Opinion
01 Civ. 6203 (RWS)
September 12, 2002
LOUIS S. EDERER, ESQ., JOSEPH P. TUCKER, ESQ., VINCENT J. WISCOVITCH, ESQ., GURSKY EDERER, New York, NY, for Plaintiff.
VICTOR M. SERBY, ESQ., New York, NY, for Defendants.
OPINION
Defendants International Basic Source, Inc. ("IBS") and Brandon Kim ("Kim") have moved pursuant to Rules 12(b)(2), 12(b)(3) and 12(b) (6) of the Federal Rules of Civil Procedure to dismiss the complaint of plaintiff GTFM, Inc. ("Fubu") and pursuant to Fed.R.Civ.P. 11 for sanctions for bringing this lawsuit.
For the following reasons, the motions are denied.
Facts
As befits a motion to dismiss, the following facts are drawn from the complaint and do not constitute findings of fact.
Parties
Fubu is a corporation duly organized and existing under the laws of the State of New York and maintains its principal place of business at 350 Fifth Avenue, Suite 6617, New York, New York.
IBS is a New Jersey corporation which maintains its principal place of business at 158 Liberty Street, Hackensack, New Jersey.
Kim is a corporate officer and/or owner of IBS and controls and directs the business activities of this entity, including the business activities complained of.
The "05" Trademark
Fubu, through its licensees and affiliates, is engaged in the manufacture, distribution and sale in interstate commerce of merchandise, including men's, women's and children's apparel and accessories. This merchandise is sold throughout the United States in high quality retail stores. Fubu's products are targeted toward young urban and suburban consumers.
Since 1992, Fubu merchandise has been widely advertised, offered for sale and sold throughout the United States under various trademarks. Such trademarks owned by Fubu include 05 (the "05 Trademark"), FUBU 05 (the "FUBU 05 Trademark") and FUBU (the "FUBU Trademark") (collectively the "Fubu Trademarks")
Due to Fubu's exclusive use of the Fubu Trademarks, these marks have acquired enormous value and recognition as famous apparel marks in the United States and worldwide. The Fubu Trademarks are well known to the consuming public and trade as identifying and distinguishing Fubu exclusively and uniquely as the source of the products to which they are applied.
On December 26, 2000, the 05 Trademark was entered on the Principal Register of the United States Patent and Trademark Office (the "Principal Register") as Registered Trademark No. 2,415,190. On December 26, 2000, the FUBU 05 Trademark was entered on the Principal Register as Registered Trademark No. 2,415,191. On August 8, 1995 and November 14, 2000, the FUBU Trademark was entered on the Principal Register as Registered Trademarks Nos. 1,910,169 and 2,403,324, respectively. The Fubu Trademarks have at all times been owned exclusively by Fubu. These registrations are valid and subsisting and are in full force and effect.
Among the products that Fubu produces, sells and distributes are a line of men's sports apparel, including athletic jerseys, t-shirts, headgear and footwear featuring the 05 Trademark and the FUBU 05 Trademark. Articles of Fubu apparel featuring the 05 Trademark and the FUBU 05 Trademark have achieved substantial sales and favorable consumer and trade acceptance.
Defendants' Infringing Activities
Fubu alleges that IBS has deliberately and willfully manufactured, distributed, offered for sale and sold in interstate commerce articles of apparel, including athletic jerseys, caps, visors, containing studied and deliberate reproductions of the 05 Trademark (the "Offending Goods"). Fubu further alleges that the Offending Goods are directed toward the identical group of consumers as Fubu's goods.
Fubu alleges that IBS's actions were a deliberate effort to cause confusion and mistake among the consuming public as to the source of IBS's apparel products, and sought to gain the benefit of the goodwill associated with the 05 Trademark.
Fubu also alleged that Kim, acting as corporate officer and/or owner of IBS, was the mastermind behind the infringing and counterfeiting activities described above, and was responsible for directing the manufacture, distribution, offer for sale and sale of the Offending Goods.
As a result, Fubu seeks injunctive relief and damages for acts of trademark counterfeiting, trademark infringement, false designation of origin, federal trademark dilution, common law trademark infringement, common law unfair competition, and unfair trade practices in violation of federal and state law. The complaint contains eight counts, alleging (1) federal trademark counterfeiting in violation of 15 U.S.C. § 1117 (b) (Count I); (2) trademark infringement in violation of 15 U.S.C. § 1114 (Count II); (3) false designation of origin in violation of 15 U.S.C. § 1125 (a) (Count III); (4) federal trademark dilution in violation of 15 U.S.C. § 1125 (c) (Count IV); (5) common law trademark infringement (Count V); (6) common law unfair competition (Count VI); (7) deceptive acts in violation of N.Y. General Business Law § 349 (Count VII); and (8) violation of N.Y. Gen. Bus. Law § 360-1 (Count VIII).
