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Tecumseh Products Company v. Kulthorn Kirby Public Company Ltd.

United States District Court, E.D. Michigan, Southern Division

July 10, 2017

TECUMSEH PRODUCTS COMPANY, Plaintiff,
v.
KULTHORN KIRBY PUBLIC COMPANY LTD. and ELCO REFRIGERATION SOLUTIONS, LLC, Defendants.

          R. Steven Whalen United States Magistrate Judge

          OPINION AND ORDER: 1) DENYING DEFEND ANTS' MOTION TO STRIKE, WITHOUT PREJUDICE; 2) DENYING DEFENDANTS' MOTION TO DISMISS IN PART: AND 3) GRANTING DEFENDANTS' MOTION TO DISMISS IN PART

          Paul D. Borman United States District Judge

         Plaintiff Tecumseh Products Company ("Plaintiff or "Tecumseh") brings this action against Defendant Kulthorn Kirby Public Company Ltd. ("KKC") and Defendant Elco Refrigeration Solutions, LLC ("Elco") for various trademark-related claims. Plaintiff and KKC are manufacturers of compressors, condensers, and other refrigeration and air-conditioning-related parts. Elco is KKC's exclusive distributor in the United States. The claims in this action include state and federal trademark and unfair competition claims, as well as one claim under the Michigan Consumer Protection Act ("MCPA"), Mich. Comp. Laws § 445.903(1)(a).

         Plaintiff owns three registered trademarks (the "subject marks") that are the focus of this lawsuit: the prefixes "AE, " "AW, " and "AE2, " used in conjunction with compressor and/or refrigeration parts of the sort that Plaintiff and KKC produce for sale. Defendants have moved to dismiss the action, arguing that their usage of the subject marks does not constitute infringement, and that Plaintiffs MCPA claim is insufficient as a matter of law. Defendants have also moved to strike several allegations in the Complaint. For the reasons below, the Court will grant in part and deny in part Defendants' Motion to Dismiss. The Court will also deny Defendants' Motion to Strike, but will wholly disregard the allegations challenged in that Motion until such time as their relevance is clearly demonstrated.

         I. BACKGROUND

         A. Factual Allegations

         1. The parties

         Plaintiff is a manufacturer of hermetically sealed compressors for residential and commercial air conditioners, refrigerators, and freezers. It also "offers a complete line of indoor and outdoor condensing units, evaporator coils, heat pumps, complete refrigeration systems and authorized spare parts." Plaintiff sells its products to "Original Equipment Manufacturers, Service Technicians and Exporters." (ECF No. 1, Compl. ¶ 29.)

         Defendant KKC is a Thai company publicly traded on the stock exchange of Thailand, and it is a manufacturer and seller of compressor products and condensing units for use in refrigeration products. (Compl. ¶ 47; ECF No. 12-1, Defs.' Mot. at 2-3.) KKC states in its Motion that it also "has a variety of holdings, including steel companies, metal product companies, magnet wire companies, and a foundry." (Defs.' Mot. at 3.) Defendant Elco, a California limited liability company with its principal place of business in California, identifies itself as the exclusive distributor of KKC's products in the United States. (Compl. ¶ 10; Defs.' Mot. at 3.) Plaintiff alleges that KKC is "well familiar" with Plaintiff and its products, in part because "KKC was a party to several manufacturing, sales and lease agreements with [Plaintiff] during the 1980s." Those agreements "expired long ago." (Compl. ¶¶ 48-49.)

         2. Idin Rafiee and PashaCo

         Plaintiff alleges on information and belief that non-party Idin "Dean" Rafiee, a California resident, owns and controls Elco, and that Mr. Rafiee is a "key . . . driver of [Elco's] KKC compressor sales in the United States." (Compl. ¶¶ 12-15.) Mr. Rafiee is also the founder of a company called Pasha International Corp. ("PashaCo"), which Plaintiff alleges on information and belief is "effectively a continuation of Elco." (Compl. ¶¶ 18, 22.)

         Mr. Rafiee and PashaCo were among the defendants in a federal criminal proceeding in the United States District Court for the Southern District of California between 2014 and 2016, and Plaintiff has attached a January 8, 2014 criminal complaint against Mr. Rafiee as an Exhibit. (Compl. Ex. 1, 2014 Complaint.) Plaintiff accurately describes the criminal complaint as alleging that Mr. Rafiee "operated PashaCo to carry out a conspiracy to evade trade sanctions against Iran by unlawfully procuring more than $8 million in goods - primarily cooling equipment - for customers in Iran." (Compl. ¶ 19.) Plaintiff further alleges that, per the criminal complaint, Mr. Rafiee's "relationship with KKC dates back many years and, between late 2011 and 2013, landed [Mr. Rafiee] and others approximately $8 million dollars in deals for the purchase of hermetic compressors shipped to Iran." (Compl. ¶ 20.) It is significant that the criminal complaint against Mr. Rafiee was subsequently dismissed.

         Attached to the Complaint is a Judgment in a Criminal Case and an Order of Criminal Forfeiture from the same proceeding, reflecting that only PashaCo pled guilty to a charge of Conspiracy to Export to Embargoed Country, forfeited $874, 940.61 in criminal proceeds to the government in connection with that plea, and was sentenced to a three-year probationary term. (Compl. ¶ 21; Compl. Ex. 2, Criminal Judgment and Forfeiture Order.)

