ALLSTAR MARKETING GROUP, LLC v. ALI DROPSHIPPING SUPPORT STORE

Background

Allstar Marketing Group, LLC sued 49 online merchants who sell products originating in China. The complaint asserts trademark infringement, trademark counterfeiting, copyright infringement, false designation of origin, and unfair competition. None of the defendants appeared. Allstar moved for a default judgment, and the court had scheduled a hearing on that motion for January 27, 2022.

Personal jurisdiction

Before entering a default judgment, the court said Allstar had to establish personal jurisdiction over each defendant. Personal jurisdiction is the court’s authority to exercise power over a particular defendant. The court emphasized that it must conduct an individualized inquiry rather than treat all defendants as a group.

Allstar relied on New York’s long-arm statute and Federal Rule of Civil Procedure 4(k). It alleged that the defendants conducted or solicited business in New York, derived substantial revenue from New York transactions, or otherwise benefited from New York law. Allstar submitted a declaration stating that its lawyer had verified that each defendant offered shipping to a New York address. But because there were many defendants and most shipped from China with significant delivery times, the lawyer purchased counterfeit products from only a representative sample of them.

The court explained that New York law can permit jurisdiction when a defendant transacts business in New York or contracts to supply goods there. A single transaction may be enough, but the plaintiff must show that the defendant deliberately conducted business in New York and that the claims are connected to those contacts.

Order

The court found that Allstar had submitted evidence of sales into New York for only a fraction of the defendants. By February 2, 2022, Allstar must either provide proof of a sale into New York for each defendant or cite legal authority supporting the argument that merely having the capacity to ship products to New York is enough to establish personal jurisdiction.

The court adjourned the default-judgment hearing to February 10, 2022, at 10:30 a.m., to be held by telephone. The order did not decide whether Allstar was entitled to a default judgment or whether its underlying infringement and unfair-competition claims were valid.