The Motion to Dismiss
Fubu commenced this lawsuit on July 10, 2001. On November 13, 2001, the defendants originally made the instant motion to dismiss. The motion consisted of a motion to dismiss on the basis of lack of personal jurisdiction and failure to state a claim, as well as for sanctions. It was considered fully submitted on April 3, 2002.
In opposition, Fubu had listed some facts supplying the basis for its belief that there was personal jurisdiction over the defendants, but noted that Kim had not complied with discovery requests that it believed would further support its case.
They alleged that Kim had sold merchandise outside of New York with the knowledge that it would result in harm to Fubu within New York. Further, these items were advertised at state and national trade shows in brochures printed by a New York City printer. IBS purchased goods from vendors in New York and sold to customers in New York.
On April 5, 2002, the motion to dismiss on the basis of lack of personal jurisdiction was denied with leave to renew. It was determined that more discovery was necessary in light of Kim's refusal to provide certain discovery to GTFM. The defendants therefore were ordered to produce certain documents to the plaintiffs within thirty days. A decision on the defendants' other grounds to dismiss was postponed until the discovery that was ordered was completed.
On June 13, 2002, the motion was renewed after the completion of discovery. It was considered fully submitted on July 31, 2002.
Additional Jurisdictional Discovery
As a result of the additional discovery ordered by this Court, see infra, GTFM has submitted invoices that were produced. These invoices are from three vendors located in New York and five customers.
The three vendors are: (1) Winner Caps Company in Flushing, New York; (2) Kissera Corp., New York, New York; and (3) Five Star America, Inc., New York, New York. The total amount invoiced for each vendor is, respectively, $4,596, $33.18, and $2,530.80. These amounts total to $7159.98.
The five customers are: (1) LA N.Y. Fashions, Brownsville, New York; (2) Whatever's Clever, Niagara Falls, New York; (3) Golden Sportswear, Inc., Flushing, New York; (4) Word Up F/S, Buffalo, New York; and (5) City Sportswear #1, Syracuse, New York. The total amount each customers purchased, respectively, was: $2,344.52, $433.33, $5,948.68, $1,043.07, and $152.78. These amounts total to $9,922.38. In addition, GTFM's counsel stated that they had uncovered two other customers of IBS who are located in New York State, but IBS had failed to produce related invoices at the time of submission of this motion.
Discussion I. Defendants' Motion to Dismiss for Lack of Personal Jurisdiction
The plaintiff bears the burden of establishing that the court has jurisdiction over the defendant when served with a Rule 12(b)(2) motion to dismiss. Robinson v. Overseas Military Sales Corp., 21 F.3d 502, 507 (2d Cir. 1994). Because discovery has been conducted with regard to the defendant's contacts with the state, but no evidentiary hearing has been held, the plaintiff's prima facie showing must include "an averment of facts that, if credited . . ., would suffice to establish jurisdiction over the defendant." Metropolitan Life Ins. Co. v. Robertson-Ceco Corp., 84 F.3d 560, 567 (2d Cir. 1996) (citing Ball v. Metallurgie Hoboken-Overpelt, S.A., 902 F.2d 194, 197 (2d Cir. 1990)). All allegations are construed in the light most favorable to the plaintiff and all doubts are resolved in the plaintiff's favor. Id.
In assessing whether personal jurisdiction is authorized, the court must look first to the long-arm statute of the forum state. Bensusan Rest. Corp. v. King, 126 F.3d 25, 27 (2d Cir. 1997). If the exercise of jurisdiction is appropriate under that statute, the court must decide whether such exercise comports with the requisites of due process. Id.
A. New York's Long-Arm Statute
The New York long-arm statute authorizes personal jurisdiction over non-domiciliaries under several circumstances. Fubu alleges that jurisdiction is appropriate under either N.Y. C.P.L.R. § 302(a)(1) or § 302(a)(3). The first provides for jurisdiction where a cause of action arises from transaction of business within the state or contracting anywhere to supply goods or services in the state. C.P.L.R. § 302(a)(1). The latter covers situations where a cause of action arises where the defendant
commits a tortious act without the state causing injury to person or property within the state . . ., if he
(i) regularly does or solicits business, or engages in any other persistent course of conduct, or derives substantial revenue from goods used or consumed or services rendered, in the state, or
(ii) expects or should reasonably expect the act to have consequences in the state and derives substantial revenue from interstate or international commerce.
