Louis Ditri and Marie K. Ostenrieder v. Coldwell Banker Residential Affiliates, Inc., Phyllis Rubin Real Estate Inc, Phyllis Rubin, Sharon Bonser, Madelyn Storelli and Robert Kent, 954 F.2d 869, 3rd Cir. (1992)
Louis Ditri and Marie K. Ostenrieder v. Coldwell Banker Residential Affiliates, Inc., Phyllis Rubin Real Estate Inc, Phyllis Rubin, Sharon Bonser, Madelyn Storelli and Robert Kent, 954 F.2d 869, 3rd Cir. (1992)
2d 869
60 USLW 2512, 1993-2 Trade Cases P
70,465, 21 U.S.P.Q.2d 1530
Louis Ditri and Marie K. Ostenrieder ("plaintiffs") appeal the order of the
district court dismissing their amended complaint. That complaint asserted
claims for damages and other relief under section 43(a) of the Lanham
Trademark Act, 1125(a), 15 U.S.C. 1051 (1988), and under state law.
Plaintiffs also sought cancellation of defendant Coldwell Banker Residential
Affiliates, Inc.'s relevant registered trademarks pursuant to 15 U.S.C. 1119
(1988). The district court had jurisdiction under 15 U.S.C. 1121, 28 U.S.C.
1331 and 1338 (1988), and 28 U.S.C.A. 1367 (West Supp.1991). This court
has jurisdiction pursuant to 28 U.S.C. 1291 (1988).
I. FACTUAL BACKGROUND
2
Plaintiffs obtained the services of Phyllis Rubin Real Estate ("Rubin R.E.") in
order to purchase real property. Rubin R.E. is an independently owned and
operated member of Coldwell Banker Residential Affiliates, Inc. ("Coldwell")
and was doing business under the name "Coldwell Banker Phyllis Rubin Real
Estate, Inc." Plaintiffs allegedly selected Rubin R.E. based upon the favorable
national reputation enjoyed by Coldwell's trademark "Coldwell Banker."
With the assistance of Rubin R.E., plaintiffs entered into an Agreement for Sale
to purchase property owned by Robert Kent. They obtained a mortgage loan
commitment which was conditioned, inter alia, upon the existence of a recorded
private road maintenance agreement. Plaintiffs' attorney requested that Rubin
R.E. supply a copy of the road maintenance agreement. In response, Rubin R.E.
agent Sharon Bonser produced a letter on Coldwell Banker stationery
purportedly signed by an adjacent property owner, Peter Conti. The letter stated
that because he was a permanent resident he maintained the road including the
portions providing access to the Kent property. The parties proceeded to
conclude the sale.
Subsequent to settlement on the property, plaintiffs learned from Mr. Conti that
the signature on the letter was not authentic and that Mr. Conti in fact did not
maintain the road. As a result, plaintiffs allege damage in excess of $50,000,
the cost of repairing and maintaining the road in accordance with local law.
Plaintiffs' amended complaint sought to impose liability upon Coldwell Banker,
Rubin R.E., Phyllis Rubin, the sole shareholder of the franchisee, Sharon
Bonser, Robert Kent, and Madelyn Storelli, the listing agent ("defendants").
Plaintiffs allege that each defendant stood to profit from the sale of the Kent
property. They assert that the defendants fraudulently represented the existence
of a private road maintenance agreement thereby intending to induce plaintiffs
to consummate the sale, and that plaintiffs justifiably relied on that
The district court dismissed Count I for failure to state a claim under section
43(a). The court likewise dismissed plaintiffs' Count III claim for cancellation
of the trademarks. It declined to exercise pendent jurisdiction over the state law
claims and dismissed them. This appeal followed.
