Helios International SARL et al v. Cantamessa U.S.A., Inc. et al

Filing 18

OPINION re: 9 MOTION to Dismiss Notice of Partial Motion to Dismiss Plaintiffs' Complaint filed by Cantamessa U.S.A., Inc., Robert Kheit, Fabrizio Cantamessa. Upon the conclusions set forth above, the Defendants' partial motion to dismiss is granted in part and denied in part, and leave is given to replead within 20 days. (Signed by Judge Robert W. Sweet on 7/27/2013) (cd)

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UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK ---------------------------------- -X HELlOS INTERNATIONAL S.A.R.L. and IDEA ITALIANA s.r.l., Plaintiffs, -against- OPINION CANTAMESSA USA, INC., FABRIZIO CANTAMESSA, and ROBERT KHEIT, Defendants. ----------------------------X A P PEA RAN C E S: Attorne for Plaintif OBERDIER RESSMEYER LLP 655 Third Avenue, 28th Floor New York, NY 10017 By: Carl W. Oberdier, Esq. Kellen G. Ressmeyer, Esq. Attorne 12 Civ. 8205 for Defendants COWAN, LIEBOWITZ & LATMAN, P.C. 1133 Avenue of the Americas New York, NY 10036 By: J. Christopher Jensen, Esq. Scott P. Ceresia, Esq. Sweet, D.J. Defendants Cantamessa USA, Cantamessa and Robert Kheit moved under Fed. R. C Inc., Fabrizio (collectively, "Defendants") have P. 12 (b) (6) partial dismissal of the complaint ("Rule 12 (b) (6)") ("Complaint") plaintiffs Helios International S.A. R. L. Italiana s.r.l. ("CUSA"), r filed by ("Helios") and Idea ("Idea" and collectively, "Plaintiffs"). In the Complaint, which was filed on November 9, 2012, Plaintiffs have asserted the following causes of action: violations of the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1962 (Counts 1-4); copyright infringement under the U.S. Copyright Act, 17 U.S.C. §§ 106(1)­ (3) (Count 5) i trademark in U.S.C. § 1125 (Count 6) (Count 7) i lse i ingement under the Lanham Act, 15 trademark dilution under the Lanham Act signation under the Lanham Act (Count 8); cancellation of federal registration under the Lanham Act (Count 9); state statutory and common law trademark infringement under the Trademark Act of New York, Gen. Bus. L. 360-1 and the common law of each of the fi y states (Count 10); conversion (Count 11); common law fraud (Count 12); trespass to chattels (Count 13); breach of fiduciary duty (Count 14); misappropriation of trade secrets (Count 15); un ir competition (Count 16); and breach of the New York Consumer Protection Act ("NYCPA") § 349 (Count 17). On January 18, 2013, Defendants submitted the instant motion r partial dismissal of Complaint, which moved for dismissal of the following c ims: (i) RICO (Counts 1-4); trademark dilution (Count 7); (iii) common law fraud (Count 12); (i v) breach of fiduciary duty (Count 14); misappropriation (Count 15); and ( (Count 17). The motion was (ii) (v) trade secret breach of the NYCPA § 349 rd and marked fully submitted on March 13, 2013. Based upon the conclusions set rth below, the Defendants' motion to dismiss is granted with respect to Counts 1-4, Count 7, Count 12, and Count 17, and denied with respect to the ot r counts. The Facts As required on a motion to dismiss pursuant to Rule 12(b) (6), the s alleged in the Complaint, which are set forth in pertinent part below, are presumed to be true, and all factual inferences are drawn in t v. Polar plaintiffs' favor. See Mills 12 F.3dl170, 1174 (2dCir. 1993). 2 Plaintiffs are owners and distributors of the Cantamessa brand of jewelry. of jewel was founded in Compl. ~ 2. business began to s.r.l.") was Id. 1 3. rship. amessa line lenza, Italy in 1939 by Cantamessa family, and flourished for six family's le The cades under t However, in early 2000s the line, and in 2004 the company ("Cantamessa ced to kruptcy. lare Id. In 2007, Cantamessa s.r.l.'s assets, incl tangible assets, i.e., copyright ng its jewelry, and intangible assets, i.e., jewelry designs, the Cantamessa name and Cantamessa "Crown Logo" trademark (collectively, t "Intellectual Property"), were acquired by pla 1 4. In 2009, plaintiff Helios pu iff I Id. sed Idea's entire inventory of Cantamessa brand jewelry and entered into an ive stributorship agreement with Idea. In December 2009, Hel s ente Id. ~ 5. into an agreement defendant Fabrizio Cantamessa ("Cantamessa"), a grandson of the founder of Cantamessa s.r.l., in which Cantamessa agreed to act as Helios' global sales agent in connection with the marketing and sale of Cantamessa brand jewelry, and was authorized to use the Intellectual Property in that capacity. 3 Id. 'l1'l1 39-41. Cantamessa was granted "unrestricted, unsupervised access" to a warehouse in Geneva, Switzerland containing Cantamessa jewelry (the "Warehouse") and permission to remove jewelry from the Warehouse, and also was given "general authority to execute sales" of any Cantamessa jewelry that he took from the Warehouse. Id. ~~ 6, 47. The agreement granted the same rights to Cantamessa's wife, non-party Paola Brussino ("Brussino"). In 2010, defendant Robert Kheit ("Kheit"), a business associate of Cantamessa, entered into an agreement with Helios similar to the agreement between Helios and Cantamessa. 44-47. 