C.P.L.R. § 302(a)(3) is inappropriate because Fubu has failed to allege that an injury has occurred in New York. As a general rule, for long-arm purposes an injury occurs at the location of the events that caused the injury, not the location where the damages are felt by the plaintiff. E.g., KIC Chemicals, Inc. v. ADCO Chem. Co., 1996 WL 122520, at *7 (S.D.N.Y. March 20, 1996) (citing Carte v. Parkoff, 152 A.D.2d 615, 616, 543 N.Y.S.2d 718, 719 (2d Dep't 1989)). Presumably the events that caused the injury took place in New Jersey and the places where the Offending Goods were purchased. There is no allegation that any Offending Goods were purchased in New York. While Fubu has presented invoices showing that the defendants have customers in New York, they did not allege that the customers purchased Offending Goods. Therefore it is necessary to determine whether the defendants were "transacting business" in New York.
Where jurisdiction is predicated upon CPLR § 302(a)(1), the defendant must transact business in the state and there must be some articulable nexus between the business transacted and the cause of action sued upon." McGowan v. Smith, 52 N.Y.2d 268, 419 N.E.2d 321, 437 N.Y.S.2d 642 (1981).
The defendants' contacts with New York certainly qualify as transacting business. They purchased at least more than $7,000 worth of goods from at least three vendors and sold at least almost $10,000 worth of goods to at least five customers. Kim attends an annual trade show in New York City. A brochure is printed in New York. Looking to the totality of the transactions — and Fubu's assertion that there are more customers for which it was unable to receive invoices — the defendants have transacted business in the state.
It is less clear whether the requisite nexus between the cause of action and these contacts is met. As noted above, the defendants claim that no Offending Goods were purchased in New York. Further, Fubu has apparently been unable to disprove this claim. Yet the defendants did engage in commercial activity in New York that would have necessarily generated name recognition and publicity for IBS products, including the Offending Goods. Even though there is no proof that Offending Goods were sold in the state, the sale of other merchandise, the brochure printed in New York (which may or may not have advertised the Offending Goods), and Kim's attendance at a yearly trade show all increased the possibility that Offending Goods would be purchased.
Neither party attached a copy of this brochure or described its contents so the Court is unable to determine whether the Offending Goods were advertised in the brochure.
Defense counsel represented at oral argument that Kim attends the annual show merely as a visitor, not as a vendor. Even if Kim attends the show and never speaks to a single vendor or visitor, this visit provides the defendants an opportunity to see what other goods are on display and what is popular. Such knowledge then enables IBS to tailor its goods — including potentially the Offending Goods — accordingly.
This Court is required on this motion to construe the facts in the light most favorable to Fubu. In addition, the fact that Kim originally in deposition claimed that IBS had only two customers in New York — while in fact IBS has at least seven customers — suggests that the defendants have been less than forthcoming. It is unclear what other contacts IBS has had with New York and how they relate to the instant lawsuit. Given the facts detailed above, and the particular situation faced by Fubu, a nexus may be found and the long-arm statu[t]e is satisfied.
B. Due Process
The due process test for personal jurisdiction has two related components: the "minimum contacts" inquiry and the reasonableness" inquiry. Metropolitan Life Ins. Co. v. Robertson Ceco Corp., 84 F.3d 560, 567 (2d Cir. 1996). To have minimum contacts, the defendant must purposefully avail himself to the privileges and immunities of the forum state. Id. The court must evaluate the following factors as part of its reasonableness analysis: (2) the burden that the exercise of jurisdiction will impose on the defendant; (2) the interests of the forum state in adjudicating the case; (3) the plaintiff's interest in obtaining convement and effective relief; (4) the interstate judicial system's interest in obtaining such relief; and (5) the shared interest of the states in furthering substantive social policies. Id. at 568.
The defendants have sufficient minimum contacts with the state as they purposefully availed themselves to the privileges and immunities of this state by (1) selling goods to at least five customers; (2) purchasing goods on numerous occasions from at least three vendors; (3) attending yearly trade shows in New York City; and (4) utilizing a New York-based printer.
Further, the exercise of this jurisdiction is reasonable. The defendant is based in New Jersey, so the distance between there and this Court is not great. The fact that the defendant travels to New York for trade shows and engages in business throughout the state suggests that travel to New York City would not be unduly burdensome. New York has a strong interest in adjudicating this case as one of its businesses, Fubu, alleges that it has been harmed. Further, New York is a convement forum for Fubu. The defendants have failed to put forward any facts that would shift the balance in the opposite direction. Therefore, this Court's exercise of personal jurisdiction is appropriate and does not offend "traditional notions of fair play and substantial justice." International Shoe Co. v. Washington, 326 U.S. 310, 316 (1945).
II. Venue
Because of the finding that the defendants are subject to this Court's personal jurisdiction, venue is appropriate pursuant to 28 U.S.C. § 1391 (b) and (c) as IBS, as a corporation, is considered to reside in this judicial district.
