This is а novel case where an alleged victim of trademark infringement has sued multiple parties who were allegedly party to a telemarketing scheme in which the victim’s trademark was used. At issue are two motions to dismiss the Second Amended Complaint (“SAC”) of Plaintiff, Medline Industries, Inc. (“Medline”). Defendant Strategic Commercial Solutions (“SCS”) filed a motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(2), for lack of personal jurisdiction over SCS, and pursuant to Federal Rule of Civil Procedure 12(b)(6), for failure to state a claim against SCS upon which relief can be granted. (R. 33, SCS Mot. to Dismiss.) In addition, Defendants Thomas Wong and 9121-3140 Quebec Inc. (collectively, the “Wong Defendants”) filed a motion to dismiss the SAC pursuant to Rule 12(b)(2) for lack of personal jurisdiction. (R. 41, Wong Mot. to Dismiss.)
BACKGROUND 1
I. Factual History
Medline is a manufacturer and distribu-ter of medical products, with annual sales of over S3 billion. (R. 31, SAC ¶ 16.) Medline has used the trademark MED-LINE in connection with its medical products since at least 1968, and owns federal trademark registrations for this mark. (Id. ¶¶ 17-19.)
Medline alleges that sometime in 2006, Defendants Wong and Mohammed Abuk-halid (“Abukhalid”) began telephoning consumers under the name “Medline Savings” and fraudulently pressuring them into purchasing “pharmaceutical discount packages” for $398. (Id. ¶¶ 24-33.) Wong and Abukhalid are residents of Quebec, Montreal. (Id. ¶¶ 10, 12.) In connection with the “Medline Savings” operations, Medline alleges that Wong and Abukhalid entered into contracts under the names Benashore Marketing Group, Inc. (“Benashore”) and Media Alliance Marketing, Inc. (“Media Alliance”). (Id. ¶ 25.) These entities were allegedly dummy corporations with no officers, assets, or valid addresses. (Id. ¶ 25-28.) Wong and Abukhalid allegedly worked with Defendant 9154^619 Quebec, Inc. d/b/a Identacall, Inc. (“Identacall”) to record the end of the “Medline Savings” calls to consumers, at which point the consumers appeared to authorize the $398 transactions. (Id. ¶¶ 30-31.) Medline alleges that the consumers’ consents to the transactions were coerced. (Id. ¶¶ 30-33.)
In July 2006, SCS was engaged by Be-nashore to provide customer service for “Medline Savings” consumers. (R. 26, Mot. to Comрel, Ex. 3, SCS Resps. to Pl.’s Interrogs. at No. 5.) Neil Haboush (“Ha-boush”) is the president and owner of SCS, a Canada corporation with its offices and employees in Quebec. (R. 34, SCS Mot. to Dismiss, Ex. A Haboush Deck ¶¶ 1, 5.) SCS does not have offices or employees located within the United States.
(Id.)
As part of the service SCS provided to Bena-shore, SCS allegedly listened to the recording of the consumers’ conversations with Wong or Abukhalid to verify their consent to purchase the “pharmaceutical discount package.” (R. 31, SAC ¶¶ 34-35.) If SCS concluded that the consent was informed, it would allegedly instruct De
“Medline Savings” consumers were given a toll-free number to contact which was owned and operated by SCS. (R. 31, SAC ¶ 39.) Calls to the number reached a call center operated by SCS. (Id. ¶ 41.) SCS would ask callers to identify which toll-free number they had dialed, and when the callers identified the number (866) 395-2013, SCS would state that the caller had transacted business with “Medline Savings.” (Id.) SCS would allegedly use the callers’ telephone number to access their electronic records, including the verification recording related to the transaction. (Id.) Medline alleges that when customers would call to complain that Wong and Abukhalid had tricked them into authorizing the $398 transaction, SCS would try to persuade the callers not to reverse the $398 charge. (Id. ¶¶ 42-43.) Some of the calls placed to the call center came from Illinois banks and residents. (Id. ¶ 39.)
