Opinion
Civil Action 21 Civ. 9499 (VEC) (SLC)
07-05-2022
AERO AG HOLDINGS, LLC, Plaintiff, v. HUGGOES FASHION LLC D/B/A AEROTHOTIC AND MAHMOOD ALI, Defendants.
REPORT AND RECOMMENDATION
SARAH L. CAVE, UNITED STATES MAGISTRATE JUDGE
TO THE HONORABLE VALERIE E. CAPRONI, United States District Judge:
I. INTRODUCTION
Plaintiff Aero AG Holdings, LLC (“Aero”) commenced this action asserting claims for trademark infringement and trademark dilution under federal and state law based on its mark and brand name, “AEROSOLES” (the “AEROSOLES Mark”) against Huggoes Fashion LLC (d/b/a Aerothotic) (“Huggoes”), and Mahmood Ali (“Ali”). (ECF No. 1 (the “Complaint”) at 2 ¶ 1). After Huggoes and Ali moved to dismiss for lack of personal jurisdiction and failure to state a claim, the parties engaged in jurisdictional discovery. (ECF Nos. 36 (the “Motion to Dismiss”); 50). Rather than oppose the Motion to Dismiss, Aero seeks leave to file a proposed amended complaint (ECF No. 78-2 (the “PAC”)), and to substitute its successor-in-interest, Aero IP Holdings, LLC (“Aero IP”) as Plaintiff in this action. (ECF No. 76 (the “Motion to Amend”)).
Aero refers to Huggoes as “Aerothotic,” while Huggoes calls itself just that. (Compare ECF No. 1 at 1 with ECF No. 37 at 9). The Court uses Huggoes unless quoted otherwise in a document.
For the reasons set forth below, I respectfully recommend that the Motion to Amend be DENIED and the Motion to Dismiss be DENIED AS MOOT.
II. BACKGROUND
A. Factual Background
The Court derives the following factual summary from the Complaint and PAC and the declarations and exhibits the parties have submitted with respect to the Motion to Amend and the Motion to Dismiss. (ECF Nos. 1; 36; 37-1; 77 - 78-6; 84-1 - 84-7; 85; 86; 86-1). See Al-Ahmed v. Twitter, Inc., 553 F.Supp.3d 118, 124 (S.D.N.Y. 2021) (“In deciding a motion to dismiss for lack of personal jurisdiction, the Court may consider materials outside the pleadings.”) The Court presumes the truth of Aero's allegations to the extent they are consistent with the declarations and exhibits, “and construes the jurisdictional allegations in the light most favorable to” Aero. Al-Ahmed, 553 F.Supp.3d at 124. “The Court need not accept either party's legal conclusions as true nor will it draw ‘argumentative inferences' in either party's favor.” Id. (quoting Licci ex rel. Licci v. Lebanese Canadian Bank, SAL, 673 F.3d 50, 59 (2d Cir. 2012) (“Licci I”).
1. Aero
Aero is a Delaware limited liability company with a principal place of business in New Jersey. (ECF No. 1 at 4 ¶ 6). Since 1987, Aero “or its predecessors have developed, styled, designed, manufactured, caused the manufacture of, imported, advertised, marketed, packaged, distributed and sold, both at wholesale and at retail to the public, footwear of various types, including comfortable, lightweight, flexible women's shoes bearing and in connection with its AEROSOLES Mark and trade name (the ‘AEROSOLES Footwear').” (ECF No. 78-1 at 6 ¶ 16). Aero “has sold large quantities of AEROSOLES Footwear throughout the United States and the world[,]” such that “AEROSOLES Footwear and AEROSOLES Mark . . . have become uniquely associated in the mind of the purchasing public with high quality, unique design, and lightweight, flexible footwear that have become well-known for being comfortable for the wearer.” (Id. at 67 ¶ 18). As early as 1987, Aero registered with the United States Patent and Trademark Office (“USPTO”) the following five marks (the “AEROSOLES Registrations”):
(Id. at 7-8 ¶ 20; see ECF No. 78-1 at 40-46). Aero alleges that four of the five AEROSOLES Registrations “are incontestable under 15 U.S.C. § 1065.” (ECF No. 78-1 at 7-8 ¶ 20).
Mark Mark
Registration Number
Registration Date
Class(es) and Goods/Services
AEROSOLES & Design
1756927
03/09/1993
(25) Clothing; namely, footwear.
AEROSOLES
2190880
09/22/1998
(18) Handbags, totebags, travel bags, purses, and small leather accessories, namely, wallets.
AEROSOLES
2836671
04/27/2004
(01) Waterproofing shoe spray. (03) Sponge applicators and brushes for shoe polishing, cleaning and waterproofing. (25) Shoes, boots, sandals, sneakers, espadrilles and slippers. (35) Retail store services and retail store services offered over the internet in the field of footwear.
AEROSOLES
2648060
11/12/2002
(03) Waterproofing shoe spray; shoe polish, cream and liquid with sponge applicator. (25) Shoes, boots, sandals, slippers, waterproofing shoe spray, shoe polish, cream and liquid. (35) Retail store services in connection with shoes, footwear and accessories.
AEROSOLES
5199292
05/09/2017
(25) Hosiery, socks, tights.
“As a result of [Aero]'s continuous use of the inherently distinctive AEROSOLES Mark and the commercial success of its footwear products and related services provided under the AEROSOLES Mark,” Aero “has achieved substantial goodwill in the AEROSOLES Mark, which has come to represent the valuable goodwill and reputation of [Aero] as a provider of high quality, reliable[,] and comfortable footwear and related products and retail services.” (ECF No. 78-1 at 8-9 ¶ 21). Aero alleges that “the fashion, retail[,] and footwear industries have come to know that goods and services marketed under the AEROSOLES Mark are exclusively associated with” Aero, as evidenced by media outlets describing Aero as, for example, being “‘known for comfort[,]"' “‘flexibility[,] and lightness.'” (Id. at 8-9 ¶¶ 21-22 (citations omitted)). “After its debut in 1987, [Aero] quickly established a reputation for creating and selling shoes that provide comfort for the wearer, including through the use of a patented sole design.” (Id. at 9 ¶ 23). Aero recorded over $30 million of sales in its first three years, and “national retailers such as Walmart, Belk, DSW, Famous Footwear[,] and Zappos” carry AEROSOLES Footwear. (Id.) Aero alleges that its “long and continuous use of the AEROSOLES Mark and name, the mark has become, and continues to be, well-known and famous.” (Id. at 9 ¶ 24).
Aero alleges that it “also owns significant common law rights in and to its AEROSOLES Mark as a result of its longstanding use in U.S. commerce of the AEROSOLES Mark, or formatives thereof, including on and in connection with the AEROSOLES Footwear and other products, [Aero]'s website and physical storefronts, . . . and . . . as social media account names and handles and as source-identifying hashtags on the Internet.” (ECF No. 78-1 at 9-10 ¶ 25; see id. at 1011, 48-55). Aero “has not licensed or otherwise authorized Defendants to use, or to offer any goods or services under or in connection with, the AEROSOLES Mark . . . .” (Id. at 11 ¶ 26).
Based on the AEROSOLES Registrations and the “common law” rights, Aero contends that it “owns strong and protectable trademark rights to the AEROSOLES Mark and name[.]” (ECF No. 78-1 at 11 ¶ 27).
2. Defendants
Huggoes is a Texas limited liability company with its principal place of business in Austin, Texas. (ECF No. 78-1 at 4 ¶ 5). In the PAC, Aero adds as a Defendant Aerosoft Footwear USA LLC (“Aerosoft”), a Texas limited liability company of which Huggoes is the parent or is “otherwise affiliated, related, or connected[.]” (Id. at 4 ¶¶ 6-7).
Huggoes, Aerosoft, and Ali (together, “Defendants”) “sell goods and services in the United States that are regularly sold or provided to consumers and customers in the State of New York.” (ECF No. 78-1 at 5 ¶ 13). On or about January 25, 2017, Defendants applied for, and later obtained from the USPTO, registration numbered 5331446 for the mark “AEROTHOTIC” (the “AEROTHOTIC Mark”) for use in connection with “‘footwear; footwear for men and women; shoes; athletic shoes; sports shoes' in Class 25” (the “AEROTHOTIC Registration”). (Id. at 12 ¶ 28). The AEROTHOTIC Mark appears as:
(aerothotic) (ECF No. 1 at 2 ¶ 1-2). Defendants' claimed date of first use of the AEROTHOTIC Mark was June 26, 2017. (ECF No. 78-1 at 12 ¶ 28).
Aero alleges that Ali is “the president and a shareholder” and “controls the[] day-to-day operations” of both Huggoes and Aerosoft. (ECF No. 78-1 at 5 ¶ 11). Ali signed documentation filed with the Texas Secretary of State recording Aerothotic “as an assumed name for Huggoes Fashion LLC.” (Id. at 5 ¶ 12 (the “Texas Certificate”); see id. at 84-85). Ali is a 50% owner of Huggoes, and listed his home address as Huggoes' business address on the Texas Certificate. (Id. at 4 ¶ 10; see id. at 82, 84). Aero describes Ali as “the mastermind behind the sales and distribution of the infringing and confusingly similar AEROTHOTIC Mark.” (Id. at 26 ¶ 55).
In “The Parties” section of the PAC, Aero lists, but does not name as a Defendant, Summit Footwear Co., Ltd. (“Summit”), a Thailand limited liability company. (ECF No. 78-1 at 4 ¶ 8). Aero states that Aerosoft and Summit “are defendants in a federal trademark infringement lawsuit” Aero filed in the District of New Jersey based on their “use of the highly confusingly [sic] similar name, AEROSOFT, in connection with highly similar footwear products as those offered by [Aero] under the AEROSOLES brand.” (Id. at 4 ¶ 9 (the “New Jersey Action”)). On October 6, 2014, Aero's predecessor-in-interest filed with the USPTO Trademark Trial and Appeal Board (“TTAB”) a notice of opposition to Aerosoft and Summit's application for a stylized AEROSOFT mark, aerosoft (the “AEROSOFT Mark”). (Id. at 13 ¶ 32 (the “TTAB Proceeding”)). The New Jersey Action and the TTAB proceeding remain pending. (Id. at 13 ¶ 33).
On August 13, 2020, Defendants applied to the USPTO to register the following mark for use in connection with “‘footwear for women; flip flops; flip-flops for use as footwear; thong footwear' in Class 25”:
(Image Omitted) (ECF No. 78-1 at 12 ¶ 29, 14 ¶ 35). On June 16, 2021, the USPTO deemed Defendants' application abandoned. (Id. at 14 ¶ 35).
Aero is “alarmed” by Defendants' “activity in the marketplace and at the USPTO, particularly during the pendency of” the New Jersey Action and the TTAB proceeding. (ECF No. 78-1 at 14-15 ¶ 36). “Defendants have continued to offer footwear products that are directly competing with [Aero's] well-known footwear” and “attempt to dilute the market.” (Id.) The PAC includes images from Defendants' website showing “footwear products [that] include the same kind of comfortable casual footwear as” Aero, and which Aerothotic markets “to the same customer groups as” Aero. (Id. at 15-16 ¶ 37; see id. at 16-18 ¶ 38; see also id. at 56-61).
