JOHN M. GERRARD, District Judge.
This matter is before the Court on the plaintiffs' motion for preliminary injunction (filing 12), motion to strike affirmative defenses (filing 61), and motion to dismiss counterclaims (filing 63). The Court will deny each of the plaintiffs' motions.
The plaintiffs and the defendants are all, generally speaking, in the information business: they compile databases about consumers and businesses and they sell access to that information through various Web sites. The plaintiffs are Infogroup, Inc., infoUSA, Inc., and infoUSA Marketing, Inc. (collectively, Infogroup). Filing 23 at 1. The defendants are DatabaseUSA.com and several individual employees of DatabaseUSA.com (collectively, DatabaseUSA).
Infogroup has pled several claims for relief, but as relevant to the current motions, Infogroup's claims generally fall into three categories: (1) DatabaseUSA's alleged acquisition of information from Infogroup's proprietary database, (2) alleged false advertising regarding the extent to which DatabaseUSA's information is "verified," and (3) alleged false representations suggesting to potential customers that there is a corporate relationship between DatabaseUSA's products and Infogroup.
As mentioned above, the basis of Infogroup's business is its proprietary database. To check the security of its database, Infogroup inserts "seed data" into its listings, containing fictitious combinations of name, address, and telephone number. Filing 14-1 at 3. Seed data is disbursed through the database geographically, and per industry, on a monthly basis. Filing 32-2 at 19-20; filing 33-1 at 2. So, if Infogroup's seed data appears in the wild, in a competitor's list, Infogroup knows that the competitor has somehow gained access to Infogroup's information.
In June 2013, Infogroup found its November 2011 seed data in DatabaseUSA's products.
But DatabaseUSA's evidence pokes some holes in that theory. The information in Infogroup's database is not wholly unavailable to the world at large — to begin with, while some data may come from private sources or Infogroup's own information-gathering, a substantial amount of the data is compiled from publicly-available sources. Filing 32-2 at 5-6; filing 33-1 at 2. And, of course, because Infogroup makes money by selling information, some
DatabaseUSA's evidence also casts substantial doubt on whether any of the individual employee defendants could have obtained the data at issue. Three of the five individual defendants were terminated by Infogroup before the November 2011 seed data was inserted into the Infogroup database. Another was not hired by DatabaseUSA until after the June 2013 audit that discovered the seed data. And none of the former Infogroup employees (with the presumable exception of Gupta, who was out the door by 2008) had the necessary access to Infogroup's database to have perpetrated a heist.
None of that conclusively proves that the individual defendants were uninvolved — for instance, someone might have been secretly working for DatabaseUSA, exceeded his authorized access to Infogroup's database, or been working with someone else at Infogroup. But there is no evidence of any of that. Infogroup speculates that perhaps DatabaseUSA bought the information from someone else who "scraped" it. Filing 39 at 4. But in the end, it suffices to say this: it is certain that information from Infogroup's proprietary database ended up in DatabaseUSA's hands, and it is wholly uncertain how that happened.
Infogroup claims that DatabaseUSA is falsely representing its database entries as "verified" when they are not. Filing 23 at 9-11, 32-33. This claim, factually, is mostly derived from the presence of Infogroup's seed files in DatabaseUSA's database. DatabaseUSA promotes its database as "Triple-Verified." Filing 14-2 at 36. When Infogroup marks a listing in its database as "verified," that apparently means an Infogroup employee has confirmed that the information is accurate and current. Filing 14-1 at 2. It is far less apparent what a "verified" record means to DatabaseUSA. E.g., filing 48-1 at 2; filing 51 at 8. But there is evidence that DatabaseUSA promotes its "verification process" as involving "original sources," telephone verification, and Internet research. Filing 82-1 at 8; Ex. A.
DatabaseUSA displayed some of Infogroup's seed files as "verified" records, stating that "Verified Records have been through our verification process that includes phone verification, search engine research and business website review."
Infogroup claims that DatabaseUSA is making misleading statements, in press releases and advertisements, that falsely imply an ongoing relationship between Gupta and Infogroup, or DatabaseUSA and Infogroup. Infogroup has presented evidence of these instances:
The video was recorded at infoUSA while Gupta was in charge there, but the clips played by DatabaseUSA do not identify the company. Filing 821, Ex. A, Ex. E. DatabaseUSA contends that it has permission from Infogroup to use those clips, pursuant to a prior agreement. Filing 14-2 at 42. But DatabaseUSA's advertising also makes repeated claims to the effect that its databases are "so good, they were featured on `60 Minutes.'"
Infogroup contends that references by DatabaseUSA to Infogroup have led to confusion among consumers about the association among the various business entities. Infogroup cites these instances:
As noted above, Infogroup's audit detected its seed files in DatabaseUSA's database in June 2013. But Infogroup waited several months to file suit. See filing 1. Infogroup explains that at the time, Infogroup and Gupta were codefendants in litigation arising from events that occurred while Gupta was associated with Infogroup. Filing 40-2 at 1. Infogroup, needing Gupta's participation and cooperation with that litigation, waited until it was resolved to file suit against him. Filing 40-2 at 2; filing 78 at 45-49. But as soon as that litigation concluded, Infogroup determined to settle all family business: it initiated the present case and moved for a preliminary injunction. See filing 12. Limited discovery, an evidentiary hearing, and extensive briefing have been had on that motion.