SCS also owns and operates other toll-free numbers for different telemarketing operations, including PC One, Secure Source, PharmacyCards.com, and Priority Savings. (Id. ¶ 40.) SCS also provided customer servicе and verification services for its other telemarketing operations, including instructing payment processors to deduct funds from banks and directing customer orders be fulfilled. (Id.)
II. Procedural History
Medline initiated this lawsuit on May 17, 2007, against SCS and Capital Payment Systems, LLC, alleging violations of the Lanham Act; the Telemarketing and Consumer Fraud and Abuse Prevention Act (“Telemarketing Act”); the Illinois Uniform Deceptive Trade Practices Act; the Illinois Consumer Fraud and Deceptive Business Practices Act; and Illinois common law. (R. 1, Original Compl.) On June 6, 2007, this Court dismissed the original complaint sua sponte, “for failure to establish jurisdiction and venue over the two non-resident defendants,” and authorized Medline “to proceed with expedited discovery and either file a proposed amended complaint in this district or the appropriate district with personal jurisdiction and venue over the defendants.” (R. 9, 6/6/07 Min. Order.)
Medline subsequently filed an amended complaint in this Court on October 17, 2007, adding the Wong Defendants, Abuk-halid, Party World Wide Merchants, LLC, Prime Time Solutions, Inc., Groupe Clad-dagh Inc., 9133-9069 Quebec Inc., and 9154-4619 Quebec Inc. (R. 11, Am. Compl.) Although the Court expressed that it “still is left with serious questions about jurisdiction and venue,” we allowed Medline’s attorneys to complete expedited service of the amended complaint, (R. 12, 10/19/07 Min. Order.) On January 4, 2008, SCS filed a motion to dismiss the amended complaint under Rules 12(b)(2) and 12(b)(6) (R. 24), and on January 7, Medline filed a motion to compel jurisdictional discovery (R. 26), and a motion for leave to file the SAC (R. 27). The Court granted Medline’s motion for leave to file the SAC and denied as moot SCS’s motion to dismiss the first amended complaint. (R. 30, 1/10/08 Min. Order.)
In the SAC, Plaintiff alleges that: (1) Wong, Abukhalid, SCS, Capital Payment
SCS subsequently filed a motion to dismiss the SAC for lack of personal jurisdiction under Rule 12(b)(2) and for failure to state a claim under Rule 12(b)(6). (R. 33, SCS’s Mot. to Dismiss.) The Wong Defendants also filed a motion to dismiss for lack of personal jurisdiction under Rule 12(b)(2). (R. 41, Wong Defs.’ Mot. to Dismiss.)
On April 2, 2008, the Court granted in part Medline’s motion to compel jurisdictional discovery from SCS. (R. 52, 4/2/08 Min. Order.) In addition, the Court directed “SCS to detail the nature and extent of SCS’s contacts with the United States, including the nature of the contacts — whether providing customer service or another kind of service — and a description of the number and nature of telephone calls or emails, if any, that SCS or its employees made to individuals residing in the United States,” in response to SCS’s representation in its briefs in support of its motion to dismiss that “SCS’s contacts with the United States are hardly more than its contacts with the Slate of Illinois.” {Id.) Subsequently, SCS has reiterated their position that it is not subject to personal jurisdiction anywhere within the United States, (R. 55, SCS’s Supp’l Resps. to Pl.’s Juris’l Discovery.)
The Court also requested the Wong Defendants to identify a federal district court, if any, where suit against them would be permissible, (R. 51, 4/1/08 Min. Order.) The Wong Defendants responded that the federal district court of New Hampshire would have personal jurisdiction over them based on their contacts with that state. (R. 53, Wong Defs.’ Resp.)
In light of the supplemental filings by SCS and the Wong Defendants, the Court is now prepared to rule on both parties’ motions to dismiss.
ANALYSIS
I. Personal Jurisdiction
A. Legal Standards
To establish personal jurisdiction when, as here, subject matter jurisdiction is predicated on the existence of a federal question, the plaintiff must establish that bringing the defendants into federal court in Chicago accords with due process prin
A complaint need not include facts alleging personal jurisdiction; however, once a defendant moves to dismiss the complaint under Rule 12(b)(2) for lack of personal jurisdiction, the plaintiff bears the burden of demonstrating a
prima facie
showing of personal jurisdiction.
