HOLDINGS: [1]-Because this dispute between two credit unions involved trademark non-infringement and invalidity claims, a declaratory action was preferable to a Trademark Trial and Appeal Board action for addressing all aspects of the controversy. Accordingly, the court exercised its jurisdiction to consider the issues in the case; [2]-The complaint did not present an allegation that defendant communicated any alleged misrepresentation about its trademark rights in commerce, i.e. the marketplace. Plaintiff’s broad interpretation of 15 U.S.C.S. § 1125(a) was not legally supported, and the court concluded that plaintiff did not sufficiently allege a Lanham Act unfair competition claim.
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Outcome
Defendant’s motion to dismiss for lack of subject matter jurisdiction the first, second, third and fourth causes of action was denied. Defendant’s motion to dismiss the fifth and sixth causes of action was granted with leave to amend. An EEOC attorney represented respondent.
Procedural Posture
Plaintiffs, a clinic and its manager, filed a complaint, alleging that defendant first hospital’s acquisition of a second hospital violated § 7 of the Clayton Act, §§ 1 and 2 of the Sherman Act, and §§ 16720 and 17200 of the California Business & Professions Code. In their second amended complaint, plaintiffs included two new claims that two health maintenance organizations (HMOs) were injured. Defendant filed a motion to compel arbitration.
Overview
Plaintiffs alleged that the two HMOs were injured by higher hospital charges as a result of defendant’s acquisition of the second hospital. The HMOs assigned their claims to plaintiffs. The HMOs had entered into contracts with defendant that governed the prices defendant charged to the HMOs for hospital services. The contracts included arbitration provisions. Defendant moved to compel arbitration of plaintiff’s claims as to the HMOs. The court found that the clauses would only cover the claims if the heart of the claim implicated a conflict over the contract’s interpretation. The complaint alleged that after the acquisition, defendant charged prices for inpatient hospital services provided to members of the HMOs which were greater than the prices that would have been charged without the acquisition. However, the claims neither “arose under” the contracts nor “arose over the terms and conditions of” the contracts. The essence of the disputed claim was that because of defendant’s acquisition of the second hospital, which had resulted in its closure, there was a lack of competition resulting in higher prices for inpatient services. Thus, the claims did not require arbitration.
Outcome
The court denied defendant’s motion to compel arbitration.
