Adina's Jewels Inc. v. Shashi, Inc.

Background

Adina’s Jewels, Inc. and Shashi, Inc. are both New York corporations and jewelry wholesalers and retailers. Adina alleged that Shashi ordered a large quantity of Adina’s jewelry, used it to copy Adina’s designs, and offered identical or substantially similar jewelry for sale on Shashi’s website.

Adina originally filed the case in the Supreme Court of New York County. Its complaint asserted three state-law causes of action: unfair competition, unjust enrichment, and deceptive business practices under New York General Business Law § 349. Shashi removed the case to federal court, arguing that the claims were completely preempted by the Copyright Act. Adina moved to remand the case to state court, and Shashi moved to dismiss under Federal Rule of Civil Procedure 12(b)(6), which allows dismissal for failure to state a legally sufficient claim.

Complete preemption and federal jurisdiction

The court explained that complete preemption can transform a state-law claim into a federal claim for jurisdictional purposes when a federal statute has extraordinary preemptive force. The Court of Appeals for the Second Circuit has held that the Copyright Act can completely preempt state-law claims.

The court applied two requirements: the work must fall within the subject matter of copyright, and the state-law rights must be equivalent to rights protected by the Copyright Act. The court also considered whether the state claims contained an additional element making them qualitatively different from copyright infringement. The court stated that awareness, intent, and bad faith generally do not supply such an additional element.

Unfair competition claim

The court held that Adina’s unfair competition claim was completely preempted. Jewelry falls within the subject matter of copyright, and Adina’s claim was based on Shashi’s alleged copying and sale of similar jewelry. Although Adina mentioned trademark damage and public confusion, the court found that the alleged confusion arose only from the copying. Adina did not allege that Shashi represented its jewelry as Adina’s jewelry. The court therefore concluded that the claim was equivalent to a copyright claim and dismissed it.

Unjust enrichment claim

The court also held that the unjust enrichment claim was preempted. The claim alleged that Shashi was enriched by selling jewelry identical or nearly identical to jewelry designed by Adina. Because the alleged harm arose from copying material within the subject matter of copyright, the court dismissed the claim.

New York General Business Law § 349 claim

The court held that the § 349 claim was preempted for the same reason: it targeted harm allegedly arising from Shashi’s copying of Adina’s jewelry. The court additionally stated that, even if the claim were not preempted, it would fail to state a claim because the complaint focused on harm to Adina as a competing business rather than sufficiently substantial public harm to consumers.

Remand and fees

Because the claims were completely preempted, the court found that removal to federal court was proper. It denied Adina’s motion to remand and denied Adina’s request for attorneys’ fees and costs incurred because of the removal.

Disposition

Judge Alvin K. Hellerstein granted Shashi’s motion to dismiss and denied Adina’s motion for remand. The Clerk was directed to terminate the pending motions and mark the case closed. The court stated that its ruling did not foreclose the possibility that Adina could plead a different, non-preempted New York-law claim based on deception or other facts not resting solely on copying.