II. DISCUSSION
A. Standard of Review
9
Defendants moved the court to dismiss plaintiffs' complaint under Federal Rule
of Civil Procedure 12(b)(6) for failure to state a claim. Although other
documents are in the record, both sides tacitly agree that the district court
confined its decision to the sufficiency of the allegations of the amended
complaint. We address the appeal on that basis. Therefore, plaintiffs'
allegations must be taken as true and this court may "affirm the dismissal only
if it appears certain that no relief could be granted to them under any set of facts
which could have been proven." Shubert v. Metrophone, Inc., 898 F.2d 401,
403 (3d Cir.1990). We exercise plenary review in this matter. Chester Cty.
Inter. Unit v. Pa. Blue Shield, 896 F.2d 808, 810-11 (3d Cir.1990).
Plaintiffs contend that the district court erred in concluding that plaintiffs'
allegations were "not within the ambit of Section 43(a)." Ditri v. Coldwell
Banker Residential Affiliates, Inc., No. Civ.A. 90-5599, 1991 WL 101479, at *
3 (E.D.Pa. June 5, 1991).
12
.....
13
14 in commercial advertising or promotion, misrepresents the nature, characteristics,
(2)
qualities, or geographic origin of his or her or another person's goods, services, or
commercial activities, shall be liable in a civil action by any person who believes
that he is or is likely to be damaged by such act.
15
16
17
18
In an action under section 43(a), plaintiffs must allege in their complaint all of
the following elements:
1) that the defendant has made false or misleading statements as to his own product
19
U.S. Healthcare v. Blue Cross of Gr. Philadelphia, 898 F.2d 914, 922-23 (3d
Cir.1990). A plaintiff must assert in the first instance that a misleading message
is conveyed. If the advertisement does not state literal falsehoods, then the
burden is on the plaintiff to show that the advertisement's intended audience is
left with a false impression. Id.
21
Plaintiffs have not alleged in their complaint any particular false statement or
misrepresentation on the part of Coldwell. Rather they appear to rely upon the
general aura of Coldwell's national advertising scheme as portraying an honest,
quality real estate service. They couple this aura with the allegation of forgery
with respect to the road maintenance agreement to evidence dishonest service.
Plaintiffs thus assert that they have established an "affirmatively misleading"
statement, actionable within the meaning of section 43(a). The Lanham Act
creates a remedy only for false descriptions or representations of products or
services in advertising. Plaintiffs' general allegations based on an inference of
honesty in all of Coldwell Banker members' operations cannot suffice. We
agree with the district court that:[m]erely because Coldwell's national
advertising may be at least in part designed to convey the impression that
Coldwell Banker member affiliates are run ethically and honestly, we believe
that it would be contrary to the law to permit a false advertising claim against
Coldwell Banker each time someone working at an affiliated agency behaves in
an allegedly unethical manner.
22
23
Count III of plaintiffs' complaint asserts that defendant Coldwell fails to control
the quality of services rendered under its trademarks in light of the fraud
allegedly perpetrated by the Rubin R.E. agent. It sought cancellation of the
trademarks under section 37 of the Lanham Act which reads as follows:
In any action involving a registered mark the court may determine the right to
26
15 U.S.C. 1119 (1988). The district court dismissed the count summarily
finding "no basis to support the claim."
28
29
30
32
We, therefore, conclude that the district court properly dismissed Count III for
lack of jurisdiction to entertain the cancellation claim since plaintiffs did not
assert a valid claim under Count I.
Having dismissed Counts I and III of plaintiffs' complaint, the district court did
not abuse its discretion in dismissing the pendent state law claims. United Mine
Workers of America v. Gibbs, 383 U.S. 715, 726, 86 S.Ct. 1130, 1139, 16
L.Ed.2d 218 (1966). The order of the district court dismissing plaintiffs'
amended complaint will be affirmed.
The events involved in this case took place in October of 1988. The 1982
version of the Lanham Act, quoted in the text, was revised in that same year,
but did not become effective until November of 1989. Rather than deciding this
case under the statute in effect at the time of the conduct, the district court
applied amended Section 43(a) to govern this case. Neither party asserts that
this retroactive application was erroneous. Since we find that the language of
the Lanham Act is substantially the same under both versions as it relates to the