WeWoreWhat, LLC v. CV Collection, LLC

Background

CV Collection, doing business as The Great Eros, sued WeWoreWhat LLC, Onia, LLC, Danielle Bernstein, Saks Fifth Avenue, Inc., Bop LLC, Carbon 38, Inc., and unnamed defendants. CV asserted copyright-infringement, Lanham Act, unfair-competition, and related state-law claims based on the alleged unauthorized copying and use of CV’s design, which featured line drawings of nude women.

The defendants moved to dismiss only Count III, a claim under California’s Unfair Competition Law, for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6). They also moved for sanctions under Rule 11. The action had been consolidated with an earlier declaratory-judgment action filed by WeWoreWhat and Onia in the Southern District of New York.

Motion to Dismiss

The court held that California’s Unfair Competition Law does not apply outside California. A plaintiff that is not a California resident must allege facts showing that the challenged misconduct occurred in California. The court rejected CV’s argument that Rule 12(g)(2) barred the later dismissal motion because the defendants had not raised the argument in an earlier motion. The court explained that the operative complaint contained materially different allegations from the earlier complaint, making the later argument permissible.

The court found that the complaint adequately connected Carbon’s alleged conduct to California. The complaint alleged, on information and belief, that Carbon sold the allegedly infringing goods at its brick-and-mortar store in Pacific Palisades, California. Because the complaint alleged that Carbon had only two brick-and-mortar locations, one in California, the court found it plausible that some allegedly infringing goods were sold there.

The court reached a different conclusion as to the other defendants. It found that the complaint did not allege that their acts of infringement had any connection to California or that they engaged in misconduct there. The court therefore dismissed the Unfair Competition Law claims against all defendants other than Carbon.

Sanctions Motion

The defendants sought Rule 11 sanctions against CV and its lawyers, including attorneys’ fees and costs, dismissal of the complaint with prejudice, and other relief. They argued that several allegations lacked factual support, including allegations about Bernstein’s visit to CV’s representative’s showroom, purchases of CV products, copying of the design, and increased use of the design after CV objected. They also argued that CV’s California lawsuit and its California-related Unfair Competition Law claims were improper.

The court denied the sanctions motion. It found that the defendants’ internal investigation and evidence of alleged independent creation did not conclusively defeat CV’s claims at the pre-discovery stage. The court stated that discovery, including documents and depositions, could provide information supporting CV’s allegations. The court also found that the claims had some factual and legal support and that the defendants had not shown the bad faith or improper purpose required for sanctions.

The court further held that CV’s decision to file its damages action in California, after WeWoreWhat and Onia had filed a declaratory-judgment action in New York, did not establish an improper purpose. It noted that both sides had made defensible choices about where to litigate and that the cases were consolidated in New York within three months.

Leave to Amend and Disposition

The court granted CV permission to file a Second Amended Complaint addressing the dismissed Unfair Competition Law claims. CV proposed restoring allegations that the other defendants had sold and marketed the allegedly infringing goods in California. The court authorized the amended complaint within two weeks and stated that no further opportunities to amend would be provided.

The court granted the motion to dismiss in part by dismissing the Unfair Competition Law claims against all defendants other than Carbon. It otherwise denied the motion to dismiss and denied the motion for sanctions.