WOLFSON, United States District Judge:
This matter comes before the Court on a motion for judgment on the pleadings under Federal Rule of Civil Procedure 12(c) filed by Plaintiff New Jersey Physicians United Reciprocal Exchange ("NJ PURE"), and Third-party Defendants Joanna Elias ("Elias") and Eric Poe ("Poe") (collectively "Third-Party Defendants"), seeking dismissal of the First Amended Counterclaim, Third Party Complaint and Demand for Trial by Jury ("Counterclaim") filed by Defendant/Thirdparty Plaintiff Whitboy, Inc. d/b/a Boynton and Boynton's ("Boynton").
For the following reasons, NJ PURE's motion to dismiss is denied in part and granted in part, and Third-Party Defendants' motion to dismiss is granted. Specifically, NJ PURE's motion to dismiss Counts I and II of the counterclaim is denied. NJ PURE's motion to dismiss Count III of the counterclaim is denied with respect to Boynton's claim of tortious interference with its contract with OB/ GYN of North Jersey. NJ PURE's motion
The following facts are drawn from Boynton's counterclaim and third party complaint, the allegations of which are assumed as true for the purposes of this motion.
Boynton is an insurance agent that, among other things, brokers the sale of medical malpractice insurance policies to physicians and other individuals engaged in the provision of healthcare. Counterclaim ¶¶ 1, 5, 13. Plaintiff NJ PURE is a "reciprocal inter-insurance exchange," that is engaged in the "direct sale of medical malpractice insurance policies that it produces itself to physicians and other individuals and institutions engaged in the provision of healthcare." Counterclaim ¶¶ 2, 6, 14. Third-Party Defendants Elias and Poe were employees of NJ PURE during the relevant time period asserted in the Counterclaim. Counterclaim ¶¶ 3, 16.
Boynton alleges it is in direct competition with NJ PURE because NJ PURE markets its medical malpractice insurance policies directly to potential insureds, without the use of a broker. Counterclaim ¶¶ 15-17. Boynton further alleges NJ PURE made false and misleading statements that NJ PURE was rated favorably by A.M. Best Company ("A.M.Best")
NJ PURE brought suit against Boynton and Defendant Kevin Byrne ("Byrne") on September 7, 2012, and filed an amended complaint on September 21, 2012, and a second amended complaint on May 17, 2013, alleging Lanham Act violations and common law claims for trade libel, libel, libel per se, slander, slander per se, tortious interference with prospective contractual relations, and unfair competition under the Insurance Trade Practices Act ("ITPA"), N.J.S.A. 17:29B-4(2)-(3).
On July 17, 2013, Boynton and Byrne moved to dismiss NJ PURE's claims for violation of the Lanham Act, libel, slander, and unfair competition under the ITPA. On January 28, 2014, the Court dismissed the Complaint only as to the claim of unfair competition under the ITPA, and denied Boynton's motion to dismiss the other counts.
On February 28, 2014, Boynton filed a counterclaim against NJ PURE, and a third-party complaint against Poe and Elias, alleging that Boynton suffered economic injury as a result of NJ PURE's false statements that NJ PURE was favorably rated by A.M. Best. On March 21, 2014, NJ PURE and Third-Party Defendants filed a motion to dismiss Boynton's counterclaim and third-party complaint.
On April 21, 2014, Boynton filed a motion for leave to amend the counterclaim and third-party complaint. On September 29, 2014, the Court ordered Boynton's counterclaims and third-party complaint stricken, and referred Boynton's motion to amend to Magistrate Judge Bongiovanni. On November 25, 2014, Magistrate Judge Bongiovanni granted Boynton's motion to amend its counterclaim and third-party complaint.
