The UPS Store, Inc. et al v. Hagan et al

Filing 391

OPINION & ORDER re: 343 MOTION for Summary Judgment filed by 1275 FIRST AVENUE CORP., et al. Defendants' motion for summary judgment dismissing the Hagans' Lanham Act counterclaim is granted because the Hagans lack standing to assert such a claim. The Clerk of Court is directed to terminate all pending motions and mark this case as closed. (Signed by Judge William H. Pauley, III on 8/2/2017) (mro)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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THE UPS STORE, INC., et al.,
:
Plaintiffs,
-againstROBERT HAGAN, et al.,

:

14cv1210

:

OPINION & ORDER

:

Defendants.
:
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WILLIAM H. PAULEY III, United States District Judge:
The UPS Store, Inc., United Parcel Service, Inc., United Parcel Service of
America, Inc., (the “UPS Parties”) and the twenty-one owners of Manhattan UPS stores (the
“Manhattan Franchisees” and, collectively with the UPS Parties, “Defendants”), move for
summary judgment on the sole remaining counterclaim of the original Defendants in this
action—Robert Hagan, Thomas Hagan, and their associated corporate entities (“the Hagans”).
That counterclaim is for false advertising under § 43(a) of the Lanham Act. Defendants’ motion
is granted, and the counterclaim is dismissed.
BACKGROUND
This Opinion and Order represents this Court’s latest effort to sweep out the
veritable Augean Stable that is the case of The UPS Store v. Hagan. 1 The UPS Parties’ original
claims against the Hagans for breach of contract and trademark infringement were adjudicated
long ago. In April 2014, however, the Hagans filed a spate of counterclaims that sprawled over a
210-page pleading. (See ECF No. 12.) This Court dismissed those counterclaims with leave to
1

For factual background, this Court assumes familiarity with its prior Opinions. See The UPS Store, Inc. v. Hagan,
99 F. Supp. 3d 426 (S.D.N.Y. 2015); The UPS Store, Inc. v. Hagan, No. 14-CV-1210, 2015 WL 9256973 (S.D.N.Y.
Nov. 18, 2015).
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replead only one, the Hagans’ claims under New York General Business Law § 349. See The
UPS Store, Inc. v. Hagan, 99 F. Supp. 3d 426, 442 (S.D.N.Y. 2015). The Hagans retained new
counsel and filed amended counterclaims, adding a count for false advertising under Lanham Act
§ 43(a). (See ECF No. 74.) In 2015, this Court granted Defendants’ motion to dismiss the § 349
claim but denied the motion as to the Lanham Act count. See The UPS Store, Inc. v. Hagan, No.
14-CV-1210, 2015 WL 9256973, at *7 (S.D.N.Y. Nov. 18, 2015). The parties proceeded to
discovery on the Lanham Act claim, and this motion followed.
The Hagans’ Lanham Act claim arises from two alleged instances of false
advertising by the Manhattan Franchisees and, by extension, the UPS Parties as franchisors.
First, the Hagans claim that the Franchisees conducted a coordinated campaign to incorrectly
inform customers that UPS Ground Service was not guaranteed in order to sell higher-margin Air
Service instead (the “Ground Guarantee Claims”). Second, the Manhattan Franchisees allegedly
conspired to consistently over-dimension packages in order to charge more for shipments priced
by size and weight (the “Over-Dimensioning Claims”). The Hagans allege that they declined to
participate in these schemes, and that customers who learned from the Hagans that Ground
Service was guaranteed subsequently refused to do business with any UPS store—thereby
causing the demise of the Hagan franchises.
Discovery on these claims generated two key bodies of evidence. The first is the
testimony of Robert Hagan, which the Hagans rely on to show that the Manhattan Franchisees’
false advertising was the proximate cause of the Hagans’ injury. On this point, Robert Hagan
stated that many customers left his store in anger, never to return to any UPS franchise, after
learning that Ground Service was in fact guaranteed.
2

