United States District Court, E.D. Michigan, Southern Division
MEMORANDUM AND ORDER DENYING ENAGIC USA'S
INC.'S MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM
(DOC. 21) AND GRANTING ENAGIC CO. LTD'S MOTION TO DISMISS
FOR LACK OF PERSONAL JURISDICTION (DOC. 16)
COHN UNITED STATES DISTRICT JUDGE.
essentially a trademark case. Comerica Bank (Comerica) has
sued two companies: Enagic Co. Ltd, a Japanese company,
(Enagic Japan) and Enagic USA, Inc. (Enagic USA) and three
individuals: Jon Swardstrom, John Schepcoff, and Claudia
Richardson. Comerica claims that defendants have
violated its trademarks and otherwise disparaged Comerica. As
will be explained Enagic manufacturers, distributes, and
sells-via individual distributors-a water filtration system.
Comerica says that in attempting to sell the system,
individual distributors improperly claimed that Comerica
endorsed the system and would provide financing for the
system. Enagic maintains that it has no control and no prior
knowledge of the actions of the individual distributors.
Comerica says that Enagic is responsible the actions of its
the Court is Enagic USA's motion to dismiss for failure
to state a claim and Enagic Japan's motion to dismiss for
lack of personal jurisdiction. For the reasons that follow,
Each motion is separately considered below.
Motion to Dismiss for Failure to State a Claim
relevant facts as gleaned from the complaint follow:
USA is the United States distribution and marketing arm of
Enagic Japan, a global company that manufactures water
filters and related products that supposedly provide
countless health benefits. (Doc. 1, complaint, ¶¶4,
29-31. The main product line Enagic Japan sells, and Enagic
USA markets and distributes throughout the United States, is
a series of water filters Enagic claims produces
“electrolytic water” it refers to as KANGEN
WATER. Id. at ¶11. Enagic USA owns a United
States trademark registration for KANGEN, as well as a
registered trademark for the Enagic slogan CHANGE YOUR WATER
…CHANGE YOUR LIFE. Id. at ¶44. Enagic
Japan owns several other U.S. trademark registrations that
Enagic and its distributors widely use throughout the United
States. Id. at ¶42.
USA's business model includes a web of distributors who
sell Enagic products directly to consumers across the country
and who also recruit new Enagic distributors. Id. at
¶¶52-59. Enagic distributors receive a commissions
on sales of Enagic products to consumers, and also receive a
commission for sales made by any “Down-line”
distributors who they recruited or who were recruited to
Enagic by one of their existing “Down-line”
distributors. Id. Enagic USA controls how its
distributors market and sell Enagic products in several ways,
including by licensing Enagic's trademarks to the
distributors, providing marketing materials, providing
training, and reserving to Enagic USA the authority to
discipline distributors who do not comply with Enagic's
policies. Id. at ¶59.
spring of 2015, Comerica began receiving reports that its
customer service representatives were receiving phone calls
asking about Comerica's special financing program for
consumers who wished to purchase Enagic products.
Id. at ¶82. After investigating the matter,
Comerica identified widespread use of its trademarks in
online videos and websites promoting Enagic products. This
included several videos published on YouTube making false
statements about Comerica such as Enagic “work[s] with
Comerica, ” that Comerica is “willing to stick
their necks out and enable [Enagic's] product, ”
and that Comerica offers special financing, including at a
special 1-800 number, for consumers interested in purchasing
Enagic products. Complaint, ¶¶63, 68, 72, 81. The
videos are cited in the complaint. Id. at
¶¶63, 68, 81.
identifying these statements, Comerica contacted Enagic USA.
Id. at ¶83-84. Enagic USA replied, through
counsel, and stated that “the only thing that can be
determined” was that the responsible distributors
“are not authorized or approved by Enagic” and
that Enagic had “no further information to
provide.” Ex. AA to complaint. In follow up email
correspondence, Enagic reiterated that there was nothing it
could do, stating “it would be futile to look to us for
relief as we have no control or relationship with these
sites.” Exhibit CC to complaint. Comerica says that
despite its ability to do so and its actual knowledge of
these false statements, Enagic did nothing to stop or prevent
its distributors from using Comerica's trademarks or
making false statements about Comerica. Id. at
Civ. P. 8(a)(2) sets forth “modest notice-pleading
requirements” that are to be liberally construed.
CNH America v. UAW, 645 F.3d 785, 794 (6th Cir.