Aero contends that “[t]he overlap between [its] AEROSOLES Mark and Defendant Aerothotic's infringing AEROTHOTIC Mark in the marketplace is certain.” (ECF No. 78-1 at 16-18 ¶ 38). Aero alleges that Defendants' AEROTHOTIC Mark and Aero's AEROSOLES Mark “are nearly identical in appearance and connotation, incorporating the distinctive term[,] ‘AERO', and are offered in connection with identical or virtually identical goods in an attempt by Aerothotic to dilute the strength of [Aero]'s AEROSOLES Mark.” (Id. at 18 ¶ 39). Aero alleges that “[i]nstances of actual consumer confusion in the marketplace between the AEROSOLES Mark and the AEROTHOTIC Mark have already occurred and are certain to occur again.” (Id. at 18-19 ¶ 40). As “[e]xamples of such actual confusion among consumers[,]” the PAC includes images of websites from two third-party retailers showing Aerothotic products marketed as Aerosoles products. (Id.; see id. at 19-20, 62-63). In addition, Huggoes' marketing and advertising of Aerothotic-branded products uses the terms “‘comfort' and ‘comfortable' directly under the AEROTHOTIC Mark . . . .” (Id. at 20-21 ¶ 42). Further, Aero alleges that the similarities between the AEROTHOTIC Mark and the AEROSOFT Mark are “not just coincidence” but are “in fact, the result of an attempt by one de facto corporate entity to introduce multiple shoe brands under AERO-formative names to weaken the strength of [Aero]'s AEROSOLES Mark.” (Id. at 22-24 ¶ 44).
3. Jurisdictional Allegations and Evidence
In the Complaint, Aero originally included only two allegations in support of personal jurisdiction over Defendants in New York:
12. On information and belief, Defendants, by and through itself [sic] and/or its [sic] affiliates, subsidiaries, related entities, licensees, distributors, and/or agents, advertises, distributes, provides, offers for sale, and sells goods and services in the United States that are regularly sold or provided to consumers and customers in the State of New York.
....
14. Venue is proper pursuant to 28 U.S.C. § 1391(b) and (c) because Defendants are doing and transacting business in this District; have substantial contacts with and/or may be found in this District; and have committed the tortious acts complained of herein in this District, among others.(ECF No. 1 at 5-6 ¶¶ 12, 14).
In support of the Motion to Dismiss, Ali submitted an affidavit in which he attested that he: lives in Austin, Texas; has never entered New York State apart from changing planes at an airport near New York City over ten years ago; does “not own or control real property, assets, or bank accounts in” New York State; has never worked, held professional licenses, or conducted personal business in New York State; does not “personally sell advertisements directed towards New York or specifically offer to sell goods or services to the citizens of New York[,]” and does not “personally call upon businesses in New York in an effort to sell footwear associated with Huggoes.” (ECF No. 37-1 at 2 ¶¶ 2-4 (the “Ali Affidavit”)). Ali admits that he is “one of the managing members of” Huggoes, but is not its “agent . . . for all business purposes,” does “not have sole control over Huggoes,” and does “not make all decisions on behalf of . . . [or] manage all of Huggoes' affairs.” (Id. at 3 ¶ 10).
In his Affidavit, Ali lists the address for Huggoes' “principal corporate office” as 9310 Metric Boulevard, Austin, Texas, an address that is different from his residential address. (ECF No. 37-1 at 2 ¶¶ 2, 5). Ali further attests that Huggoes: “does not own or control real property, assets, or bank accounts in” New York State; does not have an office in New York; does not, and has not, employed any workers in New York; “does not attend trade shows in New York”; does not hold any professional licenses in New York; and does not have any obligation to pay taxes in New York. (Id. at 3 ¶ 6). Ali attests that Huggoes “does not sell advertisements specifically directed towards New York[,]” nor do its personnel “call upon businesses in New York in an effort to sell” its footwear. (Id. at 3 ¶ 7). Huggoes' six employees live and work in Texas; none “are located in New York[,]” and Huggoes “does not hire or solicit sales representatives that live in New York[,]” or that “solicit sales in New York on behalf of Huggoes.” (Id. at 3 ¶¶ 8-9, 11).
The PAC now includes additional allegations, no longer on information and belief, about Defendants' contacts with New York. (ECF No. 78-1 at 5 ¶ 13, 24-26 ¶¶ 45, 47-48, 50-54, 34 ¶ 100; cf. ECF No. 1 at 5 ¶ 12). Huggoes and Ali admitted during jurisdictional discovery that Huggoes has employed a third-party vendor to maintain the website, www.aerothotic.com (the “AEROTHOTIC Website”), which, as of the date Aero filed this action, was accessible in and accepted orders from New York State. (ECF No. 78-1 at 24 ¶ 45; see ECF Nos. 78-4 at 5; 78-5 at 3). The AEROTHOTIC Website states, “[w]e offer free delivery within USA[.]” (ECF No. 78-1 at 24 ¶ 46). Aerothotic-branded footwear is available through “Amazon, Zulily, Wal-Mart, Ebay, Sears, Poshmark, Tanga, and Tradesy[,]” which “can accept orders from anywhere in the United States, and, . . . Aerothotic does not have the ability to prevent sales into the State of New York from such online sellers.” (ECF No. 78-4 at 4).
On or about January 26, 2022, Aero's counsel purchased through the AEROTHOTIC Website Aerothotic-branded footwear, which was shipped to an address in New York State. (ECF No. 78-1 at 25 ¶ 48; see id. at 67-68). Between January 23, 2021 and March 1, 2022, Defendants shipped approximately three dozen orders of their products to customers in New York State. (Id. at 70; see id. at 25 ¶ 51; ECF No. 78-5 at 4). During this time, Huggoes also shipped orders to retailers located in New York State. (ECF No. 78-1 at 72-75). Aerosoft's head of brand development responded via email to inquiries from customers located in New York State about footwear bearing the AEROTHOTIC Mark. (Id. at 77-80).
4. Aero's Trademark Assignment
On or about January 16, 2022, Aero IP, a Delaware limited liability company with a principal place of business in New York City, purchased Aero's assets pursuant to an asset purchase agreement. (ECF Nos. 77 at 1 ¶ 3; 78-1 at 3 ¶ 4; 79 at 8; 85 at 1 ¶ 5). Effective January 18, 2022, pursuant to a Trademark Assignment Agreement (the “TTA”), Aero assigned to Aero IP “all rights, title, and interest in and to” the Aerosoles Registrations. (ECF No. 84-1 at 4). Thus, Aero asserts that Aero IP is its “successor-in-interest” and requests that Aero IP be substituted as Plaintiff. (ECF No. 79 at 8, 20; see ECF Nos. 77 at 1 ¶ 3; 85 at 1 ¶ 5).
5. Aero's Claims
In the PAC, Aero asserts nine claims: (1) trademark infringement in violation of the Lanham Act, 15 U.S.C. §§ 1114 and 1125(a); (2) trademark infringement in violation of N.Y. Gen. Bus. L. § 360-k; (3) deceptive trade practices in violation of N.Y. Gen. Bus. L. § 349; (4) common law trademark, service mark and trade name infringement, unfair competition, and misappropriation; (5) trademark dilution in violation of 15 U.S.C. § 1125(c); (6) trademark dilution in violation of N.Y. Gen. Bus. L. § 360-l; (7) vicarious federal trademark infringement against Ali and Aerosoft only; (8) contributory federal trademark infringement against Ali and Aerosoft only; and (9) federal trademark registration cancellation. (ECF No. 78-1 at 26-36 ¶¶ 58-114). Aero seeks, inter alia, injunctive relief, cancellation of the AEROTHOTIC Registration, lost profits, treble and punitive damages, attorneys' fees, and costs. (Id. at 36-39).
B. Procedural Background
On November 16, 2021, Aero filed the Complaint. (ECF No. 1). On January 24, 2022, Defendants filed the Motion to Dismiss pursuant to Federal Rules of Civil Procedure 12(b)(2) and 12(b)(6), challenging both personal jurisdiction and the sufficiency of the pleadings, and requesting, in the alternative, transfer to the Western District of Texas pursuant to 28 U.S.C. § 1404. (ECF No. 36). In response to Aero's request, the Honorable Valerie E. Caproni adopted the parties' stipulation extending Aero's time to respond to the Motion to Dismiss and permitting targeted jurisdictional discovery from Defendants. (ECF No. 50; see ECF No. 63 (further extending Aero's deadline to "file a response to the Motion to Dismiss or file a Motion for leave to Amend”)). On April 5, 2022, Judge Caproni referred this action to me for general pretrial purposes and for a report and recommendation on dispositive motions. (ECF No. 67).
Aero complained about the sufficiency of Defendants' responses to the jurisdictional discovery requests. (ECF Nos. 60; 68). Following a conference on April 8, 2022, the Court denied Aero's requests for additional jurisdictional discovery, and ordered: (i) Aero to decide whether it would amend the Complaint or oppose the Motion to Dismiss; (ii) if the former, serve the PAC on Defendants who were to decide whether they would consent to the amendment; and (iii) Aero to file either an opposition to the Motion to Dismiss or the Motion to Amend. (ECF No. 72 (the “Apr. 8 Order”)). On April 29, 2022, Aero filed the Motion to Amend. (ECF No. 76). On May 20, 2022, Defendants filed an opposition to the Motion to Amend along with supporting declarations and exhibits. (ECF Nos. 84 (the “Opposition”)). On June 3, 2022, Aero filed a reply in further support of the Motion to Amend. (ECF No. 87). Pursuant to the Apr. 8 Order, Aero has not filed an opposition to the Motion to Dismiss.
III. DISCUSSION
As noted above, in the Motion to Dismiss, Defendants challenged personal jurisdiction as well as the sufficiency of Aero's pleading, and sought a change of venue. (ECF No. 37). In lieu of opposing the Motion to Dismiss, Aero has moved for leave to file the PAC (ECF No. 76), which Defendants oppose on grounds of futility. (ECF No. 84). The Court thus first analyzes whether Aero's PAC remedies the deficiencies described in the Motion to Dismiss for purposes of the Motion to Amend, which necessarily involves an analysis of the sufficiency of Aero's allegations.
A. Motion to Amend
1. Legal Standard
Federal Rule of Civil Procedure 15 provides that a court “should freely give leave” to amend a pleading “when justice so requires.” Fed.R.Civ.P. 15(a)(2). The Rule encourages courts to determine claims “on the merits” rather than disposing of claims or defenses based on “mere technicalities.” Monahan v. N.Y.C. Dep't of Corr., 214 F.3d 275, 283 (2d Cir. 2000) (citation omitted). The Second Circuit has explained that “district courts should not deny leave [to amend] unless there is a substantial reason to do so, such as excessive delay, prejudice to the opposing party, or futility.” Friedl v. City of N.Y., 210 F.3d 79, 87 (2d Cir. 2000); see also McCarthy v. Dun & Bradstreet Corp., 482 F.3d 184, 200 (2d Cir. 2007) (“A district court has discretion to deny leave for good reason, including futility, bad faith, undue delay, or undue prejudice to the opposing party.”). “Consistent with the liberal principles underlying Rule 15(a)(2), the party opposing the amendment has the burden of establishing that leave to amend would be unduly prejudicial or futile.” Pilkington N. Am., Inc v. Mitsui Sumitomo Ins. Co. of Am., No. 18 Civ. 8152 (JFK), 2021 WL 4991422, at *5 (S.D.N.Y. Oct. 27, 2021) (citing Ho Myung Moolsan Co. v. Manitou Min. Water, Inc., 665 F.Supp.2d 239, 250 (S.D.N.Y. 2009)).
