his means simply that the district court is limited to the materials properly before it on a motion to dismiss, which may include public records and materials embraced by the complaint." Id.
"Generally, a defendant's actions are justified if it pursues its legal rights via legal means." Id. (citing Langeland v. Farmers State Bank of Trimont, 319 N.W.2d 26, 32-33 (Minn.1982)); Kjesbo v. Ricks, 517 N.W.2d 585, 588 (Minn.1994) ("There is no wrongful interference with a contract where one asserts in good faith a legally protected interest of his own * * * believ[ing] that his interest may otherwise be impaired or destroyed by the performance of the contract or transaction." (internal quotation marks omitted)). "The general rule with which we are concerned is that one has the right to be secure in his contracts and to pursue his business ... free from the interference of others except where such others act in pursuance of a superior or equal right." Noble Sys. Corp., 543 F.3d at 983 (quoting Bennett v. Storz Broad. Co., 270 Minn. 525, 134 N.W.2d 892, 897 (1965)); Bennett, 134 N.W.2d at 897 ("Liability for wrongful interference may be avoided by showing that the defendant was justified by a lawful object which he had a right to assert."). Interference with a contract is unjustified, however, "when it is done for the indirect purpose of injuring the plaintiff or benefitting the defendant." Furlev Sales & Assoc., Inc. v. N. Am. Auto. Warehouse, Inc., 325 N.W.2d 20, 27 (Minn.1982). "Ordinarily, whether interference is justified is an issue of fact, and the test is what is reasonable conduct under the circumstances." Kjesbo, 517 N.W.2d at 588 (citing Bennett, 134 N.W.2d at 900). Select Comfort has the burden of proving justification. See id.
It is undisputed that Select Comfort has a legally protected interest in protecting its registered trademarks. Sleep Better concedes that it would have been reasonable for Select Comfort to "alert Overstock.com as to Plaintiff's `Sleep Number' mark." Def.'s Resp. Mem. 10. Sleep Better argues, however, that it was not reasonable for Select Comfort "to claim that Overstock.com's use of the term `Number Air Mattress' constituted infringement or that the use of this term might cause consumer confusion or dilution of Plaintiff's `Sleep Number' marks." Id. Sleep Better asserts that Select Comfort's demand letter was unjustified because Select Comfort had not registered the specific phrase "Number Air Mattress," and because, at least according to Sleep Better, the phrase "Number Air Mattress" is a purely descriptive term, which Sleep Better has been using since 2002. Sleep Better further argues that Select Comfort failed to provide any evidence of actual consumer confusion. Thus, Sleep Better contends that Select Comfort was unjustified because its motives were purely "designed
The crux of Sleep Better's argument appears to be that Select Comfort was unjustified because, having not registered the specific phrase "Number Air Mattress," it could not reasonably assert that use of that phrase infringed its registered trademarks. To the extent that this is the argument, Sleep Better misconstrues the protections afforded by trademark law. Trademark law protects against not only the impermissible use of a specific registered mark, but also against the use of a similar mark that is likely to cause confusion among consumers or dilution of the registered mark. See 15 U.S.C. § 1114 (prohibiting the commercial use of "any reproduction, counterfeit, copy, or colorable imitation of a registered mark in connection with the sale ... or advertising of any goods or services on or in connection with which such use is likely to cause confusion, or to cause mistake, or to deceive"); Id. § 1125(a) (prohibiting the "use[] in commerce [of] any word, term, name, symbol, or device, or any combination thereof ... which is likely to cause confusion, or to cause mistake, or to deceive"); Id. § 1125(c) (providing that "the owner of a famous mark that is distinctive... shall be entitled to an injunction against another person who ... commences use of a mark or trade name in commerce that is likely to cause dilution by blurring or dilution by tarnishment of the famous mark, regardless of the presence or absence of actual or likely confusion, or of actual economic injury"); SquirtCo v. Seven-Up Co., 628 F.2d 1086, 1091 (8th Cir.1980) (affirming the district court's holding that use of the "QUIRST" mark infringed on the well-established "SQUIRT" mark); Roederer v. J. Garcia Carrion, S.A., 732 F.Supp.2d 836 (D.Minn. 2010) (finding trademark infringement and unfair competition where the defendant's unregistered "CRISTALINO" mark was similar to the plaintiffs registered "CRISTAL" mark and created a likelihood of confusion).