Next, the Hagans submitted a declaration from Paul Puccini, a hired investigator
who oversaw a series of hidden-camera “secret shops” at the Manhattan Franchisees’ stores (the
“Puccini Evidence”). Puccini’s employees entered each store with a pre-measured package and
asked the clerk what the cheapest guaranteed service was for shipment to a particular location.
Although Ground Service is guaranteed by UPS, the clerks in the secret shop videos consistently
stated that Puccini’s investigators should pay extra for Air Service if they want guaranteed
delivery in the desired time frame. The Hagans argue that the Puccini Evidence reveals the
Franchisees’ coordinated campaign to misrepresent the Ground Service guarantee and overdimension packages.
DISCUSSION
To establish standing under § 43(a) of the Lanham Act, the Hagans must show
(1) “economic or reputational injury” to their business that (2) “flow[s] directly from the
deception wrought by [Defendants’] advertising.” Lemark Int’l, Inc. v. Static Control
Components, Inc., 134 S.Ct. 1377, 1391 (2014). The latter prong is satisfied by a showing that
“deception of customers cause[d] them to withhold trade from the plaintiff.” Lexmark, 134 S.Ct.
at 1391.
The Hagans’ theory of liability under § 43(a) is that: (1) the Manhattan
Franchisees, as part of a coordinated campaign to overcharge for shipping, told customers that
Ground Service was not guaranteed and over-dimensioned their packages; (2) the Hagans, in an
effort to comply with UPS regulations, did not participate in this scheme; (3) customers came to
the Hagans’ stores and were shocked to discover that they had been overcharged and misled
about the Ground Guarantee at other UPS franchises; (4) these same customers became so
3

incensed that they immediately swore off shipping with UPS forever, thereby costing the Hagans
business. Defendants argue that the record cannot support this attenuated chain of events, and
that accordingly the Hagans lack standing because they cannot point to any evidence of lost sales
caused by the alleged false advertising.
The viability of the Hagans’ claim depends on the admissibility of Robert
Hagan’s testimony and the Puccini Evidence. See Major League Baseball Props., Inc. v.
Salvino, Inc., 542 F.3d 290, 310 (2d Cir. 2008) (a party opposing summary judgment must offer
admissible evidence). Robert Hagan testified that he witnessed dozens of customers come into
his stores, express shock at the Ground Guarantee and the Hagans’ lower prices, and then leave
his stores exclaiming that they would never ship with UPS again. As evidence of Defendants’
coordinated scheme, the Hagans point to Puccini’s secret-shop videos, which show clerks at the
Manhattan Franchisees’ stores consistently stating that Ground Service is not guaranteed. The
Puccini Declaration also references receipts and shipping estimates that purport to reveal the
over-dimensioning conspiracy.
A. Robert Hagan’s Testimony
Robert Hagan’s testimony is critical to the causation inquiry because the record
does not contain a single statement by a former Hagan customer that (1) they felt deceived by the
Manhattan Franchisees’ misrepresentation and (2) for that reason ceased to do business with the
Hagans. 2 A Lanham Act plaintiff “must submit specific evidence that the defendant’s

2

The Hagans initially identified three former customers: David Brenner, Tai Babilonia, and Ray Hayden.
(Defendants’ Rule 56.1 Statement of Material Facts, ECF No. 344 (“56.1 Stmt.”) ¶ 594.) Brenner is deceased.
(56.1 Stmt. ¶ 594.) Babilonia testified that she never felt deceived by any UPS franchise and that she had no idea
why the Hagans had identified her as a witness. (Declaration of Mark R. McDonald (“McDonald Decl.”), ECF No.
352, Ex. 7 at 8:4-9; McDonald Decl., Ex. 10 ¶ 3.) Hayden ignored two subpoenas for a deposition and never
appeared. (56.1 Stmt. ¶ 597.)
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advertising causes direct harm to the product in which the plaintiff claims a pecuniary interest.”
PDK Labs, Inc. v. Friedlander, 103 F.3d 1005, 1112 (2d Cir. 1997). As the Hagans do not offer
any customer testimony or survey, Robert Hagan’s testimony is the only piece of evidence that
connects the alleged false advertising with his customers’ decisions to stop doing business with
UPS altogether.
A few examples of Hagan’s testimony frame this Court’s analysis. After hearing
about problems with his new “Transparency Sales Model” (under which his sales clerks were
required to explain all of the customer’s shipping options, including guaranteed Ground Service),
Hagan stated that he visited the store and heard
customers saying, you know, it’s funny . . . I’ve been shipping through UPS for a
long time . . . and I didn’t know that I would get [my package shipped] with UPS
guaranteed there in that amount of time, and they’ve been charging me a lot more
than that and that’s bullshit. And I’m not, I’m taking my package, I’ll see you and
I’m not going to do business with you guys, meaning UPS stores[,] anymore.
(Declaration of Blair Fensterstock (“Fensterstock Decl.”), ECF No. 382, Ex. 5 at 147:24–
148:10.) On that same store visit, Hagan claims, “[m]ultiple dozens” of customers made
statements to this effect. (Fensterstock Decl., Ex. 5 at 149:21.)
Hagan also testified that another unidentified customer told him “I send this
Christmas package all the time and I’m realizing now I could have gotten it there in a much
cheaper way than they’ve been charging me for the last ten years . . . UPS is a bunch of con
artists. You’ve been ripping me off and I’m never doing business here again.” (Fensterstock
Decl., Ex. 5 at 157:20–158:20.) He could not recall the identity of any particular customer or the
details of their shipping needs, but claimed that “that was the gist of” the many complaints he
overheard. (Fensterstock Decl., Ex. 5 at 158:22–23.) Hagan also did not know where these
5

