MARIMAR TEXTILES, INC. v. JUDE CLOTHING & ASSESSORIES CORP. et al

Filing 18

OPINION. Signed by Chief Judge Jose L. Linares on 10/2/17. (sr, )

NOT FOR PUBLICATION
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY

MARIMAR TEXTILES. INC.,

Civil Action No.: 17-2900 (JLL)

Plaintiff,

OPINION

V.

JUDE CLOTHING & ACCESSORIES
CORP., eta!.,
Defendant.

LINARES, Chief District Judge.
This matter comes before the Court by way of Defendants Jude Clothing & Accessories
Corporation, Jude Connally E-Cornrnerce Corp., Jude Connally Sarasota Limited Liability
Company, Jude Connally Westfield Limited Liability Company, and Jude Connally Zimmerman’s
(“Defendants”) Motion to Partially Dismiss Plaintiffs First Amended Complaint pursuant to Rule
12(b)(6) of the Federal Rules of Civil Procedure. (ECF No. 13). Plaintiff Marirnar Textiles, Inc.
has submitted Opposition (ECF No. 16), to which Defendants have replied. (ECF No. 17). The
Court decides this matter without oral argument pursuant to Rule 78 of the Federal Rules of Civil
Procedure. For the reasons set forth below, the Court grants in part and denies in part Defendants
Motion to Dismiss portions of Plaintiffs Complaint.
I.

BACKGROUND’

Plaintiff Marirnar, a New Jersey corporation with its principal place of business located in

This background is derived from Plaintiffs F irst Amended Complaint, which the Court must accept as true at this
stage of the proceedings. See ills/on v. Countiyuide fin. Corp., 585 F.3d 753, 758 (3d Cir. 2009).

Wall, NJ, brings this action seeking to recover damages from Defendants for, inter a/ia, copyright
infringement under the Copyright Act, 17 U.S.C.

§

101 et seq. (ECF No. 10 (“FAC”)

¶

1-2).

Defendants are New Jersey corporations and limited liability companies with their principal places

of business all being in Kenilworth, NJ. (FAC ¶ 3). Individual Defendant Jude Connally, is a New
Jersey resident and a “principal, owner, or rnernber[, and exercises complete control,] of each of’
the corporate Defendants. (FAC

¶ 4,

6).

“Since 1997, [Plaintiff] has supplied the US and European apparel industry with original
printed and novelty textile patters, printing over 2 million yards per year. To date, [Plaintiff] has
developed a library of over 11,000 textile patterns.” (FAC

¶

13). Plaintiff owns the copyrights

for the following patterns, and has registered same with the U.S. Copyright Office:
11121 lbhl

1123 Gn,oy
lOWS 01a’(,2

1L!

I 1120 lL

002-001-043

%o

—-

)j

U02-1014-35

002.013-40

:

r4

\:ç
11125
1loorBlok

VA2-0113-bO

001090009
•I

-III

‘

2

f:
Ø4-

H1s2
LpiHoil

‘A2-(MiI 3
‘

\ .2-O(I4-35

!;‘

(FAC

¶

14).2

VA2-4XJ4-3 I

II ‘2?
I ath PMIe

U

U

2!

Plaintiff asserts that Defendants “purchased thousands of yards of the [Subject

Patterns]” from March 2010 through September 2010.

(FAC

¶

15).

According to Plaintiff

Defendant used the purchased materials to manufacture dresses. (Id.). Plaintiff asserts that certain
“highly confidential information” relating to the Subject Patterns was not shared with any of its
customers, and “considered [this information for each pattern]

(FAC

...

to be [Plaintiffs] trade secrets.”

¶ 16). While maintaining the secrecy of the aforementioned information was important to

Plaintiff, some of its employees received access to same on a “need-to-know basis,” while others,
including non-party Ruth Bachrnann. “had direct knowledge of all of’ Plaintiffs trade secrets.
(FAC

¶ 1$).
From the period of 1997 through 2012, Ms. Bachmann was employed by Plaintiff as a

2

The images contained in Paragraph 14 of FAC shall collectively be referred to as the “Subject Patterns.”