III. Motion to Dismiss A. Standard of Review
In reviewing a motion to dismiss under Rule 12(b)(6), courts must "accept as true the factual allegations of the complaint, and draw all inferences in favor of the pleader." Mills v. Polar Molecular Corp., 12 F.3d 1170, 1174 (2d Cir. 1993) (citing IUE AFL-CIO Pension Fund v. Herrmann, 9 F.3d 1049, 1052 (2d Cir. 1993)). However, "legal conclusions, deductions, or opinions couched as factual allegations are not given a presumption of truthfulness." L'Eureopeenne de Bangue v. La Republica de Venezuela, 700 F. Supp. 114, 122 (S.D.N.Y. 1988). Complaint may only be dismissed when "it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitled him to relief." Conley v. Gibson, 355 U.S. 41, 45-46 (1957). See also Allen v. WestPoint-Pepperell, Inc., 945 F.2d 40, 44 (2d Cir. 1991);Berheim v. Litt, 79 F.3d 318, 321 (2d Cir. 1996).
Review must be limited to the complaint and documents attached or incorporated by reference thereto. Kramer v. Time Warner. Inc., 937 F.2d 767, 773 (2d Cir. 1991). In this context, the Second Circuit has held that a complaint is deemed to "include . . . documents that the plaintiffs either possessed or knew about and upon which they relied in bringing the suit." Rothman v. Gregor, 220 F.3d 81, 88 (2d Cir. 2000).
B. The Motion Against Kim Will Not Be Dismissed
The defendants allege that the complaint must be dismissed as against Kim because Kim individually cannot be liable to Fubu. However, it is well-established that
while a corporate officer is not necessarily individually liable for torts committed on behalf of the corporation, personal liability for trademark infringement and unfair competition is established "if the officer is a moving, active conscious force behind [the defendant corporation's] infringement."Monsanto v. Haskel Trading, Inc., 13 F. Supp.2d 349, 354 (E.D.N.Y. 1998) (citing Bambu Sales, Inc. v. Sultana Crackers, Inc., 683 F. Supp. 899, 913 (E.D.N.Y. 1988)). See also LoPresti v. Terwilliger, 126 F.3d 34, 42 (2d Cir. 1997) (under New York law corporate officer who participates in a tort, even if it is in the course of his duties on behalf of the corporation, may be held individually liable); New York v. Shore Realty Corp., 759 F.2d 1032, 1052 (2d Cir. 1985) (under New York law corporate officer who controls conduct and is thus an active individual participant in that conduct is liable for the torts of the corporation without the need to pierce the corporate veil).
Contrary to the defendants' contentions, GTFM did not merely allege in the complaint that Kim was acting as an officer/owner of IBS. Instead, Fubu alleges that Kim, as the owner, president and sole employee of IBS, was responsible for the acts alleged in the complaint. Kim is the only person who could have directed IBS's activities and thus clearly was the mastermind behind the alleged events. As a result, the complaint may not be dismissed on this motion as against Kim.
C. Whether the 05 Trademark Is Functional May Not Be Decided at This Time
The defendants argue that Fubu's federal, state and common law trademark infringement claims should be dismissed because the 05 Trademark is purely functional.
Functionality is a complete defense to trademark infringement. 15 U.S.C. § 1115 (b)(8); see also Qualitex v. Jacobson Prods., 514 U.S. 159, 169 (1995).
Fubu argues persuasively that the issue is inappropriate for a motion to dismiss. The facts of the complaint are not such that Fubu cannot as a matter of law prove that "05" was merely used in a functional application. Therefore, the defendants' motion to dismiss on these grounds is denied.
While any decision on this issue would be premature, it is worthwhile to note that the Honorable Denise Cote has already rejected in a bench trial a similar affirmative defense that Fubu's 05 Trademark is functional. GTFM, Inc. v. Solid Clothing, Inc., 2002 WL 1477821 (S.D.N.Y. July 11, 2002). In GTFM, which involved the same plaintiff and same trademark but different defendants, the defendants argued that the 05 Trademark was functional. Like the current defendants, they asserted that sports figures could use "05" as a number on athletic jerseys. Id. at *27. Judge Cote found that "professional athletes rarely if ever wear two digit numbers beginning with the number zero with the exception of the combination '00.'" Id. In fact, the defendant Solid could point to only one professional baseball player in the history of the sport who had used a number beginning with zero other than "00," and that player has ceased to wear the number. Id. Finally, Judge Cote stated that athletes would not in any case be prevented from wearing "05" on jerseys because they would be doing so in a descriptive, non-trademark sense. Id. Judge Cote also rejected the notion that "05" was merely functional because a class graduating in the year 2005 (or 2105 and so on) would denote itself by "'05." Id. at *26.
IV. Sanctions
In light of the above determination, sanctions are not warranted at this time and the defendants' motion therefor is denied.
Conclusion
For the foregoing reasons, the defendants' motions to dismiss and for sanctions are denied.
It is so ordered.