So, there are three pending motions that require disposition: a motion for preliminary injunction (filing 12), a motion to strike (filing 61), and a motion to dismiss (filing 63). The Court will address each in turn.
At the time of the hearing on Infogroup's motion for preliminary injunction, Infogroup had narrowed its request for injunctive relief to the following proposed terms:
See filing 81 at 24. As a way of combing through the often-interwoven tangle of factual allegations and legal theories presented by the parties, the Court has focused on the proposed injunction: only those facts or claims relevant to the terms of the proposed injunction need be considered.
When deciding whether to issue a preliminary injunction, the Court weighs the four Dataphase factors: (1) the threat of irreparable harm to the movant; (2) the state of the balance between this harm and the injury that granting the injunction will inflict on other parties; (3) the probability that the movant will succeed on the merits; and (4) the public interest. Johnson v. Minneapolis Park & Recreation Bd., 729 F.3d 1094, 1098 (8th Cir.2013); (citing Dataphase Sys., Inc. v. C L Sys., Inc., 640 F.2d 109, 114 (8th Cir.1981) (en banc)). A preliminary injunction is an extraordinary remedy, and the movant bears the burden of establishing its propriety. Roudachevski v. All-American Care Centers, Inc., 648 F.3d 701, 705 (8th Cir.2011); see also H & R Block Tax Servs. LLC v. Acevedo-Lopez, 742 F.3d 1074, 1077 (8th Cir.2014).
As will be explained below in more detail with respect to Infogroup's separate claims, the Court finds that the Dataphase factors weigh against a preliminary injunction in this case. In particular, the Court is not persuaded that Infogroup has shown a likelihood of success on the merits sufficient to warrant an injunction. And the Court bases that conclusion, in part, on Infogroup's failure to show how it has been injured by DatabaseUSA's allegedly-wrongful conduct — which means, in turn, that Infogroup's showing of irreparable harm — or, indeed, any harm — is also deficient.
Infogroup's claim regarding its database rests, for purposes of the present motion, on the Nebraska Trade Secrets Act, Neb.Rev.Stat. § 87-501 et seq. See, filing 13 at 12-17; filing 81 at 21.
Filing 78 at 12.
But that poses a problem for the Court, because it is questionable whether the activity Infogroup wants enjoined is actually proscribed by the Trade Secrets Act. To prevail under the Trade Secrets Act, Infogroup would need to prove, among other things, the existence of a trade secret and DatabaseUSA's misappropriation of it. See, Neb.Rev.Stat. §§ 87-502 to 504; Richdale Development Co. v. McNeil Co., Inc., 244 Neb. 694, 508 N.W.2d 853, 859 (1993). And Infogroup's argument is strained on both points.
To begin with, under Nebraska law, a "trade secret" is defined as information that:
Neb.Rev.Stat. § 87-502(4). That definition is narrow; it means that "if an alleged trade secret is ascertainable at all by any means that are not `improper,' the would-be secret is peremptorily excluded from coverage under the [Act]." First Express Servs. Grp., Inc. v. Easter, 286 Neb. 912, 840 N.W.2d 465, 474 (2013) (emphasis in original) (citations and quotations omitted).
So, for instance, in Easter, the Nebraska Supreme Court concluded that the Trade Secrets Act did not protect the customer list of a company that sold crop insurance, which included "customers' names and their 2009 information: what crops the farmers had, what counties the crops were located in, what insurance plan the farmers bought, what percentage of coverage each farmer had, and what commission [the insurer] had earned." Id. at 469. The court explained that "simple Internet searches could identify which farmers farmed what land and could provide contact information for those farmers." Id. at 475. And the other
Id. So, because the information on the customer list was ascertainable through proper means, the court concluded as a matter of law that it was not a trade secret. Id. at 476. Similar reasoning applies here.
Nor is Infogroup likely to be able to prove that purchasing or using lists that were obtained by "webscraping" is "misappropriation" under the Trade Secrets Act. "Misappropriation" is defined as:
Neb.Rev.Stat. § 87-502(2). "Improper means," in turn, are "theft, bribery, misrepresentation, breach or inducement of a breach of a duty to maintain secrecy, or espionage through electronic or other means[.]" Neb.Rev.Stat. § 87-502(1).
Clearly, if DatabaseUSA obtained direct possession of Infogroup's database — by, for instance, working with an Infogroup employee or accessing Infogroup's system without permission, or obtaining data from someone it knew had — that would be "misappropriation" under the Trade Secrets Act. And if Infogroup's internal database contained information that was not publicly available, or perhaps was the product of Infogroup's time and effort in developing information, then the database might be a "trade secret" under Nebraska law. Cf. Easter, 840 N.W.2d at 475. But there is no evidence proving such corporate espionage here. As a result, Infogroup has made little showing of its likelihood to succeed on the merits of its Trade Secrets Act claim. A party seeking injunctive relief need not necessarily show a greater than 50 percent likelihood that it will prevail on the merits. Planned Parenthood Minnesota, North Dakota, South Dakota v. Rounds, 530 F.3d 724, 731 (8th Cir.2008). But there must be some showing, and here there is not: to the extent that Infogroup's motion is focused on "webscraping," such conduct is not unlawful under Nebraska law.