An infringing mark need only "resemble the registered mark" so that its use is "likely to cause confusion, or to cause mistake, or to deceive." SquirtCo, 628 F.2d at 1091. There is no support for Sleep Better's proposition that a cease-and-desist letter is only justified where the allegedly infringing term is identical to the registered mark. Moreover, Select Comfort need not be correct in its assertion that use of the term "Number Air Mattress" infringed or diluted its "Sleep Number" mark — it must only have "a good faith belief that its rights were being infringed." Kemp v. Tyson Foods, Inc., No. CIV 96-173 JRT/RLE, 2001 WL 391552, at *7 (D.Minn. Mar. 31, 2001); see also Celotex Co. v. Insulite Co., 39 F.2d 213, 217 (D.Minn.1930) (explaining that when examining the propriety of pre-suit demand letters alleging patent infringement, the court need not determine whether infringement actually exists, but instead should only examine "whether the owner of such patent might believe in good faith" that infringement existed).
Here there is no indication that the demand letter was sent in bad faith or with an improper motive. First, despite Sleep Better's assertions, Select Comfort's letter did not falsely claim or misrepresent that Select Comfort had trademark rights to the phrase "Number Air Mattress" — it only claimed that use of such phrase caused confusion with or dilution of its registered "Sleep Number" mark. Second, any contention that Select Comfort's position was so incorrect on the face of the letter as to demonstrate bad faith is without merit. In fact, in its counterclaim, Sleep Better acknowledges that one of the issues in this current litigation is Select Comfort's belief that the term "Number
Nor did Select Comfort employ any improper, illegal, or otherwise reprehensible means in sending the cease-and-desist letter to Overstock.com.
It is apparent on the face of the cease-and-desist letter that Select Comfort was seeking to protect its registered "Sleep Number®" trademark from confusion and dilution. There are no factual allegations in the pleadings to support any claims that Select Comfort acted with bad faith or employed improper means. Sleep Better's mere conclusory assertions that Select Comfort's conduct in sending the cease-and-desist letter was "improper," "unjustified," "intentional," and "willful" do not
The Noerr-Pennington doctrine immunizes acts related to the constitutional right to petition the courts for grievance, unless the act is a mere sham. The First Amendment to the United States Constitution provides that Congress shall make no law abridging the right "to petition the Government for a redress of grievances." U.S. Const. amend. I. The Noerr-Pennington doctrine, which arose in the context of antitrust claims, provides immunity from claims that are based on the filing of lawsuits. "The right of access to the courts is indeed but one aspect of the right of petition." Cal. Motor Transp. Co. v. Trucking Unlimited, 404 U.S. 508, 510, 92 S.Ct. 609, 30 L.Ed.2d 642 (1972). This immunity has been extended to all claims, beyond federal antitrust claims, which are based on the petitioning of the courts or other governmental entities. See, e.g., Porous Media Corp. v. Pall Corp., 186 F.3d 1077, 1080 n. 4 (8th Cir. 1999) ("In addition, the First Amendment generally immunizes the act of filing a lawsuit from tort liability under the Noerr-Pennington doctrine."); Hinshaw v. Smith, 436 F.3d 997, 1003 (8th Cir.2006) (stating that the Noerr-Pennington doctrine "is a defense to liability premised on the defendant's actions of exercising his own private rights to free speech and to petition the government"); Kellar v. VonHoltum, 568 N.W.2d 186, 192-93 (Minn.Ct. App.1997) (holding that the Noerr-Pennington doctrine applies outside of the antitrust context and applying it to Minnesota tort claims). The Eighth Circuit has explicitly stated that the Noerr-Pennington doctrine applies to tortious interference with contract claims. See Hufsmith v. Weaver, 817 F.2d 455, 459 (8th Cir. 1987). Because "[t]he right to petition means more than simply the right to communicate directly with the government," protection under the doctrine "necessarily includes those activities reasonably and normally attendant to effective petitioning." In re IBP Confidential Bus. Documents Litig., 755 F.2d 1300, 1310 (8th Cir.1985).
Select Comfort argues that the Noerr-Pennington doctrine immunizes pre-suit demand letters, since such letters are "reasonably attendant to effective petitioning." Sleep Better contends that the doctrine does not apply in this context, since this case involves no antitrust claim and the demand letter was not sent to the government, does not ask the government for any "redress of grievances," and has not resulted in litigation against Overstock.com. Thus, Sleep Better asserts that there was no petition of the government, and "purely private threats of litigation" are not afforded immunity under the doctrine.
