Brown v. Dolce & Gabbana USA Inc.

Background

Luke Brown brought a putative class action against Dolce & Gabbana USA Inc. (D&G USA), UNXD, Inc., and Bluebear Italia S.R.L. He alleged that the defendants advertised, promoted, and sold digital assets known as non-fungible tokens through the DGFamily project, but failed to provide promised digital rewards, physical products, event access, and other benefits. Brown alleged that he lost $5,800.

D&G USA was the only defendant served and the only defendant that moved to dismiss. D&G USA argued that Brown had incorrectly named it because the allegations concerned its Italian parent company, Dolce & Gabbana S.R.L. Brown instead alleged that D&G USA and Dolce & Gabbana S.R.L. were effectively the same company and that D&G USA was the parent company’s alter ego.

Direct Liability

The court considered whether Brown adequately alleged that D&G USA itself was directly liable for the alleged misconduct. D&G USA argued that the amended complaint did not connect it to specific conduct. Brown’s opposition did not respond to that argument; the court treated the argument as abandoned. The court also stated that the amended complaint pleaded no facts about D&G USA’s specific conduct that would support a reasonable inference of liability.

Alter Ego Theory

The court next considered whether D&G USA could be treated as the alter ego of Dolce & Gabbana S.R.L. Under the New York law applied by the court, a party seeking to disregard a corporation’s separate legal identity must show both that the owner completely dominated the corporation regarding the transaction at issue and that the domination was used to commit a fraud or other wrong that injured the party.

The court held that Brown did not adequately allege complete domination. Although the amended complaint alleged shared personnel, office space, branding, and direction by a shared chief executive officer, the court found these allegations too conclusory and insufficiently detailed. It also noted that shared ownership and personnel alone do not establish an alter ego relationship. The court further held that Brown did not adequately allege that any domination was used to commit a separate fraud or wrong. Allegations supporting the underlying claims were not enough to satisfy this separate requirement for alter ego liability.

Pleading Defects

The court held that the amended complaint improperly grouped D&G USA and Dolce & Gabbana S.R.L. together under the name “Dolce & Gabbana” and attributed misconduct to them collectively without identifying what each entity allegedly did. This violated the requirement that a complaint give each defendant fair notice of the conduct supporting the claims. The court also noted that the group pleading was inconsistent with the heightened pleading requirement for claims sounding in fraud.

Leave to Amend and Disposition

Brown asked for permission to file a second amended complaint if the court found any claim deficient. The court denied that request. It reasoned that Brown had already amended once after receiving notice of D&G USA’s objections and an opportunity to address them, and that he had not explained how another amendment would cure the defects.

The court granted D&G USA’s motion to dismiss. The opinion does not add a “with prejudice” or “without prejudice” qualifier. It also does not state a disposition for the claims against UNXD, Inc. or Bluebear Italia S.R.L.