[DO NOT PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FILED
FOR THE ELEVENTH CIRCUIT U.S. COURT OF APPEALS
________________________ ELEVENTH CIRCUIT
JANUARY 23, 2008
THOMAS K. KAHN
No. 07-11640
CLERK
________________________
D. C. Docket No. 06-01669-CV-AR-S
CLASSROOMDIRECT.COM, LLC,
Plaintiff-Counter-Defendant-Appellee,
versus
DRAPHIX, LLC,
Defendant-Counter-Claimant-Appellant.
________________________
Appeal from the United States District Court
for the Northern District of Alabama
_________________________
(January 23, 2008)
Before HULL and PRYOR, Circuit Judges, and MOORE,* District Judge.
PER CURIAM:
*
Honorable K. Michael Moore, U.S. District Judge for the Southern District of Florida,
sitting by designation.
Appellant and Counter-Claimant Draphix, LLC (“Draphix”) appeals the
district court’s dismissal of its “abuse of process” counterclaim, brought under
Alabama law, against Appellee and Counter-Defendant ClassroomDirect.com,
LLC (“Classroom”). After review and oral argument, we affirm.
I. BACKGROUND
Classroom, a seller of school supplies, filed (and continues to litigate) a
series of lawsuits against its competitor and former licensee, Draphix. This appeal
arises out of an abuse of process counterclaim filed by Draphix in the most recent
of Classroom’s lawsuits against Draphix. Because Draphix’s abuse of process
counterclaim is based on the prior litigation between Classroom and Draphix, we
first briefly recount the litigation history between the two companies. We then
summarize Classroom’s current lawsuit and Draphix’s counterclaim as brought in
that lawsuit.
A. Prior litigation
1. The first federal action
In April 2005, Classroom filed a trademark infringement lawsuit against
Draphix in the U.S. District Court for the Northern District of Alabama (the “first
federal action”). Draphix, then known as “Re-Print/Draphix, LLC,” had circulated
a school-supply catalog that used the name “Teacher Direct” in conjunction with
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various marketing elements. Classroom sued, asserting that Draphix’s use of the
“Teacher Direct” name was likely to cause confusion with, and had in fact caused
confusion with, Classroom’s “Classroom Direct” products, in violation of (1)
Section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a), and (2) Alabama unfair
competition law. See ClassroomDirect.com, LLC v. Re-Print/Draphix, LLC, No.
CV-05-AR-0853-S, Docket Entry No. 1 (N.D. Ala. Apr. 25, 2005). In July 2005,
the parties settled the first federal action pursuant to a settlement and release
agreement, and the case was dismissed with prejudice.
2. The state court action
In August 2005, Classroom filed suit against Draphix in Alabama state court
(the “state court action”). The state court action was based upon Draphix’s
purported breach of the settlement agreement in the first federal action. According
to Draphix, the state court action proceeded to trial on Classroom’s claims of unfair
competition, breach of contract, fraud, and tortious interference with business
relations.
The jury returned a general verdict in favor of Classroom in the state court
action, awarding compensatory damages in the amount of $175,000.1 In response
to a special interrogatory, the jury assigned $150,000 of its verdict to Classroom’s
1
Classroom’s complaint in the state court action sought over $5,000,000 in compensatory
and punitive damages.
3
unfair competition claim. Classroom filed post-trial motions in the state court
action, seeking, inter alia, a permanent injunction prohibiting Draphix from using
the “Teacher Direct” mark in any form and prohibiting Draphix from adopting any
name containing the words “Direct” or “Teacher.” In support of its post-judgment
motions, Classroom pointed to evidence introduced at trial, including a declaration
submitted by Draphix as part of registration efforts before the U.S. Patent and
Trademark Office (“USPTO”) for the mark “Teacher Direct.” Classroom
contended in the state court action that Draphix had lied in making the declaration.
In December 2006, the state court “partially granted and partially denied”
Classroom’s motion for permanent injunction. The state court determined that
Classroom “demonstrated a likelihood of success on the merits” and showed that
“without some relief it may suffer irreparable injury”; however, the state court also
determined that the “sweeping injunction” requested by Classroom would
“outweigh the harm that it would cause” Draphix. See ClassroomDirect.com, LLC
v. RePrint/Draphix, LLC, No. CV 05-4675-GWN, slip. op. at 2 (Ala. Cir. Ct. Dec.