Purdue Research Found. v. Sanofi-Synthelabo, S.A.,
Federal Rule of Civil Procedure 4(k) govеrns whether a defendant is amenable to service in federal court. Rule 4(k)(l) provides that service is effective to establish jurisdiction over the person of a defendant “who could be subjected to the jurisdiction of a court of general jurisdiction in the state in which the district court is located,” or “when authorized by a statute of the United States.” Fed.R.Civ.P. 4(k)(1)(A), (D). In addition, Rule 4(k)(2) provides that “[f|or a claim that arises under federal law, serving a summons or filing a waiver of service establishes personal jurisdiction over a defendant if: (A) the defendant is not subject to jurisdiction in any state’s courts of general jurisdiction; and (B) exercising jurisdiction is consistent with the United States Constitution and laws.” Fed.R.Civ.P. 4(k)(2).
B. The Wong Defendants
As explained above, the Wong Defendants assert that they are subject to jurisdiction in New Hampshire, so Rule 4(k)(2) does not apply to them. Medline asserts, however, that this Court has personal jurisdiction over the Wong Defendants pursuant to the doctrine of specific jurisdiction. The inquiry into specific jurisdiction asks whether it is “fundamentally fair” to require the defendant to submit to the jurisdiction of this Court with respect to this litigation.
Purdue,
In the absence of a federal statutory provision for service, as in this case, Rule 4(k)(l)(A) and Rule 4(e)(1) limit personal jurisdiction to the forum state’s long-arm statute.
Olson,
Medline asserts that the Wong Defendants debited Illinois bank accounts from “Medline Savings” consumers located outside of Illinois and that several of these Illinois banks contacted the “Medline Savings” customer service numbers run by SCS. (R. 47, Pl.’s Resp. to Wong Mot. to Dismiss, Ex. 1, Solovay Aff., Exs. A-C.) Based on these activities, Medline asserts that the Wong Defendants are subject to personal jurisdiction in Illinois under the “effects doctrine” and because they transacted business and committed tortious acts in Illinois. Courts in this district have applied the so-called “effects doctrine” where a defendant has aimed intentional tortious actions at a plaintiff residing in the forum state with the knowledge that the plaintiff will suffer harm in the forum state.
See, e.g., Indianapolis Colts, Inc. v. Metro. Baltimore Football Club Ltd P’ship,
The Court agrees with the Wong Defendants that they did not enter or aim their allegedly tortious activities at Illinois by submitting payment requests to Illinois banks and fielding customer service calls from Illinois banks. The cases cited by Medline involve at least some purposeful entry into Illinois, through direct advertisement or mailings.
See, e.g., U.S. Tsubaki, Inc. v. Indus. Research Team,
No. 00-4447,
Likewise, the Wong Defendants did not transact business or commit tortious acts in Illinois. Under the Illinois Long Arm Statute, a court sitting in Illinois may exercise specific jurisdiction over a defendant who transacts business or commits a tort in Illinois. 735 ILCS 5/2-209(a). Medline argues that the Wong Defendants committed a tort in Illinois because their actions harmed an Illinois trademark owner. However, “Illinois does not acquire jurisdiction merely by the fact that plaintiff felt harm here.”
Berthold Types Ltd. v. European Mikrograf Corp.,
C. SCS
Medline argues that this Court has general and specific jurisdiction over SCS, or that in the alternative, this Court has personal jurisdiction over SCS under Rule 4(k)(2). For this Court to have general jurisdiction over SCS, Medline must show that SCS has “continuous and systematic general business contacts” with Illinois, such that it could be subject to suit in Illinois regardless of the subject matter of the litigation.