1 Id. ~~ As with Cantamessa, Kheit was bestowed with authorization to use the Intellectual Property in connection with the marketing and sale of Cantamessa brand jewelry. Id. At some point in 2010, Cantamessa, who was "infuriated and embittered by the loss of his family's jewelry business," secretly devised a plan with Kheit "to steal back from Helios It is unclear from the Complaint whether Kheit's agreement was made directly with Helios, or with Cantamessa acting as an agent for Helios. Regardless, the Complaint has alleged that Kheit possessed the same authority and agency powers as Cantamessa, see Compl. ~~ 47-48, so for the purposes of the instant motion, it will be assumed that the nature of the relationship between Helios and Kheit is functionally identical to that between Helios and Cantamessa. 1 4 and Idea the entire amessa brand, dollars of inventory, Cantamessa name." Id. jewel ~ including millions of signs, the Crown Logo and the 48. In September 2010, t s incorporated De defendant Cantamessa USA in New York and thereafter opened a boutique located in New York of Y (t red Cantamessa brand jewelry "New York Boutique") that r sa Defendants used the Intellectual ~~ Id. rty to market Cantamessa jewelry in the United States, and Pia iffs alleged that this included both authorized and unauthori us Id. ~ 49, 63. tances of 43. From March 2010 through December 2010, Cantamessa and sold approximately 125 pieces of Cantamessa jewelry having an te aggregate value of $1,757,484.00. Pursuant to their respective agreements with Id. ~ 50. aintiffs, Cantamessa and Kheit were entitled to retain a total of $236,380.95 as commission, and were required to rema ret to Helios. Id. However, Cantamessa the it $1,138,787.26, and remitted only $618,696.81 to Helios. Id. 5 t Defendants 185 pieces of Cantamessa jewel Warehouse. these p beginning of 2011 through November 2011, Id. -55. s from t Defendants subsequently sold many of all of the sales proceeds for themselves. Id. During t course of 2011, efforts to publicize Cantamessa brand by sending pieces of United States and the world for Cantamessa jewelry around t sibility events. use in high-profile and high June 2011, a Defendants dona use in a charity event he fashion designer Valentino. photo shoot of actress In September 2011, Id. ~~ 72. In ir of Cantamessa earrings for Paris, Id. France hosted by the In July 2011, several pieces of Cantamessa jewel Id. Defendants engaged in Defendants sent to California for use in a r Vanity Fair magazine. ay De s sent several pieces of Cantamessa jewelry to Flori use supermodel Adriana Lima for Elle Magaz a photo shoot of Id. In December 2011, Defendants sent several pieces of Cantamessa jewelry to Philadelphia for use in a photo shoot of Melania Trump, wife of Donald Trump, for Philadelphia Style Magazine. Id. Also in 2011, Cantamessa and Kheit asked Helios Idea to send approximately $5 million of jewelry to New York on 6 jewelry was to be used in a temporary the premise that exhibition (the "New York ion") meant to publicize t U.S. consumers. Cantamessa jewelry line shipping the jewel cating t t t subject to the usual taxes t imported for commerc 1 sale. ~ Id. 58. During the exhibition, Intellectual Property, including the Cantamessa name the signage used to di and therefore were not t would be due on items being Cantamessa and Kheit utiliz Cantamessa Crown Logo, on ay t eces. Defendants began sell Id. ~79. jewel York Boutique and via the internet. Id. ~ produce proof of the jewelry's return to Italy of $27,452.61. Id. ~ De trademark registration applications to the Un ("USPTO") cIa t t failure to 11 result in a s submitted ed States Patent and the Trademark and Desi Office of the European Union ("ETO") ~~ has been I 97. In June 2011 and November 2011, Id. Following the their New 63. notified by the Italian Chamber of Commerce t Cantamessa name. In items were being imported temporarily and would later be returned, & Trademark Office 57. , Relios and Idea filed certain forms with customs officials exhibition, ~ Id. 80-85. for the Crown Logo The application to the USPTO CUSA was the owner of the Crown Logo and Cantamessa name, and the ETO application asserted ownership by 7 ssa himself, whereas in actuality the Crown Logo and the a. Cantamessa name belong to I ication claimed that t amessa name were 15, 2011, whereas in actuality been used by De market In addition, the USPTO Crown Logo and first used in commerce on Ma they Id. s prior to that date in their efforts on behalf of Helios. Id. Helios first became aware of Defendants' all scheme in October 2011, when it rformed an invento the contents of the Warehouse missing. Id. <JI ch revealed that jewel tigation revealed t Furt 53. taken by Cantamessa and Kheit. jewelry k on Id. was t the On October 5, 2011, Helios demanded an accounting by Cantamessa of all sales of Hel possession. respond to s' <JI 66. When Cantamessa did not immediately sti request, Helios discovered t s still in Cantamessa's jewelry and all p its entire invent Warehouse was missing. Id. <JI t ed further and t had been sto in the 67. In early November 2011, Helios terminated its agreement with Cantamessa, restri access to its Cantamessa from having ory, and demanded that Cantamessa cease associating himself with Helios or t Cantamessa brand and/or using the Cantamessa Intellectual Property. 