Although the Eighth Circuit Court of Appeals has not addressed this issue, this Court is not without guidance. Of the seven other circuit courts that have encountered this question, six have found that the Noerr-Pennington doctrine immunizes pre-suit demand letters, so long as those demand letters are not a "sham." See Sosa v. DIRECTV, Inc., 437 F.3d 923, 935 (9th Cir.2006); Primetime 24 Joint Venture v. Nat'l Broad. Co., 219 F.3d 92, 100 (2d Cir.2000); Glass Equip. Dev., Inc. v. Besten, Inc., 174 F.3d 1337, 1343-44 (Fed.Cir.1999); McGuire Oil Co. v. Mapco, Inc., 958 F.2d 1552, 1560 (11th Cir.1992); CVD, Inc. v. Raytheon Co., 769 F.2d 842,
In Sosa, a satellite television broadcaster sent more than 100,000 letters accusing the recipients of signal theft and violations of federal criminal statutes and threatening civil legal action unless the recipients agreed to pay an unspecified sum to settle the claim. 437 F.3d at 926. Although a number of recipients claimed to be innocent of the alleged conduct, the broadcaster would not withdraw its accusations or threats of litigation. Id. at 926-27. To avoid the costs of litigation, the recipients agreed to the settlement. Id. at 927. Subsequently, some of these recipients filed a class action lawsuit, claiming that the broadcaster violated the Racketeer Influenced and Corrupt Organizations Act (RICO) through its mailing of baseless pre-suit demand letters. The district court dismissed the suit based on the Noerr-Pennington doctrine, and plaintiffs appealed. The Ninth Circuit affirmed the district court's dismissal, holding that Noerr-Pennington immunity extended to pre-litigation demand letters that were not a sham. "In determining whether the burdened conduct falls under the protection of the Petition Clause, we must give adequate `breathing space' to the right of petition." Id. at 931-32 (quoting BE & K Const. Co. v. NLRB, 536 U.S. 516, 531, 122 S.Ct. 2390, 153 L.Ed.2d 499 (2002)). "Although the letters were not themselves petitions, the Petition Clause may nevertheless preclude burdening them so as to preserve the breathing space required for the effective exercise of the rights it protects." Id. at 933. The court recognized that the Noerr-Pennington doctrine protects "conduct incidental to the prosecution" of a lawsuit and stated that "where the underlying litigation fell within the protection of the Petition Clause, such incidental conduct would also be protected." Id. at 935. "While responding to demands to settle unfounded claims is burdensome, it is likely less burdensome than if the opposing party, fearing liability in tort for demanding settlement of a possibly weak claim, proceeded directly to litigation. Moreover, the established sham exception to the Noerr-Pennington doctrine provides adequate protection against baseless claims asserted in prelitigation settlement letters." Id. at 935-36. The court concluded that restrictions on pre-suit demand letters may therefore raise substantial Petition Clause issues.
Only one circuit court has held otherwise. In Cardtoons v. Major League Baseball Players Ass'n, 208 F.3d 885 (10th Cir.2000) (en banc), the Tenth Circuit held 7-3 that the First Amendment right to petition does not provide immunity from tort claims that are triggered by a pre-litigation cease-and-desist letter communicated between private parties. The court distinguished its case, which involved tort claims, from the other circuits' cases that had involved antitrust claims. In the context of non-antitrust claims, the court stated that "[a] letter from one private party to another private party simply does not implicate the right to petition, regardless of what the letter threatens." Because the letter was not sent to the government, did not ask the government for redress of grievances, and was not known to the government prior to the lawsuit, the court found that Noerr-Pennington immunity did not apply.
The dissent in Cardtoons, however, rejected any distinction between antitrust cases and tort cases, explaining that although the doctrine arose in the antitrust context, the Supreme Court has focused its Noerr-Pennington analysis on the right to petition. Id. at 895-96 (Lucero, J., dissenting) ("Because of its foundation in the First Amendment right to petition, the Supreme Court has applied the Noerr-Pennington
The Court finds the reasoning articulated by the overwhelming majority of circuits and the dissent in Cardtoons to be persuasive. Sleep Better's argument that the Court should disregard the circuit court opinions dealing with antitrust claims is unavailing — the distinction between antitrust and non-antitrust cases is not relevant to the Noerr-Pennington analysis, given the Supreme Court's focus on the First Amendment right to petition, rather than a statutory construction of the Sherman Act. See Cal. Motor Transport Co., 404 U.S. 508, 92 S.Ct. 609; In re IBP Confidential Bus. Documents Litig., 755 F.2d at 1311 (stating that in California Motor Transport Co., the Supreme Court "explained the [Noerr] decision as resting squarely on the constitutionally guaranteed right to petition the government"); Hufsmith, 817 F.2d at 460 (holding that where Noerr-Pennington immunized conduct that formed the basis of an antitrust claim, the doctrine also extended to bar a tortious interference with contract claim based on the same conduct).