Determining whether a motion to amend is governed by Federal Rule of Civil Procedure 15 or 16 turns on whether “the motion is timely filed under [the] scheduling order in place in th[e] action. If it is timely filed, only Rule 15's liberal standard governs; if it is not, [the moving party] must also show good cause for the amendment under Rule 16.” Soroof Trading Dev. Co. v. GE Microgen, Inc., 283 F.R.D. 142, 147 (S.D.N.Y. 2012) (requiring motion to amend filed after court-ordered deadline to meet requirements of both Rule 15(a)(2) and Rule 16(b)(4)). Defendants do not dispute that Aero timely filed the Motion to Amend by the deadline the Court set in the April 8 Order, (ECF No. 72), and thus the Rule 15(a)(2) standard applies here. (See ECF No. 84 at 8-9).
2. Personal Jurisdiction
a. Legal Standard
“On a Rule 12(b)(2) motion to dismiss for lack of personal jurisdiction, [the] [p]laintiff has the burden of demonstrating personal jurisdiction.” RV Skincare Brands LLC v. Digby Invs. Ltd., 394 F.Supp.3d 376, 380 (S.D.N.Y. 2019) (citing Troma Ent., Inc. v. Centennial Pictures Inc., 729 F.3d 215, 217 (2d Cir. 2013)). When a defendant challenges personal jurisdiction on the pleadings and before discovery, “‘the plaintiff need show only a prima facie case.'” King Cnty., Wash. v. IKB Deutsche Industriebank, AG, 769 F.Supp.2d 309, 313 (S.D.N.Y. 2011) (quoting Volkwagenwerk Aktiengesellschaft v. Beech Aircraft Corp., 751 F.2d 117, 120 (2d Cir. 1984)). When the challenge follows jurisdictional discovery, “the plaintiff's prima facie showing must include an averment of fact that, if credited by the trier-of-fact, would suffice to establish jurisdiction over the defendant,” RV Skincare Brands, 394 F.Supp.3d at 380 (quoting Chloe v. Queen Bee of Beverly Hills, LLC, 616 F.3d 158, 163 (2d Cir. 2010) (internal quotation marks and alterations omitted)), and “[c]onclusory allegations are insufficient[]” King Cnty., 769 F.Supp.2d at 313. “A plaintiff must carry [t]his burden with respect to each defendant individually.” Berdeaux v. OneCoin Ltd., 561 F.Supp.3d 379, 396 (S.D.N.Y. 2021).
“Personal jurisdiction may be either general or specific.” Al-Ahmed, 553 F.Supp.3d at 124 (citing Brown v. Lockheed Martin Corp., 814 F.3d 619, 624 (2d Cir. 2016)). “General, or ‘allpurpose,' jurisdiction allows a court to adjudicate any cause of action against the defendant, regardless of where it arose.” Al-Ahmed, 553 F.Supp.3d at 124-25. Specific jurisdiction is limited to causes of action that “arise[] out of the defendant's activities in a state.” Id. at 125; see also Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 414 n.8 (1984).
In a case involving federal question jurisdiction, courts employ “[a] two-step analysis” to determine whether the court may exercise personal jurisdiction over a non-domiciliary defendant. RV Skincare Brands, 394 F.Supp.3d at 380 (quoting Eades v. Kennedy, PC L. Offs., 799 F.3d 161, 168 (2d Cir. 2015). “The first step is to determine whether a defendant's actions come within the reach of” the law of the state in which the Court sits, here, “New York State's long-arm statute, N.Y. C.P.L.R. § 302(a).” RV Skincare Brands, 394 F.Supp.3d at 380-81 (citing Sunward Elecs., Inc. v. McDonald, 362 F.3d 17, 22 (2d Cir. 2004)); see Chloe, 616 F.3d at 163-64 (looking first to the long-arm statute of New York, “the forum state”); see also Al-Ahmed, 553 F. Supp. 3d at 124 (same). If state law requirements are met, the second step is to determine whether exercising personal jurisdiction comports with the Due Process Clause.” RV Skincare Brands, 394 F.Supp.3d at 381 (citing Chloe, 616 F.3d at 164).
b. Application
i. New York's Long Arm Statute
Aero argues that it has demonstrated that Defendants “‘transacted business within New York'” and that its claims “arise from that business.'” (ECF No. 79 at 13 (quoting Energy Brands Inc. v. Spiritual Brands, Inc., 571 F.Supp.2d 458, 469 (S.D.N.Y. 2008)). Thus, although Aero expressly states neither which type of jurisdiction nor which provision of New York's long-arm statute it invokes, the Court infers that Aero is arguing only that the Court has specific, not general, jurisdiction, over Defendants pursuant to N.Y. C.P.L.R. § 302(a)(1). That statute provides that “a court may exercise personal jurisdiction over any non-domiciliary, . . . who in person or through an agent: [] transacts any business within the state or contracts anywhere to supply goods or services in the state[.]” N.Y. C.P.L.R. § 302(a)(1). “Section § 302(a) has two elements: (1) the defendant must have transacted business within the state, and (2) the cause of action must arise from that business activity.” RV Skincare Brands, 394 F.Supp.3d at 381 (quoting Licci ex rel. Licci v. Lebanese Canadian Bank, SAL, 732 F.3d 161, 168 (2d Cir. 2013) ("Licci II”) (internal quotation marks and alterations omitted)); see Berdeaux, 561 F.Supp.3d at 396 (“To determine whether the court has jurisdiction under section 302(a)(1), the court must determine whether the defendant “transacts any business” in New York and whether the plaintiff's cause of action “arises from” such a business transaction.”) (quoting Best Van Lines, Inc. v. Walker, 490 F.3d 239, 246 (2d Cir. 2007)); see also JDM Imp. Co. Inc. v. Shree Ramkrishna Exps. Pvt., Ltd., No. 20 Civ. 8759 (VEC), 2021 WL 5450237, at *3 (S.D.N.Y. Nov. 19, 2021); George Moundreas & Co SA v. Jinhai Intelligent Mfg. Co Ltd, No. 20 Civ. 2626 (VEC), 2021 WL 168930, at *9 (S.D.N.Y. Jan. 18, 2021).
The Supreme Court has “set a ‘high bar' for finding that the exercise of general jurisdiction over an out-of-state corporation comports with due process.” Al-Ahmed, 553 F.Supp.3d at 125 (quoting Brown, 814 F.3d at 626-27); see Daimler AG v. Bauman, 571 U.S. 117, 138 (2014). Aero does not attempt to show, nor does the evidence before the Court show, that Defendants had the kind of “‘continuous and systematic'” contacts to render them “‘essentially at home'” in New York State as would support general jurisdiction. Gucci Am., Inc. v. Weixing Li, 768 F.3d 122, 135 (2d Cir. 2014) (quoting Daimler, 571 U.S. at 139).
“The sufficiency of a defendant's contacts with the forum is measured by ‘the totality of the defendant's activities within the forum.'” RV Skincare Brands, 394 F.Supp.3d at 381 (quoting Best Van Lines, 490 F.3d 239, 246 (2d Cir. 2007)). “A showing that a party is transacting business requires only a minimal quantity of activity, provided that it is of the right nature and quality.” Chanel, Inc. v. Doubinine, No. 04 Civ. 4099 (CPS), 2008 WL 4449631, at *2 (E.D.N.Y. Oct. 2, 2008) (citing Agency Rent A Car Sys., Inc. v. Grand Rent A Car Corp., 98 F.3d 25, 28 (2d Cir. 1996)). The New York Court of Appeals has recognized that “the existence of a contract to ship products into New York is sufficient to establish personal jurisdiction in actions related to injuries caused by those products.” RV Skincare Brands, 394 F.Supp.3d at 381 (citing Longines-Wittnauer Watch Co. v. Barnes & Reinecke, Inc., 15 N.Y.2d 443, 465-66 (1965).
“Notably, Section 302(a)(1) is a single-act statute[,]” i.e., “proof of one purposeful transaction in New York is sufficient to trigger Section 302(a)(1), as long as there is a ‘substantial relationship between the transaction and the claim asserted.'” RV Skincare Brands, 394 F.Supp.3d at 381 (quoting Chloe, 616 F.3d at 170) (collecting cases); see Ramkrishna, 2021 WL 5450237, at *4 (“‘Section 302(a)(1) is a single act statute, which means that proof of one transaction in New York is sufficient to invoke jurisdiction.'”) (quoting High St. Capital Partners, LLC v. ICC Holdings, LLC, No. 18 Civ. 652592 (JMC), 2019 WL 2106093, at *2 (N.Y. Sup. Ct. May 14, 2019) (citation omitted); see Deutsche Bank Sec., Inc. v. Mont. Bd. of Invs., 7 N.Y.3d 65, 71 (2006) (explaining that “proof of one transaction in New York is sufficient to invoke jurisdiction, even though the defendant never enters New York, so long as the defendant's activities here were purposeful and there is a substantial relationship between the transaction and the claim asserted”) (citation omitted)). “Accordingly, ‘the purposeful creation of a continuing relationship with a New York corporation' supports the exercise of personal jurisdiction.” Ramkrishna, 2021 WL 5450237, at *4 (quoting Fischbarg v. Doucet, 9 N.Y.3d 375, 381 (2007) (citation omitted)).
The Court analyzes whether Aero has carried its burden under § 302(a)(1) as to each Defendant individually. See Berdeaux, 561 F.Supp.3d at 396.
a) Huggoes
In their Opposition to the Motion to Amend, Defendants incorporate from their Motion to Dismiss the argument that Aero has failed to plead a basis for personal jurisdiction over Huggoes. (ECF No. 84 at 18-19). The weakness in doing so, however, is that Aero has amended its pleading, such that the two paragraphs Defendants attacked in the Motion to Dismiss- paragraphs 12 and 14 of the Complaint-have been amended and are no longer Aero's sole allegations of Huggoes' contacts with New York. (Compare ECF No. 1 at 5-6 ¶¶ 12, 14 with ECF No. 78-1 at 5 ¶ 13, 24-26 ¶¶ 45, 47-48, 50-54 and id. at 34 ¶ 100). Rather, Aero has now alleged, no longer on information and belief but with documentary evidence, that Defendants shipped at least three dozen orders of Aerothotic-branded footwear to New York customers between January 23, 2021 and March 1, 2022, including one addressed to Aero's counsel in New York. (ECF No. 78-1 at 25 ¶¶ 48, 51; see id. at 68, 70; see also ECF No. 78-5 at 4). Huggoes also shipped its footwear to retailers in New York. (ECF No. 78-1 at 72-75). These sales to New York customers, which involved “actually sending items to New York,” constitutes conduct that is “purposefully directed toward” New York for purposes of § 302(a)(1). Chloe, 616 F.3d at 171.
