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Swig Holdings, LLC v. Sodalicious, Inc.

United States District Court, D. Utah, Central Division

September 8, 2017

SODALICIOUS, INC., et al., Defendants.



         This matter is before the court on Defendants Anna K. Findlay and Kent Findlay's Motion to Dismiss Plaintiff's Revised Third Amended Complaint with Prejudice [Docket No. 139] and Defendants Sodalicious, Inc., Anne Auernig, and Kevin Auernig's 12(b)(6) Motion to Dismiss Swig's Corrected Third Amended Complaint with Prejudice [Docket No. 144]. On August 24, 2017, the court held a hearing on the motions. At the hearing, Plaintiff Swig Holdings, LLC was represented by Mark M. Bettilyon and Nien-Ping Wang, the Findlay Defendants were represented by Randall B. Bateman, and Sodalicious and the Auernig Defendants were represented by Tessa Meyer Santiago and Leah Jordana Aston. The court took the motions under advisement. After carefully considering the memoranda and other materials submitted by the parties, as well as the law and facts relating to the motion, the court issues the following Memorandum Decision and Order.


         The parties are competing flavored drink/treat stores. Swig opened in 2010 in St. George and became hugely popular. Swig has opened additional stores since then, and there are currently 12 locations in Utah. Swig is known for dirty drinks, which refers to adding coconut flavoring. But it also offers many other flavors and allows the customer to make any combination they want.

         In 2013, Sodalicious opened a similar store in Provo also focusing on flavored drinks and treats. Alleging that Sodalicious copied its business model, Swig brought the present lawsuit asserting causes of action for (1) trademark infringement of Swig's “dirty” trademark; (2) infringement of Swig's state registered mark of its oval Swig logo; and (3) federal and state unfair competition claims alleging trade dress infringement for copying its business model. Swig's Third Amended Complaint dropped the trade dress claim because Sodalicious has made changes to its business and has stopped referring to drinks with flavorings as “dirty.” However, Sodalicious still refers to drinks with half and half added to them as “extra dirty.”

         The Findlay Defendants' Motion to Dismiss

         The Findlay Defendants move to dismiss Swig's Third Amended Complaint, arguing that (1) the complaint fails to allege any particular conduct by the Findlays, (2) the common law infringement claim is facially deficient, and (3) the trademark dilution claim fails because the mark is not famous. The Findlay Defendants ask the court to grant dismissal with prejudice and to deny leave to correct any of these alleged deficiencies because Swig has already filed three amended complaints.

         Procedurally, Swig argues that the Findlays cannot assert a Rule 12(b)(6) defense against claims that were previously part of Swig's Second Amended Complaint because they have already answered the Second Amended Complaint and, thus, waived their defenses. However, the motion is not procedurally improper because waiver “does not apply to defenses under Rules 12(b)(1), 12(b)(6), and 12(b)(7), which are exempted by Rule 12(g) from the consolidation requirement and are protected against waiver by Rules 12(h)(2) and 12(h)(3).” 5C Wright & Miller, Fed. Practice & Procedure § 1388 (4th ed. 2009). Moreover, a Rule 12(b)(6) motion brought after an answer can be treated as a Rule 12© motion for judgment on the pleadings.

         1. Allegations of the Findlays' Conduct

         The Findlay Defendants contend that there are no specific factual allegations against them in the Third Amended Complaint. Swig alleges that the individual defendants each have a financial interest in Sodalicious and its sales, are the sole owners and directors of Sodalicious, are responsible for Sodalicious' products and marketing, have the right and ability to supervise the business activities of Sodalicious, have personally participated in and directed Sodalicious' infringing activities, and have continued to direct Sodalicious to engage in infringing activity despite knowledge of Swig's mark and trade dress.

         The Findlays Defendants contend that to satisfy the plausibility standard the complaint must make clear who is alleged to have done what to whom and to provide each individual defendant with notice as to the basis of the claims against him or her. Robbins v. Okla. Dep't of Human Servs., 519 F.3d 1242, 1249-50 (10th Cir. 2008). However, the Robbins case was a civil rights case against multiple government actors with vague allegations as to each actor's connection to the claims. The court was concerned about whether the defendants had notice of the claims against them. Such a case is largely irrelevant to the claims and allegations in the present case. The individual defendants in this case have adequate notice of the claims against them.

         The Findlays' argument that Swig must allege specific wrongful conduct by them to state a plausible claim also ignores the context of the underlying legal theory for their alleged personal liability. Courts recognize that “[a] corporate officer or director is, in general, personally liable for all torts which he [or she] authorizes or directs or in which he [or she] participates, notwithstanding that he [or she] acted as an agent of the corporation and not on his [or her] own behalf. Comm. For Idaho's High Deseret, Inc. v. Yost, 92 F.3d 814, 823 (9th Cir. 1996). Therefore, to state a plausible claim against the Findlays for trademark infringement, unfair competition, or dilution, Swig needs only to allege facts leading to a reasonable inference that they authorized or directed Sodalicious' tortious conduct. Swig has alleged such facts. The complaint's factual allegations explain the context of the alleged tort and the defendants' role with regard to the alleged tort. When the factual allegations are viewed in the light most favorable to Swig and all reasonable inference are drawn in Swig's favor, the Third Amended Complaint sufficiently alleges that the Findlays directed and authorized Sodalicious' alleged tortious conduct. Accordingly, the court finds no basis for dismissing the complaint on these grounds.

         2. Common Law Infringement Claim

         The Findlay Defendants argue that the court should dismiss Swig's common law infringement claim because Swig has not pled that the term “dirty” has acquired a secondary meaning. The elements of common law trademark infringement are that “a plaintiff must establish a protectable interest in its mark, the defendant's use of that mark in commerce, and the likelihood of consumer ...

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