Antitrust Law Daily Wrap Up, ADVERTISING—D. Nev.: Twice-amended complaint failed to meet heightened pleading requirements, (Nov 25, 2014)

By Jody Coultas, J.D.

Shuffle Master, Inc. was granted dismissal of LT International Ltd.’s Lanham Act claim for failure to meet the heightened pleading standard required for claims based in fraud, according to the federal district court in Las Vegas (LT International Ltd. v. Shuffle Master, Inc., November 24, 2014, Dorsey, J.). LT had been granted two opportunities to amend its complaint to adequately state the claim.

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 Macau.

In a previous decision, the court held that LT failed to sufficiently plead its fraud-based allegations and that the remaining non-fraud-based allegations did not state a plausible claim for relief under Federal Rule of Civil Procedure 8(a). LT was granted leave to amend.

To state a Lanham Act claim, LT needed to show (1) Shuffle Master made a false statement of fact in a commercial advertisement about its own or another’s product; (2) the statement actually deceived or has the tendency to deceive; (3) the deception was material; (4) Shuffle Master caused its false statement to enter interstate commerce; and (5) an injury caused by the false statement.

LT’s amended allegations were grounded in fraud, according to the court. The new complaint alleged that Shuffle Master made a series of “false” statements relating to both LT’s services and its company in general. The amended complaint did not allege that any of Shuffle Master’s conduct was negligent or otherwise lacked intent to deceive. Rather, the claims were based on Shuffle Master’s alleged unfair competition with the LT Game Group in gaming markets through the use of threats, disparagement of the LT Game brand and its products, and direct and indirect interference with LT’s business deals and prospective deals. Also, the Lanham Act claims were limited to those allegations in the complaint where allegedly false statements were made. Because the claims were based in fraud, the heightened pleading standard of Rule 9(b) applied.

The amended complaint failed to meet the Rule 9(b) particularity standard or describe actions that can be redressed under the Lanham Act, according to the court. LT’s amended allegations failed to indicate who made the allegedly false statement, or when the statements were made. Discovery should have uncovered the name of the Shuffle Master agent or employee who made the statements and when. Also, LT’s allegation that Shuffle Master called LT “an unethical company” was an opinion, rather than an actionable statement of fact.

The court declined to exercise supplemental jurisdiction over LT’s remaining claims. LT argued that the court should exercise its discretion to hear the supplemental claims, in part because the parties litigated for a considerable amount of time, and because LT’s complaint contained allegations under Macau law. A federal district court may decline to exercise supplemental jurisdiction over a state law claim if “(1) the claim raises a novel or complex issue of State law; (2) the claim substantially predominates over the claim or claims over which the district court has original jurisdiction; (3) the district court has dismissed all claims over which it has original jurisdiction; or (4) in exceptional circumstances, there are other compelling reasons for declining jurisdiction.” The dismissal of the Lanham Act claim left Nevada state law claims and a claim under Macau law. LT argued that the court should retain jurisdiction given the relatively long pendency of this case in federal court. However, the delays were due to LT’s conduct.

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.; Shuffle Master, Inc.

Cases: Advertising NevadaNews