Esposito v. Information Technology Corporation of the Tr-States

Background

Vincent Esposito, July 4 Ever Fireworks, Inc., and July 4 Ever Co., Ltd. sued Information Technology Corp. of the Tri-States, Fireworks Extravaganza, Inc., J&J Computing, Inc. doing business as Fireworks Extravaganza, and John Sagaria. The complaint asserted claims under the Lanham Act, the Anticybersquatting Consumer Protection Act, and New York law for deceptive business practices, conversion, and interference with prospective business relationships. The plaintiffs also sought to hold corporate defendants responsible through veil piercing. The defendants asserted a defamation counterclaim against Esposito.

The dispute centered on the domain name july4ever.com. Esposito registered the domain in 1998. The parties agreed that defendants redirected it to defendants’ website from 2017 through 2020 and later redirected it to a blank page. They disputed who owned the domain when the redirections occurred. Plaintiffs said a 2007 transfer to Information Technology Corp. was a mistake and that the domain was promptly transferred back. Defendants offered evidence that the domain was transferred to them as part of an agreement in 2011 or 2012.

The parties filed cross-motions for summary judgment. Summary judgment is available when the evidence shows that no genuine dispute over an important fact requires a trial and that one side is entitled to judgment under the law.

Rulings on the Plaintiffs’ Claims

False designation of origin

The court granted defendants judgment on Count I, the Lanham Act false-designation claim. The court explained that this claim generally requires either “passing off,” meaning representing one party’s goods or services as another’s, or “reverse passing off,” meaning representing another party’s goods or services as one’s own. Even accepting plaintiffs’ version of events, the redirection of the website did not show either type of conduct. The claim was dismissed.

Cybersquatting

The court did not grant summary judgment to either side on Count II, the claim under the Anticybersquatting Consumer Protection Act. The parties did not appear to dispute that plaintiffs had a protected mark or that defendants used a domain name identical to that mark. But the evidence raised genuine disputes about whether defendants acted with a bad-faith intent to profit.

Evidence supporting a finding of bad faith included Sagaria’s offer to sell the website back to Esposito and the absence of evidence that defendants used the website to make a genuine offer of goods or services. Evidence supporting the opposite conclusion included the parties’ dispute over ownership: a jury could find that plaintiffs sold the website to defendants, which could undermine a finding of bad faith. The cybersquatting claim may proceed.

New York General Business Law section 133

The court granted defendants judgment on Count III. Section 133 requires proof that defendants adopted or used another party’s corporate, assumed, or trade name and intended to deceive the public. Plaintiffs presented no evidence that defendants used plaintiffs’ names or trademarks on defendants’ website, or that defendants intended to deceive the public. The claim was dismissed.

New York General Business Law section 349

The court granted defendants judgment on Count IV. A section 349 claim requires proof of actual injury, which need not be financial but cannot be speculative or uncertain. Plaintiffs offered no proof of actual injury. The court also denied plaintiffs’ request to delay the ruling to obtain additional discovery because plaintiffs had not submitted the required affidavit or declaration and had not shown why the requested customer lists were necessary.

Conversion

The court denied summary judgment to both sides on Count V. Under New York law, conversion involves intentionally exercising unauthorized control over another person’s property in a way that interferes with that person’s right to possess it. Because the parties disputed who owned the website during the redirections, the conversion claim may proceed.

Tortious interference with prospective economic advantage

The court granted defendants judgment on Count VI. This claim requires, among other things, a specific business relationship with an identified third party. Plaintiffs did not identify such a relationship. The claim was dismissed. The court also denied plaintiffs’ related request for additional discovery.

Veil piercing

The court granted defendants judgment on Count VII. To pierce the corporate veil, a plaintiff must show that an owner completely dominated a corporation in the relevant transaction and used that domination to commit a fraud or wrong that caused injury. Plaintiffs offered no evidence supporting those requirements. The court concluded there was a complete failure of proof, and the claim was dismissed.

Defamation Counterclaim

Esposito sought summary judgment on defendants’ counterclaim. The alleged statement was that there was a judgment against J&J Computing and Fireworks Extravaganza. Defendants conceded the statement was substantially true, and the record showed that a judgment had been entered against them before the statement was made. Because truth is a complete defense to defamation, the court granted Esposito summary judgment and dismissed the counterclaim.

Other Requests for Relief

The court denied plaintiffs’ request for a hearing concerning alleged perjury by Sagaria. The court treated the request as one for sanctions but found that plaintiffs did not explain what the hearing would accomplish or what sanction they sought. The court also declined to reopen discovery, which had closed more than a year earlier.

The court separately denied plaintiffs’ request to remove the “attorneys’ eyes only” designation from customer lists produced by J&J Computing. The request was an untimely challenge to earlier rulings by the magistrate judge, including a denial of reconsideration.

Disposition

The court granted in part and denied in part defendants’ motion for summary judgment and granted in part and denied in part plaintiffs’ cross-motion. The plaintiffs’ false-designation, section 133, section 349, tortious-interference, and veil-piercing claims were dismissed. Defendants’ defamation counterclaim was also dismissed. The cybersquatting and conversion claims may proceed. Plaintiffs’ other requests for relief were denied. The court scheduled a case-management conference to discuss a trial date, pretrial submissions, and settlement efforts.