3

senior print stylist and also owned shares in Simply Swim, LLC, which is a privately held company
partially owned by Plaintiff. (FAQ

¶

18-19). Ms. Bachmann resigned from Plaintiff on August

10, 2012, and took her MacBook laptop computer upon resignation. (FAQ

¶ 19).

Plaintiff did not

know that Ms. Bachrnann had Plaintiffs confidential or trade secret information on said laptop
computer when she lefl Plaintiffs employ. (Id.).
Ms. Bachrnann was then employed by Defendants. (FAC

¶ 20).

Plaintiff claims that, in

January 2014, it discovered that Ms. Bachmann had misappropriated Plaintiffs trade secrets “by
taking: (i) a MacBook laptop, onto which she had downloaded from [Plaintiffs] server digital files
containing [Plaintiffs] Trade Secrets and images of [Plaintiffs 11,000 patterns]; and (ii) other
written materials containing [Plaintiffs] Trade Secrets.”

(Id.).

According to Plaintiff, Ms.

Bachrnaim provided Defendants with Plaintiffs trade secrets, but Plaintiff did not have reason to
believe this misappropriation occurred until January 2014. (Id.).
Thereafier, Plaintiff asserts Defendants began using the information obtained from Ms.
Bachmann to directly contact Plaintiffs factories, place orders for fabrics bearing the Subject
Patterns, and using said fabrics in many of Defendants’ dresses.

(FAQ

¶

21).

Defendants

purportedly “knew that they were not authorized by [Plaintiffi to place orders for the [Subject
Patterns], whether in the same colorways and repeats as used by [Plaintiffi or in different
colorways or in larger or smaller repeats,” and that Defendants falsely represented to Plaintiffs,
and its factories, that they were in fact authorized to use said

patterns.

(FAC

¶J 24-26).

Plaintiff discovered the alleged infringements in January of 2014. (FAC

¶ 27).

Prior to

this discovery, Plaintiff knew that Ms. Bacluriann was working for Defendants, but did not have
reason to believe that any misappropriation or confidential information or trade secrets had taken

4

place.

(Id.).

Apparently, in a conversation between Plaintiff and Defendants, Individual

Defendant “Connally admitted that [Plaintiff] owned the rights, including copyright rights, in and
to [the Subject Patterns]

...

and agreed not to infringe on same and to compensate [Plaintiff] for

the use of the [Subject Patterns].” (FAC
promises. (FAC

¶ 2$).

It is alleged that Defendants failed to keep their

¶ 29).

Accordingly, on two separate occasions, by way of counsel. Plaintiff served Defendants
written notice of the alleged infringement and a demand that Defendants “immediately cease and
desist from any further use, promotion, offer for sale, and sale of’ the Subject Patters. (FAC ¶ 30).
Defendants’ counsel asserted that the dresses were made from fabrics shipped to them between
2010 and 2012, but Plaintiff asserts that this statement is false. (Id.). “The falsity of Defendants’
statement, and their willful and knowing infringement, is further demonstrated by the fact that
after [Plaintiff] provided written notice to [Defendants] of [Defendants’] Infringements and copy

of [Plaintiffs other patterns], Defendants made one of the [Subject Patterns], 10105 Status Geo,
the centerpiece of Defendants’ Spring 2017 clothing line, using that pattern on a variety of dresses
and other goods.” (FAC

¶ 31)

(emphasis in original). Accordingly, Plaintiff brought this action

asserting the following claims: Count I Copyright Infringement in violation of 17 U.S.C.
-

and 601; Count IT
Count TV

-

-

Breach of Implied and/or Quasi-Contract; Count Ill

Misappropriation of Confidential Information; Count V

-

-

§

106

Unfair Competition;

Misappropriation of Trade

Secrets in violation of N.J.S.A. 56:15-1, et seq.; Count VI Tortious Interference with Contractual
-

Relations; Count VII Tortious Interference with Prospective Economic Relationships; Count VIII
-

-

Legal fraud; Count IX

-

Equitable Fraud; and Count X

Violation of Defend Trade Secrets Act, 18 U.S.C.

5

§

1836.

-

Misappropriation of Trade Secrets in

II.

