MZ Wallace Inc. v. Susan Fuller et al
Filing
48
OPINION & ORDER....Oliver Thomass April 5, 2018 motion to dismiss count two of the Complaint is granted. MZ Wallaces May 31 motion to dismiss Oliver Thomass tortious interference with business relations counterclaim is granted. (Signed by Judge Denise L. Cote on 8/22/2018) (gr)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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:
MZ WALLACE INC.,
:
Plaintiff,
:
-v:
:
SUE FULLER D/B/A THE OLIVER THOMAS, and :
BLACK DIAMOND GROUP, INC.,
:
:
Defendants.
:
:
----------------------------------------- :
:
BLACK DIAMOND GROUP, INC.,
:
:
Counterclaim
:
Plaintiff,
:
-v:
:
MZ WALLACE INC.,
:
:
Counterclaim
:
Defendant.
:
:
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APPEARANCES
For the plaintiff:
Marc S. Reiner
Adam B. Michaels
Hand Baldachin & Associates LLP
9 West 40th Street, 12th Floor
New York, New York 10018
For the defendants:
David H. Bernstein
Christopher S. Ford
Olena V. Ripnick-O’Farrell
Debevoise & Plimpton LLP
919 Third Avenue
New York, New York 10022
18cv2265(DLC)
OPINION & ORDER
DENISE COTE, District Judge:
Plaintiff MZ Wallace Inc. (“MZ Wallace”) alleges that
defendants Sue Fuller and Black Diamond Group, Inc. (referred to
as “Oliver Thomas”) infringed its trade dress rights in a
particular quilting style used on handbags and other accessories
it sells.
Oliver Thomas has responded with counterclaims.
The
defendants have moved to dismiss three of MZ Wallace’s six
claims, and MZ Wallace has moved to dismiss one of Oliver
Thomas’s three counterclaims.
For the following reasons, Oliver
Thomas’s motion is granted in part and MZ Wallace’s motion is
granted.
Background
The following facts are taken from the pleadings, and are
construed in the light most favorable to the nonmoving party.
MZ Wallace sells luxury bags.
consisting of:
It asserts a trade dress
“(1) a nylon bag; (2) with a quilted grid; (3)
of 7/8 inch squares; (4) placed at a 45 degree angle with a
corner facing downward; (5) with squares covering all or
substantially all over the bag” (the “Trade Dress”).
MZ Wallace has spent millions of dollars advertising and
promoting bags that bear its Trade Dress.
Media outlets have
covered MZ Wallace and specifically refer to the Trade Dress.
The Complaint quotes a number of articles that refer to MZ
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Wallace’s “signature quilting pattern” and its “signature,
quilted nylon bags, colorful totes and backpacks.”
MZ Wallace
has also received an award for its handbags, and celebrities
have been photographed carrying the bags.
MZ Wallace has made
tens of millions of dollars in retail sales.
Oliver Thomas is a brand owned by defendant Black Diamond
Group.
Oliver Thomas was launched in November 2017, and was co-
founded by defendant Fuller.
Oliver Thomas asserts that it
sought to create bags that are “lightweight, washable, vegan,
[and] synthetic,” that would sell for “around . . . $100,” and
that have “quilting because it [i]s functional and strong.”
Oliver Thomas bags feature a one-inch square diagonal
quilting pattern at a 45-degree angle.
A three-dimensional
Oliver Thomas logo and word mark are placed on Oliver Thomas
bags.
Oliver Thomas bags are sold online and at boutique stores
nationwide.
Oliver Thomas had an agreement with palmer & purchase, a
retailer, to order and stock Oliver Thomas goods.
It asserts
that, before the Complaint in this action was filed, MZ Wallace
told palmer & purchase that Oliver Thomas was infringing MZ
Wallace’s trade dress rights and that MZ Wallace was litigating
this claim against Oliver Thomas.
palmer & purchase then
cancelled an existing order for Oliver Thomas goods and cited MZ
Wallace’s lawsuit as the reason for the cancellation.
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During the February 2018 fashion industry trade show known
as Coterie, one of MZ Wallace’s co-founders had a verbal
conflict with employees working at Oliver Thomas’s booth.