22, 2006). Accordingly, the state court held that Draphix would be
allowed to continue to use the name Teacher Direct, provided that it
shall cause to be placed on the front cover of every catalog issued
hereafter a disclaimer, declaring in bold, plain language and
prominently displayed, a statement to the effect that it is not, nor is
any of its employees or spokespersons affiliated or connected in any
way whatsoever with Classroom Direct and is in fact, a direct
4
competitor of Classroom Direct.
Id.2
B. This lawsuit – the second federal action
In August 2006, approximately one year after filing the state court action,
and while the state litigation remained ongoing, Classroom filed its third lawsuit
against Draphix, again in the U.S. District Court for the Northern District of
Alabama (the “second federal action”). In its initial complaint in the second
federal action, Classroom alleged (1) breach of contract, and (2) trademark
infringement in violation of Section 32 of the Lanham Act, 15 U.S.C. § 1114(1).
The contract allegedly breached in the second federal action was a “Service Mark
License Agreement” between Classroom and Draphix, pursuant to which Draphix
had been authorized to use Classroom’s federally registered service mark “Re-
Print.”3
2
The state court also granted Classroom’s “Motion for Additional Monetary Recovery,”
awarding Classroom “an additional monetary award of $269,758.00 . . . in addition to the
$175,000.00 previously awarded by the jury.” ClassroomDirect.com, No. CV 05-4675-GWN,
slip op. at 3. The state court denied Classroom’s motion for attorney’s fees, but awarded
Classroom half of its outstanding costs, in the amount of $13,803.17. Id. at 4.
3
According to Classroom’s complaint in the second federal action, Classroom, which had
previously been known as The Re-Print Corporation, sold certain of its assets to Draphix in
2001. See ClassroomDirect.com, LLC v. Re-Print/Draphix, LLC, No. CV-06-AR-1669-S,
Docket Entry No. 1, at 4 (N.D. Ala. Aug. 23, 2006). Draphix was founded in 2001 by a former
Classroom employee, at which time it was known as Re-Print/Draphix, LLC. Id. At the time of
the asset sale, the parties entered into the Service Mark License Agreement, which gave Draphix
certain rights to use Classroom’s “Re-Print” service mark. Id.
5
In January 2007, approximately one month after the final order in the state
court action, Classroom amended its complaint in this second federal action. The
amended complaint added a third count, “fraudulently procuring trademark
registration,” for alleged violation of Section 38 of the Lanham Act, 15 U.S.C. §
1120. The bases for this fraudulent procurement claim were Classroom’s
allegations that when Draphix procured its federal registration for the “Teacher
Direct” mark, (1) Draphix “suppressed documents material to its trademark
application from the USPTO” and (2) Draphix’s CEO “made a false or fraudulent
declaration to the USPTO.” ClassroomDirect.com, LLC v. Re-Print/Draphix,
LLC, No. CV-06-AR-1669-S, Docket Entry No. 14, at 22 (N.D. Ala. Jan. 18,
2007).
C. Draphix’s counterclaim
In February 2007, Draphix filed a “First Amendment to Answer and
Counterclaim” in this second federal action. Therein, Draphix denied the majority
of Classroom’s allegations and asserted various affirmative defenses, including,
inter alia, “waiver, unclean hands, estoppel, res judicata, comity and abstention.”
Id., Docket Entry No. 17, at 16 (N.D. Ala. Feb. 12, 2007). Draphix further asserted
its abuse of process counterclaim, which is the subject of this appeal.
In the counterclaim, Draphix alleges that Classroom “is intent on litigating
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Draphix and its Teacher Direct educational supplies brand out of existence.” Id. at
19. According to Draphix, “[t]he same facts that underlie Classroom Direct’s
claim for ‘fraudulent procurement’ of the Teacher Direct mark were before both
the State Court and the impaneled jury as part of Classroom Direct’s Lanham Act
and unfair competition claims” brought in the state court action. Id. Draphix
alleges that Classroom “made the allegedly fraudulent declaration” of Draphix’s
CEO “a centerpiece of its closing arguments” in the state court action, and Draphix
further alleges that the jury and the state court “weighed the merits of that
evidence” and accounted for it in the monetary and injunctive relief awarded to
Classroom in the state court action. Id. at 19-20.