anonymous customers heard that Ground Service was not guaranteed because he “[n]ever asked
them.” (Fensterstock Decl., Ex. 5 at 153:14.)
Defendants argue that this testimony is inadmissible hearsay. As a threshold
matter, there can be no dispute that the customer complaints are hearsay; they are out-of-court
statements offered for their truth, i.e. that the customer-declarants were misled by the Manhattan
Franchisees and thus stopped doing business with UPS altogether. Accordingly, they are
inadmissible unless otherwise permitted by the Rules of Evidence. Fed. R. Evid. 802.
First, the Hagans argue in passing that Robert Hagan’s testimony is admissible as
an eyewitness account of “people being frustrated, confused, and leaving the Hagans’ stores, all
directly attributable to [Defendants’] false advertising.” (Opp. at 20.) The testimony is certainly
admissible to prove the former—i.e. that Robert Hagan witnessed customers becoming frustrated
in his stores and leaving without shipping their packages—but not for the latter, which goes to
the customers’ reasons for leaving the store and thus simply restates the Rule 803(3) argument.
As to Hagan’s testimony about the reasons why customers left his stores, the
Hagans assert that it is admissible under Rule 803(3) to prove the customers’ then-existing states
of mind. Rule 803(3) provides a hearsay exception for “statement[s] of the declarant’s thenexisting state of mind (such as motive, intent, or plan) or emotional, sensory, or physical
condition.” In Lanham Act cases, hearsay declarations can come in under Rule 803(3) to prove
consumer confusion. See, e.g. Trouble v. Wet Seal, Inc., 179 F. Supp. 2d 291, 298–99 (S.D.N.Y.
2001) (finding consumer statements “that they were confused” between parties’ trademarks
admissible “to show the customers’ state of mind . . . as opposed to the truth of what they said”).
For example, the trial court in Fun-Damental Too, Ltd. v. Gemmy Indus. Corp. allowed
6

plaintiff’s sales manager to testify that “some retail customers complained because they thought
[plaintiff] was selling its [product] at a lower price than other retailers.” 111 F.3d 993, 1003 (2d
Cir. 1997). The Second Circuit found no hearsay problem because the testimony “was not
offered to prove that [plaintiff] was actually selling to some retailers at lower prices, but was
probative of the declarant’s confusion.” Fun-Damental, 111 F.3d at 1003–04.
In this case, however, the Hagans offer customer statements for more than the
simple proposition that their customers were confused by the Manhattan Franchisees’ allegedly
conflicting statements. According to the Hagans, these hearsay statements are admissible to
prove that the customers stopped doing business with UPS because they had received this
misleading information. This hearsay purpose goes a step beyond proving the customers’ thenexisting states of mind. “Evidence regarding [a Lanham Act plaintiff’s] lost customers’ motives
for ceasing to buy [plaintiff’s] products is inadmissible unless it is supported by documentary
evidence or other evidence that would be admissible at trial.” Chamilia, LLC v. Pandora
Jewelry, LLC, No 04-CV-6017, 2007 WL 2781246, at *17 (S.D.N.Y. Sept. 24, 2007). Hagan’s
testimony is admissible to prove his customers’ motives, then, only if the record contains other
evidence to support this causal connection.
The admissibility of Hagan’s testimony is thus inextricably bound up with the
Puccini Evidence, which the Hagans offer to prove that the Manhattan Franchisees
systematically misrepresented the Ground Guarantee and over-dimensioned packages. If the
Puccini Evidence is admissible to prove consumer confusion, it can serve as the factual support
to buttress Hagan’s hearsay testimony.