8 Id. <JI<JI 67-68. On January 25, 2012, counsel for Idea sent CUSA and a wr re ten demand for the return of its merchandise and a rsement of all customs penalties incurred by virtue of De s' conduct. Id. ~ 69. The demand was re by ter from Defendants' counsel dated January 31, 2012. I Id. renewed its demand via letters in March 2012, 2012, but received no response. Id. ~~ il 69, 71. On February 12, 2012, Helios sent a written Cantamessa and his wife seeking updat contact any of Plaintiffs' customers who pur the request. Id. ~ 70. d sales proceeds, Cantamessa did not respond to Id. In or about February 2012, De of Cantamessa jewelry to the same Thailand (the rmation for jewelry through Cantamessa and his wife, as well as any less commission due. st to cturing facility in ry") ~Delora s shipped pieces I had previously used to sted that Delora produce manufacture its jewelry, replicas of those pieces. Id. ~~ 73-78. In addition, Defendants asked Delora to produce certain pieces of jewelry using molds t for Idea. Id. Delora De ously used to produce pieces s rected Delora to send the new 9 pieces to the Unit States by April 2012. July and August 2012, offering for sa Id. In addition, discovered that Pia tional pieces of had been produced in iffs were ssa jewelry that Delora factory. Id. ~~ 77-78. The Rule 12(b) (6) Standard On a motion to dismiss pursuant to Rule 12(b) (6), all factual all ions in the complaint are accepted as true, and all inferences are drawn in favor of t Molecular Corp., 12 F.3d at 1174. plaintiff will ultimately prevail entitled to of Polar issue is not whet whether the cia r evidence to support the claims." Suffolk, New York v. First Am. Re 179, 187 (2d Cir. 2001) Darien, 56 F.3d 375, 378 808 " pleader. r a is Count of Estate Solutions, 261 F.3d llager Pond, Inc. v. Town of (2d Cir. 1995), cert. deni , 519 U.S. (1996)). To survive a motion to smiss pursuant to Rule 12 (bl (6), "a complaint must contain sufficient factual matter, as true, to 'state a claim to relief that is on its face.,ff ~__~ 556 U.S. 662, 678 ible (2009) ______~__~~~~~~~~, 550 U.S. 544, 570 10 (2007)). This is not intended to only allege facts suf across the line from conce an onerous burden, as plaintiffs in order to "nudge[] their claims e to plausible." Twombly, 550 u.s. at 570. The Complaint Fails To State A RICO Claim Section 1962 of Title 18 action for those injured by anot activity. s a private cause of ttern of racketeering It states, in relevant (a) It shall be unlawful r rson who has received any income der rectly or indirectly, from a pattern of racketeering acti vi ty. . to use or invest, rectly or indirectly, any part of such income, or proceeds of such income, in acquisition of any interest in, or the establi or operation of, any enterprise which is engaged in, or the activities of whi affect, interstate or foreign commerce [ . .] (c) It shall be unlawful for any person employed by or associated with any se engaged in, or the act s of ch af , interstate or foreign commerce, to conduct or participate, rectly or indirectly, in the conduct of such ise's affairs through a pattern of racketeering activity . 11 (d) It shall be unlawful for any person to conspire to violate any of the provisions of subsection (a), (b), or (c) of this section. 18 u.s.c. § 1962. To state a claim for civil damages under Section 1962, a plaintiff has a twofold pleading burden. First, the plaintiff must allege that the defendant has violated the substantive RICO statute, 18 U.S.C. § 1962 ("§1962"). See Moss v. Morgan Stanley Inc., 719 F.2d 5, 17 (2d Cir. 1983). Second, the plaintiff must allege that he or she was injured in his or her business or property by reason of the violation of Section 1962. See 18 u.S.C. § 1964(c); Moss, 719 F.2d at 17. To plead a RICO violation, a plaintiff must allege: "(1) that the defendant (2) through the commission of two or more acts (3) constituting a 'pattern' activity' (5) directly or indirectly invests in, or maintains an interest in, or participates in (6) (4) of 'racketeering an 'enterprise' (7) the activities of which affect interstate or foreign commerce." Moss, 719 F.2d at 17 (citing 18 U.S.C. §§ 1962(a), 1962(b) and 1962(c)); The Jordan (Bermuda) Inv. Co., Ltd. v. Hunter Green Invs. Ltd., 154 F. Supp. 2d 682,690 12 (S.D.N.Y. 2001). In r to satisfy the " rement, a pla iff must show (i) at least at least two predicate racketee cates are ern of racketeering" ng acts, at (ii) "the racketeer ,and (iii) amount to or pose a t threat of continued criminal activity." H.J. Inc. v. Northwestern Bell Tel. Co., 492 U.S. 229, 239. of Tit 18 sets fo the various Section 1961(1) nal violations by state and federal law that can constitute predicate acts of rac eering acti s ty upon which a §1962 RICO claim may be See 18 U.S.C. § 1961 (1). "Because the mere assertion of a RICO claim . an a izing effect on those named as t inevitable st de s, RICO al . . . courts should strive to f out frivolous ions at an early stage of the litigation." Heppt, 423 F. Supp. 2d 147, 150 (S.D.N.Y. 2006) internal quotations omit are ). of "ga . .] [has a vehicle va ety fraud or t le damages by resort to what [. en] referred to as 'the litigation thermonuclear device.'" 