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Tempur Sealy International, Inc. v. Rio Home Fashions, Inc.

United States District Court, E.D. Kentucky, Central Division, Lexington

January 25, 2018

TEMPUR SEALY INTERNATIONAL, INC., et al., Plaintiffs,
v.
RIO HOME FASHIONS, INC., et al., Defendants.

          MEMORANDUM OPINION AND ORDER

          Danny C. Reeves, United States District Judge.

         This matter is pending for consideration of the defendants' motion to dismiss the plaintiffs' Amended Complaint pursuant to Rules 1');">1');">1');">12(b)(6) and (7) of the Federal Rules of Civil Procedure. [Record No. 1');">1');">1');">19] For the reasons that follow, the Court will deny the defendants' motion.

         I.

         Plaintiffs Tempur Sealy International, Inc., Tempur-Pedic Management, LLC, Tempur-Pedic North America, LLC, and Dan Foam APS (collectively, “Tempur Sealy”) is a leader in the bedding industry involved in research, development, manufacturing, supply, and sale of premium mattresses, mattress toppers, pillow, and other comfort products. [Record No. 1');">1');">1');">15, ¶¶ 1');">1');">1');">13-1');">1');">1');">14] Tempur Sealy owns a number of trademarks and has registered such marks in the United States Patent and Trademark Office. Id. at ¶ 1');">1');">1');">17. Defendant Rio Home Fashions, Inc. (“Rio”) is a California corporation that advertises and sells pillows and mattress toppers in the United States. Id. at ¶¶ 1');">1');">1');">10, 1');">1');">1');">12. Defendant Glen Sun serves as the President, Chief Executive Officer, Secretary, Chief Financial Officer, and sole director of Rio. Id. at ¶ 1');">1');">1');">11');">1');">1');">1.

         This is not the first time these parties have met. Tempur Sealy and Rio entered into a written Settlement Agreement on April 1');">1');">1');">18, 201');">1');">1');">15, in which Rio acknowledged that it had engaged in the sale of pillows bearing the TEMPUR trademark and that such activities were unlawful. Id. at ¶ 33. In additional to agreeing to refrain from selling products bearing the TEMPUR mark or any confusingly similar mark, Rio agreed to refrain from advertising any products using the TEMPUR or confusingly similar mark. Id. at ¶ 34.

         Approximately two years later, Tempur Sealy discovered that non-genuine products were being advertised and sold on the internet using Tempur Sealy trademarks. Id. at ¶ 37. Tempur Sealy purchased several of the non-genuine products being advertised with Tempur Sealy marks and inspected them upon delivery. Id. at ¶¶ 41');">1');">1');">1, 43. Upon inspection, Tempur Sealy confirmed the product law tags identified Rio as the distributor. Id. at ¶ 43. Tempur Sealy alleges that the infringing product names and product listings in these discovered advertisements were created by Rio and submitted to various third-party websites for use in advertising and selling Rio products. Id. Tempur Sealy also discovered advertisements for non-genuine products using the Tempur Sealy marks on the interned using search engines. Id. at ¶ 40. Tempur Sealy, through outside counsel, sent a letter to Rio indicating that it was in breach of the Settlement Agreement. Id. at ¶ 51');">1');">1');">1.

         Tempur Sealy filed its initial Complaint on May 1');">1');">1');">17, 201');">1');">1');">17. [Record No. 1');">1');">1');">1] It then filed an Amended Complaint on July 25, 201');">1');">1');">17. [Record No. 1');">1');">1');">15] Tempur Sealy has asserted claims alleging several violation of the Lanham Act, including direct and/or secondary liability for federal trademark infringement (Count I), direct and/or secondary liability for unfair competition (Count II), direct and/or secondary liability for false advertising (Count III), direct and/or secondary liability for trademark dilution (Count IV), direct and/or secondary liability for trademark counterfeiting (Count V). Additionally, it has asserted a claim alleging trademark infringement and unfair competition under Kentucky law (Count VI). Finally, Tempur Sealy asserted a claim for breach of contract under Kentucky law alleging that Rio breached the Settlement Agreement (Count VII).

         II.

         The Court must determine whether the Complaint in issue states a viable claim for relief under Rule 1');">1');">1');">12(b)(6) of the Federal Rules of Civil Procedure. It “must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). The factual allegations must be sufficient to raise a right to relief above the speculative level, Twombly, 550 U.S. at 555, and permit the Court to “draw the reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal, 556 U.S. at 678. While a complaint need not contain detailed factual allegations, it must contain more than an “unadorned, the defendant-unlawfully-harmed-me accusation.” Id. “A pleading that offers ‘labels and conclusions' or a ‘formulaic recitation of the elements of a cause of action'” is insufficient. Id. (quoting Twombly, 550 U.S. at 555).

         III.

         A. Notice

         Rio appears to argue that the entire action should be dismissed because Tempur Sealy did not provide adequate notice and a 1');">1');">1');">10-day opportunity to cure, as the parties agreed in the Settlement Agreement. [Record No. 1');">1');">1');">19-1');">1');">1');">1, p. 8] The relevant portion of the Settlement Agreement provides as follows:

In the event Tempur-Pedic believes that Rio has violated the terms of this Agreement, it will provide Rio notice of the alleged breach and an opportunity to cure the breach with ten (1');">1');">1');">10) calendar days of receipt of the notice. The notice will be sent by return receipt mail to Rio at the address shown above. If Rio fails to cure the breach to the full satisfaction of Tempur-Pedic within the ten (1');">1');">1');">10) calendar days, Tempur-Pedic may proceed to seek ...

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