United States: Lit Alerts—August 2019

Eminent Domain: US Supreme Court Rules Property Owners May File Fifth Amendment Claims in Federal Court

In June, the US Supreme Court held in Knick v. Township of Scott that property owners may file an inverse condemnation claim in federal court as long as they base their claim on the Fifth Amendment. Previously, in Williamson County Regional Planning Comm'n v. Hamilton Bank, the Court held that a litigant may proceed with a Fifth Amendment claim in federal court only after exhausting all potential remedies in state court. However, the Court later held in San Remo Hotel, L.P. v. City and County of San Francisco that a state court's decision in an eminent domain case precluded a federal case under the Full Faith and Credit Clause of the US Constitution. In Knick, the Supreme Court recognized the "Catch-22" these cases placed property owners in, and reversed the Williamson County case.

The government entity condemning a property typically files an eminent domain action. However, if a government entity has taken a property through other means than directly condemning the property, an owner may file an inverse condemnation suit seeking to recover the value of the property the government has taken. Before Knick, property owners were required to file their inverse condemnation suits in state courts, and were effectively denied access to federal courts. The Supreme Court recognized this problem in Knick and ruled that "because a taking without compensation violates the self-executing Fifth Amendment at the time of the taking, the property owner can bring a federal suit at that time."

Consumer Protection: District Court Strikes Nationwide Class Allegations in Case About Pasta Sauce Labels

In Kubilius v. Barilla America, Inc., the Northern District of Illinois struck the plaintiff's nationwide class claims based on each state's consumer fraud statutes because the statutes differ substantively and procedurally, making a nationwide class unmanageable. The plaintiff had alleged that he was deceived into buying Barilla pasta sauce because Barilla marketed it as having "no preservatives" even though the product label disclosed that it contained citric acid—an ingredient known to function as a preservative. The plaintiff alleged he and a nationwide class were entitled to damages and injunctive relief under the "substantively similar" consumer protection laws of the 50 states and the District of Columbia. Barilla moved to strike the class allegations on four grounds, including that "a nationwide class action would be unmanageable because of differences among the various states' fraud and consumer protection laws."

The court agreed, and rejected the plaintiff's argument that, to the extent these laws materially differed, any differences could be dealt with by the creation of a two-subclass alternative. The court acknowledged that "subclasses can sometimes facilitate the management of multi-state class actions requiring application of dissimilar state laws," but found that the plaintiff's argument failed to account for the multiple dimensions on which state consumer protection laws differ. For example, the laws vary as to "the level of intent the plaintiff must establish, the availability of affirmative defenses such as bona fide error; the procedural requirements that must be satisfied prior to filing a claim; the circumstances in which a private right of action is available; and the limitations periods governing such claims."

The court also rejected the plaintiff's argument that "a proper determination of" whether a nationwide class can be certified "must await discovery and a motion for class certification." The court explained that "[w]hile it is true that the Rule 23 inquiry requires discovery when class certification turns on the resolution of disputed facts, 'sometimes the complaint will make it clear that class certification is inappropriate.'"

Intellectual Property: "DISCOUNT TIRE" Not Generic

In July, the US District Court for the Northern District of Georgia sided with retail chain Discount Tire (DT) in the retailer's trademark dispute with competitor Mavis Discount Tire (Mavis). The district court found DT had demonstrated a substantial likelihood of success on the merits of its trademark infringement claim, and preliminarily enjoined Mavis from using its MAVIS DISCOUNT TIRE mark in its Georgia and Florida locations for the remainder of the parties' litigation.

DT has operated its chain of automotive wheel and tire retail stores since 1960, and has primarily concentrated operations in the Southeast United States. It employs more than 22,000 people and is one of the largest private companies in the United States. Mavis began operating retail locations in Florida and Georgia under the name MAVIS DISCOUNT TIRE in 2018; until then, it had primarily operated in the Northeast.

A key question in the preliminary injunction briefing was whether DT's DISCOUNT TIRE mark was a valid trademark, or, instead, merely a generic term identifying DT's goods and services, as Mavis argued. Generic terms—like "latte" for a type of beverage—exist in the public domain and are not eligible for trademark protection when they are used in connection with the class of goods they signify. DT argued that DISCOUNT TIRE was not generic, but instead "descriptive." Descriptive phrases—such as 5 HOUR ENERGY for energy drinks—unlike generic ones, may form valid trademarks when the public has learned to recognize the phrase as identifying a particular company's goods or services.

After weighing the evidence, which included testimony from linguistics professors and survey experts, the district court sided with DT. The court explained that it found "particularly persuasive [the fact] that 'discount' is used as an adjective to describe 'tire' but that there is no such thing as a permanent 'discount tire.' Rather, a tire may be discounted for a period, or even for its life-span, but there is not a particular 'discount tire.'" After concluding its review of the other preliminary injunction factors, the court granted DT's motion.

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