In addition, Aero alleges that Huggoes advertised on the AEROTHOTIC Website its ability to deliver “within USA[,]” (ECF No. 78-1 at 24 ¶ 46), “a claim that obviously includes [customers] in New York.” RV Skincare Brands, 394 F.Supp.3d at 382. Likewise, Huggoes has admitted that it sells Aerothotic-branded footwear through well-known online sellers such as Amazon and WalMart that can deliver to New York. (ECF No. 78-4 at 4). See McGraw-Hill Glob. Educ. Holdings, LLC v. Mathrani, 295 F.Supp.3d 404, 412 (S.D.N.Y. 2017) (holding that defendant's “sales to New York customers through online marketplaces constitute relevant minimum contacts” satisfying § 302(a)(1)); see also Chanel, 2008 WL 4449631, at *2 (holding that defendants' “business operations through various internet sites which advertise and offer for sale counterfeit merchandise to consumers within this district” was sufficient to establish personal jurisdiction under § 302(a)(1)). That Huggoes marketed Aerothotic-branded products nationwide “does not diminish any purposeful contacts with” New York customers. Chloe, 616 F.3d at 171; see RV Skincare, 394 F.Supp.3d at 382 (noting that defendant's “advertised ability to reach large markets such as New York” supported finding that it had “repeatedly availed itself of the privilege of doing business in New York”). Therefore, these purposeful transactions involving the “supply [of] goods to persons in New York” are sufficient to satisfy § 302(a)(1). RV Skincare Brands, 394 F.Supp.3d at 381; see Longines-Wittnauer, 15 N.Y.2d at 467 (holding that defendant's shipment of its products into New York constituted “transaction of business” under § 302(a)(1)).
Aero has also shown that Huggoes' New York contacts bear a “substantial relationship” to the claims Aero asserts in the PAC, each of which are predicated on Huggoes' alleged infringement of the AEROSOFT Registration. Chloe, 616 F.3d at 170; see Licci II, 732 F.3d at 16869 (explaining that § 302(a)(1) “requires ‘a relatedness between the transaction and the legal claim such that the latter is not completely unmoored from the former, regardless of the ultimate merits of the claim'”) (quoting Licci v. Lebanese Canadian Bank, SAL, 20 N.Y.3d 327, 339 (2012) (“Licci III")); see also Baron Phillipe de Rothschild, S.A. v. Paramount Distillers, Inc., 923 F.Supp. 433, 436 (S.D.N.Y. 1996) (finding that defendants' shipment of allegedly infringing goods into New York was sufficient to establish personal jurisdiction because “those shipments were purposeful and substantially related to plaintiffs' claim of trademark infringement”); Longines-Wittnauer, 15 N.Y.2d at 467 (holding that injury claim arising from product defendant shipped into New York was “clearly one ‘arising from' the purposeful activities engaged in by defendant in [New York] State in connection with the sale of its products in the New York market”).Huggoes' “allegedly culpable conduct stems from” its sale and shipment of allegedly infringing footwear into New York (and elsewhere), and therefore, Aero's claims are “sufficiently related to” Huggoes' “New York business activity to satisfy the second prong of section 302(a)(1).” Licci II, 732 F.3d at 169.
Defendants do not dispute that the transactions with New York customers involved allegedly infringing products, but even if they did, the possibility that some, but not all, of the New York transactions involved allegedly infringing products would not defeat the conclusion that Huggoes had sufficient relevant minimum contacts with New York to satisfy § 302(a)(1). See McGraw-Hill, 295 F.Supp.3d at 412 (holding that defendant's “sales to New York customers through online marketplaces constitute relevant minimum contacts, even if not all of those sales were counterfeit or of Plaintiffs' textbooks”).
Defendants do not, and cannot, explain why Huggoes' New York contacts listed above are insufficient to satisfy § 302(a)(1). (See ECF No. 84 at 18-19). The Court therefore finds that Huggoes' “conduct brings it within the ambit of C.P.L.R. § 302(a)(1) because it supplied goods into New York . . . that are now the subject of [Aero's] infringement claims.” RV Skincare Brands, 394 F.Supp.3d at 383.
b) Aerosoft
Defendants do not contend that Aero has failed to establish that Aerosoft's conduct is sufficient to establish it was transacting business in New York under § 302(a)(1). (See generally ECF No. 84). Nor could they-Aero alleges, supported by documentary evidence, that Aerosoft engaged in at least one transaction to ship allegedly infringing footwear to a retail customer in Kingston, New York. (ECF No. 78-1 at 75; see id. at 34 ¶ 99). This “proof of one purposeful transaction in New York is sufficient to trigger Section 302(a)(1),” given that “there is a ‘substantial relationship between the transaction and the claim[s] asserted” by Aero. RV Skincare Brands, 394 F.Supp.3d at 381 (quoting Chloe, 616 F.3d at 170); see Paramount Distillers, 923 F.Supp. at 436 (finding that defendants' shipment of infringing goods to New York was “purposeful and substantially related to plaintiffs' claim of trademark infringement”). Accordingly, the Court finds that Aero has satisfied the requirements of § 302(a)(1) as to Aerosoft.
c) Ali
In their Opposition to the Motion to Amend, as they did in the Motion to Dismiss, Defendants focus their efforts on disputing Ali's contacts with New York, leaning heavily on Ali's disavowal of any connections to New York. (See ECF Nos. 37 at 16-19; 84 at 14-18). As Defendants note, Aero mentions Ali fourteen (14) times in the PAC, eight of which appear in the causes of action, and one of which mentions his residence in Texas. (ECF No. 78-1 at 4 ¶ 10, 3335 ¶¶ 97-98, 101-03, 105-07). The Court analyzes whether the remaining five allegations are sufficient to establish minimum contacts with New York for purposes of § 302(a)(1). (Id. at 5 ¶¶ 11-12, 24-26 ¶¶ 45, 55-56).
Paragraph 11 alleges that “Ali is the president and a shareholder of both Defendants Aerothotic and Aerosoft and controls their day-to-day operations.” (ECF No. 78-1 at 5 ¶ 11). Defendants argue, based on the Ali Affidavit, that “Ali does not control Huggoes' daily operations.” (ECF Nos. 84 at 15; see ECF No. 37-1 at 3 ¶ 10). Defendants do not dispute, however, that Ali is one of only two owners of Huggoes. (ECF No. 78-1 at 82; see ECF No. 37-1 at 3 ¶ 10 (“I am one of the managing members of Huggoes.”)). And Ali's statements in his Affidavit that he is not Huggoes' “agent . . . for all business purposes” and does “not have sole control” over Huggoes, implicitly concedes that Ali does, in fact, act as Huggoes' agent for some purposes and has some control over its operations. (ECF No. 37-1 at 3 ¶ 10). The Court finds unpersuasive Defendants' attempt to disavow Ali's connection to Huggoes. See McGraw-Hill, 295 F.Supp.3d at 413 (finding defendants' “conclusory and self-serving” affidavits, some of which documentary evidence “flatly contradicted[,]” unpersuasive). While Ali had some control over Huggoes' operations, however, the Court agrees with Defendants that this allegation fails to connect Ali with any act that Huggoes or Aerosoft purposefully directed at New York. See Berdeaux, 561 F.Supp.3d at 400 (holding the court lacked personal jurisdiction over individual defendant whom plaintiffs did not allege “transacted any business in New York” but offered only an “wholly conclusory allegation” that he “directed” conduct at bank headquartered in New York). This allegation fails to allege “any connection” between Ali's “control[]” over Huggoes and Aerosoft's daily operations, New York, and Aero's claims, and therefore, fails to satisfy § 302(a)(1). Id. at 400, 403.
Paragraph 12 alleges that “Ali is also the signatory on documentation filed with the Texas Secretary of State recording ‘Aerothotic' as an assumed name for Huggoes Fashion LLC.” (ECF No. 78-1 at 5 ¶ 12; see id. at 84). Because the Texas Certificate lists Huggoes' “principal office address” as the same as Ali's home address, Aero contends that it provides further evidence of Ali's control of Huggoes. (Id. at 84; see id. at 4 ¶ 10; ECF No. 79 at 10). While Ali's partial ownership of Huggoes is not in dispute, however, Aero fails to connect Ali's signature on the Texas Certificate to New York or to Aero's claims, and therefore, it similarly fails to satisfy § 302(a)(1).
Paragraph 45 alleges, “[b]ased on admissions by Defendants Aerothotic and Ali, Defendant Aerothotic has employed a third-party vendor to maintain its website ....” (ECF No. 78-1 at 24 ¶ 45; see ECF No. 78-4 at 5). While the Court has found that the Aerothotic Website marketed products nationwide sufficient to establish Huggoes was transacting business in New York (see § __, supra), this admission fails to connect any conduct by Ali with the AEROTHOTIC Website. The fact of his 50% ownership of Aerothotic alone is not sufficient to make that connection. See Jonas v. Estate of Leven, 116 F.Supp.3d 314, 328 (S.D.N.Y. 2015) (explaining that “‘control cannot be shown based merely upon a defendant's title or position within the corporation, or upon conclusory allegations that the defendant controls the corporation'”) (quoting ADP Inv. Commc'n Servs., Inc. v. In House Att'y Servs., Inc., 390 F.Supp.2d 212, 219 (E.D.N.Y. 2005)). Rather, Aero was required to allege that Ali had “direct involvement, knowledge, or consented to the transactions at issue.” Trisvan v. Heyman, 305 F. Supp. 3d 381, 393 (E.D.N.Y. 2018) (collecting cases). This allegation fails to demonstrate Ali had any involvement in, knowledge of, or consent to the operation of the AEROTHOTIC Website.
Paragraph 55 alleges that “Ali is the mastermind behind the sales and distribution of the infringing and confusingly similar AEROTHOTIC Mark” and that he “is both an owner and president of Aerothotic and Aerosoft,” citing the Texas Certificate. (ECF No. 78-1 at 26 ¶ 55; see id. at 82, 84-85). Similarly, Paragraph 56 alleges that “Ali directs activities related to [] Aerosoft as a distributor of footwear bearing the infringing AEROTHOTIC Mark, and works in tandem with [] Aerothotic and Aerosoft for the sale and distribution of footwear bearing the infringing and confusingly similar AEROTHOTIC Mark.” (Id. at 26 ¶ 56). The Court agrees with Defendants that these conclusory characterizations of Ali fail to establish a connection between his conduct, New York, and Aero's claims. While it is true that “if a corporation has sufficient in-state contacts to fall subject to personal jurisdiction, then a corporate officer who has played a part in the [corporate] activities that gave rise to the action is likewise subject to jurisdiction, to the extent due process permits[,]"' Aero has not alleged here how Ali played such a part in Huggoes' or Aerosoft's allegedly infringing activities in New York. Henao v. Parts Auth., LLC, 557 F.Supp.3d 490, 497 (S.D.N.Y. 2021) (quoting Ramiro Aviles v. S & P Glob., Inc., 380 F.Supp.3d 221, 261 (S.D.N.Y. 2019) (citation omitted)).