Purdue Research Found.,
Haboush, SCS’s president, attests that SCS does not offer any services in Illinois, has no business dealings or contracts with any entity located in Illinois, and does not have a license to do business in Illinois. (R. 34, SCS Mem. in Supp. of Mot. to Dismiss, Ex. A, 1st Haboush Decl. ¶ 6.) Haboush also attests that no employee of SCS has ever entered into any transactions in Illinois or solicited any business in Illinois on behalf of SCS. (Id. ¶ 7.) SCS receives incoming telephone calls from customers of the entities for whom SCS provides customer service, but “SCS employees never make any outbound phone calls in providing customer service except when administrative phonе lines are used to call customers who request clarification” from SCS’s managers, and these calls average three to five per week, (Id. ¶ 9.) These contacts clearly do not constitute “continuous and systematic general business contacts,” so SCS is not subject to general jurisdiction in this Court.
With respect to the question of specific jurisdiction, SCS provided customer service for the Medline Savings program from July 2006 to May 2007. (Id. ¶ 13.) During that time, Haboush states that SCS’s only interaction with customers of that program was its receipt of inbound customer service calls. (Id.) SCS never received any files for customers residing in Illinois, nor serviced any customers from Illinois relating to that progrаm. (Id. ¶ 14.) SCS received calls from 17 different phone numbers located in Illinois to the toll free number it established for the Medline Savings program, most of which appear to have come from banks. (Id. ¶ 15.) Pursuant to its contract with Benashore, SCS forwarded the list of verified “Medline Savings” customers to Benashore’s designated payment processors and customer fulfillment company. (R. 48, SCS Reply, Ex. A, 2nd Haboush Decl. ¶¶ 5-7.) Haboush states that SCS did not have communications with Wong or Abukhalid on a routine basis outside of receiving customer files from them, (Id. ¶ 9.)
Medline argues that pursuant to these activities, SCS “directed” the withdrawal of funds from Illinois banks and the shipment of fulfillment packages to “Med-line Savings” consumers, аnd thus is subject to personal jurisdiction in Illinois under the “effects doctrine” and because it transacted business and committed tortious acts in Illinois. (R. 46, Pl.’s Resp. to SCS Mot. to Dismiss at 3.) SCS, however,
Nevertheless, Rule 4(k)(2) provides for personal jurisdiction if SCS is not subject to jurisdiction in any state’s courts of general jurisdiction and exercising jurisdiction is cоnsistent with the United States Constitution and laws. Fed.R.Civ.P. 4(k)(2). Rule 4(k)(2) applies to defendants “who do not reside in the United States, and have ample contacts with the nation as a whole, but whose contacts are so scattered among states that none of them would have jurisdiction.”
ISI Int’l, Inc. v. Borden Ladner Gervais,
SCS contends that Rule 4(k)(2) does not apply because it does not have ample contacts with the United States as a whole. The Court disagrees. SCS has done business with 16 United States cоmpanies in the past 4 years, including companies based in Georgia, New York, Utah, Kentucky, Nevada, California, Colorado, Texas, Florida, and Rhode Island. (R. 55, SCS Resp. to Court Order, Ex. B.) SCS receives telephone calls on a daily basis from individuals residing in the United States as part of its customer service operations. (R. 55, SCS Resp. to Court Order at 3.) SCS has “one or two” telephone lines capable of making outgoing calls used for “call-backs” to customers of a merchant or banks that have requested certain information. (R. 55, SCS Resp. to Court Order at 4.) SCS makes an average of 6 to 7 outbound calls per day to customers or companies in the United States. (Id.) SCS providеd customer service and verification services for many of these companies, similar to what it provided for the “Medline Savings” operation. Medline estimates that SCS serviced 5,000 United States customers for the “Medline Savings” program alone, and 1,000,000 United States customers total. (R. 59, Medline Sur-Reply at 2.) Further, Medline alleges that SCS derives a substantial economic benefit from its dealings with United States consumers and banks, including over $80,000 for the Medline Savings operation alone. (R. 46, Pl.’s Resp. to SCS Mot. to Dismiss, Ex., Solovay Aff. ¶ 11.)
