Camelot SI, LLC v. ThreeSixty Brands Group, LLC

Background

Camelot SI, LLC sued ThreeSixty Brands Group LLC, formerly 360 Holdings II-A LLC, and MerchSource LLC. Camelot alleged that the defendants infringed its exclusive e-commerce rights for the SHARPER IMAGE brand. Camelot relied principally on a 2014 Website and Catalog Rights Purchase Agreement, which granted Camelot an exclusive license to use the SHARPER IMAGE trademarks in specified e-commerce services, subject to stated exceptions. ThreeSixty acquired that agreement and a separate Manufacturing License Agreement from Icon in 2016 and became the owner of the SHARPER IMAGE brand and trademarks.

Camelot alleged that ThreeSixty operated a SHARPER IMAGE storefront on Amazon, a website called Sharper Tomorrow, and SHARPER IMAGE-related social-media accounts. Camelot claimed that these activities diverted consumers from Camelot’s website and products. Camelot also alleged that ThreeSixty reported Camelot to Amazon for listing counterfeit products, after which Amazon removed Camelot’s products and placed its seller account under review. Camelot further alleged that ThreeSixty later purported to terminate the Manufacturing License Agreement.

The first amended complaint asserted nine counts. The claims relevant to ThreeSixty’s partial motion to dismiss were: Count I, unfair competition under section 43(a) of the Lanham Act; Count II, New York common-law unfair competition; Count III, tortious interference with prospective economic advantage; Count IV, tortious interference with a contract; and Count VIII, specific performance. Camelot also requested leave to amend if the court found deficiencies.

Rule 12(b)(6) standard

On a motion under Federal Rule of Civil Procedure 12(b)(6), the court accepts well-pleaded factual allegations as true and draws reasonable inferences for the plaintiff. It does not have to accept conclusory statements or a bare recital of legal elements. The complaint must contain enough factual matter to state a claim that is plausible on its face.

Counts I and II: Federal and state unfair competition

The court held that Camelot failed to plead two essential elements of its Lanham Act claim: a qualifying commercial interest in the trademarks and a likelihood of consumer confusion about the trademarks’ origin. Although Camelot alleged contractual rights against ThreeSixty, it did not allege that it owned the required commercial interest in the trademarks. The agreements stated that ThreeSixty owned the trademarks and the goodwill attached to them.

Relying on controlling Second Circuit precedent, the court concluded that Camelot, as a licensee, could not claim impairment of the goodwill associated with trademarks owned by ThreeSixty. The court also rejected Camelot’s argument that its claim could proceed as a general federal unfair-competition claim, explaining that section 43(a) does not create a standalone federal cause of action for unfair competition apart from claims such as false designation of origin and false advertising. Camelot had not alleged false advertising.

The court reached the same result for the New York common-law unfair-competition claim because that claim generally requires the same core elements as the Lanham Act claim, plus bad faith. The court did not need to decide bad faith because Camelot had not pleaded the required commercial interest and consumer confusion. Counts I and II were dismissed with prejudice.

Count III: Tortious interference with prospective economic advantage

Under New York law, this claim requires a specific business relationship with a third party, the defendant’s knowledge and intentional interference, conduct motivated solely by malice or involving dishonest, unfair, or improper means, and resulting injury. The court found that Camelot had not identified a specific relationship with a particular consumer. Allegations about hundreds of customers and general customer relationships were not enough.

The court also found that Camelot had not adequately alleged wrongful means or conduct motivated solely by malice. Camelot relied on alleged misrepresentations to consumers, but the court concluded that the cited cases involved misrepresentations to specific plaintiffs or entities and allegations supporting fraud. The amended complaint did not plead comparable facts. The court therefore dismissed Count III. It later granted Camelot leave to amend Count III against ThreeSixty and MerchSource because the court found that a valid claim might still be stated.

Count IV: Tortious interference with a contract

A New York contract-interference claim requires a valid contract between the plaintiff and a third party, the defendant’s knowledge of that contract, intentional and unjustified procurement of the third party’s breach, an actual breach, and resulting damages. The court decided that an actual breach was required and declined to apply an alternative theory based on making contract performance impossible.

Camelot identified its agreement with Amazon and alleged that ThreeSixty’s report caused Amazon to remove Camelot’s products and place its seller account under review. But Camelot did not allege that Amazon breached its agreement. The agreement gave Amazon broad authority to remove or alter website content and to suspend, refuse to list, or remove products in its sole discretion. The court also noted that Camelot continued to sell products on Amazon, which undermined its alternative argument that performance had become impossible. Count IV was dismissed. The court later granted Camelot leave to amend Count IV against ThreeSixty and MerchSource.

Count VIII: Specific performance

Specific performance is a court-ordered remedy requiring contractual performance when legal damages are inadequate. The court explained that New York courts commonly treat specific performance as a remedy for breach of contract rather than as a separate cause of action in cases like this one. It dismissed Count VIII without prejudice to Camelot’s ability to seek specific performance as a remedy if it ultimately succeeded on its contract claim.

Leave to amend and jurisdiction

The court dismissed Counts I and II with prejudice because the defects concerned Camelot’s lack of an ownership interest in the trademarks and its inability to plead confusion about their origin. The court found that a valid claim might still be stated for Counts III and IV and granted Camelot leave to amend those counts, subject to the jurisdiction discussion.

After dismissing the only federal claim, the court stated that it presumptively no longer had federal-question jurisdiction over Camelot’s remaining state-law claims. The defendants asserted that diversity jurisdiction existed and that their counterclaims also supplied federal-question jurisdiction, but the court found that the submissions did not adequately identify the citizenship of all members of the limited liability companies. The parties were directed to submit information about the citizenship of the members of Camelot Venture Group, LLC and MerchSource LLC and to address whether federal-question jurisdiction existed over the counterclaims. The court stated that, if neither diversity nor federal-question jurisdiction existed over the counterclaims, it would dismiss the balance of the complaint without prejudice.

Disposition

Judge Ramos granted Defendants’ partial motion to dismiss. Counts I and II were dismissed with prejudice. Counts III and IV were dismissed, with leave to amend. Count VIII was dismissed without prejudice to Camelot’s ability to pursue specific performance as a remedy. The opinion did not finally resolve the jurisdictional status of the remaining claims or the defendants’ counterclaims.