By comparison, in Henao, the allegations that the individual defendant negotiated the contract governing and dictated the conditions of the plaintiffs' employment, and approved fees charged to employees were “transactions . . . at the root of [p]laintiffs' claims that the conditions of their employment violated state and federal wage law” were sufficient to satisfy § 302(a)(1). 557 F.Supp.3d at 497. Similar allegations of Ali's tangible involvement in Huggoes' or Aerosoft's infringing conduct are noticeably absent here.
Nor has Aero shown other factual bases for imputing Huggoes' conduct to Ali, such as evidence that he shared in the profits of the infringing products, access to bank accounts of Huggoes and Aerosoft, or otherwise participated “in the decision-making and execution of the purchase and sale of” their products. See Chloe, 616 F.3d at 168-69 (finding these allegations sufficient to impute to individual defendant actions of corporate defendant). Aero's conclusory allegations of Ali's control are more analogous to those the court in Trisvan found insufficient to allege the individual defendants' control “over the sale or promotion” of the products at issue, and therefore, were insufficient to “allow for the exercise of personal jurisdiction over them.” 305 F.Supp.3d at 394-95. Thus, the allegations in paragraphs 55 and 56 are insufficient to impute any corporate malfeasance to Ali for purposes of personal jurisdiction under § 302(a)(1). See Jonas, 116 F.Supp.3d at 329 (holding that “conclusory allegation” that individual defendants “used their power” failed to establish a basis to attribute corporate acts to individual defendants for purposes of § 302(a)(1)).
Assessing the totality of Aero's allegations as to Ali in the five paragraphs analyzed above, the Court finds that Aero has failed to allege that Ali transacted business in New York, and therefore, has failed to satisfy § 302(a)(1). Accordingly, the Court recommends that, as to Ali, Aero's Motion to Amend be DENIED.
ii. Due Process Clause
Having satisfied the requirements of New York's long-arm statute as to only Huggoes and Aerosoft, the Court turns to the question whether the exercise of personal jurisdiction over them complies with Due Process. “To exercise personal jurisdiction over an out-of-state defendant, the Due Process Clause requires that the defendant have ‘certain minimum contacts with [the forum state] such that the maintenance of the suit does not offend ‘traditional notions of fair play and substantial justice.'” Ramkrishna, 2021 WL 5450237, at *7 (quoting Int'l Shoe Co. v. State of Wash., Off. of Unemployment Comp. & Placement, 326 U.S. 310, 316 (1945) (citations omitted)). “In evaluating whether a defendant has sufficient minimum contacts, the ‘crucial question is whether the defendant has purposefully avail[ed] itself of the privilege of conducting activities within the forum state' such that [it] ‘should reasonably anticipate being haled into court there.'” Ramkrishna, 2021 WL 5450237, at *7 (quoting Best Van Lines, 490 F.3d at 24243). The Supreme Court has instructed courts to consider five factors in determining the reasonableness of a particular exercise of jurisdiction:
(1) the burden that the exercise of jurisdiction will impose on the defendant; (2) the interests of the forum state in adjudicating the case; (3) the plaintiff's interest in obtaining convenient and effective relief; (4) the interstate judicial system's interest in obtaining the most efficient resolution of the controversy; and (5) the shared interest of the states in furthering substantive social policies.Chloe, 616 F.3d at 164-65 (quoting Asahi Metal Indus. Co. v. Sup. Ct. of Calif., Solano Cnty., 480 U.S. 102, 113-14 (1987)). Considering these factors, the Court finds that this case presents the “rare” situation in which Defendants have sufficient minimum contacts for purposes of New York's long-arm statute, but that exercising jurisdiction over them would be unreasonable. Licci H, 732 F.3d at 170; see Al-Ahmed, 553 F.Supp.3d at 130-31 (noting that “even if New York's long-arm statute would permit the Court to exercise jurisdiction, due process would prevent it”).
Addressing first the burden on Defendants, Aero does not dispute that Huggoes is incorporated and maintains its principal place of business in Texas, and neither owns property, maintains bank accounts, employs workers, attends trade shows, or pays taxes in New York, such that litigating in New York would be a burden on Huggoes and Aerosoft. (ECF No. 37-1 at 2 ¶¶ 24; see ECF No. 37 at 22). Huggoes and Aerosoft “would face a significant burden by having to defend this case in federal court in New York,” particularly given the absence of any footprint or employees in this state. Ramgoolie v. Ramgoolie, No. 16 Civ. 3345 (VEC) (SN), 2016 WL 11281385, at *6 (S.D.N.Y. Dec. 20, 2016), adopted by, 2017 WL 564680 (S.D.N.Y. Feb. 10, 2017); see Porina v. Marward Shipping Co., No. 05 Civ. 5621 (RPP), 2006 WL 2465819, at *8 (S.D.N.Y. Aug. 24, 2006) (finding that “litigating a case in New York would be a substantial burden” for a foreign defendant where “[n]one of the records, files, or witnesses with information about the litigation are located in New York . . .”). While “the conveniences of modern communication and transportation ease what would have been a serious burden only a few decades ago[,]” this factor nevertheless “cuts slightly in favor of” Huggoes and Aerosoft. Metro. Life. Ins. Co. v. Robertson-Ceco Corp., 84 F.3d 560, 574 (2d Cir. 1996)).
Second, while Aero IP, whom Aero seeks to substitute as a Plaintiff, has a principal place of business in New York City, Aero IP, like Aero, is a Delaware limited liability company. (ECF Nos. 1 at 4 ¶ 6; 78-1 at 3 ¶ 4). Thus, New York's interests in having the dispute heard in this forum are “considerably diminished.” Asahi, 480 U.S. at 114. Aero has not explained why New York would have much, if any, interest in adjudicating a dispute between Delaware and Texas entities, even if some of the infringing products ended up in this state or the entity that obtained the AEROSOFT Registrations after this action commenced has an office here. See Ramgoolie, 2016 WL 11281385, at *8 (finding that “New York ha[d] little to no interest in adjudicating” dispute between Texas domiciliary and foreign defendant, notwithstanding residence of defendant's director and shareholder in New York); see also Sherwin-Williams Co. v. C.V., No. 14 Civ. 6227 (RA), 2016 WL 354898, at *5 (S.D.N.Y. Jan. 28, 2016) (finding that “New York has no interest in adjudicating [a] case” where, inter alia, “neither party is a citizen of New York”).
Third, Aero has not explained why it has any interest in litigating this dispute in New York, let alone why that interest is stronger than, for example, the District of New Jersey, where it maintains a principal place of business and has been litigating similar issues against Aerosoft since November 2020, or in the Western District of Texas, where personal jurisdiction over all three Defendants would be indisputable. (ECF Nos. 1 at 4 ¶ 6; 84-5 at 2-6; see ECF No. 37 at 24 (stating that “neither Huggoes, nor Ali will challenge personal jurisdiction” in the Western District of Texas in Austin)). In short, “New York is no more convenient or efficient than the alternatives.” Sherwin-Williams, 2016 WL 354898, at *5; see Porina, 2006 WL 2465819, at *8 (finding third factor not met where plaintiffs were not forum residents and had not shown why litigating in alternative forum would be less convenient).
Fourth, “in evaluating the judicial system's interest in obtaining an efficient resolution, ‘courts generally consider where witnesses and evidence are likely to be located.'” Sherwin-Williams, 2016 WL 354898, at *6 (quoting Metro. Life., 84 F.3d at 574-75). Given the presence of witnesses and documents for Huggoes and Aerosoft in Texas (ECF No. 37-1 at 3 ¶ 10), and the absence of any showing by Aero that any witnesses or evidence are located in New York, this factor “strongly favors declining jurisdiction[]” Sherwin-Williams, 2016 WL 354898, at *6.
Finally, because Aero asserts, among other claims, federal trademark claims, the Court recognizes the “shared interest” in furthering a substantive social policy, i.e., protecting trademark rights. Asahi, 480 U.S. at 113. Given, however, that Aero may assert federal trademark claims in any jurisdiction (and has not alleged that New York's protection for its trademarks are any more robust than under Texas, Delaware, or New Jersey law), the Court finds that this factor is, at most, neutral as to reasonableness.
Considering all five Asahi factors, see 480 U.S. at 113-14, the Court finds that Huggoes and Aerosoft have made “a compelling case” that it would be unreasonable for New York to assert specific jurisdiction in this case, and to do so would violate the constitutional guarantee of Due Process. Burger King Corp. v. Rudzewicz, 471 U.S. 462, 477 (1985).
* * *
For these reasons, the Court recommends that the Motion to Amend be DENIED for lack of personal jurisdiction over Huggoes, Aerosoft, and Ali.
3. Futility
In the alternative, Defendants continue to challenge the sufficiency of Aero's allegations, even if the Court were to grant Aero leave to file the PAC, i.e., that the amendments are futile. (ECF No. 84 at 19-27). Thus, in the event personal jurisdiction were to be exercised over Defendants, the Court determines which, if any, claims in the PAC adequately state a claim.
a. Legal Standard
“Futility is a determination, as a matter of law, that proposed amendments would fail to cure prior deficiencies or to state a claim under Rule 12(b)(6) of the Federal Rules of Civil Procedure.” Panther Partners. Inc. v. Ikanos Commc'ns, Inc., 681 F.3d 114, 119 (2d Cir. 2012) (citing Cortec Indus., Inc. v. Sum Holding L.P., 949 F.2d 42, 50 (2d Cir. 1991)); see Valelly v. Merrill Lynch, Pierce, Fenner & Smith Inc., No. 19 Civ. 7998 (VEC), 2021 WL 240737, at *1 (S.D.N.Y. Jan. 25, 2021) (“Leave to amend is futile if the proposed amendment ‘could not withstand a motion to dismiss pursuant to Rule 12(b)(6).”). In assessing whether Aero's claims in the PAC are futile, the Court considers “‘the proposed amendment[s] . . . along with the remainder of the complaint,' [Starr v. ]Sony BMG [Music Ent.], 592 F.3d [314,] 323 n.3 [(2d Cir. 2010)], accept as true all non-conclusory factual allegations therein, and draw all reasonable inferences in plaintiff's favor to determine whether the allegations plausibly give rise to an entitlement to relief.” Panther Partners, 681 F.3d at 119 (citing Ashcroft v. Iqbal, 556 U.S. 662, 678-80 (2009)).
The Court analyzes each of the claims in the PAC, considering Defendants' arguments in the Opposition as supplemented by the Motion to Dismiss. (ECF Nos. 37 at 24-33; 84 at 19-27).
b. Trademark Infringement and Unfair Competition
In the PAC, Aero asserts claims for federal trademark infringement under 15 U.S.C. §§ 1114 and 1125(a) (Count I), trademark infringement under New York law, N.Y. Gen. Bus. L. § 360-k (Count II), and common law trademark infringement and unfair competition (Count IV). (ECF No. 78-1 at 26-28 ¶¶ 58-70, 76-82).