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B. The Puccini Evidence
There are three components of the Puccini Evidence: the “secret shop” hiddencamera videos, the shipping quotes and receipts generated during the secret shops, and the
Puccini Declaration outlining the contents of the videos and receipts.
1. The Secret Shop Videos
The secret shop videos themselves are admissible as party admissions. Rule
801(d)(2)(D) provides that a statement is not hearsay if it is offered against a party and is made
“by the party’s agent or servant concerning a matter within the scope of agency or employment,
[and] during the existence of the relationship.” Fed. R. Evid. 801(d)(2)(D). Admissibility under
this rule requires a finding of “(1) the existence of [an] agency relationship, (2) that the statement
was made during the course of the relationship, and (3) that it relates to a matter within the scope
of the agency.” Fed. R. Evid. 801(d)(2)(D); Pappas v. Middle Earth Condominium Ass’n, 963
F.2d 534, 537–38 (2d Cir. 1992).
The secret shop videos show employees of the Manhattan Franchisees interacting
with Puccini’s investigators, who are attempting to ship packages via UPS. There can be no
reasonable dispute that the clerks in the videos were agents of the Manhattan Franchisees and
that their statements regarding the Ground Guarantee and the prices for shipping were matters
within the scope of the agency relationship. Accordingly, the videos themselves are admissible
to prove their contents.
2. The Secret Shop Shipping Quotes and Receipts
The Hagans offer the shipping quotes and store receipts from each secret shop as
evidence that Puccini’s investigators were systematically overcharged by the Manhattan
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Franchisees. (See, e.g., Declaration of Paul Puccini (“Puccini Decl.”), ECF No. 119, at 6 n.3
(directing the reader to an exhibit purporting to be a “true copy of the Shipping Quote detailing
the proper retail rate for the transaction, the POS receipt, CMS information and all other
information relating to the transaction” for one of the secret shops.)
Defendants argue that these documents are inadmissible because they have not
been authenticated, but this objection is improper at the summary judgment stage. The Hagans
could conceivably authenticate these documents through the testimony of the investigators who
generated them or Puccini himself. Fed. R. Evid. 901(b)(1). Further, the store receipts should
survive any hearsay challenge under the business records exception. Fed. R. Evid. 803(6).
These exhibits are admissible for their contents.
3. The Puccini Declaration
The Puccini Declaration presents a more difficult question, however, as Puccini
himself did not conduct any of the secret shops. (56.1 Stmt. ¶ 619.) Rather, Puccini hired the
secret-shop investigators and supervised the undercover operation at the instruction of the
Hagans. (56.1 Stmt. ¶¶ 623–624.) He viewed the videos once during the process of transferring
them to the Hagans and acknowledged that he did not draft his Declaration. (56.1 Stmt. ¶¶ 619,
639.) The Hagans offer the Declaration as summary evidence under FRE 1006 or, in the
alternative, as a survey of consumers’ states of mind under FRE 803(3).
a. Admissibility as Summary Evidence
Rule 1006 allows into evidence “a summary, chart, or calculation to prove the
content of voluminous writings . . . that cannot be conveniently examined in court.” Fed. R.
Evid. 1006. Summary evidence survives a hearsay challenge “as long as the underlying
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documents also constitute admissible evidence and are made available to the adverse party.”
Tamarin v. Adam Caterers, Inc., 13 F.3d 51, 53 (2d Cir. 1993).
A party offering summary evidence must also, however, establish that “the
summary is accurate and nonprejudicial . . . [and can] be properly introduced through the
testimony of a witness who supervised its preparation.” United States v. Stone, 852 F. Supp. 2d
820, 828 (E.D. Mich. 2012). This finding is necessary because a summary “is admissible to
prove its contents,” and accordingly “great care must be taken to ensure that the proposed
summary contains no annotation or suggestion, even inferential, that may be considered
argumentative.” Anderson v. Otis Elevator Co., No 11-10200, 2012 WL 5493383, at *3 (E.D.
Mich. Nov. 13, 2012).
Leaving aside the fact that Puccini did not draft his 147-page Declaration, the
document cannot come in as summary evidence because it is suffused with argumentation. (See,
e.g., Puccini Decl. ¶ 17 (“[T]he employee affirmatively misrepresented the available shipping
options, the guaranteed delivery dates and the actual costs for the service requested . . . More
specifically, the employee also made the following false and misleading statements to the
customer . . ..”)) The Declaration is not a summary of the videos and receipts, but rather a thinly
veiled argument as to the implications of that evidence. Accordingly, it is not admissible under
Rule 1006.
b. Admissibility as Survey Evidence
Alternatively, the Hagans argue that the Declaration is admissible under Rule
803(3) as a consumer survey offered to prove a specific idea in the public mind. Consumer
surveys are routinely admitted under Rule 803(3) in Lanham Act cases to prove confusion as a
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result of misleading statements or infringing trademarks. See Schering Corp. v. Pfizer Inc., 189
F.3d 218, 227 (2d Cir. 1999) (“The great majority of surveys admitted in this Circuit, including
those used in Lanham Act cases to establish actual confusion or secondary meaning, fall [under
Rule 803(3)]: they poll individuals about their presently existing states of mind to establish facts
about the group’s mental impressions.”). Surveys are particularly useful in Lanham Act cases
because a plaintiff “need only show—using whatever evidence—that a substantial number of
consumers were, in fact, confused by the allegedly misleading statement.” Reed Const. Data Inc.
v. McGraw-Hill Cos., Inc., 49 F. Supp. 3d 385, 416 (S.D.N.Y. 2014).
Here, Rule 803(3) cannot save the Puccini Declaration because Puccini did not
conduct a survey. Although the Hagans are correct that “errors in [a survey’s] methodology . . .
properly go only to the weight of the evidence,” Puccini’s investigation cannot be classified as a
consumer survey because it did not involve a single consumer of UPS services. Schering, 189
F.3d at 225, 228 (noting that courts assign probative weight to surveys based on, inter alia,
whether the “universe [of respondents] was properly defined” and whether “a representative
sample of that universe was selected”). The investigation involved Puccini’s investigators
entering Manhattan Franchisee stores with a package and a list of questions designed to elicit
statements about the Ground Guarantee. The only UPS customers appearing in the videos were
investigators employed by Puccini, and accordingly the Declaration is not admissible as survey
evidence of UPS consumers’ then-existing states of mind. 3

