Antitrust Law Daily Wrap Up, ADVERTISING—D. Nev.: Thread-bare complaint failed to meet heightened pleading requirements, (Mar 27, 2014)

By Jody Coultas, J.D.

A five-page complaint filed by LT International Ltd. against competitor Shuffle Master, Inc. for false advertising and unfair competition was dismissed for failure to meet the heightened pleading standard of Federal Rule of Civil Procedure 9(b), the federal district court in Las Vegas has held (LT International Ltd. v. Shuffle Master, Inc., March 26, 2014, Dorsey, J.). The court granted LT a limited amendment to cure factual deficiencies.

LT, a Canadian corporation that markets and sells gaming technology and services both in North America and international markets, alleged that competitor Shuffle Master willfully misrepresented the quality of LT’s products and services to customers both in Nevada and Macao.

Lanham Act. Nothing in the elements of a Lanham Act false advertising claim themselves triggers Rule 9’s heightened pleading standard, as neither fraud nor mistake are required. However, misrepresentation claims are like fraud claims, and Lanham Act claims alleging “misleading and false representations” by a business competitor must meet the Rule 9(b) standard because the claims are grounded in fraud.

LT’s Lanham Act claim did not meet the Rule 9(b) pleading requirements, according to the court. The allegations noted that the “Defendant” made the misrepresentations, and the misrepresentations were made at the “G2E trade show in May, 2012.” The misrepresentations allegedly pertained to the “LT Game Live Multi-Table System.” However, there was no indication of “how” the alleged statements were made, why the statement at issue was false or misleading, or allegations of the factual content of any statement.

Nevada claim. LT’s Nevada unfair competition law claim was also dismissed for failure to adequately allege a claim, according to the court. LT merely repeated its allegation from its general statement of facts and alleged that Shuffle Master’s actions constituted unfair competition and caused irreparable harm. A formulaic recitation of the elements of a cause of action is insufficient to state a claim and cannot be accepted as true.

Leave to amend. LT may file a second amended complaint within 15 days if it believes it can offer sufficient facts to revive the dismissed claims, according to the court. LT argued that its amended complaint would allow LT to supplement any insufficient factual allegations and add a new plaintiff. In determining whether to grant leave to amend, courts look at: (1) bad faith, (2) undue delay, (3) prejudice to the opposing party, (4) futility of amendment, and (5) whether the plaintiff has previously amended the complaint. There was evidence of bad faith in Lt’s request to add LT Canada as a plaintiff. LT’s failure to identify LT Canada as an interested party before the court questioned the adequacy of LT’s allegations suggested a complete lack of diligence and bad faith in the investigation of the true owner of these claims. LT’s delay in naming LT Canda was clearly an undue delay as it had to know of LT Canada’s purported role in this case before filing suit or when filing its first amended complaint in response to Shuffle Master’s first motion to dismiss. Addition of a new plaintiff would also be unfair based on the current state of the case. There were no such issues with LT filing an amended complaint to cure factual deficiencies.

The case is No. 2:12-cv-1216-JAD-GWF.

Attorneys: Amanda C. Yen (McDonald Carano Wilson) and Dariush Keyhani (Meredith & Keyhani, PLLC) for LT Game International Ltd. Christopher R. Miltenberger (Pisanelli Bice, PLLC) for Shuffle Master, Inc.

Companies: LT International Ltd. v. Shuffle Master, Inc.

Cases: Advertising StateUnfairTradePractices NevadaNews