Poof-Slinky, LLC v. A.S. Plastic Toys Co., Ltd.

Background

Poof-Slinky, LLC sued numerous defendants for allegedly selling counterfeit Slinky products. The complaint asserted four causes of action: trademark counterfeiting, infringement of registered trademarks, and false designation of origin under the federal Lanham Act, plus unfair competition under New York common law.

The Orel Defendants were thirty-four defendants represented by Sergei Orel. The opinion described them as individuals or businesses located in China that used Alibaba and AliExpress storefronts to advertise and sell products worldwide, including to buyers in New York. Poof-Slinky hired New Alchemy Limited to investigate possible counterfeits. Between July and August 2019, New Alchemy purchased allegedly counterfeit Slinky products from the Orel Defendants through their websites, and more than 20% of those purchases were ultimately shipped to New York. The opinion also states that the Orel Defendants admitted that New Alchemy completed at least one transaction with each of them for allegedly counterfeit products shipped to New York.

The Orel Defendants moved under Federal Rule of Civil Procedure 12(b)(2), which allows dismissal for lack of personal jurisdiction, and Rule 12(b)(6), which allows dismissal for failure to state a legally sufficient claim.

Personal Jurisdiction

The court denied the Rule 12(b)(2) request. It applied New York’s long-arm statute, which can permit jurisdiction over an out-of-state defendant who transacts business in New York when the claims are substantially connected to that business. The court held that the defendants’ highly interactive Alibaba and AliExpress storefronts, which allowed New York consumers to view products, communicate with sellers, place orders, and receive shipments, supported jurisdiction.

The court further held that a single purposeful sale of an allegedly counterfeit product into New York can be enough under the statute. It rejected the defendants’ arguments that most investigator orders were not fulfilled, that completed orders involved small amounts of money, or that the purchases were improper “trap purchases.” The court stated that even an offer to sell one allegedly infringing item can support jurisdiction and that the investigator’s role did not change whether the defendants purposefully conducted business in New York.

The court also concluded that exercising jurisdiction complied with constitutional due process. The defendants had sufficient minimum contacts with New York because their online storefronts allowed sales and communications with New York consumers and were allegedly used to sell infringing products there. The defendants did not present arguments showing that exercising jurisdiction would be unreasonable. Because the court found jurisdiction under New York Civil Practice Law and Rules § 302(a)(1), it did not decide whether jurisdiction also existed under § 302(a)(3) or Federal Rule of Civil Procedure 4(k).

Failure to State a Claim

The court separately denied the Rule 12(b)(6) request. The defendants’ only argument was that purchases made by Poof-Slinky’s investigator, particularly purchases that were not shipped, could not have proximately caused Poof-Slinky’s damages. The court rejected that argument, explaining that Poof-Slinky alleged reputational harm from consumers being deceived into believing that the defendants’ lower-quality products were genuine Slinky products. The court also noted that proximate cause was not an element of Poof-Slinky’s asserted claims as presented in the opinion.

Disposition

Judge Edgardo Ramos denied the Orel Defendants’ motion to dismiss for lack of personal jurisdiction and failure to state a claim in its entirety. The court directed the parties to appear by telephone for a status conference and directed the Clerk to terminate the motion.