3

The Hagans also argue that the Declaration is admissible under the residual hearsay exception to prove that
Defendants engaged in an organized false advertising campaign. Because the videos and receipts underlying the
Declaration are admissible, however, the argumentative Declaration is not “more probative on the point for which it
is offered than any other evidence which the proponent can procure through reasonable efforts.” Fed. R. Evid. 807.
The Declaration is thus not admissible under the residual hearsay exception.
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4. Effect on Robert Hagan’s Testimony
The inadmissibility of the Puccini Declaration renders Robert Hagan’s hearsay
testimony likewise inadmissible. The latter depends on the former for admissibility purposes, as
the Hagans offer the Puccini Evidence to prove that the Manhattan Franchisees did in fact
systematically misrepresent the Ground Guarantee and over-dimension packages. As discussed
above, however, the admissible Puccini Evidence (i.e. the secret-shop videos and associated
receipts) reveals nothing about whether any former Hagan customer received misleading
information from a Manhattan Franchisee or had a package over-dimensioned at a Manhattan
Franchisee store. The Puccini Evidence cannot substantiate Hagan’s testimony because it
“makes no mention of any customer’s reasons for ending his purchases” with UPS and “provides
no support for the relevant material fact that these [decisions to cease doing business] were a
result of” Defendants’ alleged false advertising. Chamilia, 2007 WL 2781246, at *17.
Accordingly, Robert Hagan’s testimony regarding his former customers’ reasons for ceasing to
ship with UPS is inadmissible. 4
C. Standing Analysis
Standing to sue under the Lanham Act is a two-part inquiry. First, the plaintiff
must “come within the zone of interest” protected by the Act, which requires that the plaintiff
“allege an injury to a commercial interest in reputation or sales.” Lexmark, 134 S.Ct. at 1390.

