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LT Int'l Ltd. v. Shuffle Master, Inc.

United States District Court, D. Nevada

November 24, 2014

LT International Ltd., Plaintiff,
v.
Shuffle Master, Inc., Defendant

For LT Game International Ltd., Plaintiff: Amanda C Yen, LEAD ATTORNEY, McDonald Carano Wilson, Las Vegas, NV; Dariush Keyhani, LEAD ATTORNEY, PRO HAC VICE, Meredith & Keyhani, PLLC, East Aurora, NY; McDonald Carano Wilson LLP, LEAD ATTORNEY, Las Vegas, NV.

For Shuffle Master, Inc., Defendant: Christopher R Miltenberger, James J. Pisanelli, LEAD ATTORNEYS, Todd L. Bice, Pisanelli Bice PLLC, Las Vegas, NV; Eric T Aldrian, LEAD ATTORNEY.

For DEQ Systems, Corp., Interested Party: Robert L Rosenthal, LEAD ATTORNEY, Howard and Howard, Las Vegas, NV.

ORDER GRANTING IN PART DEFENDANT'S MOTION TO DISMISS [DOC. 119]

Jennifer A. Dorsey, United States District Judge.

Plaintiff LT International Ltd. (" LT") was given leave to amend its complaint for the second time to more adequately allege facts consistent with Rule 9(b)'s particularity standard. Doc. 112. LT filed an amended complaint, and defendant Shuffle Master, Inc. now moves to dismiss it and alternatively asks for summary judgment, arguing that LT's allegations still fall short of Rule 9's particularity requirement. Doc. 119. Even assuming arguendo that LT has standing to bring this claim, it has twice failed to allege its Lanham Act claim with requisite particularity, and I dismiss the claim. Having dismissed LT's only federal claim, I also decline to exercise supplemental jurisdiction over LT's non-federal claims, and I thus dismiss this case in its entirety.

Background

The relevant background and procedural history of this action is described in my prior order, Doc. 112, and incorporated here by reference. I also incorporate by reference the legal standards of review and conclusions from Doc. 112, specifically my conclusions that LT's Lanham Act claim for false advertising is " grounded in fraud" such that it triggers the heightened pleading standard in Rule 9(b). Doc. 112 at 4-6. I note that, in my prior order, I concluded that, although LT had not explicitly alleged fraud, it had alleged misrepresentation, which is widely considered to be a " species" of fraud subject to Rule 9(b) scrutiny. Doc. 112. As a result, any fraud-based allegations required LT to " identify the who, what, when, where, and how of the misconduct charged, as well as what is false or misleading about the purportedly fraudulent statement, and why it is false." [1] This increased detail is required " to give defendants notice of the particular misconduct which is alleged to constitute the fraud charged so that they can defend against the charge and not just deny that they have done anything wrong." [2] I then found, after applying the standard from Vess v. Chiba-Geigy Corp. USA [3] to LT's Lanham Act claim, that LT had not sufficiently pled its fraud-based allegations and that its remaining non-fraud-based allegations did not state a plausible claim for relief under Rule 8(a). Doc. 112 at 7-9.

Near the end of my order permitting leave to amend, I cautioned LT that it should " err on the side of being overly inclusive and descriptive with the how, what, and why, because the Court is unlikely to permit amendment beyond the opportunity that is being offered by this order absent truly extraordinary circumstances. Considering that discovery has been completed, the Court can perceive no obstacle to comprehensive factual inclusion except the true lack of a cognizable claim for relief." Doc. 112 at 17.

Discussion

LT's Third Amended Complaint continues to allege 15 U.S.C. § 1125(a)(1)(B) of the Lanham Act as the sole basis for federal recovery. Doc. 115 at 8. This provision provides liability for false advertising, which requires a plaintiff to establish: (1) a false statement of fact was made by the defendant in a commercial advertisement about its own or another's product; (2) the statement actually deceived or has the tendency to deceive a substantial segment of its audience; (3) the deception is material in that it is likely to influence the purchasing decision; (4) the defendant caused its false statement to enter interstate commerce; and (5) the plaintiff has been or is likely to be injured as a result of the false statement, either by direct diversion of sales from itself to defendant or by a lessening of the goodwill associated with its products.[4] It is theoretically possible to allege a false advertising claim without triggering Rule 9(b) because intent or scienter is not explicitly required.[5]

1. LT's new allegations are grounded in fraud.

Shuffle Master moves to dismiss because, inter alia, LT's new Lanham Act allegations still fail to meet the particularity standard under Rule 9(b). Doc. 119.[6] LT's new complaint excises all references to " misrepresentation" and now claims that Shuffle Master merely made a series of " false" statements relating to both LT's services and its company in general. See Doc. 115. But a finding that allegations are subject to Rule 9(b) is not a matter of adding " magic words"; instead, " [f]raud can be averred . . . by alleging facts that necessarily constitute fraud (even if the word 'fraud' is not used)." [7]

When read in context, LT's allegations imply an intent to deceive--i.e., fraud. Each of LT's allegations is set against a backdrop that Shuffle Master " has systematically been unfairly competing with the LT Game Group in gaming markets throughout the world through the use of threats, disparagement of the LT Game brand and its products, and direct and indirect interference with Plaintiff's business deals and prospective deals." Doc. 115 at 3 (emphasis added). Nowhere in the newly amended complaint does LT allege that any of Shuffle Master's conduct was negligent or otherwise lacked an intent to deceive; indeed, its allegations plainly suggest the opposite. See id . at 7 (alleging that Shuffle Master's statements regarding patent infringement were " baseless and made in bad faith."); id . (alleging that Shuffle Master's CEO sent a series of emails to an industry representative indicating that Shuffle Master could not be a member of an association that would admit an unethical business like LT as a member). LT's allegations of a " uniform pattern of conduct, " when taken as a whole, are clearly " grounded in fraud, " and Rule 9(b) requirements apply to all false statement allegations.

Moreover, LT's Lanham Act allegations are limited to those allegations in the complaint where allegedly false statements were made. LT alleges that " Defendant has made false statements about Plaintiff's brand and its products to members of the gaming community, including but not limited to statements that LT Game Group products and Plaintiff's sale of the LTMG in the U.S. infringes Defendant's patents, the LTMG cannot be sold outside of Macau, the LT Game Group bribed Macau judges, and the LT Game Group is an unethical company . . . . Defendant's false statements have deceived Plaintiff's current and prospective customers and materially influenced ...


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