392, 394 (citations and some Plaintiff has attempted to breach of contract cases transform Kirk v. Such frivolous RICO allegations manifested in 0 s ivalent of a v. Sichenza, 118 F. Supp. 2d Gol (S.D.N.Y. 2000) Schmidt v. Fleet ----------------~------ Supp. 2d 340, 346 (S.D.N.Y. 1998)). 13 This Court has ,16 F. iously counseled that courts "must c wary of putative civil RICO s ims that are nothing more clothing." Kirk, masquerading in wolves' 423 F. Supp. 2d at 149 (quoting W. 79th St. ion Kahl Minchas Chi No. 03 Civ. 8606 (RWS), 2004 WL 2187069, at *5 (S.D.N.Y. instant case presents just such a s 29,2004)). The ion. In an effort to satisfy RICO's pI requirements, intiffs have alleged the commission of a dable array of cate acts: National Stolen Property Act of (b) (a) transportation of stolen sa 2315; of st ("NSPA"), in violation 18 U.S.C. § 2314; en goods in violation of the NSPA, 18 U.S.C. § (c) laundering of money instruments in U.S.C. § 1956(a) (2); interstate and foreign t t at lation of 18 or in aid of racketeering enterprises in of 18 U. S. C. § 1952; (e) criminal copyright infringement in violation of 18 U.S.C. § 2319; services by mail olation (f) deprivation of honest wire fraud in violation of 18 U.S.C. §§ 1341, 1343 & 1346; (g) mail and wire fraud in violation of 18 U.S.C. §§ 1341 & 1343. Comp1. ~~ 106-35. However, "Plaintiffs cannot turn this case into a RICO case simply by recasti of contract [and common bus torts] as conspiracies of ion and fraud." 14 Bachewicz v. s Pre rred Dev., Inc., No. 10 C 3875, 2011 WL 2560218, at *5 (N.D. Ill. June 28, of t 2011). allegations of cate racketee more As set rth below, red in support of these putat acts reveals this case is nothing a commonplace business di essence, "garden var an examination involving what are, at y" commercial cla such as brea of contract, breach of fiduciary duty and infringement of intel ual property r s. A. Plaintiffs' all engaged ions that Cantamessa and Kheit transportation of stolen goods U.S.C. § 2314 are premi upon the contention following conduct consti such a violation: removal of jewelry from the Warehouse, retent of jewelry sent and (iii) ation of 18 (ii) t (i) 72, 110. ibition, of jewelry to various parts of the United States for use in photo shoots, and sh jewelry to Paris for use in a Defendants' s' De r use at the New York Defendants' sh the rity auction. of See Compl. ~~ However, that contention is belied by the allegations 15 in the Complaint between Helios, scr ng the contractual relationships ssa Khe , under which: • De ndants were"g n unrestricted, unsupervis access to Plaintiffs' multi-million dollar inventory wa se," Compl. ~ 6; • Defendants were "allowed to take jewelry from the warehouse t for sale, display or marketing," to "serve as cashier on a l l . jewelry sales," . ~ 6; • Defendants were " ral authority to execute sales," to "draw[] upon the warehouse for international to Cantamessa customers," Compl. ~ 47; • Defendants were aut i . Cantamessa jewelry" to "market and sell "to use the Crown a Logo and Cantamessa name" to engage in such marketing and sales ef ts, Compl. ~ 41; and • Defendants "were required to use their utmost skills to further Helios' interests. " Compl. 46. With respect to the allegations re Defendants' removal of jewelry from the Warehouse, given De s' express rity to effect such removal, these all a contract dispute regarding the extent ed to Defendants over the Warehouse me ~ raise i and se. Alt these allegations are largely stated with re to only Cantamessa, they are assumed to e lly icable to Kheit, since as noted above, the Complaint has characterized Cantamessa and Kheit as possessing commensurate powers and dut s with respect to Helios. See Compl. ~~ 46 47. 2 16 With respect to the allegations concerning Defendants' retention of the jewelry sent for the New York Exhibition, given Defendants' express authority to engage in the marketing and sale of Cantamessa jewelry, these allegations merely indicate a contract dispute regarding the extent of the authority and autonomy granted to Defendants over marketing and sales. same goes for the allegations concerning Defendants' The shipment of the jewelry to domestic and international locations for use in photo shoots and other promotional events - such allegations evidence a contract dispute as to the extent of the autonomy afforded to Defendants in fulfilling their contractual duty to market the Cantamessa brand and further Helios' B. interests. Sale of Stolen Goods Plaintiffs' allegations in support of the putative predicate act of selling stolen goods mirror those asserted in support of the putative predicate act of transportation of stolen goods. See Compl. ~~ 110, 112. Accordingly, for substantially the same reasons stated above, see supra § A, Plaintiffs' allegations purporting to establish that Defendants sold stolen goods in violation of 18 U.S.C. sound in breach of contract. 