To state claims under 15 U.S.C. §§ 1114 and 1125, Aero must show that (i) the AEROSOLES Mark is entitled to protection, and (2) that Defendants' use of the AEROTHOTIC Mark “is likely to cause consumers confusion as to the origin or sponsorship of [Defendants'] goods.” Guthrie Healthcare Sys. v. ContextMedia, Inc., 826 F.3d 27, 37 (2d Cir. 2016); see Virgin Enters. Ltd. v. Nawab, 335 F.3d 141, 146 (2d Cir. 2003) (“A claim of trademark infringement, whether brought under 15 U.S.C. § 1114(1) (for infringement of a registered trademark) or 15 U.S.C. § 1125(a) (for infringement of rights in a mark acquired by use), is analyzed under the familiar two-prong test . . . .”); see also Dan-Foam A/S v. Brand Named Beds, LLC, 500 F.Supp.2d 296, 306 (S.D.N.Y. 2007) (quoting Virgin Enters, 335 F.3d at 146). “[T]he elements necessary to prevail on causes of action for trademark infringement and unfair competition under New York common law ‘mirror the Lanham Act claims[,]'” except that unfair competition “requires an additional showing of bad faith.” Lorillard Tobacco Co. v. Jamelis Grocery, Inc., 378 F.Supp.2d 448, 456 (S.D.N.Y. 2005) (quoting Louis Vuitton Malletier v. Dooney & Bourke, Inc., 340 F.Supp.2d 415, 436-37 (S.D.N.Y. 2004), aff'd in part, vacated in part, 454 F.3d 108 (2d Cir. 2006)); Weight Watchers Int'l, Inc. v. Stouffer Corp., 744 F.Supp. 1259, 1283 (S.D.N.Y. 1990) (explaining that under New York law, “[c]ommon law unfair competition claims closely parallel Lanham Act unfair competition claims”).
Defendants do not dispute that the AEROSOLES Mark is entitled to protection but focus their challenge to Aero's trademark infringement and unfair competition claims on whether Aero has adequately alleged consumer confusion. (ECF No. 84 at 20-21; see ECF No. 37 at 24-28).
“The likelihood-of-confusion prong turns on whether ordinary consumers ‘are likely to be misled or confused as to the source of the product in question because of the entrance in the marketplace of [the junior user's] mark.'” Guthrie, 826 F.3d at 37 (quoting Playtex Prod., Inc. v. Georgia-Pac. Corp., 390 F.3d 158, 161 (2d Cir. 2004)). Satisfying this standard requires “a probability of confusion, not a mere possibility[.]” Nora Beverages, Inc. v. Perrier Grp. of Am., Inc., 269 F.3d 114, 121 (2d Cir. 2001); see Tiffany & Co. v. Costco Wholesale Corp., 971 F.3d 74, 84 (2d Cir. 2020) (“To prevail in a trademark infringement action, a plaintiff must prove ‘a probability of confusion . . . affecting numerous ordinary prudent purchasers.'”) (quoting Star Indus., Inc. v. Bacardi & Co. Ltd., 412 F.3d 373, 383 (2d Cir. 2005) (citation omitted)). Courts evaluate likelihood of confusion:
In Starbucks Corp. v. Wolfe's Borough Coffee, Inc., the Second Circuit recognized that Playtex has been superseded by statute on grounds not relevant here. 588 F.3d 97, 108 (2d Cir. 2009).
using the test articulated in Polaroid Corp. v. Polarad Elecs. Corp., 287 F.2d 492 (2d Cir. 1961) (“Polaroid”), which balances the following eight factors: (1) the strength of the trademark; (2) the degree of similarity between the plaintiff's mark and the defendant's allegedly imitative use; (3) the proximity of the products and their competitiveness with each other; (4) the likelihood that the plaintiff will “bridge the gap” by developing a product for sale in the defendant's market; (5) evidence of actual consumer confusion; (6) evidence that the defendant adopted the imitative term in bad faith; (7) the respective quality of the products; and (8) the sophistication of the relevant population of consumers.Tiffany & Co., 971 F.3d at 84-85. Evaluating the Polaroid factors “is not a mechanical process where the party with the greatest number of factors weighing in its favor wins[,]” but rather, “a court should focus on the ultimate question of whether consumers are likely to be confused[.]” Nabisco, Inc. v. Warner-Lambert Co., 220 F.3d 43, 46 (2d Cir. 2000) (citations omitted).
Defendants' challenge to Aero's trademark infringement and unfair competition claims focuses only on the fifth Polaroid factor, evidence of actual consumer confusion, arguing that Aero's examples in the PAC “show a third party mis-using both parties' marks[,]” not consumers themselves. (ECF No. 84 at 21-22 (citing ECF No. 78-1 at 4 ¶ 5; see id. at 63)). Aero responds that the examples in Exhibit 5 to the PAC show Mercari and E-Bay, which are “well-known for consumers re-selling goods,” confusing the AEROSOLES Mark with the AEROTHOTIC Mark, and thus “could very well be consumers who are confused about the difference between” the marks. (ECF No. 87 at 10).
The Court finds that Aero has adequately alleged likelihood of confusion for purposes of pleading its trademark infringement and unfair competition claims at this stage. As the Second Circuit has observed, “‘it is black letter law that actual confusion need not be shown to prevail under the Lanham Act, since actual confusion is very difficult to prove and the Act requires only a likelihood of confusion as to source.'” Savin Corp. v. Savin Grp., 391 F.3d at 459 (2d Cir. 2004) (quoting Lois Sportswear, U.S.A., Inc. v. Levi Strauss & Co., 799 F.2d 867, 875 (2d Cir. 1986)) (internal alterations omitted); see Guthrie, 826 F.3d at 44 (same). Thus, while “[a] single ‘anecdote[] of confusion over the entire course of competition” may be “‘insufficient to raise triable issues'” for summary judgment purposes, Savin Corp., 391 F.3d at 459 (quoting Nora Beverages, 269 F.3d at 124), Aero's allegations are sufficient to create a plausible inference that consumers are likely to be confused by the similarity between the AEROSOLES Mark and the AEROTHOTIC Mark. The PAC includes images of both the AEROSOLES Mark and the AEROTHOTIC Mark, as well as the AEROSOLES Footwear juxtaposed with Aerothotic-branded footwear. (ECF No. 78-1 at 7-20 ¶¶ 20, 29, 32, 35, 38, 40, 42; see id. at 44-46). The PAC also alleges Defendants' knowing and intentional infringement and use of confusingly similar marks to sell very similar footwear products. (ECF No. 78-1 at 3 ¶ 3, 12-24 ¶¶ 28-44). Further, the example of confusion by third-party websites where consumers resell goods renders the likelihood of confusion at least plausible. (ECF No. 78-1 at 18-20 ¶ 40). These allegations are sufficient to allege plausible trademark infringement and unfair competition claims. See Adidas Am., Inc. v. Thom Browne Inc., No. 21 Civ. 5615 (JSR), 2022 WL 1185605, at *5 (S.D.N.Y. Apr. 21, 2022) (finding that “indicia of likelihood of confusion” were “sufficient to state a plausible claim”); see also GeigTech East Bay LLC v. Lutron Elec. Co., 352 F.Supp.3d 265, 285 (S.D.N.Y. 2018) (denying motion to dismiss, notwithstanding absence of allegations of actual confusion, where defendant used marks that had “striking similarity” to plaintiff's marks on products sold in the same industry); Kaplan, Inc. v. Yun, 16 F.Supp.3d 341, 349-50 (S.D.N.Y. 2014) (explaining that “likelihood of confusion, rather than actual confusion, is the requirement for a claim of trademark infringement[,]” and denying motion to dismiss where plaintiff's and defendants' marks both contained the same word and allegations demonstrated likelihood of confusion).
Accordingly, the Court finds that leave to amend Aero's trademark infringement and unfair competition claims, as pled in the PAC, would not be futile.
Should the Court determine that the exercise of personal jurisdiction over Huggoes and Aerosoft would comply with due process and thus allow Aero's trademark infringement and unfair competition claims to proceed, venue remains appropriate in this District given the undisputed shipment of allegedly infringing products to addresses in this District, and therefore, Defendants' request to transfer venue should, respectfully, be denied. (ECF No. 37 at 24). See Paramount Distillers, 923 F.Supp. 433, 437 (S.D.N.Y. 1996).
c. New York Deceptive Trade Practices Act
Aero alleges that “Defendants' aforesaid activities constitute deceptive acts or practices in the conduct of business trade or commerce or in furnishing of services” that “caused [Aero] to sustain monetary damage, loss and injury . . .” in violation of N.Y. Gen. Bus. L. § 349. (ECF No. 781 at 29 ¶¶ 72-73).
To state a deceptive trade practices claim under N.Y. Gen. Bus. L. § 349, “a plaintiff must allege that ‘(1) the defendant's deceptive acts were directed at consumers, (2) the acts are misleading in a material way, and (3) the plaintiff has been injured as a result.'” Eliya, Inc. v. Kohl's Dep't Stores, No. 06 Civ. 195 (GEL), 2006 WL 2645196, at *7 (S.D.N.Y. Sept. 13, 2006) (quoting Maurizio v. Goldsmith, 230 F.3d 518, 521 (2d Cir. 2000)). As courts in the Second Circuit have recognized, § 349 “is, at its core, a consumer protection device,” Securitron Magnalock Corp. v. Schnabolk, 65 F.3d 256, 264 (2d Cir. 1995), “not a tool to resolve disputes between competitors.” Eliya, 2006 WL 2645196, at *7. For § 349 to apply, “a plaintiff must establish a ‘direct harm to consumers' that is greater than the ‘general customer confusion' commonly found in trademark actions.” Id. (quoting Sports Traveler, Inc. v. Advance Mag. Publishers, Inc., No. 96 Civ. 5150 (JFK), 1997 WL 137443, at *3 (S.D.N.Y. Mar. 24, 1997)). Thus, “[t]he ‘gravamen' of the claim must be an alleged injury to consumers or the general public[,]” Eliya, 2006 WL 2645196, at *7 (quoting Securitron, 65 F.3d at 264), which “includes harms such as ‘potential danger to the public health or safety.'” Eliya, 2006 WL 2645196, at *7 (quoting Gucci Am., Inc. v. Duty Free Apparel, Ltd., 277 F.Supp.2d 269, 273 (S.D.N.Y. 2003)); see also Conopco Inc. v. Wells Enters., Inc., No. 14 Civ. 2223 (NRB), 2015 WL 2330115, at *6 (S.D.N.Y. May 14, 2015) (collecting cases that “have drawn a distinction between false advertising claims that pose a danger to the consumer and those that merely encourage consumers to buy an inferior product or buy a product from one company where they may have preferred to buy it from another”).
The Court agrees with Defendants that, in the PAC, Aero has failed to allege a plausible deceptive trade practices claim under § 349. (ECF No. 84 at 23-24). In Count III, Aero does no more than parrot the language of the statute without describing any injury to consumers or the public generally. (ECF No. 78-1 at 29 ¶¶ 72-73). Aero has merely described the type of injury that “is generally associated with violations of intellectual property[,]” which “courts in this district have found that plaintiffs cannot state a claim under § 349.” Eliya, 2006 WL 2645196, at *8; see SMJ Grp., Inc. v. 417 Lafayette Rest. LLC, No. 06 Civ. 1774 (GEL), 2006 WL 2516519, at *5 (S.D.N.Y. Aug. 30, 2006) (dismissing deceptive practices claim that alleged only “the general confusion that always exists in connection with a claim of trademark infringement”); see also Conopco, 2015 WL 2330115, at *7 (dismissing § 349 claim where “the primary injury sought to be redressed is harm to [the party's] business” and did “not present significant ramifications for the public at large above and beyond [the party's] private injury”) (quoting Shred-It USA, Inc. v. Mobile Data Shred, Inc., 228 F.Supp.2d 455, 465 (S.D.N.Y. 2002), aff'd, 92 Fed.Appx. 812 (2d Cir. 2004) (internal quotation marks omitted)).