And to the extent that Infogroup's motion is more broadly directed — that is, at "acquiring data directly from Infogroup" or from someone who had — then there has been no showing of irreparable harm. To show a threat of irreparable harm, the movant must show that the harm is certain and great and of such imminence that there is a clear and present need for equitable relief. Roudachevski, 648 F.3d at 706. Stated differently, the harm "must be actual and not theoretical." Brady v. Nat'l Football League, 640 F.3d 785, 794 (8th Cir.2011). And here, the evidence does not prove that DatabaseUSA has violated the Trade Secrets Act by hacking or copying Infogroup's database in the past, much less that it intends to do so in the future. It is clear that the parties neither like nor trust one another, and that Infogroup, in particular, suspects Gupta and DatabaseUSA of all sorts of malfeasance. But for a preliminary injunction, the Court must have evidence that the complained-of misconduct is likely to occur — that is, the movant must "demonstrate that irreparable injury is likely in the absence of an injunction." Winter v. Natural Resources Defense Council, Inc., 555 U.S. 7, 22, 129 S.Ct. 365, 172 L.Ed.2d 249 (2008). Infogroup has not demonstrated such a likelihood here.
Infogroup claims that DatabaseUSA's promotion of listings as "verified" is false advertising actionable under the Lanham Act, 15 U.S.C. § 1051 et seq.
The false statement necessary to establish such a violation usually falls into one of two categories: a commercial claim that is literally false as a factual
The Court finds, first, that DatabaseUSA's description of its listings as "verified" has not been shown literally false.
To the extent that DatabaseUSA's representations might be misleading in context, the Court finds that they are, at worst, puffery. Although the Eighth Circuit has generally categorized false advertising as either literally false, or literally true or ambiguous but misleading in context, the Court of Appeals has observed that many claims will actually fall into a third category, generally known as "puffery" or "puffing." Clorox Co., 140 F.3d at 1180. Puffery is exaggerated advertising, blustering, and boasting upon which no reasonable buyer would rely and is not actionable under the Lanham Act. Id. Nonactionable puffery includes representations of product superiority that are vague or highly subjective. Id. However, false descriptions of specific or absolute characteristics of a product and specific, measurable claims of product superiority based on product testing are not puffery and are actionable. Id. Whether a database entry is "verified" is not (as the parties' disagreements here demonstrate) a specific, measurable attribute. And it should also be noted that both Infogroup and DatabaseUSA are primarily in the business of providing information about consumers and businesses to people who want to market their own goods and services — in other words, to people who are themselves sales professionals. Such an audience is unlikely to be confused by such advertising techniques. Cf., Sensient Techs. Corp. v. SensoryEffects Flavor Co., 613 F.3d 754, 766 (8th Cir.2010); WSM, Inc. v. Hilton, 724 F.2d 1320, 1330 (8th Cir.1984). No reasonable buyer of such services would expect verification to be foolproof.
And, even if DatabaseUSA's claim of "verified" listings was misleading in context, there is nothing to show that anyone was misled. Where a commercial claim is not literally false but is misleading in context, proof that the advertising actually conveyed the implied message and thereby deceived a significant portion of the recipients becomes critical. Clorox Co., 140 F.3d at 1182. If a plaintiff does not prove the claim to be literally false, he must prove that it is deceptive or misleading, which depends on the message that is conveyed to consumers. Id. at 1182-83. Unless a commercial claim is literally false, or a competitor acted willfully with intent to deceive or in bad faith, a party seeking relief under this section of the Lanham Act bears the ultimate burden of proving actual deception by using reliable consumer or market research. Id. at 1183.
There is no evidence in the record of any customer of DatabaseUSA who claims to
Because the Court finds that DatabaseUSA's use of the word "verified" is neither literally false, nor misleading in context, and that no tendency to deceive or actual deception has been shown, the Court finds that Infogroup has not shown a likelihood of succeeding on its claim. But Infogroup's claim has another problem: Infogroup has not shown that it has been injured or is likely to be injured by DatabaseUSA's actions. This has a number of implications. It means that another element of Infogroup's false advertising claim is missing, further diminishing its likelihood of success on the merits. It may even mean that Infogroup lacks standing to prosecute the claim. And, of course, absent evidence of an injury, much less an irreparable one, Infogroup cannot obtain an injunction.
As noted above, a false advertising claim under the Lanham Act requires that the plaintiff has been or is likely to be injured as a result of the false statement, either by direct diversion of sales from itself to defendant or by a loss of goodwill associated with its products. Buetow, 650 F.3d at 1182; Clorox Co., 140 F.3d at 1180. The Court finds no evidence to suggest that this is the case. And failure to show such injury may be a more fundamental defect in Infogroup's case: in Lexmark Int'l, Inc. v. Static Control Components, Inc., the Supreme Court explained that a plaintiff's right to sue under a particular statute depends on whether the plaintiff comes within the "zone of interests" protected by the law involved, and that the statutory cause of action is limited to plaintiffs whose injuries are proximately caused by violations of the statute. ___ U.S. ___, 134 S.Ct. 1377, 1387-88, 188 L.Ed.2d 392 (2014). Specifically, to come within the zone of interests for false advertising under the Lanham Act, the plaintiff must allege an injury to a commercial interest in reputation or sales. Id. at 1390. And to satisfy the proximate cause requirement, the plaintiff must show economic or reputational injury flowing directly from the deception wrought by the defendant's advertising, "and that that occurs when deception of consumers causes them to withhold trade from the plaintiff." Id. at 1391 (emphasis supplied).