On December 10, 2014, Boynton filed its first amended counterclaim and third-party complaint, in which Boynton asserted four causes of action (in three counts) against NJ PURE: (1) Unfair Competition in violation of the Lanham Act, 15 U.S.C.A. § 1125(a)(1)(A); (2) False promotion in violation of the Lanham Act, 15 U.S.C.A. § 1125(a)(1)(B); and (3) tortious interference with (i) contract and (ii) prospective economic advantage. Boynton alleges identical counts against Elias and Poe in its third-party complaint. On April 23, 2015, NJ PURE and Third-Party Defendants answered the counterclaim and third-party complaint. On May 29, 2015, NJ PURE and Third-Party Defendants filed the instant motion to dismiss the counterclaim and third-party complaint pursuant to Federal Rule of Civil Procedure 12(c).
Rule 12(c) of the Federal Rules of Civil Procedure allows a party to move for judgment on the pleadings "after the pleadings are closed but within such time as not to delay trial." Fed.R.Civ.P. 12(c). The applicable standard on a motion for judgment on the pleadings is similar to that applied on a motion to dismiss pursuant to Rule 12(b)(6). Spruill v. Gillis, 372 F.3d 218, 223 n. 2 (3d Cir.2004). When reviewing a motion made pursuant to Rule 12(c), a court must take all allegations in the relevant pleading as true, viewed in the light most favorable to the non-moving party. Gomez v. Toledo, 446 U.S. 635, 636 n. 3, 100 S.Ct. 1920, 64 L.Ed.2d 572 (1980); Mele v. Fed. Reserve Bank of N.Y., 359 F.3d 251, 253 (3d Cir.2004). All reasonable inferences must be made in the non-moving party's favor. See In re Ins. Brokerage Antitrust Litig., 618 F.3d 300, 314 (3d Cir.2010). "The motion should not be
The Third Circuit has required a three-step analysis to meet the plausibility standard mandated by Twombly and Iqbal. First, the court should "outline the elements a plaintiff must plead to a state a claim for relief." Bistrian v. Levi, 696 F.3d 352, 365 (3d Cir.2012). Next, the court should "peel away" legal conclusions that are not entitled to the assumption of truth. Id.; see also Iqbal, 556 U.S. at 678-79, 129 S.Ct. 1937 ("While legal conclusions can provide the framework of a complaint, they must be supported by factual allegations."). It is well-established that a proper complaint "requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Twombly, 550 U.S. at 555, 127 S.Ct. 1955 (internal quotations and citations omitted). Finally, the court should assume the veracity of all well-pled factual allegations, and then "determine whether they plausibly give rise to an entitlement to relief." Bistrian, 696 F.3d at 365 (quoting Iqbal, 556 U.S. at 679, 129 S.Ct. 1937). A claim is facially plausible when there is sufficient factual content to draw a "reasonable inference that the defendant is liable for the misconduct alleged." Iqbal, 556 U.S. at 678, 129 S.Ct. 1937. The third step of the analysis is "a context-specific task that requires the reviewing court to draw on its judicial experience and common sense." Id. at 679, 129 S.Ct. 1937. Judgment on the pleadings pursuant to Rule 12(c) will be granted where the moving party clearly establishes there are no material issues of fact to be resolved, and that he or she is entitled to judgment as a matter of law. DiCarlo v. St. Mary Hosp., 530 F.3d 255, 259 (3d Cir.2008).
Boynton asserts two different causes of action under the Lanham Act: Count I, "unfair competition" under 15 U.S.C.A. § 1125(a)(1)(A), and Count II, "false promotion" under 15 U.S.C.A. § 1125(a)(1)(B).
As a preliminary matter, the Court notes that the parties have expended considerable briefing on the issue of "prudential standing" under the Lanham Act, focusing specifically on the multi-factor balancing test articulated by the Third Circuit in Conte Bros. Auto. v. Quaker State-Slick 50, Inc., 165 F.3d 221 (3d Cir. 1998).
In Lexmark, the Supreme Court held that, rather than employ the five-factor Conte test to determine "prudential" standing (a label the Court described as "misleading," 134 S.Ct. at 1386), or other tests utilized by different circuits,
Here, Boynton alleges in its counterclaim that it suffered an economic injury — loss of a customer — which was proximately caused by NJ PURE's misrepresentation of its rating by A.M. Best:
Counterclaim ¶¶ 39-40. Based on these allegations, the Court finds that Boynton has standing to pursue its Lanham Act claims against NJ PURE Boynton has alleged an injury that comes within the "zone of interests" protected by the Lanham Act — its commercial interest in sales to OB/GYN.
