iOttie Inc. v. HSM Co. Ltd

Background

Plaintiffs iOttie Inc. and Worldshoppe Co. Ltd. brought state-law claims including breach of contract, conversion, tortious interference, defamation and trade libel, and trade-secret misappropriation against HSM Co. Ltd., Youngkyu Yeo, Onetto, and fictitious defendants identified as ABC Corp. 1–10. Plaintiffs originally filed in New York State Supreme Court. Defendants removed the case to the Southern District of New York, asserting diversity jurisdiction and arguing that Worldshoppe had been fraudulently joined.

Worldshoppe is described as a Korean company that helped iOttie fulfill orders by purchasing goods from manufacturers and shipping them to customers on iOttie’s behalf. The parties agreed that Worldshoppe shared Korean citizenship with HSM and Yeo, which ordinarily would defeat complete diversity. Defendants argued that Worldshoppe had no viable claims and had been included to prevent removal. Plaintiffs moved to remand the case to state court.

Legal standard

A defendant may remove a state-court case when a federal district court would have original jurisdiction. In a diversity case, the parties generally must be citizens of different states or countries. The fraudulent-joinder exception allows a federal court to disregard a nondiverse party when there is no possibility, based on the pleadings, that the plaintiff can state a claim against that party. Defendants bear a heavy burden and must establish the point by clear and convincing evidence. The court must resolve factual and legal issues in the plaintiff’s favor when applying this standard.

The court considered the original complaint because plaintiffs’ counsel conceded that the remand motion should be evaluated using that pleading. The court also considered materials that clarified the claims actually alleged, including a declaration and an email.

Worldshoppe’s tortious-interference claim

The plaintiffs argued that Worldshoppe could possibly state a claim for tortious interference with prospective economic advantage. Under New York law, that claim requires a business relationship with a particular third party, intentional interference with that relationship, wrongful or improper conduct, and resulting injury.

The court found no reasonable possibility that Worldshoppe could recover. Although the complaint referred to relationships with Amazon, Walmart, Best Buy, and Target, plaintiffs’ counsel acknowledged that iOttie—not Worldshoppe—had contracts with those companies. Worldshoppe fulfilled iOttie’s orders and earned commissions and fees, but it did not have contracts with those retailers and was not alleged to have been positioned to enter into them. Any lost income was therefore an indirect consequence of alleged interference with iOttie’s contracts, not interference with Worldshoppe’s own prospective relationships.

The court also rejected plaintiffs’ alternative argument concerning people who attended the 2025 Consumer Electronics Show. The complaint did not identify particular customers with whom Worldshoppe was about to enter contracts, explain what relationships Worldshoppe sought to establish, or allege how defendants prevented those relationships. General references to possible customers were insufficient.

Defamation and trade libel

Plaintiffs also argued that Worldshoppe could possibly assert defamation or trade libel based on two statements by Yeo. New York defamation and trade-libel claims require, among other things, a false factual statement. Defamation also requires publication to a third party, while trade libel involves the knowing publication of false and derogatory facts about a business.

The first statement was Yeo’s alleged statement, “I will kill all of them,” at the 2025 Consumer Electronics Show. The court held that the statement was not a provably false statement of fact about Worldshoppe. It did not name Worldshoppe or say anything about its products. The court also stated that, even if the statement referred to Worldshoppe, it was an expression of frustration or a nonspecific threat rather than an actionable factual assertion.

The second statement was an email in which Yeo allegedly threatened that HSM’s legal team would contact plaintiffs’ customers and interfere with plaintiffs’ marketing and sales. The court held that the email failed the publication requirement because it was sent to plaintiffs, not to a third party. The court stated that there were no allegations that any third party saw or knew about the email and therefore did not address other possible defects in those claims.

Ruling

The court concluded that there was no reasonable possibility that Worldshoppe could state a claim for tortious interference with prospective economic advantage, defamation, or trade libel. It therefore held that Worldshoppe was fraudulently joined for purposes of the removal dispute and denied plaintiffs’ motion to remand. The court directed the Clerk of Court to terminate the motions pending at docket numbers 16 and 17.