There is nothing here that persuades the Court that Infogroup has been, or is likely to be, injured by DatabaseUSA's description of its occasionally-inaccurate data as "verified." Without that showing, the Court can find neither a likelihood of success on the merits of this claim, nor the irreparable harm that is a necessary prerequisite to a preliminary injunction. The Court may not issue a preliminary injunction based only on a possibility of irreparable harm. Winter, 555 U.S. at 22, 129 S.Ct. 365.
So, the Court finds neither a likelihood of success on the merits nor a likelihood of irreparable harm and, as above, that much would be dispositive. See, Barrett, 705 F.3d at 320; Dataphase, 640 F.2d at 114 n. 9. But for the sake of completeness, the Court also finds that the public interest is not implicated by this claim, and that the balance of harms tips significantly in DatabaseUSA's favor: Infogroup has not shown a likelihood of harm, but Infogroup's proposed injunction would undoubtedly be disruptive to DatabaseUSA's business. Infogroup has not established
There are two specific provisions of the Lanham Act at issue here.
Mark infringement requires proof that the plaintiff has ownership or rights in the mark and that the defendant has used the mark in commerce, in connection with goods or services, in a manner likely to cause consumer confusion as to the source or sponsorship of the goods or services. Cmty. of Christ Copyright Corp. v. Devon Park Restoration Branch of Jesus Christ's Church, 634 F.3d 1005, 1009 (8th Cir.2011). In evaluating a likelihood of confusion between a mark and an allegedly-infringing mark, courts generally consider such factors as the strength of the owner's mark, the similarity between the marks, the degree to which the allegedly-infringing service competes with the mark-owner's service, the alleged infringer's intent to confuse the public, and evidence of actual confusion. See Devon Park, 634 F.3d at 1009. No one factor controls, and because the inquiry is inherently case-specific, different factors may be entitled to more weight in different cases. Id.
Of course, at this point, the degree of similarity is not a relevant criterion, because only Infogroup's marks are at issue — Infogroup's theory is that DatabaseUSA is using Infogroup's marks in a manner that could confuse the public.
The Ninth Circuit has said that whether a defendant is entitled to nominative fair use depends on whether the product or service is readily identifiable without use of the mark, whether only so much of the mark is used as is reasonably necessary to identify the product, and whether the user has done anything that would, in conjunction with the mark, suggest sponsorship or endorsement by the trademark holder. New Kids on the Block v. News Am. Publ'g, Inc., 971 F.2d 302, 308 (9th Cir.1992). In other words, the defendant's conduct or language must reflect the true and accurate relationship between plaintiff and defendant's products or services. Century 21 Real Estate Corp. v. Lendingtree, Inc., 425 F.3d 211, 222 (3d Cir.2005). The Eighth Circuit has not discussed the doctrine, and the Ninth Circuit's approach has not been universally adopted, but the broad parameters of the doctrine are consistent. See Dwyer Instruments, Inc. v. Sensocon, Inc., 873 F.Supp.2d 1015, 1030 (N.D.Ind.2012); see also Bd. of Supervisors v. Smack Apparel Co., 550 F.3d 465, 489 (5th Cir.2008); cf. Swarovski Aktiengesellschaft v. Building No. 19, Inc., 704 F.3d 44, 49-53 (1st Cir. 2013); Rosetta Stone Ltd. v. Google, Inc., 676 F.3d 144, 154 (4th Cir.2012); Tiffany (NJ) v. eBay, Inc., 600 F.3d 93, 102 (2d Cir.2010).
And in this case, Gupta's identification of himself as the founder of Infogroup and its associated entities is accurate — and Gupta is entitled to accurately describe his experience in the industry when marketing his company's products and services.
Granted, some of Gupta's descriptions come very close to the line.
Nor, the Court finds, has Infogroup sufficiently demonstrated actual confusion on the part of consumers. Infogroup's evidence of confused consumers is, again, anecdotal at best. The only instance of confusion that was clearly tied to any of Gupta's representations was the letter sent to a "loyal customer" which led the customer to call Infogroup and ask about the mailing. Filing 14-1 at 8-9. But the precise nature of the customer's inquiry is not reflected in the record. See filing 14-1 at 8-9; Hr'g Ex. 2; see also Duluth News-Tribune, Inc. v. Mesabi Publ'g Co., 84 F.3d 1093, 1098 (8th Cir.1996) ("vague evidence of misdirected phone calls and mail" was "hearsay of a particularly unreliable nature given the lack of an opportunity for cross-examination of the caller or sender regarding the reason for the `confusion'"). And even then, the fact that the customer called to ask "indicates a distinction in the mind of the questioner, rather than confusion." Id.
The evidence does not directly connect the other instances of purported confusion proffered by Infogroup to any conduct by Gupta or DatabaseUSA. The Court finds that evidence "to be de minimis and to show inattentiveness on the part of the caller or sender rather than actual confusion." Id. The various Infogroup and DatabaseUSA entities do similar business, and the prefixes "info-" and "data-" have similar connotations and can only be conjoined in so many ways. To be candid, it would be surprising if someone hadn't confused them at some point, particularly when at least some customers apparently use both businesses. Ask enough people and you could probably find someone who thought infofree.com and Infowars.com were somehow associated.