4

Even if this testimony were admissible, however, it would not support the Hagans’ counterclaim because it does
not establish that the customers were misled by any of the Manhattan Franchisees. Rather, these hearsay statements
merely show that these particular customers did not know that Ground was a guaranteed service. As Hagan
conceded in his deposition, no customer said they had received conflicting information (e.g. that Air was the only
guaranteed service) at a Manhattan Franchisee store. “[A] failure to inform consumers of something, even
something that they should know, is not per se a misrepresentation actionable under Section 43(a) of the Lanham
Act.” McNielab, Inc. v. Am. Home Prods. Corp., 501 F. Supp. 517, 532 (S.D.N.Y. 1980).
12

Second, the cause of action “is limited to plaintiffs whose injuries are proximately caused by
violations of the statute.” Lexmark, 134 S.Ct. at 1390. Under this prong, a plaintiff “ordinarily
must show economic or reputational injury flowing directly from the deception wrought by the
defendant’s advertising.” Lexmark, 134 S.Ct. at 1391. And although the parties argue
expansively about both steps of this analysis, this Court need not look beyond the proximatecause prong.
1. The Over-Dimensioning Claims
Defendants argue that the Over-Dimensioning Claims fail because the Hagans
offer no evidence that over-dimensioning by the Manhattan Franchisees caused harm to the
Hagans’ business. The Hagans appear to concede this point, as their only responses are a pair of
conclusory sentences, one of which cites to inapposite portions of their Rule 56.1 counterstatement of material facts. (See Opp. at 13 (“The evidence shows that the Hagans lost sales as a
direct and proximate result of [Defendants’] organized campaign to misrepresent the Ground
guarantee and overdimension packages.”); Opp. at 15 (“Here, the evidence shows that the
systematic false advertising bolstered by the UPS Parties’ forced Model on the Hagans [sic]
proximately caused the demise of the Hagans’ stores.”).) This alone could be dispositive of the
Over-Dimensioning Claims. See Shenk v. Karmazin, 868 F. Supp. 2d 299, 311 n.12 (S.D.N.Y.
2012) (arguments not addressed in opposition to summary judgment are conceded).
Briefing aside, however, the Over-Dimensioning Claims fail because the record is
devoid of “specific evidence that [the Manhattan Franchisees’ over-dimensioning scheme]
cause[d] direct harm” to the Hagans’ franchises. PDK Labs, 103 F.3d at 1112. First, the Hagans
do not identify any customers who could testify that they no longer patronize UPS stores because
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a Manhattan Franchisee overcharged them for shipping by measuring a package incorrectly. In
their Rule 56.1 statement, the Hagans point to a single complaint by Ray Hayden—a customer of
one Manhattan Franchisee who complained to UPS Customer Relations that “his box was
11x9x2 and not the 12x10x32 [as measured in the store]” and who “[felt that] he was grossly
overcharged due to size.” (Fensterstock Decl., Ex. 74.) However, Hayden ignored two
deposition subpoenas, and Robert Hagen could not recall whether Hayden was one of the
customers who told him that he would never patronize UPS again. (Fensterstock Decl., Ex. 5 at
211:9–212:6.) Thus even if Hagan’s testimony were admissible to prove why his customers
stopped shipping with UPS (which it is not), he would not be able to connect Hayden’s
complaint with the injury to the Hagans’ business.
The only remaining admissible evidence of a causal connection between the
Manhattan Franchisees’ over-dimensioning scheme and the Hagans’ lost business, then, is the
material underlying the Puccini Declaration (i.e. shipping quotes and receipts that purportedly
show the Manhattan Franchisees over-dimensioning packages) and records showing that the
Hagans’ revenue declined after they instituted the Transparency Sales Model. From this record,
the Hagans ask this Court to find a genuine issue of material fact as to whether the following
occurred: (1) UPS customers had their packages over-dimensioned by the Manhattan
Franchisees; (2) those same customers subsequently brought packages to the Hagans’ stores for
shipment; (3) the Hagans correctly measured those packages; (4) the customers immediately
realized they had been cheated by the other UPS stores; and (5) as a direct result of this
epiphany, those customers stormed out of the Hagans’ stores, never to return to UPS. This
causal chain is several bridges too far. Defendants’ motion for summary judgment dismissing
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the Over-Dimensioning Claims is granted.
2. The Ground Guarantee Claims
As to the Ground Guarantee Claims, Defendants again argue that the Hagans
cannot show that any customers stopped doing business with them because the Manhattan
Franchisees falsely stated that Ground Service is not guaranteed. The evidence on these claims
is more substantial than for the Over-Dimensioning Claims, as the record contains statements by
UPS employees that the Hagans’ declining revenue was at least partially the result of the Hagans
selling more Ground Service than Air Service. (See 56.1 Counter-Statement, ECF No. 381 ¶¶
H62–H67.) The Hagans allege that their stores had a higher Ground/Air sales ratio because UPS
enforced the Transparency Sales Model on them. Laboring under that model, the Hagans’
employees “had to print out a shipping quote for every customer and prominently display all of
the available shipping options” for each transaction. (56.1 Counter-Statement ¶ H40.) Robert
Hagan testified that the Transparency Sales Model slowed transactions in his stores, creating
long lines and causing some customers to leave rather than wait. (56.1 Counter-Statement ¶
H64.)
Although this theory is more plausible than the series of events alleged in
connection with the Over-Dimensioning Claims, the Hagans still cannot point to any evidence
that they lost business because any Defendant misrepresented the Ground Guarantee. The
Lanham Act imposes liability for injuries proximately caused by false advertising, not abusive
treatment of franchisees, and the record in this case does not create a genuine dispute of fact as to
causation. Although the Hagans correctly observe that identifying specific lost customers “is not
a sine qua non of a Lanham Act claim,” the inadmissibility of Robert Hagan’s testimony renders
15