In
ISI Int’l,
the Seventh Circuit held that a defendant who wants to preclude use of Rule 4(k)(2) has only to name some other state in which the suit could proceed.
ISI Int’l,
II. Rule 12(b)(6) Failure to State a Claim
As for SCS’s Rule 12(b)(6) motion to dismiss for failure to state a claim, the
A. Count I — Telemarketing and Consumer Fraud and Abuse Prevention Act
SCS argues that the Telemarketing Act does not provide a cause of action for Medline. (R. 34, SCS Mem. in Supp. of Mot. to Dismiss at 13.) Section 6104, titled “Actions by private persons,” states:
Any person adversely affected by any pattern or practice of telemarketing which violates any rule of the Commission under section 6102 of this title, or an authorized person acting on such person’s behalf, may ... bring a civil action ... against a person who has engaged or is engaging in such pattern or practice of telemarketing if the amount in controversy exceeds the sum or value of $50,000 in actual damages for each person adversely affected by such telemarketing ....
15 U.S.C. § 6104(a). The Telemarketing Act does not provide a separate definition for “person.” SCS claims that Section 6104 provides a cause of action for the individual consumers who received the allegеdly fraudulent telephone calls and purchased the “Medline Savings” packages, but not for Medline, an alleged victim of trademark violations.
There is a dearth of case law on this issue.
2
What case law exists, however, supports Medline’s interpretation that the Telemarketing Act does provide it with a cause of action. In
800-JR Cigar, Inc. v. GoTo.com,
SCS argues, however, that Medline’s alleged damages are speculative and conclu-sory, and therefore cannot sustain the Telemarketing Act claim. Medline alleges that defendants used the “Medline Sav
Nevertheless, SCS contends, without case law support, that damages to reputation and loss of goodwill cannot constitute “actual damages” as required by the Telemarketing Act, The Court disagrees. These damages are typical of the type that result from the trademark infringement alleged by Medline.
See, e.g., Promatek Indus., Ltd. v. Equitrac Corp.,
B. Count II — Direct Trademark Infringement
SCS next argues that Count II of the SAC, alleging direct trademark infringement by SCS under 15 U.S.C. §§ 1114 and 1117, is legally deficient because Medline cannot establish that SCS used Medline’s trademark in commerce. The Lanham Act makes actionable a defendant’s “use in commerce” of the plaintiffs mark “in connection with the sale, offering for sale, distribution or advertising of any goods or services.” 15 U.S.C. § 1114(1). Thе word “commerce” in this context means all commerce which may lawfully be regulated by Congress. 15 U.S.C. § 1127. The phrase “use in commerce” means
the bona fide use of a mark in the ordinary course of trade ... For purposes of this chapter, a mark shall be deemed to be in use in commerce ... on services when it is used or displayed in the sale or advertising of services and the services are rendered in commerce, or the services are rendered in more than one State or in the United States and a foreign country and the person rendering the services is engaged in commerce in connection with the services.
Id.
In the SAC, Medline alleges that SCS directed payment processors to deduct Medline Savings funds from bank accounts and directed fulfillment companies to ship “Medline Savings” packages to consumers after listening to verification recordings of the sales of “Medline Savings” between the consumers and the telemarketers. (R. 31, SAC ¶¶ 35, 38.) In addition, Medline alleges that SCS provided additional customer service, such as receiving calls from consumers questioning the “Medline Savings” transactions and requesting refunds, as well as calling back certain consumers to discuss questions they had about a transaction.
(Id.
¶¶ 42-43,) SCS phone operators would verify the source of the consumer calls as regarding “Medline Savings,” and acсording to the SAC, would try to convince consumers not to revoke their consent to the transaction,
(Id.
¶¶ 41, 43.) Medline alleges that SCS derived an economic benefit from these activities.
(Id.