LEGAL STANDARD

To withstand a motion to dismiss for failure to state a claim, “a complaint must contain
sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.”
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544,

570 (2007)). “A claim has facial plausibility when the plaintiff pleads factual content that allows
the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.”
Iqbat, 556 U.S. at 678 (citing Tit’ornbly, 550 U.S. at 556). “The plausibility standard is

not

akin to

a ‘probability requirement,’ but it asks for more than a sheer possibility that a defendant has acted
unlawfully.” Id.
To determine the sufficiency of a complaint under Ti’omb/v and Iqbal in the Third Circuit,
the court must take three steps: first, the court must take note of the elements a plaintiff must plead
to state a claim; second, the court should identify allegations that, because they are no more than
conclusions, are not entitled to the assumption of truth; finally, where there are well-pleaded
factual allegations, a court should assume their veracity and then determine whether they plausibly
give rise to an entitlement for relief. See Connellv v. Lane Constr. Coip., 809 F.3d 780, 787 (3d
Cir. 2016) (citations omitted).

“In

deciding a Rule 12(b)(6) motion, a court must consider only

the complaint, exhibits attached to the complaint, matters of public record, as well as undisputedly
authentic documents if the complainant’s claims are based upon these documents.” Mayer v.
Belichick, 605 F.3d 223, 230 (3d Cir. 2010).
III.

ANALYSIS

Defendants move to partially dismiss Plaintiffs FAC.

(ECF No. 13).

Specifically,

Defendants ask this Court to dismiss Count I as to the “Status GEO” patterns and the request for

6

attorneys’ fees as to all patterns, as well as Counts II, III, V, VIII, IX, and X. (See general/v ECF
No. 13-1 (“Def. Mov. Br.”)). Each cause of action shall be analyzed separately below.
A. Count I

-

Copyright Infringement

Defendants’ Motion regarding Plaintiff copyright infringement claim is two-fold. First,
Defendants argue that Plaintiff does not

own

the copyright registration for “Status Geo” pattern,

and is therefore barred from asserting a claim with respect to this pattern. (Def. Mov. Br. at 8-9).
Next, Defendants assert that Plaintiff registered the remaining copyrights with the U.S. Copyright
Office afier the date of infringement and are therefore time barred from seeking attorneys’ fees or
statutory damages for any alleged infringement relating to these patterns.
In order to establish copyright infringement, a plaintiff must prove two elements: “(1)
ownership of a valid copyright; and (2) copying of constituent elements of the work that are
original.” feistPztbl’ns, Inc. v. Rttrctl Tel. Serv. Co., 499 U.S. 340, 361 (1991); see also Browiistein
v. Lindsay, 742 F.3d 55,77 n.16 (3d Cir. 2014) (quotingMasquerade Novelty, Inc. v. Unique Inthts,
Inc., 912 F.2d 663, 667 (3d Cir. 1990)). A copyright registration certificate isprimafacie evidence
sufficient to meet the first prong of the analysis. See 17 U.S.C.

§ 410(c); ford Motor Co. v. Sttmmit

Motor Prods., Inc., 930 F.2d 277, 290 (3d Cir. 1991). As such. the analysis is usually focused on
the second “copying” prong. As it is rarely possible to prove copying through direct evidence,
copying may be proved inferentially by showing that defendant had access to the allegedly
infringing copyrighted work and that the allegedly infringing work is substantially similar to the
copyrighted work. See Roth Greeting v. United Card Co., 429 F.2d 1106, 1110 (9th Cir. 1970).
Preliminarily, the Court is satisfied that Plaintiff has pled a prima fade cause of action
under the Copyright Act. This is because, as to all patterns, Plaintiff has pled it is the rightful

7

owner and that said patterns have been registered with the U.S. Copyright Office. (FAC
15). Accordingly, there is a presumption of ownership. See 17 U.S.C.
930 f.2d at 290.

¶J

14-

§ 410(c); ford Motor Co.,

Additionally, Plaintiff has properly pled that Defendants infringed on its

copyrights by using the Subject Patterns, as well as Plaintiff’s other patterns, without Plaintiffs
authorization. (FAC

¶ 20-45).