their proximate-cause argument purely speculative. Grant Airmass Corp. v. Gaymar Indus., Inc.,
645 F. Supp. 1507, 1514 (S.D.N.Y. 1986). 5
Taking the admissible evidence in the light most favorable to the Hagans, a
reasonable jury could conclude that: (1) clerks in certain Manhattan Franchisee stores
misrepresented Ground Service as not guaranteed (as seen in the Puccini videos); (2) following
the institution of the Transparency Sales Model, the Hagan stores sold more Ground Service than
Air Service and experienced long lines due to slower transactions (according to the testimony of
Robert Hagan and UPS representative Tripp Singer); and (3) the Hagan stores suffered from
declining revenue after adopting the Transparency Sales Model (as evidenced by the store sales
records). These conclusions, however, are a far cry from the Hagans’ § 43(a) theory of
liability—i.e. that many dozens of customers, incensed by the Manhattan Franchisees’
misrepresentations about the Ground Guarantee, ceased to do business with UPS immediately
upon learning the truth at the Hagans’ stores.
Summary judgment is especially appropriate here because the Hagans seek
monetary damages, which requires them “to show more proof of [their] reasonable belief of the
likelihood of injury and causation than would otherwise be required when requesting injunctive
relief.” Enzymotec Ltd. v. NBTY, Inc., 754 F. Supp. 2d 527, 547–48 (E.D.N.Y. 2010) (granting
summary judgment where the “only evidence” of causation was a “vague allegation based on
hearsay about an unnamed customer[‘s]” decision not to purchase a product based on a

5

The Hagans’ reliance on Grant Airmass is peculiar, as the plaintiff in that case submitted testimony by one of
defendant’s salesmen that “he used the [false advertising material] as a selling tool and that it was a factor in the
purchasing decision of many [customers],” as well as testimony from “a number of individuals involved in the
purchasing decision of [defendant’s customers], many of whom stated that they read and relied on [the false
advertising material].” 645 F. Supp. at 1514. No such evidence appears in this record.
16

misleading statement) (internal quotations omitted). And although a plaintiff need not
“indisputably prove the harm” at the summary judgment stage, “mere conclusory statements,
conjecture, or speculation by the party resisting the motion will not defeat summary judgment.”
Enzymotec, 754 F. Supp. 2d at 547 (quoting Kulak v. City of New York, 88 F.3d 63, 71 (2d Cir.
1996)). Because the Hagans submit no evidence connecting Defendants’ alleged false
advertising with injury to the Hagan franchises, Defendants are entitled to summary judgment.
CONCLUSION
Defendants’ motion for summary judgment dismissing the Hagans’ Lanham Act
counterclaim is granted because the Hagans lack standing to assert such a claim. 6 The Clerk of
Court is directed to terminate all pending motions and mark this case as closed.

Dated: August 2, 2017
New York, New York
SO ORDERED:

_____________________________
WILLIAM H. PAULEY III
U.S.D.J.

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The Hagans’ additional arguments regarding Defendants’ alleged failure to respond to their “additional material
facts” is unavailing. Local Rule 56.1 does not require a moving party to file a separate counter-statement of material
facts in the event that the non-moving party decides to add “additional material facts” to its own counter-statement.
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