Oliver Thomas asserts that MZ Wallace also made “damaging
statements” to buyers concerning Oliver Thomas, and that this
resulted in Oliver Thomas losing business opportunities.
In May 2018, a Coterie employee disclosed that MZ Wallace
“was upset that Oliver Thomas had been permitted to participate
in the February 2018 Coterie.”
The Coterie employee explained
that, because of the longstanding relationship between MZ
Wallace and Coterie and because of this lawsuit, Oliver Thomas
would not be permitted to participate in the September 2018
Coterie trade show.
Procedural History
This action was filed on March 14, 2018.
asserts six causes of action:
The Complaint
false designation of origin and
dilution in violation of the Lanham Act, deceptive practices and
dilution under New York state law, common law trademark and
trade dress infringement, and common law unfair competition.
On
April 5, Oliver Thomas moved to dismiss the Lanham Act dilution
claim, and the New York deceptive practices and dilution claims.
This motion became fully submitted on May 10.
Also on April 5, Oliver Thomas answered the Complaint and
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filed counterclaims seeking a declaration that the Trade Dress
is not protectable under federal or state law, a declaration of
noninfringement, and alleging that MZ Wallace tortuously
interfered with Olive Thomsas’s business relationships.
Following a motion to dismiss the tortious interference
counterclaim, Oliver Thomas filed an amended counterclaim.
The
MZ Wallace motion to dismiss that counterclaim became fully
submitted on June 21.1
The parties are scheduled to file a joint
pretrial order for the bench trial in this matter on November
16, 2018.
Discussion
A court reviewing a motion to dismiss made under Rule
12(b)(6), Fed. R. Civ. P., must “accept[] all of the complaint’s
factual allegations as true and draw[] reasonable inferences in
the [nonmovant’s] favor.”
(2d Cir. 2018).
Giunta v. Dingman, 893 F.3d 73, 79
“The complaint’s allegations, however must be
plausible on their face, a standard that asks for more than a
sheer possibility that a defendant has acted unlawfully.”
Montero v. City of Yonkers, 890 F.3d 386, 394 (2d Cir. 2018)
(citation omitted).
A court “need not accept conclusory
On June 22, the defendants objected to exhibits attached to and
statements made in MZ Wallace’s reply brief, and requested leave
to file a sur-reply. On June 25, MZ Wallace filed a letter
addressing these contentions.
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allegations or legal conclusions couched as factual
allegations.”
Milan v. Wertheimer, 808 F.3d 961, 963 (2d Cir.
2015) (citation omitted).
“Rule 12(b) applies equally to
claims, counterclaims, cross-claims and third-party claims, see
Fed. R. Civ. P. 12(b), and plaintiff’s motion to dismiss
defendant’s counterclaim[ is] evaluated under these same
standards.”
Wine Enthusiast, Inc. v. Vinotemp Int’l Corp., No.
17cv6782(DLC), 2018 WL 3475468, at *2 (S.D.N.Y. July 19, 2018).
I. MZ Wallace’s Federal Dilution Claim
Oliver Thomas has moved to dismiss the plaintiff’s Lanham
Act dilution claim for failure to sufficiently allege that the
Trade Dress is famous.
The motion is granted.
Section 43(c) of the Lanham Act permits
the owner of a famous mark that is distinctive,
inherently or through acquired distinctiveness, [to
obtain] an injunction against another person who, at
any time after the owner's mark has become famous,
commences use of a mark or trade name in commerce that
is likely to cause dilution by blurring or dilution by
tarnishment of the famous mark, regardless of the
presence or absence of actual or likely confusion, of
competition, or of actual economic injury.
15 U.S.C. § 1125(c)(1).
In dilution actions “for trade dress
not registered” with the United States Patent and Trademark
Office (“PTO”), “the person who asserts trade dress protections
has the burden of proving that . . . the claimed trade dress,
taken as a whole, is not functional and is famous.”
§ 1125(c)(4)(A).
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15 U.S.C.
“[A] mark is famous if it widely recognized by the general
consuming public of the United States as a designation of source
of the goods or services of the mark’s owner.”
§ 1125(c)(2).