The Court does not find the evidence offered by Infogroup to be persuasive evidence of actual confusion, much less confusion attributable to DatabaseUSA's use of Infogroup's marks. The Eighth Circuit has said, for purposes of summary judgment, that "even several isolated incidents of actual confusion" may be "insufficient to establish a genuine issue of material fact as to the likelihood of confusion." Id. Evidence that could not prevent summary
Unrelated to Gupta's résumé, Infogroup argues that DatabaseUSA's use of search engine ad placement services, triggered by Infogroup's marks, is somehow infringing. Filing 81 at 6-7. The Court is unpersuaded. Although the use of such targeted advertising can be misused, it is generally understood that such tactics can be deployed consistently with the Lanham Act. See, CollegeSource, Inc. v. AcademyOne, Inc., 597 Fed.Appx. 116, 130-31 (3d Cir. 2015); 1-800-Contacts, Inc. v. Lens.com, Inc., 722 F.3d 1229, 1242-45 (10th Cir. 2013); Network Automation, Inc. v. Advanced Sys. Concepts, Inc., 638 F.3d 1137, 1148-54 (9th Cir.2011); compare N. Am. Med. Corp. v. Axiom Worldwide, Inc., 522 F.3d 1211, 1222-23 (11th Cir.2008) (advertisers created likelihood of confusion by using competitors Web address and trademarks in their own advertisements). The advertisements at issue here, as displayed by Infogroup's exhibits, do not use Infogroup's marks in the advertisement itself, and each is either separated from the search results or plainly labeled as a sponsored advertisement. See, filing 82-1 at 25; filing 82-2 at 5, 7. As the Tenth Circuit explained:
Lens.com, 722 F.3d at 1245. And that could explain why Infogroup has presented no evidence to suggest that anyone has actually been confused by the advertisements, or is likely to be. Having considered "(1) the strength of the mark; (2) the evidence of actual confusion; (3) the type of goods and degree of care likely to be exercised by the purchaser; and (4) the labeling and appearance of the advertisements and the surrounding context on the screen displaying the results page," the Court finds that Infogroup has not shown a likelihood of success under the Lanham Act based on DatabaseUSA's search engine advertisements. See Network Automation, 638 F.3d at 1154.
One final note: Infogroup also contends that the "60 Minutes" references, and description of DatabaseUSA as having been creating databases "since 1972," somehow support its false association claim. Filing 81 at 16-17. But neither the "60 Minutes" excerpts, nor the slogan, make any direct reference to Infogroup. Because Database's conduct in this regard does not actually make use of Infogroup's marks, it does not support a claim under § 1125(a)(1)(A). Perhaps they could be false advertisements — but, as noted above, Infogroup has not asked the Court to enjoin them as such, so that issue is not presented by the motion before the Court.
Infogroup also contends that by implying a connection between DatabaseUSA and Infogroup, DatabaseUSA is falsely advertising its services. As discussed above, a false advertising claim requires proof of a false statement of fact in a commercial advertisement that had a tendency to deceive, was material to the purchasing decision, and injured the plaintiff. See, Buetow, 650 F.3d at 1182; Clorox Co., 140 F.3d at 1180.
For the reasons explained above, the Court finds that Infogroup has shown neither a likelihood of success on the merits, nor a likelihood of irreparable injury, for its claims based on allegedly-false representations about the association between Infogroup and DatabaseUSA. That is enough to deny Infogroup's motion for preliminary injunction. See, Barrett, 705 F.3d at 320; Dataphase, 640 F.2d at 114 n. 9. But for the sake of completeness, the remaining Dataphase factors do not help Infogroup. The public interest is again not implicated, except to the extent that it might favor permitting Gupta to make truthful statements about his experience in the field, so that consumers can make fully-informed choices. The balance of harms does not swing as far in DatabaseUSA's favor on these claims, because unlike with the "verified" data, it would not be as disruptive to DatabaseUSA's business operations (as opposed to its marketing) to preclude its use of Infogroup's marks. But because Infogroup has not shown how it would be injured, the balance of harms still favors DatabaseUSA.
In sum, the Court finds when the Dataphase factors are applied to each of Infogroup's claims, Infogroup has not met its burden of establishing the propriety of preliminary injunctive relief. Infogroup's motion for preliminary injunction (filing 12) will be denied.
Infogroup moves the Court to strike DatabaseUSA's affirmative defenses pursuant to Fed.R.Civ.P. 12(f). Filing 61. Infogroup complains that DatabaseUSA has failed to allege facts supporting its affirmative defenses, and that some fail as a matter of law. Filing 61.
But as a preliminary matter, the Court must address the appropriate standard for such a motion. Specifically, the question is whether the elevated pleading requirements of Fed.R.Civ.P. 8(a), as explicated in Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) and Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007), also apply to affirmative defenses stated pursuant to Rule 8(c)(1). Neither the Supreme Court nor any circuit court has considered the question, and district courts are sharply divided.
To begin with, the Eighth Circuit's law is clear regarding motions to strike affirmative defenses: while the Court enjoys "liberal discretion" to strike pleadings under Fed.R.Civ.P. 12(f), it is "an extreme and disfavored measure." BJC Health Sys. v. Columbia Cas. Co., 478 F.3d 908, 917 (8th Cir.2007); Stanbury Law Firm v. I.R.S., 221 F.3d 1059, 1063 (8th Cir.2000). A motion to strike a defense will be denied if the defense is sufficient as a matter of law or if it fairly presents a question of law or fact which the Court ought to hear. Lunsford v. United States, 570 F.2d 221, 229 (8th Cir. 1977). And while defenses must be asserted in a responsive pleading, they need not be articulated with any rigorous degree of specificity, and may be sufficiently raised for purposes of Rule 8 by their bare assertion. See Zotos v. Lindbergh Sch. Dist., 121 F.3d 356, 361 (8th Cir.1997).
