The Franchise Memorandum

A federal court in Mississippi recently denied motions to dismiss filed by various wholesalers of Pepsi and Dr. Pepper products, challenging tortious interference and unfair competition claims brought against them by Brown Bottling Group, a bottler, seller, and distributor of Pepsi and Dr. Pepper products. Brown Bottling Group, Inc. v. Imperial Trading Co., LLC, 2022 WL 667780 (S.D. Miss. March 4, 2022). In its lawsuit, Brown alleges that the wholesalers have been selling trademarked Pepsi and Dr. Pepper products in Brown’s exclusive territory, without authorization. The wholesalers moved to dismiss Brown’s complaint because, among other things, Brown failed to join the trademark owners, Pepsi and Dr. Pepper, who they claimed were indispensable parties to the dispute; because Brown failed to adequately allege tortious interference; and because Brown lacked standing, as a mere licensee of the trademarks, to assert Lanham Act claims. The district court denied the motions.  

First, the court rejected the wholesalers’ argument that Pepsi and Dr. Pepper were indispensable parties because the ownership of the marks was not in dispute and Brown only sought a determination of its rights with respect to the wholesalers, not a determination of any party’s rights under any agreements with Pepsi and Dr. Pepper. Next, the court held that Brown had adequately pled its tortious interference claim, rejecting the wholesaler’s argument that an actionable tortious interference claim required allegations of illegal conduct. Allegations of wrongful conduct by shipping products into Brown’s exclusive territory, without authorization were sufficient. The court further held that Brown had adequately alleged that the wholesaler’s putative interference damaged Brown through, among other things, the loss of actual and prospective customer relationships in the territory and damage to Brown’s reputation and goodwill through the distribution of inferior products. Finally, rejecting the wholesaler’s argument that Brown lacked standing to assert an unfair competition by false association claim under the Lanham Act, the court noted that trademark ownership is immaterial to an unfair competition claim under the Act. A party need only show that they were or are likely to be damaged by the prohibited conduct. Brown had adequately alleged that the wholesalers had engaged in damaging unlawful conduct by distributing trademarked Pepsi and Dr. Pepper products into Brown’s territory that were sub-par and likely to cause customer confusion as to their true source.