Accordingly, the Court is satisfied that Plaintiff has sufficiently

pled a claim under the Copyright Act.
As to the “Status Geo” pattern, Defendants argue that the copyright registration is owned
by Simply Swim, LLC and, therefore, Plaintiff has failed to assert proper ownership of the
copyright and cannot bring a claim for infringement of same. (Def Move. Br. at 9). However,
Plaintiff avers that, while it is true that Simply Swim, LLC initially registered the “Status Geo”
copyright on August 16, 2016, Simply Swim, LLC also transferred said rights in the “Status Geo”
copyright to Plaintiff on October 16, 2016. (ECF No. 16 (“P1. Opp. Br.” at 6-7)). Accordingly,
Plaintiff is correct that it held the rights to the “Status Geo” copyright well before this action was
instituted and therefore may maintain this action. The Court finds that, at this stage in the litigation,
Plaintiff has pled sufficient facts concerning the ownership and infringement of the “Status Geo”
copyright and, therefore, will not dismiss this claim.
Finally, Plaintiffs are correct that Defendants’ statutory damages and attorneys’ fees
arguments are premature. (P1. Opp. Br. at 8). Indeed, whether statutory damages or attorneys’
fees are warranted in a copyright infringement case is a question best decided afier the matter has
progressed through discovery and not at the motion to dismiss phase. See City of New York v.
GeoData Plus, LLC, 537 F. Supp. 2d 443, 457 (E.D.N.Y. 2007). Accordingly, the Court denies
Defendants’ Motion as it pertains to statutory damages and attorneys’ fees, without prejudice, with

8

the right to re-raise same at the summary judgment phase, consistent with Greenfield v. Twin
Vision Graphics, Inc., 26$ F. Supp. 2d 35$ (D.N.J. 2003).
B. Count II

-

Breach of Implied Contract/Quasi-Contract

To recover on the theory of quasi-contract, a plaintiff must prove “that the defendant
received a benefit, and that retention of the benefit without payment therefor would be
unjust.” Callano

i’.

OakwoodfarkHomes Coip., 91 N.J. Super. 105, 108 (N.J. Super. App. Div.

1966). Qttantttin merutit, or breach of implied contract, is a foim of quasi-contract. Kopin v.
Orcunge Products, Inc., 297 N.J. Super. 353, 367 (N.J. Super. App. Div. 1997). “Quasi-contracts
are imposed by law to bring about justice, without reference to the parties’ intent.” Kopin, N.J.
Super. at 3 66-67. Thus, quantum meruit enables a party to recover the reasonable value of services
rendered in the absence of a contract governing wages or remuneration. Id. at 367. Regardless of
what this Count is entitled (breach of implied contract or quasi-contract), the analysis remains the
same, i.e. whether Defendants herein retained a benefit without payment that would render same
as an unjust result for Plaintiff.
Plaintiff’s allegations in support of this Count essentially boil down to the fact that
Defendants “cut out the middleman” and ordered their dresses directly from Plaintiffs overseas
factories.

Indeed, Plaintiff alleges that Defendant “commissioned [Plaintiffs] factories to

manufacture those fabrics and then sold those fabrics to [Defendants] at a price comprising the
manufacturing cost plus [Plaintiffs] profit on the sale.” (FAC
Defendants were contacting its factories overseas.

(FAC

¶ 48).
¶

Plaintiff was not aware that

49).

According to Plaintiff,

“Defendants have been unjustly enriched by their receipt of fabrics bearing the [Subject] Patterns,
which they retained without paying” Plaintiff. (F AC

9

¶J 50).

These facts alone are insufficient to support a claim of breach of implied contract or quasicontract. Plaintiff points to no benefit it conferred upon Defendants other than the simple fact that
Defendants were put in contact with Plaintiffs factories.

Serving as an intermediary, and

subsequently being cut out of the proverbial loop, does not in and of itself constitute a benefit
Plaintiff conferred upon Defendants.

As a matter of fact, Plaintiff itself admits that putting

Defendants in contact with Plaintiffs factories was a necessary aspect of the parties’ business
relationship. (FAC ¶ 16). In sum, simply learning the identity of Plaintiffs factories, alone, cannot
be said to be a benefit conferred upon Defendants for which Plaintiff expected compensation.
Accordingly, the Court dismisses Count II.
C. Count III Unfair Competition
-

This Court address Plaintiffs claim for unfair competition under federal law, New Jersey
state law, and the common law simultaneously. The standards for liability under these types of
causes of action are nearly identical, and a finding of liability under federal law leads to a finding
of liability as to the others. See SC Holdings, LLC v. Optinium iVetworks, Inc., 731 F. Supp. 2d
400, 410-Il (D.N.J. 2010); see ct/so 15 U.S.C.

