Moonbug Entertainment Limited v. 640350 Store

Background

Moonbug Entertainment Limited and Treasure Studio Inc. moved for entry of default against 95 defendants on May 25, 2023. The Clerk of Court entered a certificate of default that day. The plaintiffs then submitted a proposed order to show cause, a proposed default judgment under Federal Rule of Civil Procedure 55(b)(2), and supporting papers.

The court had previously issued a temporary restraining order and a preliminary injunction. The plaintiffs sought a default judgment and permanent injunction, but the court explained that its earlier orders did not eliminate the plaintiffs’ obligation to establish personal jurisdiction before the court could issue relief that would bind the defendants indefinitely.

Personal Jurisdiction Standard

Personal jurisdiction is the court’s legal authority over a particular defendant. Before entering default judgment, the court must determine that it has personal jurisdiction over each defendant. In this trademark case, the court first applies New York’s long-arm statute and then considers whether exercising jurisdiction would comply with the United States Constitution’s Due Process Clause.

The plaintiffs relied on New York Civil Practice Law and Rules §§ 302(a)(1) and 302(a)(3). Under § 302(a)(1), the plaintiffs had to show that each defendant transacted business in New York and that the claims arose from that business. When the alleged business occurs through a website, courts consider how interactive the website is and whether the defendant used it to reach New York in a meaningful way. Merely operating an interactive third-party website, or offering products that could be shipped to New York without an actual New York sale, is not enough.

Under § 302(a)(3), the plaintiffs had to show, among other things, that each defendant committed a tort outside New York that caused an injury in New York, that the defendant reasonably expected consequences in New York, and that the defendant derived substantial revenue from interstate or international commerce. The opinion explains that, for these claims, the plaintiffs needed to allege lost sales or lost consumers in New York and facts showing that each defendant purposefully served or targeted the New York market.

Court’s Analysis

The court held that the complaint did not allege sufficient facts to establish personal jurisdiction over any individual defendant. The complaint stated that the defendants were located in China, but it generally referred to the defendants as a group rather than providing defendant-specific allegations.

The plaintiffs alleged that New York consumers could view the defendants’ storefronts on online marketplaces such as Alibaba and AliExpress; that the defendants could ship products to New York; that they accepted U.S. currency; and that they offered allegedly counterfeit products to consumers in the United States, including New York. The plaintiffs also alleged that they verified that each defendant offered shipping to a particular New York address. But the complaint did not allege that any specific defendant actually made a sale to a New York consumer, and the cited exhibit did not establish such sales.

Ruling

The court concluded that the plaintiffs had not met their burden of showing that each defendant engaged in transactions in New York or that the court otherwise had personal jurisdiction over each defendant. Judge Analisa Torres ordered the plaintiffs to provide additional information supporting personal jurisdiction as to each defendant by July 6, 2023. The court stated that failure to do so would result in dismissal of the action for lack of personal jurisdiction. The order did not itself dismiss the action or enter default judgment.