Moreover, Cardtoons simply does not apply where the statute creating the very rights to be protected provides for notice to potential litigants. See, e.g., Keystone Retaining Wall Sys., Inc. v. Rockwood Retaining Walls, Inc., No. 00-496, 2001 WL 951582, at *11 (D.Minn. Aug. 22, 2001) (distinguishing its facts from Cardtoons by noting that the patent statutes require notification of infringement prior to recovering damages, and that "the notice requirement of 35 U.S.C. § 287 put [plaintiff]'s actions within the ambit of immunized activity under the Noerr-Pennington doctrine.").
Sleep Better argues that even if Noerr-Pennington immunity applies to pre-suit demand letters outside of the antitrust context, Select Comfort's conduct is still not immunized because it was merely a sham intended to disguise anticompetitive conduct. The Court disagrees. The "sham exception" applies when a lawsuit (or threatened lawsuit) is so "objectively baseless in the sense that no reasonable litigant could realistically expect success on the merits." Prof'l Real Estate Investors, Inc. v. Columbia Pictures Indus., Inc., 508 U.S. 49, 60, 113 S.Ct. 1920, 123 L.Ed.2d 611 (1993). But "[i]f an objective litigant could conclude that the suit is reasonably calculated to elicit a favorable outcome, the suit is immunized under Noerr." Id. Even when the litigation is objectively meritless, the inquiry does not end there — the court must then "examine the litigant's subjective motivation." Id. at 60, 113 S.Ct. 1920. To defeat a claim of Noerr immunity, a party must "demonstrate[e] both the objective and the subjective components of a sham." Id. at 61, 113 S.Ct. 1920.
Sleep Better asserts that Select Comfort's threat of litigation was baseless because Select Comfort had not registered the term "Number Air Mattress," and according to Sleep Better, the term is a purely descriptive phrase that it had been using for years. For the same reasons, Sleep Better also argues that Select Comfort misrepresented its right to the "Number Air Mattress." Because Sleep Better believes that Select Comfort "was incorrect to state that Overstock's use of the term infringed [Select Comfort]'s trademark rights," it contends that the letter was merely a sham to disguise Select Comfort's anticompetitive behavior.
Again, Sleep Better's argument hinges on its assertion that Select Comfort is just flat-out wrong in its allegation of trademark infringement. But whether the demand letter is a "sham" does not depend on Select Comfort's ultimate success or failure in pursuing its trademark infringement claims. See, e.g., BE & K Const. Co., 536 U.S. at 531-32, 122 S.Ct. 2390 (considering "reasonably based but unsuccessful lawsuits" and stating that the doctrine "protect[s] petitioning whenever it is genuine, not simply when it triumphs."). Moreover, as noted above, the pleadings do not reveal Select Comfort's claim to be objectively baseless. Even if it were a losing claim, more than that is needed to prove that a threat of litigation is a "sham." As the Eighth Circuit noted,
Razorback Ready Mix Concrete Co., Inc. v. Weaver, 761 F.2d 484, 487 (8th Cir. 1985); see also id. at 488 (finding immaterial whether the defendants' motive was selfish or not). Here, there has been no indication of any such illegal or reprehensible practices or that the letter was merely a "sham" to conceal some sinister motive. Despite Sleep Better's argument that the cease-and-desist letter misrepresented Select Comfort's rights, the Court finds nothing in the pleadings to support this contention. Select Comfort did not assert that it had registered the specific phrase "Number Air Mattress" — rather, it stated only that Select Comfort believed that use of that phrase caused confusion with or dilution of its registered "Sleep Number" mark. On its face, the cease-and-desist letter articulates precisely the type of concerns that can legitimately form the basis of a lawsuit to protect federally registered trademarks.
Pre-suit demand letters are customarily used to protect intellectual property rights. These letters are "reasonably attendant" to litigation, especially where the trademark statute explicitly provides for such pre-suit notification to alleged infringers. Absent any indication that Select Comfort's cease-and-desist letter was a "sham," the Court finds that the Noerr-Pennington doctrine immunizes Select Comfort from Sleep Better's tortious interference with contract counterclaim.
Based on the files, records, and proceedings herein, and for the reasons stated above, IT IS ORDERED THAT:
1. Select Comfort's Renewed Motion to Dismiss Count II of Defendant's Answer to First Amended Answer and Counterclaim [Docket No. 54] is GRANTED.
2. Sleep Better's counterclaim of tortious interference with contract (Count II) is DISMISSED.