§

1125(a);N.J.S.A. 56:4-1.

A claim for unfair competition is established by showing that: (1) the mark at issue is valid
and legally protectable; (2) the mark at issue is indeed owned by the party seeking to use it; and
(3) the use of the mark by another party to identif goods or services is likely to create conftision
concerning the origin of the goods or services. See CSC Holdings, LLC, 731 F. Supp. 2d at 40506; see also 15 U.S.C.

§

1125(a). This Court has already found that the Subject Patterns are in

fact owned by, and registered to, Plaintiff. Accordingly, the first two elements of the above test is
satisfied. Plaintiff further alleges that Defendants’ use of the Subject Patterns is likely to confuse

10

consumers regarding the source of the goods because the patterns utilized by Defendants are either
identical to Plaintiffs Subject Patterns, or exactly the same patterns with a different color scheme.
FAC ¶J 30-33, 56-59). Hence, the Court finds that Plaintiff has pled aprima fade claim for unfair
competition.
U. Count V Misappropriation of Trade Secrets Under New Jersey Law
-

Defendants assert that Plaintiffs claims under New Jersey’s Trade Secrets Act is time
barred pursuant to the statute of limitations set forth by the Act. (Def. Mov. Br. at 14-15) (citing
N.J.S.A. 50:15-8). That provision states that a claim under the New Jersey’s Trade Secrets Act
must “be brought within three years afier the misappropriation is discovery or by the exercise of
reasonable diligence should have been discovery.” N.J.S.A. 50:15-8. Plaintiff, in response, points
to the tolling agreement, where the parties agreed to toll the statute of limitations pending a
potential amicable resolution prior to the institution of this action. (P1.
No. 16-5)).

Opp. Br. at

19 (citing ECF

Defendants do not reply to this argument (see generally ECF No. 17), and,

accordingly, the Court treats their argument in favor of dismissal as abandoned, without prejudice,
and with the right to re-raise same at the summary judgment phase, if necessary.
E. Counts Vill/IX Legal fraud/Equitable Fraud
-

Defendants move to dismiss both Counts VIII and TX, which are for legal fraud and
equitable fraud, respectively, asserting that the allegations supporting these Counts do not meet
the heightened pleading standard for fraud-based claims.

(Def. Mov. Br. at 15-19).

Claims

sounding in fraud must be pled under the heightened standards of Federal Rule of Civil Procedure
9(b).

See Byrnes v.

DeBolt Transfer, Inc., 741 F.2d 620, 626 (3d Cir. 1984). The Third Circuit has

set forth the following requirements for pleading fraud:

11

In order to satisfy Rule 9(b), plaintiffs must plead with particularity “the
‘circumstances’ of the alleged fraud in order to place the defendants on
notice of the precise misconduct with which they are charged, and to
safeguard defendants against spurious charges of immoral and fraudulent
behavior.” Seville Indus. Mach. Corp. v. Southmost Mach. Corp., 742 F.2d
786, 791 (3d Cir. 1984). Plaintiffs may satisfy this requirement by pleading
the “date, place or time” of the fraud, or through “alternative means of
injecting precision and some measure of substantiation into their allegations
of fraud.” Id.
Lum v. Bank ofAm., 361 F.3d 217, 223-24 (3d Cir. 2004). With this in mind, the Court turns to
New Jersey law. In order to plead a fraud-based claim in New Jersey, a plaintiff must allege: “(1)
a material misrepresentation of a presently existing or past fact; (2) knowledge or belief by the
defendant of its falsity; (3) an intention that the other person rely on it; (4) a reasonable reliance
thereon by the other person; and (5) resulting damages.” Gennari v. Weichert Co. Realtors, 148
N.J. 582, 610 (N.J. Sup. Ct. 1997).
The Court concludes that Plaintiff has not pled prima facie claims for legal or equitable
fraud. This is because nowhere within the First Amended Complaint does Plaintiff assert the
specific misrepresentations it relied upon.

