Free Order on Motion to Dismiss - District Court of Delaware - Delaware

Case 1 :05-cv—00069-GIVIS Document 59 Filed 03/29/2006 Page 1 of 3
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE
McNEIL NUTRITIONALS, LLC, )
)
Plaintiff, )
)
v. ) C.A. N0. 05-69 (GMS)
)
THE SUGAR ASSOCIATION, et al., )
)
Defendants. )
ORDER
On February 8, 2005, McNeil Nutritionals, LLC ("McNeil") brought the present action
against the Sugar Association, the Sugar Association’s seventeen member companies] the American
Sugarbeet Growers Association, and Qorvis Communications, LLC (collectively, "the Sugar
Association"). The complaint alleges one count offalse advertising in violation of Section 43(a) of
the Lanham Act, 15 U.S.C.A. § 1125(a) (1998), one count ofdeceptive trade practices in violation
ofthe Delaware Uniform Deceptive Trade Practices Act, Del. Code Ann. tit. 6, §§ 2531 ez seq., and
one count of unfair competition and product disparagement in violation of Delaware common law.
(D.I. 1 {if] 60-71.) Presently before the court is the Defendants’ motion to dismiss. (D.I. 26.)
The Sugar Association is a Delaware non—profit corporation (D.I. 28 Ex. C il 1), comprising
seventeen member companies who are "producers and growers of sugar in the United States" (D.I.
34 Ex. 3). Its stated mission is "educating health professionals, media, government officials, and the
1The Sugar Association’s seventeen member companies include: The Amalgamated
Sugar Co. LLC, American Crystal Sugar Co., American Sugar Cane League, American Sugar
Refining, Inc., Atlantic Sugar Ass’n, Inc., Hawaiian Sugar & Transportation Coop., Imperial
Sugar Co., Michigan Sugar Co., Minn—Dal< Farmers Coop., Okeelanta Corp., Osceola Farms Co.,
Rio Grande Valley Sugar Growers, Inc., Southern Minnesota Beet Sugar Coop., Sugar Cane
Growers Coop. of Florida, United States Sugar Corp., Westem Sugar Coop., and Wyoming
Sugar C0., LLC.

Case 1 :05-cv—00069-GIVIS Document 59 Filed 03/29/2006 Page 2 of 3
public about sugar’s goodness." (Id.) McNeil, on the other hand, is a Delaware limited liability
company that markets products containing the no-calorie sweetener sucralose, which is sold under
the name Splenda. (DI. 1 ll 3.) In December 2004, the Sugar Association filed suit against McNeil
in the United States District Court for the Central District of California ("the Califomia Action"),
alleging false advertising under the Lanham Act (and Misleading Advertising under Califomia state
law) based on McNeil’s advertising Splenda as containing real sugar, as being a natural, no-calorie
form of sugar, as being healthy, and as tasting like sugar. (Cal. Compl. fl 1 1.) Shortly thereafter, the
Sugar Association created its "Truth About Splenda" website, which contains many of the same
allegations of false advertising that are alleged in the Califomia Action. In response, McNeil almost
immediately tiled suit in this court, alleging that the "facts" stated on the website are not facts at all,
but rather deceptions designed to mislead the public about the safety of Splenda. (D.I. 1 {[11 50-51.)
The Sugar Association argues that because both suits are "rooted in the exact same factual and legal
issues," McNeil’s claims should be dismissed as compulsory counterclaims to the Califomia Action.
The court agrees.
A cotmterclaim is compulsory when "it arises out ofthe transaction or occurrence that is the
subject matter of the opposing party’s claim and does not require for its adjudication the presence
of third parties of whom the court cannot acquire jurisdiction." Fed. R. Civ. P. l3(a). The Third
Circuit interprets Rule l3(a) quite liberally:
For a claim to qualify as a compulsory counterclaim, there need not be precise
identity of issues and facts between the claim and the counterclaim; rather, the
relevant inquiry is whether the counterclaim "bears a logical relationship to an
opposing party’s claim." Xerox Corp. v. SCM Corp., 576 F.2d 1057, 1059 (3d Cir.
1978). The concept of a "logical relationship" has been viewed liberally to promote
judicial economy. Thus, a logical relationship between claims exists where separate
trials on each of the claims would "involve a substantial duplication of effort and
2

Case 1:05-cv—00069-Gl\/IS Document 59 Filed 03/29/2006 Page 3 of 3
time by the parties and the courts." Id. Such a duplication is likely to occur when
claims involve the same factual issues, the same factual and legal issues, or are
offshoots ofthe same basic controversy between the parties. See ia'.; Great Lakes
Corp. v. Herbert Cooper Co,, 286 F.2d 631, 634 (3d Cir. 1961). 111 short, the
objective of Rule l3(a) is to promotejudieial economy, so the term "transaction or
occurrence" is construed generously to ftuther this purpose.
Transamerica Occidenta/Ly? Ins. Co. v. Aviation Ojfiee ofAm., [nc., 292 F.3d 384. 389-90 (3d Cir.
2002). In this ease, it is clear that MeNeil’s contentions are merely the flip side ofthe Sugar
Association’s contentions in the Cali iornia Action. Granted, there may be some uncommon ground
between the two suits, but they share one fundamental question, that is, whether Splenda is either
safe and/or healthy, or unsafe and/or unhealthy. Therefore, it would be a poor use of this count1y’s
limited judicial resources to answer that question in parallel proceedings. Furthermore, the court is
unpersuaded by McNeiI’s vague assertion that the California court may not have jurisdiction over
all ofthe defendants named in this action. And, even ifjurisdiction is lacking in California, McNeil
has made no showing that the presence ofthose defendants is "required" in order to adj udicate its
claims against the Sugar Association. Fed. R. Civ. P. l3(a). Thus, the case will be dismissed
without prejudice as to N1cNeil’s ability to petition the California court to add the compulsory
counterclaims.
IT IS HEREBY ORDERED THAT:
1. The Def`endants’ motion to dismiss (D.I. 26) be GRANTED; and
2. The Plaintiffs complaint be DISMISSED without prejudice.
Dated: March Q , 2006
UNI ST TES DISTRICT JUDGE
F I L E D
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DISTRICT or DELAWARE