         On the basis of these allegations and Exhibits, as well as its own information and belief, Plaintiff alleges that "Elco (as the successor to PashaCo) and [Mr. Rafiee] are no strangers to activity involving KKC, and KKC compressors, reaching a criminal level of disregard for the laws of the United States." (Compl. ¶ 76.)

         3. The trademarks at issue

         There are three subject marks at issue in this case. Each is a two-letter prefix (and in one case a prefix with two letters and one number) that designates a series of compressor models manufactured and sold by Plaintiff: the "AE Mark, " the "AW Mark, " and the "AE2 Mark."

         The AE Mark corresponds to Plaintiffs "AE" series of compressors, first released on the market in 1960. The AE series originally consisted of seven basic models, but now Plaintiff offers over 100 models in the series. (Compl. ¶ 31.) On November 1, 2016, a U.S. trademark was granted to Plaintiff for "AE, " with "[e]lectric compressors, compressors for commercial refrigeration and air conditioning applications" as the specified goods and services connected with the trademark. (Compl. ¶ 41; Compl. Ex. 3, AE Registration.)

         The AW Mark corresponds to Plaintiffs "AW" series of compressors, first released on the market in 1986. The AW series originally consisted of 22 basic models, but now Plaintiff offers over 35 models in the series. (Compl. ¶ 32.) On November 1, 2016, a U.S. trademark was granted to Plaintiff for "AW, " with "[e]lectric compressors, compressors for commercial refrigeration and air conditioning applications" as the specified goods and services connected with the trademark. (Compl. ¶ 42; Compl. Ex. 4, AW Registration.)

         The AE2 Mark corresponds to Plaintiffs "AE2" series of compressors, first released on the market in 2011. The AE2 series originally consisted of 10 basic models, but now Plaintiff offers over 100 models in the series. (Compl. ¶ 33.) On November 1, 2016, a U.S. trademark was granted to Plaintiff for "AE2, " with "[e]lectric compressors, compressors for commercial refrigeration and air conditioning applications" as the specified goods and services connected with the trademark. (Compl. ¶ 43; Compl. Ex. 5, AE2 Registration.)

         Plaintiff has used these marks both on labels and in advertising throughout the world. (Compl. ¶ 35.) The Complaint includes five exemplary images of Plaintiffs use of the marks. (Compl. at 14-18.) Plaintiff alleges that each of the three marks has created a "strong source identifying significance in the minds of United States consumers, " and that they are widely recognized and highly distinctive trademarks owing to their use by Plaintiff in association with compressors. (Compl. ¶¶ 37-40.) Plaintiff alleges that the compressor series connected with the three marks have been highly successful, and that Plaintiff has made millions of dollars' worth of sales between them. (Compl. ¶¶ 45-46.)

         4. Alleged acts of infringement

         Plaintiff alleges that in the first half of 2016, KKC and Elco began "using the marks AE and AW in association with compressors sold to, and advertising directed at, consumers throughout the world, including in the United States . . . ." (Compl. ¶¶ 51-52.) The Complaint includes screen-capture images from each Defendant's website showing the use of the subject marks: four images from KKC's website (Compl. at 24-27), and six images from Elco's website (Compl. at 28-33).

         Plaintiff also alleges that Defendants' use of the subject marks is not limited to the Internet, and includes in the Complaint what appears to be a print advertisement for a KKC compressor that uses the AE mark. (Compl. ¶ 57; Compl. at 34.) The advertisement features a KKC logo at the top, an Elco logo at the bottom (next to company contact information), a picture of a compressor visibly bearing a label with the KKC logo on it, and the following text comprising roughly a quarter of the advertisement:

Winter 2016 Compressor Special
The Famous AE 4440Y-l
ONLY $85.00

(Compl. at 34.) "AE 4440Y-1" and "$85, 00" are printed in red, while the remainder of the text is printed in black. (See id.) An image of this advertisement is attached to this Opinion and Order as Appendix A.

         Plaintiff also alleges that KKC's use of the subject marks extends to online retailers like Amazon.com, and that it is even reproduced by third parties in secondhand markets such as the auction website eBay. (Compl. ¶¶ 58-59.) As an example, the Complaint includes an image of an eBay listing in which the seller uses the AE mark to refer to a KKC product, and then compares the KKC product to an analogous Tecumseh product (also using the AE mark). (Compl. at 36.)

         Finally, the Complaint includes images of product literature from Plaintiff and both Defendants, each of which lays out product specifications for a particular compressor model or models, and each of which contains the AE mark. (Compl. at 37-38.) Of this, Plaintiff asserts that "KKC and Elco are so dedicated to promoting consumer confusion that they slavishly mimicked Tecumseh's compressor model nomenclature in creating KKC's compressor model nomenclature-all in an unabashed effort to free ride off the goodwill and consumer recognition of Tecumseh's AE Trademark, AE2 Trademark and AW Trademark." (Compl. ¶ 60.) These images are attached to this Opinion and Order as Appendix B.

         Plaintiff alleges on information and belief that Defendants have targeted wholesalers and manufacturers with whom Plaintiff does business, and promoted what Defendants call "Tecumseh" products. This (along with the other alleged acts of infringement) has led to substantial consumer confusion; in fact, Plaintiff alleges that consumers have contacted ...


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