NJ PURE argues that Boynton cannot recover monetary damages because it does not allege an "actual injury" under the Lanham Act. A plaintiff seeking only injunctive relief to stop violations of Section 43(a) of the Lanham Act needs only to plead "a reasonable basis for the belief that plaintiff is likely to be damaged as a result of the false advertising." Warner-Lambert Co. v. BreathAsure, Inc., 204 F.3d 87, 95 (3d Cir.2000). In order to state a claim under the Lanham Act to recover monetary damages, Boynton must plead that it was damaged as result of NJ PURE's misrepresentation or that NJ PURE profited from that misrepresentation. See 15 U.S.C.A. § 1117. In other words, Boynton must plead "that the falsification or misrepresentation actually deceives a portion of the buying public." U.S. Healthcare, Inc. v. Blue Cross of Greater Phila., 898 F.2d 914, 922 (3d Cir.) (citing Parkway Baking Co. v. Freihofer Baking Co., 255 F.2d 641, 648 (3d Cir. 1958), cert. denied, 498 U.S. 816, 111 S.Ct. 58, 112 L.Ed.2d 33 (1990). However, "[t]his does not place upon the plaintiff a burden of proving [or pleading] detailed individualization of loss of sales. Such proof goes to quantum of damages and not to the very right to recover." Id. (quoting Parkway Baking, 255 F.2d at 648); see also Warner-Lambert, 204 F.3d at 92 ("[A] plaintiff seeking damages under § 43(a) must establish customer reliance but need not quantify loss of sales as that goes to the measure of damages, not plaintiff's cause of action.").
Here, Boynton has alleged that NJ PURE's misrepresentation actually deceived a portion of the buying public which profited NJ PURE — Boynton alleges that OB/GYN was deceived by NJ PURE's misrepresentation regarding it's A.M. Best rating, ceased using Boynton as its broker, and switched its insurance coverage to NJ PURE, all based on that misrepresentation. Counterclaim ¶¶ 39-40. NJ PURE's alleged conduct thus led Boynton to seek both injunctive relief and monetary relief under the Lanham Act, Counterclaim ¶ 65(a-e), which are proper requests for relief here.
NJ PURE also argues that Count II of the counterclaim must be dismissed for failure to allege that NJ PURE's statements were either literally false, or misleading and tending to deceive. To allege a Lanham Act violation under 15 U.S.C.A. § 1125(a)(1)(B), Boynton must plead:
Pharmacia Corp. v. GlaxoSmithKline Consumer Healthcare, L.P., 292 F.Supp.2d 594, 598 (D.N.J.2003) (quoting Highmark, Inc. v. UPMC Health Plan, Inc., 276 F.3d 160, 171 (3d Cir.2001); see also Trans USA Prods. v. Howard Berger Co., No. 07-5924, 2008 WL 852324, at *4-5, 2008 U.S. Dist. LEXIS 25370, at *13-14 (D.N.J. Mar. 28, 2008).
"[L]iability arises under section 43(a)(1)(B) if the defendant makes a commercial message or statement that is either literally false, or literally true but ambiguous such that it has the tendency to deceive consumers." Trans USA Prods., 2008 WL 852324 at *4-5, 2008 U.S. Dist. LEXIS 25370 at *12-13 (citing Novartis Consumer Health, Inc. v. Johnson & Johnson-Merck Consumer Pharms. Co., 290 F.3d 578, 586 (3d Cir.2002); see also Castrol Inc. v. Pennzoil Co., 987 F.2d 939, 943 (3d Cir.1993) (noting "a plaintiff must prove either literal falsity or consumer confusion, but not both") (emphasis in original). "[I]f the plaintiff alleges literal falsity, he need not show that the audience was misled." Trans USA Prods., 2008 WL 852324 at *5, 2008 U.S. Dist. LEXIS 25370 at *14 (citing Santana Prods., Inc. v. Bobrick Washroom Equip., Inc., 401 F.3d 123, 136 (3d Cir.), cert. denied, 546 U.S. 1031, 126 S.Ct. 734, 163 L.Ed.2d 569 (2005)). "If the advertisement is literally true, the plaintiff must persuade the court that the persons to whom the advertisement is addressed would find that the message received left a false impression about the product." Blue Cross of Greater Phila., 898 F.2d at 922-23 (citation and internal quotation marks omitted).