Of course, Zotos precedes the Supreme Court's decisions in Iqbal and Twombly. The Eighth Circuit, if presented with the question, might well conclude that Zotos has been abrogated by Iqbal and Twombly (although it is unlikely to do so, for the reasons explained below). But Zotos is squarely on point, and Iqbal and Twombly are not, which means Zotos remains the law of this Circuit. Strauss v. Centennial Precious Metals, Inc., 291 F.R.D. 338, 342-43 (D.Neb.2013); Bank of Beaver City v. Sw. Feeders, L.L.C., No. 4:10-CV-2309, 2011 WL 4632887, at *5-8 (D.Neb. Oct. 4, 2011). As far as this Court is concerned, it is the Eighth Circuit's prerogative to overrule its own decisions. See, Rodriguez de Quijas v. Shearson/Am. Express, 490 U.S. 477, 484, 109 S.Ct. 1917, 104 L.Ed.2d 526 (1989); Hood v. United States, 342 F.3d 861, 864 (8th Cir.2003); Okruhlik v. Univ. of Ark., 255 F.3d 615, 622 (8th Cir.2001).
But even if faced with an open question, the Court would hold that the Iqbal/Twombly standard does not apply. To plead a claim for relief, Rule 8(a)(2) requires, as relevant, a "short and plain statement of the claim showing that the pleader is entitled to relief." This, the Supreme Court explained in Twombly, "requires a `showing,' rather than a blanket assertion, of entitlement to relief." 550 U.S. at 555 n. 3, 127 S.Ct. 1955. The Supreme Court's holding in Twombly, and its iteration of that standard in Iqbal, were expressly grounded on Rule 8(a)(2)'s language requiring a "showing" of the pleader's entitlement to relief. See, e.g., Iqbal, 556 U.S. at 679, 129 S.Ct. 1937; Twombly, 550 U.S. at 556-56, 127 S.Ct. 1955. But the terms of Rule 8(c)(1) require no such "showing": rather, a party is only required to "affirmatively state any avoidance or affirmative relief." Several district courts have relied on that distinction in concluding that the reasoning of Iqbal and Twombly does not apply with equal force to Rule 8(c). See, Phelps v. City of Parma, Idaho, No. 14-cv-85, 2015 WL 893112, at *2 n. 2 (D.Idaho Mar. 2, 2015); Sibley v. Choice Hotels Int'l, Inc., 304 F.R.D. 125, 132 (E.D.N.Y.2015); Fed. Trade Comm'n v. AMG Servs., Inc., No. 2:12-CV-536, 2014 WL 5454170, at *5-6 (D.Nev. Oct. 27, 2014); Hansen v. R.I.'s Only 24 Hour Truck & Auto Plaza, Inc., 287 F.R.D. 119, 122 (D.Mass.2012); Kohler v. Staples the Office Superstore, LLC, 291 F.R.D. 464, 468-69 (S.D.Cal.2013); Bank of Beaver City, 2011 WL 4632887, at *6-7; Falley v. Friends Univ., 787 F.Supp.2d 1255, 1258 (D.Kan.2011); Lane v. Page, 272 F.R.D. 581, 591-94 (D.N.M.2011); but see, e.g., Dodson v. Strategic Rests. Acquisition Co. II, LLC, 289 F.R.D. 595, 600 (E.D.Cal.2013).
It is, of course, not the Court's place to question whether Iqbal and Twombly are themselves sound policy, or consistent with the plain language of the Federal Rules of Civil Procedure — but the Court need not extend them further absent clear authority compelling that conclusion. Whatever its faults, the Iqbal/Twombly standard, when applied to claims for relief, at least helps resolve cases. Applying that standard to affirmative defenses, however, merely invites motions to strike — and while "[m]otions to dismiss help resolve cases; motions to strike, in most cases, waste everyone's time." Lane, 272 F.R.D. at 586. In sum, neither the language of Rule 8 nor basic principles of fairness and practicality weigh in favor of applying the Iqbal/Twombly standard to affirmative defenses, and the Court declines to do so.
Infogroup contends, in the alternative, that the Court should strike at least some of DatabaseUSA's affirmative defenses regardless of whether the Iqbal/Twombly standard is applied. Infogroup complains that some of the affirmative defenses are "bare bones" conclusions insufficient to provide notice, and that others are not actually affirmative defenses. Filing 62 at 911. The Court is not persuaded.
As noted above, striking an affirmative defense is "an extreme and disfavored measure." BJC Health Sys., 478 F.3d at 917; Stanbury Law Firm, 221 F.3d at 1063. Motions to strike are often considered "time wasters," and should be denied unless the challenged allegations have no possible relation or logical connection to the subject matter of the controversy. Lane, 272 F.R.D. at 587 (citing 5C C. Wright and A. Miller, Fed. Prac. & Proc. Civ. § 1382 (3d ed.2004)); see Lunsford, 570 F.2d at 229. And Infogroup does not explain how it is prejudiced by the alleged defects in DatabaseUSA's pleading.