¶¶ 35, 37.) Further, Medline claims that these activities caused consumers to be confused as to the source of origin of Med-line Savings goods and services, and irrep
SCS argues that Medline failed to allege that SCS used the MEDLINE trademark in commerce, and that SCS’s activities do not constitute “use in commerce” of the MEDLINE mark because SCS did not use the mark in connection with its own products or services. (R. 34, SCS Mem. in Supp. of Mot. to Dismiss at 9; R. 48, SCS Reply at 13.) First, Med-line’s detailed factual allegations as to how the MEDLINE mark was used in the “Medline Savings” calls and follow-up SCS customer service calls are sufficient to allege “use in commerce” under the Supreme Court’s interpretation of federal pleading standards in
Bell Atlantic,
C. Count III — Contributory Trademark Infringement
In Count III of the SAC, Med-line alleges that SCS committed contributory trademark infringement in violation of 15 U.S.C. §§ 1114 and 1117. Contributory trademark infringement occurs when a manufacturer or distributor (1) intentionally induces another to infringe a trademark or (2) continues to supply a product to one whom it knows or has reason to know is engaging in trademark infringement.
In-wood Labs., Inc. v. Ives Labs. Inc.,
Medline has properly pled that the “Medline Savings” transactions infringed its trademark and that SCS knew or had reason to know of the trademark infringement when it provided customer service for the “Medline Savings” transactions. 3 (R. 31, SAC ¶¶ 43^14.) Furthermore, Medline alleges in the SAC that SCS may have had an even more integral role in the alleged infringement by trying to convince “Medline Savings” consumers not to withhold their consent to the “Med-line Savings” transactions, (Id. ¶ 42.) Therefore, SCS’s motion to dismiss Med-line’s contributory trademark infringement count is denied.
D. Counts IV through VI
Finally, SCS summarily argues that the last three Counts of the SAC fail for the same reasons that SCS argued that the Lanham Act claims fail. (R. 34, SCS Mot. to Dismiss at 12.) Thus, for the same reasons this Court denied SCS’s motion to dismiss Medline’s Lanham Act claims, this Court denies SCS’s motion to dismiss Counts IV through VI of Medline’s SAC.
SCS additionally argues that Medline’s claim in Count V for trademark dilution under the Lanham Act fails because Med-line does not allege “contributory dilution,” and there is no recognized claim for “eon-tributary dilution.” (Id. at 12.) The Court agrees with SCS that Medline did not state a claim for contributory trademark dilution; however, Medline’s direct trademark dilution claim is sufficient for the same reason its direct trademark infringement claim is sufficient: Medline has adequately alleged that SCS used Med-line’s trademark in commerce. Therefore, Medline has adequately pled trademark dilution under the Lanham Act, and SCS’s motion tо dismiss Counts IV through VI for failure to state a claim is denied.
CONCLUSION
For the reasons discussed above, this Court does not have personal jurisdiction over the Wong Defendants, so the Wong Defendants’ motion to dismiss is granted. (R. 41.) The Wong Defendants are dismissed without prejudice to being named as defendants in the District of New Hampshire. The Court has personal jurisdiction over SCS pursuant to Federal Rule of Civil Procedure 4(k)(2), and SCS’s motion to dismiss under Rules 12(b)(2) and 12(b)(6) is denied. (R. 33.) The parties are directed to reevaluate their settlement positions in light of this opinion and to engage in renewed efforts to settle this case. A firm litigation schedule, including a trial date, will be set at the next status hearing on May 28, 2008, at 9:45 a.m. unless this lawsuit has been settled.
Notes
. Most of the facts are derived from Medline's SAC, as on a motion to dismiss, the Court assumes all well-pleaded allegations in the complaint to be true and draws all reasonable inferences in the plaintiffs favor. Fed. R. Civ. P. 12(b)(6);
Christensen v. County of Boone, Illinois,
. SCS points to the Senate committee report on the Telemarketing Act, which appears to limit persons who may bring actions under Section 6104(a) to "those who actually purchased goods or services or are obligated to pay for goods or services, or financial institutions.” S.Rep. No. 103-80,
. SCS argues that to state a claim for contributory trademark infringement, Medline must further show that SCS had direct control or monitoring of the instrumentality used by Wong to infringe on Medline’s mark. In support of this argument, SCS cites to
SB Designs v. Reebok Int’l Ltd.,