Draphix asserts that Classroom’s amended complaint in this second federal
action—specifically, the fraudulent procurement claim in count three of
Classroom’s amended complaint—constitutes abuse of process under Alabama
law. Draphix alleges (1) that Classroom’s fraudulent procurement claim is merely
an attempt to “rethread” its unfair competition claim from the state court action as
a violation of Section 38 of the Lanham Act, 15 U.S.C. § 1120, and (2) that
Classroom is “yet again” attempting to “deny Draphix the continued use of the
Teacher Direct mark even though the State Court declined to grant just such
injunctive relief.” Id. at 23. According to Draphix, Classroom engaged in abuse of
7
process by causing “regularly issued civil process that compels both the
performance and forbearance of a prescribed act, namely Draphix’s continued use
of the mark Teacher Direct.” Id. at 24.
Classroom moved to dismiss Draphix’s abuse of process counterclaim, and
the district court granted the motion, determining that the facts as alleged by
Draphix could not “constitute an Alabama claim of abuse of process.”4 The district
court expressly certified its judgment as final pursuant to Federal Rule of Civil
Procedure 54(b), determining that “there is no just reason for delay,” and Draphix
now appeals.5
II. STANDARD OF REVIEW
4
The district court initially granted Classroom’s motion to dismiss before Draphix filed a
response brief (apparently because the district court never issued a briefing schedule for the
motion and the motion was never set on the motions docket). Draphix then filed a motion to
alter or amend the judgment pursuant to Federal Rule of Civil Procedure 59(e), and the district
court conducted a hearing, at which the district court stated: “I should have let you brief it. I
should have done that. I didn’t do it. And now we’re briefing it after the fact, is what we’re
doing, and we’re arguing it after the fact.” See Draphix Br. at 7. The district court then issued a
second order denying Draphix’s Rule 59(e) motion, in which the district court stated that “as a
result of Draphix’s brief and oral argument, the court now can better understand Draphix’s
theory supporting a claim of abuse of process, [but] the court still does not believe the facts as
alleged, or as they might be amended, can constitute an Alabama claim of abuse of process.”
5
We have jurisdiction over Draphix’s appeal pursuant to 28 U.S.C. § 1291 because the
district court properly certified its judgment as final under Rule 54(b). See Lloyd Noland
Found., Inc. v. Tenet Health Care Corp., 483 F.3d 773, 777 (11th Cir. 2007); Beluga Holding,
Ltd. v. Commerce Capital Corp., 212 F.3d 1190, 1200 & n.1 (11th Cir. 2000). The district
court’s decision was “final” because it ultimately disposed of an individual claim in a multiple-
claim action, and the decision was a “judgment” because it was a decision upon a cognizable
claim for relief. See Lloyd Noland Found., 483 F.3d at 777. Moreover, the district court did not
abuse its discretion when it expressly determined that there was no just reason for delay in
certifying its judgment as final and immediately appealable. See id. at 777-78.
8
We review de novo a district court’s grant of a motion to dismiss, taking as
true the facts as alleged.6 Doe v. Pryor, 344 F.3d 1282, 1284 (11th Cir. 2003).
Although a complaint attacked pursuant to Federal Rule of Civil Procedure
12(b)(6) for failure to state a claim upon which relief can be granted
does not need detailed factual allegations, a plaintiff’s obligation to
provide the “grounds” of his “entitlement to relief” requires more than
labels and conclusions, and a formulaic recitation of the elements of a
cause of action will not do. Factual allegations must be enough to
raise a right to relief above the speculative level, on the assumption
that all the allegations in the complaint are true (even if doubtful in
fact).