Nor is the Court cited to any authority for Infogroup's repeated demands that the Court strike DatabaseUSA's affirmative defenses "with prejudice." E.g. filing 62 at 1. The remedy for striking defenses at this stage of the litigation is often to permit amendment later. Falley, 787 F.Supp.2d at 1259. And leave to amend a pleading to add a defense is to be freely given — it should be denied "only where it will result in `undue delay, bad faith or dilatory motive on the part of the movant, repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to the opposing party by virtue of allowance of the amendment, [or] futility of amendment.'" Dennis v. Dillard Dep't Stores, Inc., 207 F.3d 523, 525-26 (8th Cir.2000); see also Joseph v. Allen, 712 F.3d 1222, 1226 n. 3 (8th Cir.2013) (amendment adding affirmative defense should be allowed with liberality, even after motion for summary judgment has been filed). The intent of Rule 12(f) is to "minimize delay, prejudice, and confusion" — not create it by establishing a cycle of pleading and striking and repleading. See Falley, 787 F.Supp.2d at 1259 (citation and quotation omitted). The Court is not inclined, at this point in the proceedings, to accept Infogroup's apparent invitation to take a blue pencil to DatabaseUSA's answer, so Infogroup's motion to strike (filing 61) will be denied.
Infogroup has moved to dismiss two of DatabaseUSA's counterclaims — specifically, its tortious interference and unjust enrichment claims. See filing 63. Infogroup also, in its motion to dismiss, moves the Court to strike what it calls "undisclosed facts" cited in support of the counterclaims. See filing 63.
To survive a motion to dismiss for failure to state a claim, a pleading must set forth a short and plain statement of the claim showing that the pleader is entitled to relief. Rule 8(a)(2). This does not require detailed factual allegations, but it demands more than an unadorned accusation. Iqbal, 556 U.S. at 678, 129 S.Ct. 1937. The pleading need not contain detailed factual allegations, but must provide more than labels and conclusions; a formulaic recitation of the elements of a cause of action will not suffice. Twombly, 550 U.S. at 555, 127 S.Ct. 1955. For the purposes of a motion to dismiss a court must take all of the factual allegations in the pleading as true, but is not bound to accept as true a legal conclusion couched as a factual allegation. Id. And the pleading must also contain sufficient factual matter, accepted as true, to state a claim for relief
DatabaseUSA alleges that Infogroup knows that customers come to DatabaseUSA's Web sites looking for information about its products and services, and that Infogroup made false statements about DatabaseUSA's products and services for the purpose of interfering with its business expectancies. Filing 60 at 40. Infogroup asserts that this claim fails because DatabaseUSA has alleged neither that the alleged interference caused any harm, nor that it was damaged. Filing 64 at 5. DatabaseUSA, Infogroup argues, "do[es] not identify any prospective customers who reviewed any alleged false statements made by plaintiffs about any products, or that any such customers declined to purchase defendants' services because of any false statements. Nor do[es DatabaseUSA] allege any facts from which this conclusion can reasonably be inferred." Filing 64 at 5. In response, DatabaseUSA directs the Court to allegations found elsewhere in the answer, and incorporated by reference into its tortious interference counterclaim: that agents of Infogroup left false reviews on DatabaseUSA's Web sites for the purpose of harming its reputation. Filing 60 at 34; filing 72 at 3.
To succeed on a claim for tortious interference with a business relationship or expectancy, a plaintiff must prove (1) the existence of a valid business relationship or expectancy, (2) knowledge by the interferer of the relationship or expectancy, (3) an unjustified intentional act of interference on the part of the interferer, (4) proof that the interference caused the harm sustained, and (5) damage to the party whose relationship or expectancy was disrupted. Steinhausen v. HomeServices of Neb., Inc., 289 Neb. 927, 857 N.W.2d 816, 831 (2015). The interference must impact a valid business relationship or expectancy, and the relationship or expectancy interfered with must belong to the party asserting the claim. Id.
Although Nebraska law is not fully developed on this point, it is true that proving a business expectancy "valid" will generally require proof that there was a reasonable likelihood or probability of a business relationship. See, e.g., Lucas v. Monroe Cnty., 203 F.3d 964, 978 (6th Cir. 2000) (applying Michigan law); Gieseke ex rel. Diversified Water Diversion, Inc. v. IDCA, Inc., 844 N.W.2d 210, 221-22 (Minn. 2014). And this may require proof of a potential relationship with a particular party, or at least a class of parties. See, Lucas, 203 F.3d at 978; Dunn v. Air Line Pilots Ass'n, 193 F.3d 1185, 1191 (11th Cir.1999) (applying Florida law); Gieseke, 844 N.W.2d at 222. But this case is at the pleading stage, not the proving stage. The Court finds that DatabaseUSA's pleading sufficiently alleges the existence of a group of potential customers who may have been diverted from doing business with it by a wrongful act of Infogroup. See TYR Sport Inc. v. Warnaco Swimwear, Inc., 679 F.Supp.2d 1120, 1139-40 (C.D.Cal.2009) (citing Cook v. Winfrey, 141 F.3d 322, 328 (7th Cir.1998)); see also Am. Home Assurance Co. v. Greater Omaha Packing Co., No. 8:11-CV-270, 2012 WL 2061941, at *2 (D.Neb.2012). Accordingly, the Court will not dismiss DatabaseUSA's tortious interference claim.