17 § 2315 actually C. Launder of Mone Instruments Plaintiffs' all laundering in s V10 ions that Defendants engaged in ion of 18 U.S.C. § 1956(a) (2) upon the contention constitut money laundering: are the following conduct (i) Defendants' trans r of $35,000 to the Delora factory in payment for the production of Cantamessa jewelry; stora (ii) De costs associated wi s' payment of ing and shipment of jewel t from the Warehouse to Switzerland 3 ; and (iii) Defendants' trans least $1.5 Ilion for the purpose of "advertising, mar exhib selling" Cantamessa brand jewelry. is contention is and powers contract r of at ing, ~ Compl. by the substantial aut Ii were vested in s by virtue of agreements with PIa iffs. sale, display or marketing," Compl. of jewelry from Since Defendants were the jewelry. r 6, Defendants' ar ~ Warehouse to New York merely raises a contractual issue the autonomy af ty ir "allowed to take jewelry from the warehouse unmonitored for the s 114. ng the parameters of rded to Defendants as to the transportation of se, since De 3 The jewelry was subsequently transpo Compl. ~ 112. 18 s were contractually to New York. See aut zed to "mar t and sell Cantamessa jewelry," Compl . • 39, intiffs' allegation that Defendants' expended purpose of "advertis for the , marketing, exhibiting and selling" Cantamessa jewelry merely implies a contractual dispute regarding t parameters of the autonomy afforded to Defendants to fulfill their contractual obI al tions. ion that Defendants pa lly, Plaintif r the production of Cantamessa jewelry with the intention of selling gives rise to either a contractual dispute or perhaps a cause of action for breach of iary duty.4 D. Rac Interstate and Foreign Travel or Transportation in ises d of Plaintiffs' allegations with respect to this putat cate act are premised upon the contention that following conduct by Defendants constituted interstate and 4 is alleged t the complained-of conduct occur s is of no to have te ted its ement with De consequence, as Defendants' conduct nonetheless evi s a commercial dispute re rding the contracting parties' rights to unilaterally terminate the agreement, or perhaps the nature substance of the rties' r s in the wa of a terminat of the agreement. Indeed, the Complaint has alleged that Defendants' arrangement of the production of Cantamessa pieces by the factory constituted a ach of Defe s' fiduci duties to aintiffs, see Compl. ~~ 122 23, thereby implying that the contractual relationship between Plaintiffs and Defendants rsisted in some form even at that point in t 19 foreign travel or transportation in aid of rac ee enterprises: u.s. (i) Defendants' travel, both in the ng internationally, and Defendants' use of facilities in interstate or fore commerce, market [ing] , (ii) for the pu ibit[ing] and sell[ing]" Cantamessa jewelry; and De s' use of facilit commerce to s the Delora se of "advertis[ing], s of interstate or the design of a ct and to trans ce of Cantamessa jewelry to to the Delora r production of Cantamessa jewelry. in payment However, as set forth above, Compl. ctory ~ 116. see -"---"-""'-=--­ § C, due to the s contractual nature of the parties' relationship, Plaintiffs' in breach of contract or other common law allegations causes of act , rather than cr form the basis lations suff r a RICO claim. E. 1 to Criminal Copyright Infringement Plaintiffs criminal copyright ory to produce 27 alleged that Defendants committed ngement by ar r the Delora s of Cantamessa jewelry by the Delora ctory in February 2012, and taking delivery of those pieces in April 2012. However, as noted above, see s contract with Plaintiffs sell Cantamessa jewel ra § 0, Defendants' ed them authority to "market and " Compl. ~ 20 39, so De s' alleged Ils more into t conduct realm of breach of contract or breach of fiduciary duty. Moreover, as noted in Pro ssor d Nimmer's treatise Nimmer on Copyright, which has been characterized as the "1 ng copyright treatise," New York Mercantile _I_n_c~.__ v~.__ I_n~t~e~r~c~o~n_t~l_·n~e_n_t~a~l~~__~~~_I_n~c~., 497 F.3d 109, 114 Cir. 2007), and "the bedrock authority on all matters," 1 copyri instances of cr 313 y the most egregious infringement upheld as predicate offenses to rac § ight raco v. Lawler F. Supp. 2d 247, 253 (S.D.N.Y. 2004), "[oj RICO." ever teering charges --------------~--~-- (2013) (emphasis added). This is in keeping with general adage that courts "must be wary of att ative ci ims that are nothing more than sheep masque cloth r Melville B. Nimmer & David Nimmer, 1 Nimmer on 3.04 [B] [3J c (2d " Kirk, in wo s' 423 F. Supp. 2d at 149, and of plaintiffs ing to "appl [yJ controversies." 