Brickstructures, Inc. v. Coaster Dynamix, Inc.
1:16-cv-10969
N.D. Ill.Sep 28, 2017Background
- Brickstructures (Illinois) alleges a joint venture with Coaster Dynamix (incorporated in Virginia) to develop a LEGO‑compatible roller coaster kit; parties executed a Memorandum of Understanding (2011) and a Joint Venture Agreement (2012).
- Brickstructures claims it contributed capital, participated in production (initial runs of "The Rollercoaster Factory"), and that Coaster underpaid Brickstructures and later launched its own Kickstarter/Indiegogo campaigns for a similar product called "The Cyclone."
- Brickstructures asserts three claims: breach of contract (Count I), breach of fiduciary duty (Count II), and false advertising under the Lanham Act (Count III).
- Coaster moved to dismiss: Count I for lack of a formed contract; Count II because no fiduciary duty without a joint venture; Count III for lack of Lanham Act standing and failure to plead consumer reliance.
- The court first addressed subject‑matter jurisdiction: diversity alleged but defendant’s principal place of business was not sufficiently pleaded, leaving diversity jurisdiction unresolved.
- The court analyzed Count III (Lanham Act) to determine whether federal question jurisdiction existed and found Brickstructures’ allegations of Lanham Act injury were conclusory and pled on "information and belief," failing Article III and Rule 8 plausibility standards.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Subject‑matter jurisdiction (diversity) | Alleged diversity: Brickstructures Illinois, Coaster out‑of‑state | Coaster’s citizenship not adequately pleaded; court must ensure jurisdiction | Diversity not adequately pleaded; court could not rely on allegations "on information and belief" |
| Federal jurisdiction via Lanham Act | Count III invokes federal question jurisdiction; Brickstructures alleges false advertising injured sales/reputation | Coaster: Brickstructures lacks standing because not a direct competitor and failed to plead reliance | Direct‑competitor rule rejected; standing can be based on injury to commercial interests, but Brickstructures failed to allege non‑speculative Lanham Act injury |
| Sufficiency of Lanham Act pleadings (injury/reliance) | Alleged loss of proceeds, harm to goodwill, and diversion of credit to Coaster (mostly pled on information and belief) | Allegations are conclusory, speculative, lack consumer reliance/materiality proof | Complaint’s Lanham Act allegations are too conclusory/speculative under Rule 8 (Twombly/Iqbal); plaintiff must plead concrete injury based on its own knowledge |
| Disposition and amendment | Sought to proceed on all counts in federal court | Motion to dismiss all counts for failure to plead jurisdiction and Lanham Act injury | Complaint dismissed without prejudice; plaintiff allowed to amend by court deadline to cure pleading defects |
Key Cases Cited
- Jakupovic v. Curran, 850 F.3d 898 (7th Cir.) (federal courts must address subject‑matter jurisdiction first)
- America’s Best Inns, Inc. v. Best Inns of Abilene, L.P., 980 F.2d 1072 (7th Cir.) (allegations of citizenship on information and belief insufficient for diversity)
- Med. Assurance Co., Inc. v. Hellman, 610 F.3d 371 (7th Cir.) (court may look beyond complaint to determine jurisdiction)
- Buchel‑Ruegsegger v. Buchel, 576 F.3d 451 (7th Cir.) (court must evaluate its own jurisdiction sua sponte)
- Lexmark Int’l, Inc. v. Static Control Components, Inc., 572 U.S. 118 (2014) (Lanham Act standing requires injury to commercial interest in sales or reputation proximately caused by defendant)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) (complaint must state a plausible claim; more than speculative allegations required)
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (legal conclusions must be supported by factual allegations)
- Lujan v. Defenders of Wildlife, 504 U.S. 555 (1992) (standing requires a concrete, particularized injury that is traceable and redressable)