Infogroup also moves to dismiss DatabaseUSA's unjust enrichment claim. Filing 64 at 6-7. DatabaseUSA alleges that Infogroup has received "substantial financial benefit" as a result of "tortious and improper conduct, including but not limited to unfair competition and deceptive trade practices." Filing 60 at 40. So, DatabaseUSA asserts that it would be "inequitable
To recover under a theory of unjust enrichment in Nebraska, one must allege facts that the law of restitution would recognize as unjust enrichment. City of Scottsbluff v. Waste Connections of Nebraska, 282 Neb. 848, 809 N.W.2d 725, 743 (2011). Restitution constitutes an independent basis of liability comparable to a liability in contract or tort. Id. Unjust enrichment may result, as Infogroup contends, from a transaction that the law treats as ineffective to work a conclusive alteration in ownership rights. Id. But there may also be cases in which the remedy for unjust enrichment gives the plaintiff something, such as the defendant's wrongful gain, that the plaintiff did not previously possess. See Restatement (Third) of Restitution and Unjust Enrichment § 1, cmt. a (2011). As the Restatement (Third) explains, the "inherent flexibility" of the concept of unjust enrichment means that
Id. But the Restatement — and the Nebraska Supreme Court — reject the view that "restitution" is limited to a remedy. Id., cmt. e(3); see Waste Connections, 809 N.W.2d at 743. Instead, the Restatement explains, while "a claim for restitution or `disgorgement' of the profits of conscious wrongdoing ... normally incorporates as its predicate the substantive elements of a cause of action for tort or other breach of duty[,]" the Restatement
Id. (citation omitted).
DatabaseUSA's allegations fall within the scope of unjust enrichment for which restitution may be available under the Restatement (Third): "A person who obtains a benefit by conscious interference with a claimant's legally protected interests (or in consequence of such interference by another) is liable in restitution as necessary to prevent unjust enrichment...." Restatement (Third) of Restitution and Unjust Enrichment § 44. "Conscious interference with property rights of any kind, with contractual expectations, or with other interests to which the law of torts extends a similar protection, will support
The Nebraska Supreme Court has adopted the Restatement (Third) view of unjust enrichment. See, United Gen. Title Ins. Co. v. Malone, 289 Neb. 1006, 858 N.W.2d 196, 232-13 (2015); Waste Connections, 809 N.W.2d at 738-48. Accordingly, the Court finds that DatabaseUSA has adequately stated a claim for unjust enrichment under Nebraska law. Infogroup's motion to dismiss will be denied.
Infogroup also complains about a handful of references in the answer to "additional facts" that are confidential, and thus unpled, but which will also (according to DatabaseUSA) support some of its counterclaims. Filing 60 at 37-39; filing 64 at 1. Infogroup insists that these allegations should be stricken "with prejudice" and that DatabaseUSA should be precluded from relying on them, or, in the alternative, that the Court should order DatabaseUSA to amend its answer. Filing 64 at 1-2.
This matter is easily disposed of. The Court has already explained its view on striking "with prejudice" and will not revisit it. Nor is the complained-of language prejudicial to Infogroup: it is mere surplusage, which does not affect the issues. Bd. of Comm'rs of Lake Cnty. v. Keene Five-Cents Sav. Bank, 108 F. 505, 515 (8th Cir.1901); see Moran v. Judson, 96 F.2d 551, 552-53 (D.C.Cir.1938); cf. United States v. DeRosier, 501 F.3d 888, 897 (8th Cir.2007). Infogroup does not contend that the relevant claims are not well stated without them. See Bd. of Comm'rs, 108 F. at 515. The Court could strike such allegations. Cf. DeRosier, 501 F.3d at 897. But the Court sees no need to do so.
For the reasons explained above, Infogroup's various motions are denied. One final matter: the Court has, in reaching its conclusions, relied upon and described some of the contents of documents that were filed as restricted-access pursuant to NEGenR 1.3(a)(1)(B)(ii) and NECivR 5.3(c) and the protective order agreed to by the parties. Filing 29. However, it has not always been clear to the Court what information in those documents was intended to be confidential.
The Court has endeavored to avoid including information in this memorandum and order that would require it to be restricted as well. The Court has done so because under the common law, judicial records and documents have been historically considered to be open to inspection by the public. In re Search Warrant for Secretarial Area Outside Office of Gunn, 855 F.2d 569, 573 (8th Cir.1988); see also Nixon v. Warner Commc'ns, 435 U.S. 589, 597, 98 S.Ct. 1306, 55 L.Ed.2d 570 (1978). Accordingly, there is a common-law presumption in favor of public access to judicial records.
But records or parts of records are sometimes sealed for good reasons, including the protection of state secrets, trade secrets, and informers; and to protect the privacy of children, rape victims, and other particularly vulnerable parties or witnesses. See Doe v. Blue Cross & Blue Shield United of Wisc., 112 F.3d 869, 872 (7th Cir.1997); see also NECivR 5.3(b). So, when determining whether access to a document should be restricted, the Court must consider the degree to which sealing ;a judicial record would interfere with the interests served by the common-law right of access and balance that interference against the interests served by maintaining confidentiality of the information sought to be sealed. IDT Corp., 709 F.3d at 1222.
As noted, the Court is not aware of anything in this memorandum and order that implicates confidentiality to the extent necessary to overcome the strong presumption of public access to a court order. But from an excess of caution, the Court will provisionally restrict access to this memorandum and order to attorneys of record and court users. That restriction will be lifted on April 3, 2015, in the absence of a persuasive objection from a party.
IT IS ORDERED:
