2:19-cv-03584
E.D. Pa.Jul 27, 2021Background:
- Pac-West and AFAB are competitors in cleaning/product distribution who previously litigated trademark and related claims; they settled in 2016 by a written settlement agreement that dismissed prior litigation with prejudice.
- The settlement included: (1) a covenant by Pac-West not to sue AFAB for use of RUSH, PWD, SUPER RUSH, POWER-PAK PELLET, and NEVER FAKE IT WITHOUT IT! for goods AFAB was then offering; and (2) a broad mutual release of claims "arising out of or related to the Actions."
- AFAB later sued Pac-West (2019) alleging breach of the settlement and Lanham Act claims based on Pac-West’s website statements; Pac-West filed this separate 2019 suit alleging AFAB infringed multiple Pac-West trademarks and trade dresses, breached the settlement, and tortiously interfered with Pac-West’s retail relationships.
- AFAB moved to dismiss some claims here, arguing the 2016 settlement precluded Pac-West’s trademark and trade dress claims (claim preclusion/release); the Court allowed AFAB a second opportunity to show preclusion and then considered this second motion to dismiss.
- Pac-West alleges some asserted infringements and packaging/label changes occurred after the settlement (including a later-registered RUSH ORIGINAL mark), and contends those post-settlement acts could not have been litigated previously.
Issues:
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the 2016 settlement/release precludes Pac-West's trademark and trade dress claims generally | Pac-West: release and covenant were limited to matters contemplated by the agreement; many alleged infringements occurred after the settlement and thus are not precluded | AFAB: the settlement's broad release and covenant bar all claims that were or could have been raised related to the prior litigation, including trade dress and RUSH ORIGINAL-related claims | Court: Denied AFAB's motion; AFAB failed to meet its burden to show the settlement precludes the claims at the pleading stage |
| Whether RUSH ORIGINAL trademark claim is precluded by the settlement | Pac-West: RUSH ORIGINAL was registered after the settlement and was not part of prior litigation or the agreement, so it is not covered | AFAB: argues release language "arising out of or related to" prior actions bars related trademark suits | Court: RUSH ORIGINAL not precluded; settlement does not mention the mark and AFAB did not show how the release covers it |
| Whether trade dress claims (including for RUSH, SUPER RUSH, PWD, NEVER FAKE IT!, POWER-PAK PELLET) are precluded | Pac-West: alleged trade dress changes and copying occurred after the settlement; trade dress is distinct from trademark and can be asserted independently post-settlement | AFAB: contends trade dresses were unchanged and were or could have been litigated previously, so precluded by the release | Court: Denied dismissal on preclusion grounds; factual inquiry (comparison of trade dresses and timing of changes) is necessary and inappropriate on 12(b)(6) |
| Whether court may resolve alleged identity of trade dress via photographs at Rule 12(b)(6) stage | Pac-West: factual comparison of packaging is disputed and requires development | AFAB: urges the court to compare side-by-side images and dismiss as unchanged/precluded | Court: Refused to resolve factual trade dress comparisons on motion to dismiss; accepting Pac-West's allegations, dismissal is inappropriate |
Key Cases Cited
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) (pleading must state a plausible claim beyond labels and conclusions)
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (courts need not accept legal conclusions as true at pleading stage)
- Toscano v. Connecticut Gen. Life Ins. Co., [citation="288 F. App'x 36"] (3d Cir. 2008) (settlement agreements may have preclusive effect; express terms control bounds of preclusion)
- Duhaney v. Att'y Gen. of U.S., 621 F.3d 340 (3d Cir. 2010) (elements of claim preclusion articulated)
- Morgan v. Covington Twp., 648 F.3d 172 (3d Cir. 2011) (res judicata does not bar claims predicated on events that postdate the initial suit)
- Fair Wind Sailing, Inc. v. Dempster, 764 F.3d 303 (3d Cir. 2014) (definition and scope of trade dress)
- Duraco Prod., Inc. v. Joy Plastic Enters., Ltd., 40 F.3d 1431 (3d Cir. 1994) (trade dress infringement may be actionable independent of trademark use)