2011); see also Smith v. City of Salem, 378 F.3d
566, 576 n.1 (6th Cir. 2004) (applying the “liberal
pleading standards of Federal Rule of Civil Procedure
8”). Rule 8 requires “a short and plain statement
of the claim showing that the pleader is entitled to relief,
' in order to ‘give the [opposing party] fair
notice of what the * * * claim is and the grounds upon which
it rests.'” Bell Atl. Corp. v. Twombly,
550 U.S. 544, 555 (2007) (quoting Conley v. Gibson,
355 U.S. 41, 47 (1957)).
Fed.R.Civ.P. 12(b)(6) motion tests the sufficiency of a
plaintiff's pleading. Courts evaluate Rule 12(b)(6)
motions by construing the complaint in the light most
favorable to the plaintiff, accepting all factual allegations
as true, drawing all reasonable inferences in favor of the
plaintiff, and ultimately determining whether the complaint
contains “enough facts to state a claim to relief that
is plausible on its face.” Twombly, 550 U.S.
at 470. A claim is facially plausible where “the
plaintiff pleads factual content that allows the court to
draw the reasonable inference that the defendant is liable
for the misconduct alleged.” Ashcroft v.
Iqbal, 566 U.S. 662, 678 (2009). Detailed factual
allegations are not required, but a
party's“obligation to provide the
‘grounds' of his ‘entitle[ment] to
relief' requires more than labels and conclusions.”
Twombly, 550 U.S. at 555. A "plaintiff's
obligation to provide the 'grounds' of his
'entitlement to relief' requires more than labels and
conclusions, and a formulaic recitation of the elements of a
cause of action will not do." Id.
deciding a motion to dismiss pursuant to Fed.R.Civ.P.
12(b)(6), th[e] Court may only consider 'the facts
alleged in the pleadings, documents attached as exhibits or
incorporated by reference in the pleadings, and matters of
which the [Court] may take judicial notice.'"
Murray v. Geithner, 624 F.Supp.2d 667, 671 (E.D.
Mich. 2009) (citing 2 James Wm. Moore et al., Moore's
Federal Practice 12.342 (3d ed. 2000)); see also Weiner
v. Klais & Co., 108 F.3d 86, 89 (6th Cir. 1997)
(holding that a document incorporated by reference in a
complaint can be introduced by a defendant if it is not
attached by plaintiff).
USA says the complaint must be dismissed because “it
does not allege sufficient facts to show that: (1) Enagic USA
encouraged or was involved at all with the activities of the
Individual Defendants about which Comerica complains, (2)
there were any sales of water ionizers associated with the
Individual Defendants' use of Comerica's trademark,
and (3) Comerica sustained any damages.” (Doc. 21 at p.
5). Comerica says that the complaint is sufficiently plead.
The Court agrees with Comerica.
aside that Enagic USA has not differentiated between the
eight claims Comerica has asserted or any of the elements and
has relied upon matters outside of the pleadings in support
of its motion, Enagic's primary argument is that Comerica
has asserted no facts to support its allegations that Enagic
USA played any role in the false statements about Comerica.
This essentially boils down to the argument that (1) Enagic
is not responsible for the misconduct alleged and (2) Enagic
USA has not sufficiently plead its damages.
the counts of the complaint, Comerica has alleged a
contributory liability claim, i.e. that Enagic USA violated
the Lanham Act and state as a contributory infringer and as a
conspirator. Under the Lanham Act, liability extends to
“those who facilitate infringement.” Coach v.
Goodfellow, 717 F.3d 498, 503 (6th Cir. 2013); see
also Habeeba's Dance of the Arts v. Knoblauch, 430
F.Supp.2d 709, 714 (S.D. Ohio 2006) (imposing liability for
contributory infringement on one who “had enough
control over [the direct infringer] to have prevented the
infringing event from taking place”). This includes an
entity that “continues to supply its product to one
whom it knows or has reason to know is engaging in trademark
infringement.” Coach, 717 F.3d at 503.
Comerica alleges that Enagic USA is the distribution and
marketing arm of Enagic Japan in the United States. Complaint
at ¶¶3-5, 43. Comerica also says that Enagic
controls how its distributors market and sell Enagic
products, including by licensing the Enagic trademarks to its
distributors, subjecting them to its distributor policies,
offering training to distributors, and retaining the
authority to discipline distributors who do not comply with
Enagic's policies. Id. at ¶¶58-59.