Accordingly, leave to amend Aero's deceptive trade practices claim under § 349 would be futile.
d. Trademark Dilution
In Counts V and VI, Aero alleges that its “AEROSOLES Mark is famous, well-known and distinctive and has been for many years[,]” and that “Defendants' unauthorized advertisement, promotion, display, offering for sale, sale, and distribution of footwear under the infringing AEROTHOTIC Mark in commerce is likely to impair the distinctive quality of, and harm the reputation of, [Aero]'s distinctive, well-known and famous AEROSOLES Mark.” (ECF No. 78-1 at 31 ¶¶ 84-85; see id. at 31-33 ¶¶ 86-90, 92-95). Elsewhere in the PAC, Aero alleges that, since 1987, it “has long been a leading footwear innovator in the area of proprietary comfort technologies, offering women a wide range of stylish footwear” and sold over $30 million in AEROSOLES Footwear in just the first three years of operation. (ECF No. 78-1 at 6 ¶¶ 16-17; see id. at 8-9 ¶¶ 21-23).
To prove dilution under the Lanham Act, Aero must show: (1) that the AEROSOLES Mark is famous; (2) that Defendants' use of the AEROTHOTIC Mark is “commercial use in commerce[;]” (3) that the AEROSOLES Mark was famous before Defendants began using the AEROTHOTIC Mark; and (4) Defendants' use of the AEROTHOTIC Mark “dilutes the quality” of the AEROSOLES Mark. Savin Corp., 391 F.3d at 448. A mark is “‘famous'” if it is “‘widely recognized by the general consuming public of the United States' as a designation indicating a single source of goods or services,” taking into account: (1) the “‘duration, extent, and geographic reach of advertising and publicity of the mark,'”; (2) the “‘amount, volume, and geographic extent of sales of goods or services offered under the mark'”; (3) the “‘extent of actual recognition of the mark'”; and (4) whether “‘the mark was registered.'” Heller Inc. v. Design Within Reach, Inc., No. 09 Civ. 1909 (JGK), 2009 WL 2486054, at *4 (S.D.N.Y. Aug. 14, 2009) (quoting 15 U.S.C. § 1125(c)(2)(A)). “The dilution provisions of the Lanham Act protect only marks that have achieved ‘a substantial degree of fame,' TCPIP Holding Co., Inc. v. Harr Commc'ns, Inc., 244 F.3d 88, 99 (2d Cir. 2001), and that are ‘approaching household names,' Friesland Brands, B.V. v.[] Vietnam Nat'l Milk Co., 228 F.[ ]Supp.[ ]2d 399, 412 (S.D.N.Y. 2002), such as Dupont, Buick, and Kodak, the examples provided in the statute's legislative history[.]"' SMJ Grp., 2006 WL 2516519, at *3.
“Under New York law, ‘the necessary elements for a dilution . . . claim are the possession of a distinctive trademark and likelihood of dilution.'” Salvatore Ferragamo S.p.A. v. Does 1-56, No. 18 Civ. 12069 (JPO), 2020 WL 774237, at *4 (S.D.N.Y. Feb. 18, 2020) (quoting Scholastic, Inc. v. Stouffer, 124 F.Supp.2d 836, 848 (S.D.N.Y. 2000), abrogated on other grounds by Dastar Corp. v. Twentieth Century Fox Film Corp., 539 U.S. 23, 34 (2003)); see N.Y. Gen. Bus. L. § 360-l. Although “New York's dilution statute does not require that a mark be famous[,] . . . the mark must ‘possess a distinctive quality capable of dilution.'” SMJ Grp., 2006 WL 2516519, at *3 (quoting Mead Data Cent., Inc. v. Toyota Motor Sales, U.S.A., Inc., 875 F.2d 1026, 1030 (2d Cir. 1989)). “[C]ourts in this district have concluded that ‘the standards for establishing the distinctiveness required to show dilution under New York law closely resemble the standards for fame under the [Lanham Act].'” SMJ Grp., 2006 WL 2516519, at *3 (quoting Empresa Cubana del Tabaco v. Culbro Corp., No. 97 Civ. 8399 (RWS), 2004 WL 602295, at *54 (S.D.N.Y. Mar. 26, 2004), aff'd in part, rev'd in part, 399 F.3d 462 (2d Cir. 2005)).
The Court finds that Aero has failed to allege sufficiently the “key ingredient” of fame to support its dilution claim. Adidas Am., 2022 WL 1185605, at *6 (quoting DigitAlb, Sh.a v. Setplex, LLC, 284 F.Supp.3d 547, 557 (S.D.N.Y. 2018) (citation omitted)). In contrast to brands such as the Adidas “Three Stripe Mark,” see Adidas Am., 2022 WL 1185605, at *2, or those mentioned in the Lanham Act legislative history, SMJ Grp., 2006 WL 2516519, at *3, Aero has not plausibly alleged that its mark “enjoy[s] such broad renown so as to at least approach (if not attain) the status ‘household names' [to] qualify as [a] famous mark[] under federal law.” Urb. Grp. Exercise Consultants, Ltd. v. Dick's Sporting Goods, Inc., No. 12 Civ. 3599 (RWS), 2013 WL 866867, at *6 (S.D.N.Y. Mar. 8, 2013) (quoting Friesland Brands, 228 F.Supp.2d at 412). The allegations that Aero has used the AEROSOLES Mark for over 30 years or sold over $30 million between 1987 and 1990 are likewise insufficient to establish fame for purposes of a dilution claim. See TCPIP, 244 F.3d at 99 (finding that existence of 228 retail stores, $280 million in sales, and 30 years of continuous use did not establish dilution claim); see also SMJ Grp., 2006 WL 2516519, at *4 (“Neither continuous use of a mark nor a high volume of sales is sufficient to establish a claim for dilution.”). Rather, Aero needed to allege facts supporting the plausible inference that the AEROSOLES Mark is “sufficiently distinctive and famous in the eyes of the general public[,]” SMJ Grp., 2006 WL 2516519, at *4, which is a group that numbers well over 130 million people. See Exercise Consultants, 2013 WL 866867, at *6-7 (explaining that the point of reference is the “‘general consuming public of the United States[,]'” not solely consumers of plaintiff's products and citing U.S. Bureau of Labor Statistics data (quoting 15 U.S.C. § 1125(c)(2)(A)). Finally, although Aero cites two “third-party media outlets” who discussed its brand as being, inter alia, “known for comfort[,]” (ECF No. 78-1 at 9 ¶ 6), Aero provides no details about the visibility or readership of these publications as would support a plausible inference that they reflect the perspective of the “mind of the public” to establish a dilution claim. Mead, 875 F.2d at 1030.
See U.S. Bureau of Labor Statistics, Consumer Expenditures in 2020,https://www.bls.gov/opub/reports/consumer-expenditures/2020/home.htm (last visited July 4, 2022).
Because Aero has failed to plausibly allege “a sufficient level of public recognition,” leave to amend its federal and New York trademark dilution claims would be futile. SMJ Grp., 2006 WL 2516519, at *4 (dismissing dilution claims where plaintiffs failed to allege their marks were “sufficiently distinctive and famous in the eyes of the general public”); see Exercise Consultants, 2013 WL 866867, at *7 (quoting SMJ Grp., 2006 WL 2516519, at *4 and dismissing federal dilution claim); see also Pablo Chavez v. Brit. Broad. Corp., No. 17 Civ. 9572 (JGK), 2019 WL 2250446, at *7 (S.D.N.Y. May 23, 2019) (quoting SMJ Grp., 2006 WL 2516519, at *4 and dismissing § 360-l claim where plaintiff offered only “conclusory statements” about distinctiveness of his mark).
e. Vicarious Trademark Infringement
For its federal vicarious liability claim (Count VII), Aero alleges “[u]pon information and belief” that Ali “as owner and president of Aerothotic and Aerosoft, exercises control over these Defendants regarding the sale and distribution of footwear bearing the infringing AEROTHOTIC mark[,]” and that his filing of the Texas Certificate shows his “apparent or actual partnership” with Huggoes “related to the sale and distribution of footwear bearing the infringing AEROTHOTIC Mark.” (ECF No. 78-1 at 33 ¶¶ 97-98). As to Aerosoft, Aero alleges that a purchase order shows that Aerosoft “may be the owner of the Aerothotic brand[,]” and that “Aerosoft's alleged head of brand development also acted as representative for Aerothotic and communicated with a retail customer in New York, on behalf of Defendant Aerothotic for the sale of infringing footwear bearing the AEROTHOTIC Mark.” (Id. at 34 ¶¶ 99-100; see id. at 75, 7780). Based on these allegations, Aero asserts that Ali and Aerosoft “have apparent or actual partnership, and/or have authority to bind Aerothotic and exercise joint ownership . . . [,]” “share profits and losses with Aerothotic, jointly control and manage Aerothotic, and share financial resources and management . . .” such that they “are vicariously liable” for Aerothotic's trademark infringement. (Id. at 34 ¶¶ 101-03).
“‘Vicarious liability for trademark infringement requires a finding that the defendant and the infringer have an apparent or actual partnership, have authority to bind one another in transactions with third parties or exercise joint ownership or control over the infringing product.'” Kelly-Brown v. Winfrey, 717 F.3d 295, 314 (2d Cir. 2013) (quoting Perfect 10, Inc. v. Visa Int'l Serv. Ass'n, 494 F.3d 788, 807 (9th Cir. 2007)).
A comparison of the language of Count VII to Kelly-Brown demonstrates that Aero's vicarious infringement allegations “are nothing more than a restatement of the legal standard and are plainly insufficient to survive a motion to dismiss.” Lopez v. Bonanza.com, Inc., No. 17 Civ. 8493 (LAP), 2019 WL 5199431, at *13 (S.D.N.Y. Sept. 30, 2019) (finding that allegations that defendants had “an actual partnership and business relationship” and “both have the authority to bind one another in transactions that control the infringing products and activities” were insufficient to state vicarious trademark liability claims). The exhibits to the PAC do not alter that conclusion-as discussed above, Ali's execution of the Texas Certificate does not evidence an apparent or actual partnership, involve a transactions with a third party, or connect him to the distribution of the allegedly infringing products. (See § III.A.2.b.i.c, supra). Cf. River Light V, L.P. v. Lin & J. Int'l, Inc., No. 13 Civ. 3669 (DLC), 2014 WL 6850966, at *17 (S.D.N.Y. Dec. 4, 2014) (sustaining vicarious trademark infringement claim where plaintiff provided evidence that defendant “authorized, directed, and was the moving force behind the design, manufacture, marketing, and sale” of infringing products). And Aero's allegation that Huggoes is Aerosoft's parent renders nonsensical Aero's suggestion, based on an email chain, that “Aerosoft may be the owner of” Huggoes. (Compare ECF No. 78-1 at 4 ¶ 7 with id. at 34 ¶ 99). Therefore, because Aero has not plausibly alleged a vicarious trademark infringement claim, leave to amend to add this claim would be futile. See Rosenshine v. A. Meshi Cosms. Indus. Ltd., No. 18 Civ. 3572 (LDH), 2020 WL 1914648, at *10 (E.D.N.Y. Mar. 30, 2020) (dismissing vicarious trademark infringement claim that based only on a “conclusory” allegation of partnership that is “far too vague”).
f. Contributory Trademark Infringement
In support of a claim for federal contributory trademark infringement (Count VIII), Aero alleges that Ali and Aerosoft “intentionally induced” Huggoes to distribute and supplied to Huggoes footwear bearing the AEROTHOTIC Mark, such that they are contributorily liable for its trademark infringement. (ECF No. 78-1 at 35 ¶¶ 105-07).