"When analyzing a challenged advertisement, the court first determines what message is conveyed." See id. at 922. In doing so, many district courts within this circuit have applied a so-called "slightly heightened" or "intermediate" pleading standard for false advertising claims under the Lanham Act, although the Third Circuit has not yet addressed the issue.
Trans USA Prods., 2008 WL 852324 at *5, 2008 U.S. Dist. LEXIS 25370 at *14-15 (citations and internal quotation marks omitted).
Assuming arguendo that this intermediate pleading standard is applicable in Lanham Act false advertising claims, Boynton has clearly satisfied such a standard. Here, Boynton alleges that in "May or June of 2012" an unknown representative of NJ Pure "verbally advised" a representative of OB/GYN that "NJ PURE had received a favorable rating from A.M. Best Company."
NJ PURE and Third-party Defendants move to dismiss Count III of the counterclaim and third-party complaint based on a failure to plead damages with sufficient specificity.
NJ PURE incorrectly argues that "[w]ith regard to [OB/GYN], Boynton has not alleged any facts that would give rise to a probability that, without interference of NJ PURE, this entity would have obtained their insurance coverage through Boynton as a broker." On the contrary, Boynton alleged that OB/GYN was already a customer of Boynton's when NJ PURE made its misrepresentation, and that it ceased to be Boynton's client and began procuring medical malpractice insurance directly from NJ PURE based on NJ PURE's alleged misrepresentation. Counterclaim ¶ 40. However, while this allegation supports a claim for tortious interference with an existing contract, it does not support a claim of tortious interference with a prospective economic advantage. See Fineman v. Armstrong World Indus., 980 F.2d 171, 195 (3d Cir.1992); Storis v. GERS Retail Sys., No. 94-4400, 1995 WL 337100, at *5, 1995 U.S. Dist. LEXIS 7614, at *14-15 (D.N.J. May 31, 1995) (while a plaintiff need not prove "that it had sufficiently concrete prospective contracts with its customers" in opposition to a motion to dismiss, it must "at least allege specific prospective contracts that were interfered with" by the defendant). Boynton's counterclaim fails to identify any prospective economic advantage it expected from OB/GYN that NJ PURE tortiously interfered with, and, accordingly, that cause of action is dismissed without prejudice.
Accordingly, NJ PURE's motion to dismiss Count III of the counterclaim is granted in part with respect to Boynton's claims regarding URG, PAA, and unknown prospective customers, and tortious interference with prospective economic advantage with OB/GYN, and denied in part with respect to Boynton's claim of tortious interference with its contract with OB/GYN. Third-Party Defendants' motion to dismiss Count III of the third-party complaint is granted, and all claims against these individuals are dismissed.
For the foregoing reasons, NJ PURE's motion to dismiss is denied in part and granted in part, and Third-Party Defendants' motion to dismiss is granted. Specifically, NJ PURE's motion to dismiss Counts I and II of the counterclaim is denied. NJ PURE's motion to dismiss Count III of the counterclaim is denied with respect to Boynton's claim of tortious interference with its contract with OB/GYN of North Jersey. NJ PURE's motion to dismiss Count III of the counterclaim is granted with respect to Boynton's claim of tortious interference with its prospective economic advantage with OB/GYN of North Jersey, and tortious interference with its contract and prospective economic advantage with University Radiology Group; Pulmonary & Allergy Associates; and unknown, prospective customers. Third-Party Defendants' motion to dismiss the third-party claims is granted, and the third-party complaint is dismissed.
15 U.S.C.A. § 1125(a)(1).