1 RICO [RICOJ to commonplace commercial Ba ~~~----~~--~--------~~~----- 3:07CV212-HEH, 2007 3124881, at *4 An example of an that was deemed sufficient No. (E.D. Va. Oct. 23, 2007). tance of copyright infringement "egregious" so as to constitute a cate act for RICO purposes is found 21 Inc., 573 F. Supp. 2d 1254 (C.D. Cal. 2007), where the court upheld a RICO claim based upon a predicate act of criminal copyright infringement of a line of dolls that was bringing in an annual revenue of $500 million to the alleged infringer. id. at 1257. See Here, Plaintiffs have alleged that the infringing jewelry produced by Defendants has an aggregate retail value of merely $270,000. Compl. ~ 119; Pl. Opp. at 13. The relatively minor value of the allegedly infringing items, coupled with the overall "run-of-the-mill commercial dispute" tenor of the case, see supra §§ A-D, indicates that even if Plaintiffs have adequately alleged the requisite elements of criminal copyright infringement, it would nonetheless be inappropriate for such infringement to constitute a predicate act for RICO purposes. Cf. Stewart v. Wachowski, No. CV 03-2873 MMM (VBKx), 2005 WL 6184235, at *4 (C.D. Cal. June 14, 2005) (noting that the legislative history of the Anticounterfeiting Consumer Protection Act of 1996, Pub. L. No. 104-153, § 3, 110 Stat. 1386 ("ACPA"), which added §2319 to the list of crimes that can serve as a predicate act for RICO purposes, indicates that "Congress intended that the ACPA would provide necessary sanctions against large-scale organized counterfeiting schemes") 22 (emphasis added). F. & Deprivation of Honest Services by Mail Mail and Wire Wire Fraud Plaintiffs' all ions with respect to cate acts of mail f and deprivation by mail and wire fraud are st services sed upon the contention that the lowing conduct by De use of putative s constituted criminal fraud: internet and social media to "market, a sell" Cantamessa jewelry; (ii) use of the interna t and wires to obtain jewelry the Warehouse; (i) rtise and I mails (iii) use of the international mails and wires to convince Plaintiffs to s jewel r use in the New York t ion; (iv) use of I mails and wires to arrange for the Delora factory's p ion of pieces of Cantamessa jewelry. 1. 'IT'lT 122 23, 129. s contention is contravened by the all ions in the aint that describe De the jewel s' "unfettered" access the Warehouse, Compl. 'IT 9, and contractual authorization to "market and sell Cantamessa jewelry," Compl. 'IT 39, which cate that the compla causes of action rather than a "broad-based" of conduct supports ral criminal fraud that was I racketeering scheme. Allen v. Devine, 726 F. Supp. 2d 240, 248 2010) (citation lor fiduciary duty, r breach of contract tted as part of See Allen ex reI. (E.D.N.Y. ("the [RICO] statute was intended to 23 bring only the most serious, broa courts") frauds into federal (emphasis added) . * * * As set fo above, the aIle ions in the Complaint that purport to plead predicate criminal acts suffic e ish a cause of action under RICO "amount merely to a of contract cannot of ga [and common business torts], whi into a RICO cIa ing that the Carr v. in t a transmogrif ----------------~ is , 591 F. was fraudulent, 909, another instance of" to fit a s riety business di Midwest Grinding Co. v. Spitz, 1992). to Whi 918 viI RICO P Plaintiffs' [who] persist s into civil RICO actions." 976 F.2d 1016, 1025 (7th Cir. a case against [breach of contract, or other absolutely no case against [Plainti lation." r a civil RICO Given the absence if This case in a round hole by squeezing [Defendants] for breach [Defendants] indeed criminal." (7th Cir. 2010). "[Plaintiffs] may very well business torts,] by the facile vi failed to Id. at 1025 26. e predicate acts, "pattern of rac teering" that is a necessary and core element of substantive RICO claims 24 under 18 U.S.C. §§ 1962 (a), (b) 4 and I, respectively), the causes of action. substant (asserted re as Counts 3, necessitating di In addit RICO claim, PIa 1962(d) (c) & ssal of those the absence of a validly pled iffs' claim under 18 U.S.C. § r RICO conspiracy fails as well. Jordan Bermuda Inv. Co., 154 F. Supp. 2d at 695. The Complaint Fails To State A Claim For Trademark Dilution In 0 r to plead t Trademark Dilution Revision Act rk dilution under t ("TDRA"), 15 U.S.C.§ 1125(c), a trademark owner must allege four elements: famous; (2) commerce; mark is the defendant is making use of the mark in such use began a (3) and (4) that (1) that re is a likelihood the defendant's use. mark became r 0 lution as a resu Heller Inc. v. Desi Within Reach Si of Inc., --------------------~----------------~----- No. 09 Civ. 1909 (JGK), 2009 WL 2486054, at *3 (S.D.N.Y. 15, 2009). In order for a given mark to considered "famous" under the TDRA, it must be "widely recognized by the general consuming public of United States as a indicating a single source of good or se 15 U.S.C. § 1125(c)) signation ces. " (internal quotation mar 25 Id. (quoting ed) . "[C]ourts generally have limited famous marks to those that receive multi-million dollar advertising budgets, generate hundreds of millions of dollars in sales annually, and are almost universally recognized by the general public." Id. (collecting cases that have found "fame" with respect to marks such as DuPont, Buick, Kodak and Budweiser) . In addition, the statute's caveat that the mark be widely recognized "by the general consuming public of the United States" is intended to exclude "dilution claims based on 'niche' fame, limited to a particular channel of trade, segment of industry or service, or geographic region." i.e., fame Dan-Foam A/S v. Brand Named Beds, LLC, 500 F. Supp. 2d 296, 307 n. 90 (S.D.N.Y. 2007). A claim for trademark dilution under the TDRA will survive a motion to dismiss only when the plaintiff has "ple[d] enough facts to show that its dilution claim is facially plausible." Heller, 2009 WL 2486054, at *4. While Plaintiffs have made a conclusory allegation that the Crown Logo and the Cantamessa name are "famous," Compl. 