“‘To be liable for contributory trademark infringement, a defendant must have (1) intentionally induced the primary infringer to infringe, or (2) continued to supply an infringing product to an infringer with knowledge that the infringer is mislabeling the particular product supplied.'” Kelly-Brown, 717 F.3d at 314 (quoting Perfect 10, 494 F.3d at 807 (internal quotation marks omitted)). As to the first prong, “[i]ntentional inducement requires specific acts undertaken with knowledge of infringing behavior and with intent to cause infringement.” Gym Door Repairs, Inc. v. Young Equip. Sales, Inc., 206 F.Supp.3d 869, 905 (S.D.N.Y. 2016). As to the second prong, the plaintiff must allege that the “defendant knowingly ‘supplied the ammunition' that allowed the wrongful user to complete the infringement.'” Sly Mag., LLC v. Weider Publ'ns L.L.C., 241 F.R.D. 527, 530-31 (S.D.N.Y. 2007) (quoting Power Test Petrol. Distribs., Inc. v. Manhattan & Queens Fuel Corp., 556 F.Supp. 392, 394 (E.D.N.Y. 1982) (citation omitted)).
Aero offers but a single sentence in support of either of the prongs of the contributory infringement test, which “amount to nothing more than legal conclusions” that are insufficient to state a plausible claim. Lopez, 2019 WL 5199431, at *14. Aero's bare legal conclusions pales in comparison to the robust sets of factual allegations that the courts have deemed sufficient to plead a contributory trademark infringement claim. See, e.g., Ferring B.V. v. Fera Pharms., LLC, No. 13 Civ. 4640 (SJF) (AKT), 2015 WL 4623507, at * 4 (E.D.N.Y. July 6, 2015) (finding sufficient allegations that defendant provided “labels, packaging, advertising, and pharmaceutical products[,]” authorized manufacture of products, and “encouraged [the] manufacture [of] pharmaceutical products and place[ment] in packaging” bearing the infringing marks), adopted by, 2015 WL 4611990 (E.D.N.Y. July 31, 2015); see also Elastic Wonder, Inc. v. Posey, No. 13 Cv. 5603 (JGK), 2015 WL 273691, at *5 (S.D.N.Y. Jan. 22, 2015) (finding sufficient allegations that defendants “supplied fabric for the production of the allegedly infringing” products and “maintained a website and storefront where” infringing products were sold).
Because Aero has failed to allege either of the prongs of contributory negligence, leave to amend to add this claim would be futile.
4. Substitution of Plaintiff
Based on the TTA, Aero seeks leave to substitute Aero IP as Plaintiff in this action, based on the statement of Aero IP's Chief Strategy Officer, Steven Velasquez (“Velasquez”), that on January 16, 2022, Aero IP “purchased all of the assets of [Aero], pursuant to an asset purchase agreement [as] of that date and, as such, is the successor-in-interest to” Aero. (ECF Nos. 77 at 1 ¶¶ 1-3; 79 at 20; 87 at 14). Defendants oppose the substitution, attaching the TTA and citing a press release in which Velasquez, listed as Chief Strategy Officer of American Exchange Group (“AEG”), discussed a transaction in January 2022 which AEG “acquire[d] the assets of luxury comfort footwear brand, Aerosoles.” (ECF No. 84-6 at 2-3). Defendants argue that these documents “raise concerns over who [Aero]'s successor-in-interest is, if any, and which of the two companies, Aero IP or AEG, owns the rights necessary to be substituted into this litigation.” (ECF No. 84 at 30). In response, Velasquez submitted a supplemental declaration “clarify[ing] the record” that AEG “is a trade name that is used to collectively refer to several affiliated family-owned entities for marketing and other purposes” but “is not itself a legal entity.” (ECF No. 85 at 1 ¶ 4). Velasquez further stated that Aero IP “on or about January 16, 2022, purchased all of [Aero]'s rights, title, and interests, including all of its assets and liabilities, relating to this litigation pursuant to an asset purchase agreement as of that date” such that Aero IP “is the successor-in-interest to” Aero. (Id. at 1 ¶ 5).
Federal Rule of Civil Procedure 25(c) governs substitution of parties following the transfer of an interest, as follows: “If an interest is transferred, the action may be continued by or against the original party unless the court, on motion, orders the transferee to be substituted in the action or joined with the original party.” Fed.R.Civ.P. 25(c). This rule provides “a procedural mechanism designed to facilitate the continuation of an action when an interest in a lawsuit is transferred and does not affect the substantive rights of the parties.” Travelers Ins. Co. v. Broadway W. St. Assocs., 164 F.R.D. 154, 164 (S.D.N.Y. 1995). “The purpose of Rule 25(c) is to allow a case to continue even when an interest changes hands without requiring a new suit because the ‘successor in interest is bound by a judgment against its predecessor even if substitution is not effected.'” United States Sec. & Exch. Comm'n v. Collector's Coffee Inc., 451 F.Supp.3d 294, 296 (S.D.N.Y. 2020) (quoting Software Freedom Conservancy, Inc. v. Best Buy Co., No. 09 Civ. 10155 (SAS), 2010 WL 4860780, at *2 (S.D.N.Y. Nov. 29, 2010) (citation omitted)). “Courts will frequently grant substitution where a party has fully transferred its interest to another person or entity.” Collector's Coffee Inc., 451 F.Supp.3d at 297-98 (collecting cases). The decision to substitute or join as an additional party a successor-in-interest “is generally within the sound discretion of the trial court.” Organic Cow, LLC v. Ctr. For N. Eng. Dairy Compact Rsch., 335 F.3d 66, 71 (2d Cir. 2003) (citation omitted). In exercising this discretion, courts consider “whether substitution will expedite and simplify the action.” In re Rates-Viper Pat. Litig., No. 09 Civ. 4068 (LTS) (THK), 2011 WL 856261, at *1 (S.D.N.Y. Mar. 10, 2011) (citation omitted).
Although Aero, curiously, did not submit a copy of the TTA-the apparent basis of its request to substitute Aero IP-Defendants have submitted a copy, which corroborates Velasquez's sworn statements that Aero IP “purchased all of the assets of Aero” on or about January 16, 2022. (ECF Nos. 77 at 1 ¶ 3; 84-1 at 4; 85 at 1 ¶ 5). Indeed, the TTA specifically provides that Aero “irrevocably sold, assigned, transferred, and conveyed to” Aero IP “all of [Aero]'s rights, title, and interests in and to the Trademarks,” which are defined to include the AEROSOLES Mark. (ECF No. 84-1 at 4, 9; see also id. at 2). These exhibits should mitigate any “concerns” Defendants may have had about who Aero's successor-in-interest is. (ECF No. 84 at 30). And to the extent that any such concerns may linger, the TTA, and Aero's relationship with Aero IP and AEG, are certainly fair game for discovery, and not a basis for denying substitution, as Aero remains subject to discovery through Federal Rule of Civil Procedure 45. See Collector's Coffee, 451 F.Supp.3d 298-99 (rejecting argument that additional discovery was a basis to deny substitution). Finally, Defendants have provided no reason to doubt that Aero IP is “strongly incentivized to fully participate in discovery” to maximize any chance of recovery on the remaining claims. Id. at 300.
Accordingly, in the event the Court were to exercise personal jurisdiction over Huggoes and Aerosoft and allow the trademark infringement and unfair competition claims to proceed, I respectfully recommend that Aero's Motion to Amend to substitute Aero IP as Plaintiff be GRANTED.
B. Motion to Dismiss
The Second Circuit has recognized that while “‘an amended pleading ordinarily supersedes the original and renders it of no legal effect[,]' . . . [t]his rule does not, however, dictate that a pending motion to dismiss is automatically rendered moot when a complaint is amended.” Pettaway v. Nat'l Recovery Sols., LLC, 955 F.3d 299, 303 (2d Cir. 2020) (quoting In re Crysen/Montenay Energy Co., 226 F.3d 160, 162 (2d Cir. 2000)). Instead, “[d]istrict courts in this Circuit have repeatedly explained that, when faced with an amended complaint, they may either deny a pending motion to dismiss as moot or consider the merits of the motion, analyzing the facts as alleged in the amended pleading.” Pettaway, 955 F.3d at 303 (collecting cases).
Here, in the process of analyzing the futility of Aero's PAC, the Court has considered the merits of Defendants' arguments in the Motion to Dismiss and determined that only Aero's trademark infringement and unfair competition claims would survive a motion to dismiss. (See § III.A.3.b, supra). Accordingly, I respectfully recommend that the Motion to Dismiss be DENIED AS MOOT.
IV. CONCLUSION
For the reasons set forth above, I respectfully recommend that
(1) Aero's Motion to Amend be DENIED for lack of personal jurisdiction.
(2) If the Court were to find that Aero has sufficiently established personal jurisdiction over Huggoes and Aerosoft, however, I respectfully recommend that the Motion to Amend be:
a. GRANTED as to (i) Aero's trademark infringement and unfair competition claims (Counts I, II and IV), and (b) Aero's request to substitute Aero IP as Plaintiff and b. DENIED as futile as to Aero's remaining claims (Counts III, V, VI, VII, and VIII).
(3) Defendants' Motion to Dismiss be DENIED AS MOOT.
* * *
NOTICE OF PROCEDURE FOR FILING OBJECTIONS TO THIS REPORT AND RECOMMENDATION
The parties shall have fourteen (14) days (including weekends and holidays) from service of this Report and Recommendation to file written objections pursuant to 28 U.S.C. § 636(b)(1) and Rule 72(b) of the Federal Rules of Civil Procedure. See also Fed.R.Civ.P. 6(a), (d) (adding three additional days when service is made under Fed.R.Civ.P. 5(b)(2)(C), (D) or (F)). A party may respond to another party's objections within fourteen (14) days after being served with a copy. Fed.R.Civ.P. 72(b)(2). Such objections, and any response to objections, shall be filed with the Clerk of the Court. See 28 U.S.C. § 636(b)(1); Fed.R.Civ.P. 6(a), (d), 72(b). Any requests for an extension of time for filing objections must be addressed to Judge Caproni.
FAILURE TO OBJECT WITHIN FOURTEEN (14) DAYS WILL RESULT IN A WAIVER OF OBJECTIONS AND WILL PRECLUDE APPELLATE REVIEW. See 28 U.S.C. § 636(b)(1); Fed.R.Civ.P. 6(a), (d), 72(b); Thomas v. Arn, 474 U.S. 140 (1985).