15 U.S.C.
A court is to “consider all relevant factors”
when determining a mark’s fame, including:
(i) The duration, extent, and geographic reach of
advertising and publicity of the mark, whether
advertised or publicized by the owner or third
parties.
(ii) The amount, volume, and geographic extent of
sales of goods or services offered under the mark.
(iii) The extent of actual recognition of the mark.
15 U.S.C. § 1125(c)(2)(A).
“[T]he element of fame is the key ingredient” to a
successful federal dilution claim, because it is “the one that
most narrows the universe of potentially successful claims.”
Savin Corp. v. Savin Grp., 391 F.3d 439, 449 (2d Cir. 2004).
A
mark with “only a degree of ‘niche fame’” is not entitled to
dilution protection.
Id. at 450; see also TCPIP Holding Co. v.
Haar Commc’ns Inc., 244 F.3d 88, 99 (2d Cir. 2001) (noting that
it is “improbab[le] that Congress intended to grant [the
protections extended to famous marks] to marks that are famous
in only a small area or segment of the nation”).
Construing the allegations in the light most favorable to
MZ Wallace, the Complaint fails to state a plausible dilution
claim.
MZ Wallace alleges that it has promoted the Trade Dress
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“[f]or nearly two decades,” and that “no other significant
manufacturer of clothing or accessories uses designs that are
the same as, or confusingly similar to, the MZ Wallace Trade
Dress without MZ Wallace’s consent.”
Merchandise with the Trade
Dress “is sold in high-end department stores such as Nordstrom
and Saks Fifth Avenue, MZ Wallace stores, online at
mzwallace.com, and in other authorized retail establishments.”
“MZ Wallace has expended millions of dollars and significant
effort in advertising and promoting products” bearing the Trade
Dress, and MZ Wallace has realized “tens of millions of dollars
in retail sales.”
A number of general interest and fashion
publications have written about MZ Wallace generally and the
Trade Dress specifically.
Some of these pieces refer to the
Trade Dress as MZ Wallace’s “signature,” and others state that
MZ Wallace is “known for” products bearing the Trade Dress.
These allegations are insufficient to plead a claim that
the Trade Dress itself, on which MZ Wallace bases this claim, is
famous.
The examples the Complaint provides of its advertising
campaign prominently display the MZ Wallace name on top of
quilted fabric.
Much of the media coverage quoted in the
Complaint appears to discuss the quilted pattern as a feature of
MZ Wallace’s best-known products.
These and the other
allegations do not state a plausible claim that the Trade Dress
itself has achieved the degree of recognition in the general
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population to qualify it as a famous mark.
II. MZ Wallace’s New York Law Dilution Claim
MZ Wallace claims that Oliver Thomas has also diluted its
Trade Dress in violation of Section 360-l of the New York
General Business Law.
Oliver Thomas moves to dismiss this claim
on the ground that the Complaint fails to allege that the Trade
Dress has acquire secondary meaning.
For the reasons that
follow, the motion is denied.
To state a claim of dilution under Section 360-l, a
plaintiff must allege, inter alia, that its mark “has a
distinctive quality or has acquired a secondary meaning such
that the trade[mark] has become so associated in the public's
mind with the [plaintiff] that it identifies goods sold by that
entity as distinguished from goods sold by others.”
Fireman’s
Ass’n of State of N.Y. v. French Am. Sch. of N.Y., 839 N.Y.S.2d
238, 242 (3d Dep’t 2007) (citation omitted).
Secondary meaning exists where the public is moved in
any degree to buy an article because of its source.
Factors that are considered in determining whether a
mark has developed secondary meaning include (1)
advertising expenditures, (2) consumer studies linking
the mark to a source, (3) unsolicited media coverage
of the product, (4) sales success, (5) attempts to
plagiarize the mark, and, (6) length and exclusivity
of the mark’s use.
De Beers LV Trademark Ltd. v. DeBeers Diamond Syndicate Inc.,
440 F. Supp. 2d 249, 280 (S.D.N.Y. 2006) (addressing Section
360-l).
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This portion of Oliver Thomas’s motion is denied.
There is
no heightened pleading standard for a trade dress infringement
claim.
