Hello All,
Actually, there does seem to be a legal basis for the claim (based upon my limited knowledge from law school, Trademark law class, and my limited assistance of a few attorneys with a few Trademark issues during my summer stints at firms).
Courts have recognized *colors* as enforceable trade dress, when coupled with a product that the court is willing to acknowlege that you have built up enough goodwill/rep, etc. in to make the color a distinctive symbol, so to speak, for the product. For instance, Corning has trade dress in the pink color of their fiberglass product. The courts have recognized that this trade dress in that shade of pink for the fiberglass product belongs to Corning and has awarded Corning damages in court based on it.
In court, the Council would have to prove that they have built up so much rep in the public eye in the color combo that seeing the color combo on the product (b/c all trade dress and trade mark only goes as far as the actual product that you attempt to attach it to) would cause confusion as to the maker/endorser of the product.
Kimmie1913 hit the head on the nail with the other way that the Council could claim: under false advertisement/misappropriation statute of the Lanham Act 43(a). Basically, it's illegally to intentionally use words, marks, etc. to confuse the public into making them think that manufacturer A created or endorses the product when that is not the case. I think that a claim under 43(a) is stronger.
It really seems that there are at least these two meritorious claims that would at least allow them to avoid failure-to-state-a-legal-claim dismissal in federal court.
SummerChild