One Step Up, Ltd. v. Empire Apparel LLC

Background

One Step Up, Ltd. brought a trademark infringement and unfair competition lawsuit against Empire Apparel LLC and Assaf Cohen. The parties filed cross-motions to amend their pleadings.

One Step Up sought to add Stephanie Goldman as a defendant and to assert additional claims for fraud and unjust enrichment. Empire Apparel and Cohen sought to add a breach-of-contract claim against Harry Adjmi, identified as One Step Up’s principal, as a proposed third-party defendant.

Report and Recommendation

On April 13, 2022, Magistrate Judge Robert W. Lehrburger recommended granting One Step Up’s motion and denying Empire Apparel and Cohen’s motion. The parties’ objections to the proposed amendments were based only on alleged futility. An amendment is futile when the proposed claim could not survive a motion to dismiss for failure to state a claim.

The magistrate judge concluded that One Step Up’s proposed amendment was not futile. The recommendation stated that One Step Up’s allegations met the heightened pleading requirements for fraud claims and plausibly alleged an unlawful inflated-price scheme involving Cohen and Goldman.

The recommendation concluded that Empire Apparel and Cohen’s proposed amendment was futile because their allegations did not show either a contractual relationship between them and Adjmi personally or grounds to disregard the company’s separate legal status, known as piercing the corporate veil.

Ruling

The recommendation warned that written objections had to be filed within fourteen days and that failing to object would waive objections and prevent judicial review. No party objected. Judge Alvin Hellerstein reviewed the recommendation and supporting materials under the clear-error standard, which required the court to determine whether the recommendation contained an obvious mistake on the existing record.

The court found no clear error and adopted the Report and Recommendation in full. The result was that One Step Up’s motion to amend was granted, and Empire Apparel and Cohen’s motion to amend was denied. The Clerk of Court was directed to terminate the motions at ECF Nos. 25, 26, and 27.