The allegations in the Complaint plausibly allege that
the public is moved to buy products bearing the Trade Dress
because the public associates the Trade Dress with a single
source.
III. MZ Wallace’s New York Law Deceptive Practices Claim
MZ Wallace claims that the defendants, in advertising and
selling products similar in style to the Trade Dress, have
engaged in a deceptive practice in violation of Section 349 of
the New York General Business Law.
Oliver Thomas moves to
dismiss this claim on the ground that MZ Wallace has failed to
allege a direct harm to consumers.
This motion is denied.
Section 349 prohibits “[d]eceptive acts or practices in the
conduct of any business, trade or commerce or in the furnishing
of any service.”
N.Y. Gen. Bus. Law § 349(a).
“To state a
claim for a [Section] 349 violation, a plaintiff must allege
that a defendant has engaged in (1) consumer-oriented conduct
that is (2) materially misleading and that (3) plaintiff
suffered injury as a result of the allegedly deceptive act or
practice.”
Nick’s Garage, Inc. v. Progressive Cas. Ins. Co.,
875 F.3d 107, 124 (2d Cir. 2017) (citation omitted).
Conduct is consumer-oriented where a defendant engages in
“an extensive marketing scheme [or] multi-media dissemination of
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information to the public,” as well as where it reflects “a
standard or routine practice that [could] potentially affect[]
similarly situated consumers.”
N. State Autobahn, Inc. v.
Progressive Ins. Grp., 953 N.Y.S.2d 96, 101 (2d Dep’t 2012)
(citation omitted).
“The kinds of trade practices which have
been considered as deceptive in the past include false
advertising, . . . [and] misrepresentation of the origin, nature
or quality of the product.”
Teller v. Bill Hayes, Ltd., 630
N.Y.S.2d 769, 773 (2d Dep’t 1995) (citation omitted).
Conversely, “[p]rivate contract disputes, unique to the
parties,” or “[t]he single-shot transaction” are not “consumeroriented conduct.”
(citation omitted).
N. State Autobahn, 953 N.Y.S.2d at 101
A plaintiff “need not show that the
defendant committed the complained-of acts repeatedly -- either
to the same plaintiff or to other consumers -- but instead must
demonstrate that the acts or practices have a broader impact on
consumers at large.”
Oswego Laborers’ Local 214 Pension Fund v.
Marine Midland Bank, N.A., 85 N.Y.2d 20, 25 (1995); see also
James v. Penguin Grp. (USA) Inc., No. 13cv2801(DLC), 2014 WL
1407697, at *9-10 (S.D.N.Y. Apr. 11, 2014).
Thus, a Section 349
violation was stated where a plaintiff alleged that “standard
forms and advice supplied to the consuming public at large” were
deceptive, but not where a plaintiff alleged that a unique
insurance policy negotiated by two highly sophisticated parties
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violated the statute.
N.Y. Univ. v. Continental Ins. Co., 87
N.Y.2d 308, 321 (1995).
The Complaint alleges that Oliver Thomas engaged in
consumer-oriented conduct.
The Complaint alleges that Oliver
Thomas has marketed and sold bags that have “confusingly similar
designs” to the Trade Dress, and supports this allegation with
photographs of bags sold by each party.
The Complaint also
quotes Fuller, a founder of Oliver Thomas, as stating that
Oliver Thomas’s bags are “just like MZ Wallace at a fraction of
the price.”
Taken together, these allegations support an
inference that Oliver Thomas has directed conduct “to the
consuming public at large.”
Id.
Oliver Thomas also asserts that MZ Wallace is required to
allege conduct that negatively affects the public interest that
is distinct in some way from misleading consumer-oriented
commercial conduct.
This is incorrect.
Section 349 is violated
when misleading conduct is directed at the public at large.
There is, of course, a well-recognized public interest in
prohibiting conduct that confuses or deceives consumers.
IV. Oliver Thomas’s Tortious Interference Counterclaim
Oliver Thomas claims that MZ Wallace tortuously interfered
with its prospective business relationships when it advised
third parties that Oliver Thomas was infringing MZ Wallace’s
rights in its Trade Dress.
