Fab Habitat Corporation v. Houselights, LLC

Background

Fab Habitat Corporation brought claims against Houselights, LLC and Satisfylove, Inc. for copyright infringement, unfair competition and false designation of origin, violation of New York General Business Law § 360, New York common-law unfair competition, conspiracy, alleged fraud on the Copyright Office, and violations of the Digital Millennium Copyright Act. Fab Habitat alleged that it created the design used on its Kilimanjaro Rug and that the defendants imported, supplied, advertised, and sold substantially similar rugs.

The amended complaint alleged that Satisfylove was registered in California and that Houselights was a New York-based corporation. Houselights responded that it was registered in Delaware and had its principal place of business in California. Houselights also stated that it had never maintained an office, facility, warehouse, or other fixed physical presence in New York. Both defendants disputed Fab Habitat’s allegations that they regularly conducted business in New York.

Defendants’ Motion

The defendants moved to dismiss under Federal Rule of Civil Procedure 12(b)(2) for lack of personal jurisdiction and under Rule 12(b)(6) for failure to state a claim. Personal jurisdiction is a court’s authority to exercise power over a defendant. Fab Habitat argued that New York had general jurisdiction over Houselights and specific jurisdiction over both defendants because they allegedly offered, sold, and shipped goods to New York consumers.

Personal Jurisdiction

The court rejected Fab Habitat’s argument that Houselights was subject to general jurisdiction in New York. Fab Habitat relied in part on a New York mailing address listed in Houselights’ response to a Digital Millennium Copyright Act complaint. The court concluded that the address was Houselights’ New York-based counsel’s address, not evidence that Houselights maintained a physical business address there. The court also found that Fab Habitat had not alleged that Houselights was registered in New York, had its principal place of business there, or had New York contacts so continuous and systematic that Houselights was essentially at home in the state.

The court also rejected the argument that Houselights consented to personal jurisdiction through its Digital Millennium Copyright Act response. The response was not a contract between Houselights and Fab Habitat, and the record did not suggest that the parties freely negotiated its terms.

For specific jurisdiction, the court considered New York Civil Practice Law and Rules § 302(a)(1), which concerns conducting business in New York, and § 302(a)(2), which concerns committing a tortious act in New York. The court found that Fab Habitat’s allegations that the defendants offered goods for sale and shipped products to New York were conclusory and did not identify a specific New York transaction substantially related to the claims. The court also determined that purchases made from the defendants after the lawsuit began could not establish jurisdiction at the time the action was filed.

The court found no sufficient factual showing under § 302(a)(2), which generally requires the defendant to have been physically present in New York when committing the alleged tortious act. Fab Habitat’s jurisdiction theory appeared to rely on New York consumers receiving the allegedly infringing rugs, rather than on either defendant’s physical presence in New York.

Jurisdictional Discovery and Disposition

Although Fab Habitat had not made a prima facie, or initial, showing of personal jurisdiction, the court found some basis to believe that one or both defendants might have conducted at least some business in New York. It therefore allowed limited jurisdictional discovery concerning whether the defendants transacted business in New York sufficient to support specific jurisdiction under § 302(a)(1).

Because the court could not determine whether it had jurisdiction, it did not reach the defendants’ remaining arguments that Fab Habitat failed to state its claims. The court denied the motion to dismiss with leave to renew after jurisdictional discovery. It also stated that the defendants’ remaining dismissal arguments were denied without prejudice to renewal after that discovery. The parties were directed to meet and confer and submit a proposed discovery plan by October 12, 2023.