Bell Atl. Corp. v. Twombly, __ U.S. __, 127 S. Ct. 1955, 1964-65 (2007)
(citations, brackets, and footnote omitted).7
III. DISCUSSION
6
Here, because the district court made clear that it intended its Rule 59(e) order to
supplement its original motion to dismiss order, see supra note 4, we review de novo both the
original motion to dismiss order and the Rule 59(e) order. To the extent that Classroom suggests
that we should review the Rule 59(e) order for an abuse of discretion, we reject that argument
under the specific circumstances of this case, while recognizing and reaffirming our ordinary
abuse-of-discretion review for Rule 59(e) orders. See, e.g., Drago v. Jenne, 453 F.3d 1301, 1305
(11th Cir. 2006).
7
In reciting what it believed to be the applicable legal standard, the district court quoted
Conley v. Gibson, 355 U.S. 41, 45-46, 78 S. Ct. 99, 102 (1957), in which the Supreme Court
stated that a complaint should not be dismissed for failure to state a claim “unless it appears
beyond doubt that the plaintiff can prove no set of facts in support of his claim which would
entitle him to relief.” Conley, 355 U.S. at 45-46, 78 S. Ct. at 101. However, in Twombly,
decided after the district court’s decision in this case, the Supreme Court expressly “retire[d]”
that portion of Conley. Twombly, __ U.S. at __, 127 S. Ct. at 1969. Even if the district court
applied an unduly strict Conley standard to Classroom’s motion to dismiss, we need not address
the question because Classroom’s motion to dismiss was properly granted under both Conley
and Twombly.
9
In order to establish an abuse of process claim under Alabama law, a
plaintiff must show: (1) an ulterior purpose; (2) a wrongful use of process; and (3)
malice. See Preskitt v. Lyons, 865 So. 2d 424, 430 (Ala. 2003); Willis v. Parker,
814 So. 2d 857, 865 (Ala. 2001); C.C. & J., Inc. v. Hagood, 711 So. 2d 947, 950
(Ala. 1998). Additionally, “abuse of process concerns the wrongful use of process
after it has been issued.” Hagood, 711 So. 2d at 950 (emphasis omitted).
In this case, the district court granted Classroom’s motion to dismiss
because, in the view of the district court, Draphix failed to “allege that Classroom
engaged in any illicit or abusive activity after it filed this suit.” In other words, the
district court read Draphix’s complaint as alleging only that the “process”
Classroom wrongfully caused to be issued was Classroom’s filing of the second
federal action, and the district court determined that allegation failed to meet the
Hagood requirement that process be wrongfully used after its issuance.
On appeal, Draphix insists that the district court incorrectly viewed the
second federal action as the only “process” at issue. According to Draphix, in the
context of two legal actions, the legal process should be evaluated as a whole, and
while the state process was entirely legitimate, the second federal action
constituted an act “after” the initial use of judicial process in state court and
“demonstrate[s] an abuse of the judicial process.” Draphix asserts that Alabama
10
law is clear on this “timing” question, but Draphix asks us to certify the question to
the Alabama Supreme Court if we disagree. Additionally, Draphix contends that it
has properly pled the other elements of abuse of process.
We need not address the “timing” question implicated by the district court’s
order, nor need we certify that question to the Alabama Supreme Court. Instead,
assuming arguendo that the “timing” question resolves in Draphix’s favor, and
further assuming arguendo that Draphix has properly alleged malice and an ulterior
purpose, we affirm the district court because Draphix has failed to allege (beyond
its use of conclusory labels) wrongful use of process by Classroom.8
The essence of Draphix’s abuse of process claim is that Classroom’s second
federal action—specifically, the third count of Classroom’s second federal
action—is “wrongful” because it seeks “to deny Draphix the continued use of the
Teacher Direct mark even though the State Court declined to grant just such
injunctive relief.” According to Draphix, the state court “expressly allowed”
Draphix’s continued use of the “Teacher Direct” mark, subject to certain
restrictions, and therefore, because Classroom’s amended complaint in the second
federal action seeks “compensatory damages and profits associated with
8
“[W]e may affirm the district court’s decision on any adequate ground, even if it is other
than the one on which the court actually relied.” Parks v. City of Warner Robins, 43 F.3d 609,
613 (11th Cir. 1995).