181, they do not allege ~ that these marks are "widely recognized by the general consuming public of the United States"; rather, Plaintiffs allege that the marks "have an extremely high degree of recognition among consumers of luxury jewelry." Compl. ~ 181 (emphasis added) This is the very definition of the type of "niche" fame that is 26 ng of fame for TDRA purposes. ufficient to support a fi See Luv N' Care, Ltd. v. Regent Baby Prods. Corp., 841 F. Supp. 2d 753, 758-59 (S.D.N.Y. 2012) ssing dilution claim where "plaintiffs in this case have not all cts indicating that . trademarks [at issue] are market, i.e., the baby product mar zed beyond a niche "). Since Plaintiffs have a11e t the marks in stion enjoy fame only within the narrow niche of the American ic that comprises the consumer market their r "luxury jewelry,"5 lution claim fails because they have not facts to show that the dilution claim is fa "enough lly plausible." Heller, 2009 WL 2486054, at *4. The Complaint Fails To State A Claim For Common Law Fraud r New York law, a plaintiff asserting f establish t t "(1) the defendant made a material false representation, plaintiff the must (2) defendant intended to defraud the (3) the plaintiff reasonably relied upon representation, and (4) plaintiff suffered damage as a ions in the Complaint, it appears that the 5 Based on the all average piece of Cantamessa jewelry retails for at least $5,000. See, e.g., Compl. 112, 119. 27 reliance." result Bri __________ stone/Firestone_ _ _ _ _ _ _ _ _ _ _ _ v. _ _ _ _- L_ _ _ _ _ _ ~ ~ Credit Servs., Inc., 98 F.3d 13, 19 (2d Cir. 1996). iffs have aIle a common law f York for di that Defendants by convincing Pla 1 iffs to ship jewelry to New at the New York tion, and then return the jewelry to Defendants ~~ 56-65. iling to ately thereafter. However, at the time representation, P trated Compl. allegedly fraudu iffs and De s were engaged in a contractual relationship that specifically granted authori to Defendants to "mar and sell Cantamessa jewelry," Compl. Accordingly, De s' eventual failure to return the jewel to Plaintiffs is at st a breach of Plaintiffs, as by Plaintif iary duties to ' allegation that the Regarding s ch of Defendants' iffs, see Compl. a s 39. r contract with ilure to the return the jewelry was a f ~ ~ 123(b). uations, New York courts have long that "a cause of action for fraud does not arise when the only fraud charged relates to a breach of contract." ~~~~~~~~~~~~~~~, Div. 1998) 243 A.D.2d 107, 118 (N.Y. App. (quoting Tesoro Petroleum 108 A.D.2d 607 "t Non-Linear (N.Y. App. . 1985)). cause of action at issue . Oil Co. According . does not alle 28 ,here, where t breach of a duty extraneous to, or stinct from the contract between the parties," Courageous Syndicate v. People-to-People Sports Comm., 141 A.D.2d 599, 600 (N.Y. App. Div. 1988) Edwil ________________________~____-L-, 131 A.D.3d 425 Div. 1987)), (N.Y. App. "plaintiff[s'] theory of recovery is necessarily 1 v. ted to a breach of contract." 50 A.D.2d 108, 113 (N.Y. App. Div. 1975). Moreover, while Plaintiffs have alleged that Defendants "tric d" Plaintiffs into pping the jewelry because Defendants never intended to return the pieces, not provide any ctual basis for Defendants' state of mind at the t i i 56-65. ir assertion rega of exchange. Under New York law, "if a with a preconcei do See se was actually and undisclosed intention of not perfo ng it, it constitutes a misrepresentation of material existing " giving rise to a fraud claim. Sabo v. Delman 714, 716 (N.Y. 1957). However, "[t] mere conclusory ion that a party never intended to al r fficient" to state a cause of action in f Lasermedics, Inc., No. 95 C (S.D.N.Y. Apr. 3, 1996). i c facts indicat honor his or her obli 1122 164 N.Y.S.2d rm. is Grossberg v. (DC), 1996 WL 1537 01, at * 2 "Instead, a plaintiff must set forth the promisor never intended to ions at the time the p 29 se was made." Id. Accordingly, Plaintiffs' conclusory allegation that Defendants did not intend to return the jewelry at the time that they persuaded Plaintiffs to send it is insufficient to state a claim for common law fraud. The Complaint Has Stated A Claim For Breach Of Fiduciary Duty To state a claim for breach of fiduciary duty under New York law, a plaintiff must plead "breach by a fiduciary of a duty owed to plaintiff; defendant's knowing participation in that breach; and damages." Co., 360 F.3d 329, 342 SCS Commc'ns, Inc., v. Herrick (2d Cir. 2004). Defendants contend that Plaintiffs' claim for breach of fiduciary duty fails because the relationship between Plaintiffs and Defendants was not fiduciary in nature, but rather was an "arms' length" business relationship that does not give rise to a fiduciary relationship. Def. Mem. at 30-31. However, Plaintiffs have alleged that pursuant to their agency relationship with Defendants, Plaintiffs entrusted Defendants with broad authority and discretion over Plaintiffs' business, including "unfettered" authority to draw inventory from Plaintiffs' warehouse. Compl. ~~ 4-6, 9, 41, 44, 46-47, 52. See An agency relationship of such an extensive nature creates a fiduciary bond between the involved parties. See, e.g., St. John's Univ. v. Bolton, 757 F. 30 Supp. 2d 144, 168 (E.D.N.Y. 2010) relationship (finding a fiduciary re the defendants "were entrust with [plaintiff's] resources and the autonomy and discretion to use those resources" knowledge and cause the defendants possess rtise required to exploit therefore "[the the special se resources, and intiff] was vulnerable to abuse of their pos s of trust . fendants'] ."); Pensee Assocs., Ltd. v. Quon Indus., Ltd., 241 A.D.2d 354, 359 (N.Y. ("Agency is a fiducia conduct by parties mani . 