Moreover, Plaintiff does not state which of the

Defendants was the utterer of the misrepresentations, or when or where such misrepresentations
were made. Plaintiff also fails to explain how it relied on the alleged misrepresentations to its
detriment. Rather, the First Amended Complaint contains generalized statements of purported
misrepresentations and reliance thereon. Even when Plaintiff attempts to particularize the alleged
misrepresentations, the recipient of said alleged misrepresentations was not Plaintiff, but rather
Plaintiff’s factories.

(e.g. FAC

¶

91) (“Defendants made material misrepresentations to

[Plaintiff s] factories, namely that Defendants were authorized by [Plaintiff] to place the order for
the [Subject Patterns].”) (emphasis added). These allegations, alone, are insufficient to meet the

12

heightened pleading standard of Rule 9(b). Accordingly, the Court dismisses Counts VIII and IX
for lack of particularity, without prejudice.
F. Count X
Act

-

Misappropriation of Trade Secrets in Violation of Defend Trade Sccrets

Defendants advance three arguments in support of dismissal of Count X. First, Defendants
argue that Plaintiffs claim under the Defend Trade Secrets Act accrued prior to enactment and the
statute is not retroactive, thereby prohibiting such a claim. (Def. Mov. Br. at 19-2 1). Defendants
further argue that claim is barred by the Defendant Trade Secrets Act’s statute of limitations of
three years. (Def. Mov. Br. at 21-22). finally, Defendants claim Plaintiff has failed to assert a
nexus between Plaintiffs trade secrets and interstate or foreign commerce. The Court disagrees
with all three arguments.
Indeed, this Court recognizes that the Defend Trade Secrets Act is not retroactive and is
forward looking. See Pub. L. No. 114-153,
18 U.S.C.

§

§

2(e), 130 Stat. 376 (2016) (codified as amended at

1831 et seq.). However. Plaintiff asserts that the violations relating to this claim are

ongoing and, at least a portion of the violations, took place after the enactment of the Act. (FAC

¶J 2 1-32).

Courts have held that allegations of pre-enactrnent acquisition of a trade secret coupled

with post-enactment continued use are sufficient to sustain a claim under the Defend Trade Secrets
Act at the motion to dismiss phase. See Brand Energy & Infrastructare Servs. v. Irex Contracting
Gip., 2017 U.S. Dist. LEXIS 43497, at *11 (E.D. Pa. Mar. 23, 2017); High 5 Games, LLC v.
Marks, 2017 U.S. Dist. LEXIS 9302, at *15 (D.N.J. Jan. 24, 2017). Accordingly, the Court finds
Defendants’ non-retroactivity argument unpersuasive and will not dismiss Count X. Similarly,
Plaintiffs claim is not time barred by the three-year statute of limitations, because Plaintiff has
alleged violations as recent as Spring of 2017. (FAC
13

¶

2017). If Plaintiff can show that such

violations did in fact take place in Spring of 2017, then this action is timely. Moreover, as
discussed above, III.D supra, Plaintiff has alleged that the parties have entered into a statute of
limitations tolling agreement, which further negates Defendants’ statute of limitations argument.
Hence, at this juncture, the Court will not dismiss Count X as untimely.
Finally, the Court is satisfied that Plaintiff has made sufficient allegations to assert a nexus
between the violation and interstate commerce.

Plaintiff clearly alleges that Defendants

improperly used Plaintiff’s trade secrets to create infringing goods, which were meant to be sold,
at the very least, throughout the United States. (FAC ¶J 30-33, 47-48, 79, 87). These allegations
are sufficient to survive a motion to dismiss. Defendants are free to re-raise this argument afier
the completion of discovery at the summary judgment phase of the case, but the Court will not
dismiss Count X at this juncture of the litigation.
CONCLUSION

For the aforementioned reasons, Defendants’ Motion to Dismiss Plaintiffs’ First Amended
Complaint is hereby granted in part and denied in part. An appropriate Order accompanies this
Opinion.

7J
DATED: Octoberj% 2017
JOS”IJLLNARES
,/Chief Judge, United States District Court

14