11
[Draphix’s] use of the Teacher Direct mark since the jury verdict in the state court
case,” Classroom’s filing of the second federal action constitutes abuse of process.
However, the Alabama Supreme Court has said that “[m]erely proceeding
with a . . . complaint and later agreeing to dismiss the charge cannot constitute a
wrongful use because . . . [t]here is no liability where the defendant has done
nothing other than carry out the process to its authorized conclusion, even though
with bad intentions.” Willis, 814 So. 2d at 865 (quoting Hagood, 711 So. 2d at
951) (quotation marks and emphasis omitted; first omission in original). Unless a
defendant “somehow acted outside the boundaries of legitimate procedure after the
charge had been filed,” there is no wrongful use. Id. (quoting Hagood, 711 So. 2d
at 951-52) (quotation marks and emphasis omitted).
Here, it is undisputed that in the state court action, Classroom sued Draphix
for unfair competition, fraud, rescission, and breach of contract. It is further
undisputed that in the second federal action, Classroom sued Draphix for
fraudulent procurement of a trademark registration, in violation of Section 38 of
the Lanham Act, 15 U.S.C. § 1120. Even accepting Draphix’s contention that in
the state court action, Classroom “invoked evidence” of the allegedly fraudulent
declaration made by Draphix’s CEO to the USPTO—which forms the basis of
Classroom’s Section 38 claim in the second federal action—there is still nothing
12
about Classroom’s filing of the second federal action that is “wrongful” or
improper. The state court action and the second federal action simply raise
different causes of action and are thus different lawsuits, even if evidence
presented in one may also be presented in the other.9
Moreover, we find unavailing Draphix’s contention that Classroom has
engaged in wrongful use of process by causing “regularly issued civil process that
compels both the performance and forbearance of a prescribed act.” According to
Draphix, Classroom, on the one hand, caused process to issue in the state court
action that permits Draphix some limited use of the “Teacher Direct” mark
(through the state court’s order), and on the other hand, Classroom in the second
federal action seeks the issuance of process (a damages order) that will penalize
9
This is, among other things, what distinguishes this case from Dunn v. Koehring Co.,
546 F.2d 1193 (5th Cir. 1977). In Dunn, the defendant attempted to re-litigate “the same action”
in Oklahoma federal court, despite the fact the same case already been fully and finally litigated
in Mississippi state court. Dunn, 546 F.2d at 1196 (emphasis added). Our predecessor court,
applying Mississippi law, concluded that the defendant’s re-litigation of the same action
constituted a misuse of civil process. Id. at 1199. Likewise, this is not a case in which the
plaintiff obtained a judgment and sued to execute the judgment even after having the judgment
already satisfied. Cf. Preskitt, 865 So. 2d at 430 (indicating that such a situation would
constitute a wrongful use of process under Alabama law). And this is not a case in which the
defendant allegedly expressly threatened to “flood” the courts with litigation—the implication
being that such litigation would be meritless and “‘inappropriate’”—which would be a wrongful
use of process. Cf. Harmon v. Berry, 776 F.2d 259, 260 (11th Cir. 1985) (where pro se prisoner
sent letter threatening to “flood the federal courts with litigation that defendants will have to
defend unless [his] demands are met,” state officials’ counterclaim for abuse of process against
the prisoner appeared to state a cause of action under Alabama law).
In Bonner v. City of Prichard, 661 F.2d 1206, 1209 (11th Cir. 1981) (en banc), this Court
adopted as binding precedent all decisions of the former Fifth Circuit handed down prior to
October 1, 1981.
13
Draphix for its use of the “Teacher Direct” mark. But it is axiomatic that merely
because Draphix can engage in some use of the “Teacher Direct” mark under some
laws, that does not necessarily mean that Draphix can engage in use of the
“Teacher Direct” mark under other laws. Whether Draphix has a viable waiver,
estoppel, or res judicata defense—in other words, whether Classroom should have
asserted its Section 38 claim in the state court action or even in the first federal
action—is another matter, but we need not address that question at this time. For
today, we need only conclude that Draphix has failed to state a claim, and cannot
state a claim, for abuse of process under Alabama law.
AFFIRMED.
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