1997) relationship created as a result of sting that the principal party is willing to allow the other party, upon such other party's consent, to act for it ect to the principal's control and within the limits of ty thus conferred. a commission agent includes the relationsh i 1 for the sale of goods, principal.") al This a in which title rema (internal citations omitted). the Accordingly, t ions in the Complaint are sufficient to plead t existence of a fiduciary relationship between Plaintiffs and De f sis for Plaintiffs' ndants which can serve as a iary duty claim. 31 of The Complaint Has Stated A Claim For Trade Secret Misappropriation To plead a claim trade secret mis riation under New York law, a plaintiff must allege: "(1) t posses a trade secret, and (2) that defendants used that trade secret in breach of an a relationsh me a n s . " it ement, confidential or duty, or as a result of discovery by improper _L_________'--_I_n_c_._v_._ _d...-i...;.t_s...;.u_L_t...;.d_. 230 F. S u pp. 2 d 4 92 , 4 97­ 98 (S.D.N.Y. 2002). s have conte De state a claim trade secret mis based upon jewel sales and displ that Plaintiffs designs that il to ation because it is been made public of those pieces, as well as through registration of Def. Mem. at 32 33. designs with U.S. Copyright Of However, the Comp ce .. int has alleged Defendants misappropriated Plaintiffs "propriety business information," which included not only "proprietary jewel designs [and] mo " but also proprietary "products, lations, indust documents, planning 1 processes, internal corporate strategy documentation, financial and accounting information, customer contact lists and information, [and] supplier contact lists and information." Plaintiffs further all Compl. i 223. that they "took reasonable steps to 32 maintain the conf Compl. 1 224. iality of t ir proprietary formation." s' allegations with respect to t latter items are sufficient to state a claim for t misappropriation with respect to those items. . Inc. v. Ranir, LLC, 596 F. secret See Medtech 2d 778 (S.D.N.Y. 2008) Iding that generally allegations rding manu ails, drawings, test data, and ot r information sign and manufacturing process were cost the ficient to state a aim for trade secret misappropriation) . With respect to the jewelry signs, however, t ct design drawings were available to the public and that that t pieces constructed from such designs were sold to the public lude the designs themselves from does lifying as t secrets for the purposes of a misappropriation cause of act ~P~h~i~l~l~~~~~~s I_n_c~., __ See *7 (N.D. Ill. May 28, 1996) not a t Accord r as it is asserted wi designs (holding that a copyrighted work was secret because "it was readily available through t Copyright Office"). inso 1996 U.S. Dist. LEXIS 7342, at y, Plaintiffs' cla respect to t fails ical jewelry were publicly disclosed via sales of the pieces and registration of the designs with the Copyright Office. 33 The Complaint Has Stated A Claim Under The NYCPA New York General Obli is modeled after courts have inte tions Law § 349 (the "NYCPA") Federal Commiss ted the statute's scope as limited to t types of offenses to the public erest that would trigger ral Trade Commission intervent as under 15 C.S.C. lth or sa ential danger to the public LLC v. Fried Denim, Inc., 2009). Act, and "federal 634 F. y." § 45, such Do Denim 2d 403, 409 (S.D.N.Y. "It is well settled that trademark or trade dress infringement claims are not cognizable under [ NYCPA] unless there is a specific substantial injury to t public interest over and ordinary tra dilu on." rk in t Nat'l Distillers Prods. Co., LLC v. Re or shment Brands, Inc., 198 F. Supp. 2d 474, 486-87 (S.D.N.Y. 2002) (emphasis added). Here, Plaintif NYCPA cIa f is premis upon s conspired to deceive American allegations that De consumers with counter goods. allegat to state a cIa are suffic 914 F. Compl. . 964, 984 ~~ 233-35. S under the NYCPA. In (S.D.N.Y. 1995) (holding t allegations of goods and importing of counterfeit goods with the lse advertising of a plaintiff's 34 to source ive customers as to origin of the products were sufficient to state a claim under §349 because such conduct would involve a ic harm if proved) . Conclusion Upon the conc partial motion to and leave is sions set h above, the Defendants' ed in smiss is and deni ven to replead within 20 days. New York, NY July 2013 ? 7, U.S.D.J. 35 in part,

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