Kelly Toys Holdings, LLC v. Top Department Store
- Paul Engelmayer
- 1:22-cv-00558
- U.S. District Court · Southern District of New York
- 24
In Kelly Toys v. Top Department Store, Judge Engelmayer denied the defendants’ motion challenging email service of process.
The ruling directly affected Kelly Toys Holdings, LLC and the defendant online stores and website addresses by allowing the case to proceed after upholding service by email. It resolved only the service-of-process issue, not the parties’ underlying trademark claims.
What happened
Kelly Toys Holdings, LLC sued two China-based online stores and related website addresses, alleging that they sold products infringing its Squishmallows trademarks. The court had authorized Kelly Toys to serve the defendants by email after efforts to find their physical addresses failed.
The defendants argued that the email service was inadequate and that they should have been served at physical addresses under the international treaty governing service abroad. Kelly Toys argued that the treaty did not apply because the defendants’ addresses were unknown despite reasonably diligent searches, and that the court-authorized email service was valid.
Judge Paul A. Engelmayer denied the defendants’ motion to dismiss. He ruled that Kelly Toys had made reasonably diligent but unsuccessful efforts to find the defendants’ physical addresses, so the treaty did not apply, and that the email service was authorized, likely to reach the defendants, and consistent with basic notice requirements. The court did not decide Kelly Toys’ alternative argument about whether email service would have been allowed under the treaty.
The detailed version
- Kelly Toys Holdings, LLC v. Top Department Store · No. 1:22-cv-00558
- Paul Engelmayer
- Aug. 26, 2022
Background
Kelly Toys Holdings, LLC, which manufactures and distributes Squishmallows plush toys, brought claims under the Lanham Act for trademark counterfeiting, trademark infringement, false designation, and unfair competition. The defendants were identified as two China-based online retail stores—Top Department Store and Perfectdisc Squishmollaws.com—and three website addresses through which the stores allegedly operated.
Kelly Toys’ counsel tried to identify physical addresses for service. Counsel found addresses in California and London associated with the websites, but investigations showed that those addresses were not connected to the defendants. Counsel also investigated addresses appearing on shipping labels, searched the websites’ registration information, and asked counsel in Beijing to locate the defendants’ Chinese addresses. Those efforts did not identify a reliable physical address.
The court had therefore authorized alternative service under Federal Rule of Civil Procedure 4(f)(3). On January 28, 2022, Kelly Toys emailed the temporary restraining order, summons, complaint, and a link to a secure website to seven email addresses associated with the defendants. Delivery was confirmed for three addresses. The defendants later appeared, participated in settlement discussions, and challenged service under Rule 12(b)(5), which allows a defendant to seek dismissal for insufficient service of process.
Arguments
The defendants argued that the Hague Service Convention applied because the defendants were in China and required service at their physical addresses. They contended that service by email was therefore deficient. Kelly Toys argued that the Convention did not apply because the defendants’ physical addresses were unknown despite reasonable diligence. Kelly Toys also argued, alternatively, that email service was permissible even if the Convention applied.
Court’s analysis
Judge Engelmayer concluded that the Hague Service Convention did not apply. The Convention does not apply when the address of the person to be served is not known. The court found that Kelly Toys had made reasonably diligent efforts to locate the defendants, including investigating addresses displayed on the websites, checking shipping-label addresses, reviewing website-registration information, and using Beijing counsel to search for Chinese addresses.
The court rejected the defendants’ argument that Kelly Toys had to use every possible investigative method, such as a Google search, obtaining address information from PayPal, or hiring a private investigator in China. The court held that reasonable diligence—not every imaginable investigative step—was required. It also found that the defendants’ later disclosure of possible current addresses did not show that Kelly Toys had known those addresses when it attempted service.
The court then held that email service was proper under Rule 4(f)(3). That rule permits court-ordered service on a foreign defendant when the method is not prohibited by an international agreement and satisfies constitutional due process. The court had authorized the email service, and the defendants did not dispute that they received the process or argue that the service failed to satisfy Rule 4(f)(3) once the Hague Convention was found inapplicable.
The court also found that the email method was reasonably likely to notify the defendants. The defendants operated online businesses, used email to communicate with customers, had email addresses associated with their websites, and received actual notice of the case, as shown by their subsequent settlement discussions and appearance in the litigation.
Disposition
The court denied the defendants’ motion to dismiss for deficient service. It did not reach Kelly Toys’ alternative arguments concerning whether email service would have been permissible under the Hague Service Convention. The court directed the Clerk to terminate the motion and stated that it would schedule an initial pretrial conference by separate order.
Read the full 24-page opinion on CourtListener, the free public archive maintained by the Free Law Project.