CDC Newburgh Inc. v. STM Bags, LLC

Background

CDC Newburgh Inc. described itself as a non-authorized reseller that sold consumer products through online marketplaces, including Amazon. CDC alleged that Lienau, acting for itself and as STM’s agent, reported ten of CDC’s STM-product listings to Amazon as counterfeit, causing Amazon to remove the listings. CDC claimed that the products were authentic and that the reports were made for anticompetitive reasons.

CDC’s amended complaint asserted claims for defamation, tortious interference with prospective business relations, declaratory relief concerning trademark non-infringement, and New York common-law unfair competition. STM asserted counterclaims for federal and New York trademark infringement, false advertising, unfair competition, and trademark dilution. The court considered Lienau’s motion to dismiss CDC’s amended complaint and request to add an anti-SLAPP counterclaim, as well as CDC’s motion to dismiss STM’s counterclaims.

Rulings on CDC’s Claims Against Lienau

The court granted Lienau’s motion to dismiss CDC’s amended complaint in its entirety.

Defamation. The court held that the statements in Lienau’s reports were pure opinions rather than actionable statements of fact. The reports stated, among other things, that STM had authorized only two Amazon sellers and that Lienau therefore concluded or assumed that CDC’s products were counterfeit. Because the reports disclosed the information supporting those conclusions, the court treated the statements as opinions. The court therefore granted the motion to dismiss CDC’s defamation claim.

Tortious interference. CDC alleged that Lienau interfered with CDC’s business relationship with Amazon by causing Amazon to remove the reported listings. The court held that removal of product listings did not establish harm to the underlying business relationship with Amazon. It therefore granted the motion to dismiss this claim.

New York unfair competition. The court concluded that CDC had not plausibly alleged either recognized theory of common-law unfair competition: passing off, which involves selling one party’s goods as another’s, or misappropriation, which involves taking a competitor’s labor, skill, expenditures, or goodwill. The court also found CDC’s allegations of bad faith conclusory. It granted the motion to dismiss this claim.

Declaratory judgment. CDC sought a declaration that its products were not counterfeit and did not infringe STM’s trademarks. The court declined to exercise jurisdiction over this request. It reasoned that the requested declaration would not resolve the factual question of whether the products were counterfeit, would not remedy the listing removals, and would not resolve CDC’s other claims. The court granted the motion to dismiss this claim.

Anti-SLAPP counterclaim. Lienau asked to add a counterclaim under New York’s anti-SLAPP statute, which is intended to protect certain speech and petitioning activity. The court denied that request because it agreed with other courts that New York’s anti-SLAPP procedures conflict with the Federal Rules of Civil Procedure and do not apply in federal court.

Rulings on STM’s Counterclaims

The court granted in part and denied in part CDC’s motion to dismiss STM’s counterclaims.

Federal trademark infringement and federal unfair competition. STM alleged that CDC’s sale of products bearing STM’s trademarks was likely to confuse consumers because the products were not subject to STM’s quality controls, customer-service requirements, or warranty. CDC argued that the first-sale doctrine protected its resale of genuine STM products. The court declined to resolve the fact-intensive likelihood-of-confusion issue at the motion-to-dismiss stage. It held that STM had plausibly alleged trademark use in commerce, trademark protection, and a likelihood of consumer confusion. The court therefore denied the motion to dismiss STM’s federal trademark-infringement and federal unfair-competition claims.

New York common-law trademark infringement. The court granted the motion to dismiss this counterclaim because New York law requires a showing of bad faith in addition to the other trademark-infringement elements. The court found that STM’s allegations that CDC acted fraudulently, maliciously, willfully, or in bad faith were conclusory and unsupported by sufficient factual allegations.

False advertising. STM alleged that CDC’s Amazon product listings falsely advertised that the products came with STM’s warranty, even though products sold by unauthorized sellers that did not comply with STM’s quality controls allegedly did not receive that warranty. The court held that STM had plausibly alleged standing, injury, a false or misleading statement, materiality, commercial advertising in interstate commerce, and likely damage. The court denied the motion to dismiss this counterclaim.

Trademark dilution. The court granted the motion to dismiss STM’s dilution counterclaim. Federal dilution law requires a mark to be famous among the general consuming public of the United States. The court found that STM’s allegations that its marks were widely recognized and that it had spent substantial resources advertising them were too conclusory and lacked supporting facts such as advertising expenditures, sales figures, or evidence comparable to marks previously found famous.

Disposition and Further Pleadings

The court granted Lienau’s motion to dismiss CDC’s claims for defamation, tortious interference with prospective business relations, declaratory judgment of non-infringement, and common-law unfair competition, dismissing all of CDC’s claims against Lienau. It denied Lienau’s request to file an anti-SLAPP counterclaim.

The court granted CDC’s motion to dismiss STM’s New York common-law trademark-infringement and trademark-dilution counterclaims. It denied CDC’s motion to dismiss STM’s federal trademark-infringement, false-advertising, and unfair-competition counterclaims. The claims dismissed by the order were dismissed without prejudice, and the parties were allowed to file amended pleadings. CDC was given until October 18, 2023, to file a second amended complaint. STM could amend its dismissed counterclaims in its answer and counterclaims. If the permitted amended pleadings were not filed on time, the dismissed claims would be deemed dismissed with prejudice.