MZ Wallace has moved to dismiss this
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claim, arguing that the counterclaim fails to allege wrongful
intent and causation.
For the following reasons, the motion is
granted.
There are four elements required to state a claim for
tortious interference with prospective business relations under
New York law:
(1) the plaintiff had business relations with a third
party; (2) the defendant interfered with those
business relations; (3) the defendant acted for a
wrongful purpose or used dishonest, unfair, or
improper means; and (4) the defendant’s acts injured
the relationship.
16 Casa Duse, LLC v. Merkin, 791 F.3d 247, 261 (2d Cir. 2003)
(citation omitted).
Where a tortious interference claim is
premised on “interference not with contract rights but only with
existing or prospective economic relations,” a plaintiff must
plead wrongful means.
(2004).
Carvel Corp. v. Noonan, 3 N.Y.3d 182, 190
Wrongful means consist of either “conduct [that]
amount[s] to a crime or an independent tort,” or “conduct [with]
the sole purpose of inflicting intentional harm on plaintiff[].”
Id. (citation omitted).
Acting pursuant to one’s “normal
economic self-interest” is not sufficient, and when a defendant
“has acted with a permissible purpose, . . . wrongful means have
not been shown, even if the defendant was indifferent to the
plaintiff’s fate.”
16 Casa Duse, 791 F.3d at 262 (citation
omitted).
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“New York courts have left open the possibility that a
defendant who has harassed a plaintiff with meritless litigation
may have utilized wrongful means.”
Id. (citation omitted).
The
Second Circuit has suggested, however, that litigation is only
wrongful if it is “frivolous, objectively unreasonable, . . .
patently meritless,” or brought in subjective bad faith.
Id. at
263.
Oliver Thomas fails to state a claim of tortious
interference with business relations because it fails to allege
that MZ Wallace used wrongful means to interfere with a
prospective economic relationship between Oliver Thomas and a
third party.
The amended counterclaim asserts that MZ Wallace
interfered with Oliver Thomas’s business relations by making
statements to palmer & purchase in late February 2018, and to
Coterie employees at some time after the February 2018 Coterie
trade show.
Oliver Thomas alleges that MZ Wallace stated that
Oliver Thomas was infringing its trade dress rights and that MZ
Wallace was litigating against Oliver Thomas.
MZ Wallace sent
Oliver Thomas a cease and desist letter on February 26, 2018,
and the Complaint in this action was filed on March 14.
Taking
these allegations as true, Oliver Thomas has alleged no more
than MZ Wallace’s pursuit of its “normal economic selfinterest.”
Id. at 262.
Oliver Thomas contends that MZ Wallace’s acts were wrongful
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in two ways.
First, it asserts that MZ Wallace “knew it had no
protectable trade dress rights” because the PTO twice denied
registration of the Trade Dress.
MZ Wallace applied to have the
Trade Dress registered with the PTO.
The PTO denied
registration and MZ Wallace has abandoned that process.
The
administrative denial of trade dress registration does not
automatically render a claim that a trade dress is protectable
meritless.
Second, Oliver Thomas asserts that MZ Wallace had not yet
filed the Complaint in this action at the time it told palmer &
purchase that it was litigating its trade dress claim.
Oliver
Thomas acknowledges that MZ Wallace had sent a cease and desist
letter to it before telling third parties that it was
litigating.
A reference to litigation in conversation is vague
enough to encompass a cease and desist letter that threatens
litigation.
These allegations do not support an inference that
MZ Wallace’s actions were solely motivated by subjective bad
faith or other improper motive.
Accordingly, Oliver Thomas has
failed to state a claim of tortious interference with business
relations.2
Because the tortious interference counterclaim fails for this
reason, the Court does not resolve whether the Exhibits attached
to MZ Wallace’s reply brief may be considered. Oliver Thomas’s
June 22, 2018 request to file a sur-reply is denied.
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Conclusion
Oliver Thomas’s April 5, 2018 motion to dismiss count two
of the Complaint is granted.
MZ Wallace’s May 31 motion to
dismiss Oliver Thomas’s tortious interference with business
relations counterclaim is granted.
Dated:
New York, New York
August 22, 2018
____________________________
DENISE COTE
United States District Judge
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