Finally, Comerica alleges that despite having had actual
knowledge of the false statements about Comerica since April
2015 at the latest, Enagic USA has not taken action against
the responsible distributors, and allowed the false
statements about Comerica to continue. Id. at
¶99 and at Ex. AA (letter from Enagic USA's General
Counsel declining to take any action and stating “we
have no further information to provide”) and at Ex. CC
(statement from Enagic USA's General Counsel that
“we have no control or relationship with these
as true, these allegations sufficiently state a claim that
Enagic USA engaged in the same “ostrich-like
practices” that resulted in a finding of Lanham Act
violations based on contributory infringement in
Coach. See 717 F.3d at 55 (“[w]e therefore
hold that [defendant] is properly held liable for
contributory trademark infringement because he knew or had
reason to know of the infringing activities and yet continued
to facilitate those activities by providing space and storage
units to vendors without undertaking a reasonable
investigation or taking other appropriate remedial
direct liability, the complaint allegations are sufficient to
state a claim of direct liability against Enagic USA under
the Lanham Act and the state law violations alleged in the
complaint. The complaint alleges that dozens of distributors
are misusing the Comerica Mark and that Enagic maintains
extensive control over those distributors. According to
Enagic's policies, which are attached to the Complaint,
Enagic controls who it accepts as a distributor, use of its
registered trademarks by its distributors, the approved
methods of marketing, advertising, and selling Enagic
products, distributor compensation, how consumers purchase
and receive Enagic products, and maintains the authority to
discipline distributors who do not comply with Enagic's
policies. Complaint, ¶¶58-59, 95-99 and at Ex. P,
p. 9-10, 25-26. This level of control, if proven, is enough
to hold Enagic USA directly liable for the actions of its
distributors, who are its agents and trademark licensees.
See Am. Tel. & Tel. Co. v. Winback & Conserve
Program, 42 F.3d 1421, 1438 (3d Cir. 1994) (a
“principal will be liable in an action brought pursuant
to section 43(a) of the Lanham Act based on the agents'
foreseeable infringing actions upon which it would be
reasonable for [a] third party to rely, provided the third
party has no notice that the representations are
unauthorized”); see also GEICO v. Google, 330
F.Supp.2d 700, 704 (E.D. Va. 2004) (denying motion to dismiss
Lanham Act claims because, “[a]ccepting as true the
facts alleged by plaintiff regarding the inclusion of [its]
marks in advertisements and defendants' overall control
of their advertising program, we find that plaintiffs have
alleged facts sufficient to support their claims that
advertisers make a ‘trademark use' of GEICO's
marks, and that defendants [internet search engines] may be
liable for such ‘trademark use'”).
end, Enagic USA's argument that it bears no
responsibility for the actions of its distributors presents a
factual issue that cannot be decided at the pleading stage.
The allegations of the complaint are sufficient to state a
claim against Enagic USA.
USA next contends that Comerica has failed to state a claim
because it has not alleged that the false statements about
Comerica resulted in the sale of an Enagic product. Enagic
USA essentially argues that the complaint should be dismissed
because of a failure to plead “use in commerce.”
See Enagic USA's Brief at 13-14. This argument misses the
has pled, with supporting facts, use of its mark “to
attract customers and garner sales of Enagic filters by
falsely affiliating Defendant Enagic with Comerica.”
See Complaint, ¶¶10, 12, 14, 63-64, 67-69,
72-74, 80-81. The complaint specifically alleges that the
defendants are making false statements about Comerica, and
using its trademark in the process, for the purpose of
selling more Enagic products. Complaint, ¶¶10, 12,
14, 63-64, 67-69, 72-74, 80-81. This constitutes “use
in commerce.” See Kelly Svcs. v. Creative
Harbor, 124 F.Supp.3d 768, 776 n.2 (E.D. Mich. 2014)
(plaintiff “correctly argues that an actual sale is not
necessary to establish use”) (internal punctuation
omitted); Planetary Motion v. Techsplosion, 261 F.3d
1188 (11th Cir. 2001) (“a party may establish
‘use in commerce' even in the absences of
sales”); Hoenig Developments v. Dial Inds.,
213 F.Supp.3d 895, 903 (E.D. Mich. 2016) (solicitations sent
to retailers satisfied “use in commerce”
requirement because they showed defendant was “trying
to sell” products with the infringing mark); PETA
v. Dougherty, 263 F.3d 359, 365 (4th Cir. 2001)
(“[t]o use PETA's Mark ‘in connection
with' goods or services, [defendant] need not have
actually sold or advertised goods or services on the
www.peta.org website”); Florists'
Transworld Delivery, Inv. v. Fleurop-Interflora, 261