Sa v. Giftports, Inc.

Decision Date15 July 2014
Docket NumberNo. 12–4174–cv.,12–4174–cv.
PartiesTECHNOMARINE SA, Plaintiff–Appellant, v. GIFTPORTS, INC., a New York Corporation, Defendant–Appellee, Does 1 through 10, Defendants.
CourtU.S. Court of Appeals — Second Circuit

OPINION TEXT STARTS HERE

Brent Herbert Blakely, Blakely Law Group, Hollywood, CA, for PlaintiffAppellant.

William Thomashower (Rachel Schwartz, Carla Sereny, on the brief), Schwartz & Thomashower LLP, New York, NY, for DefendantAppellee.

Before: LIVINGSTON and LOHIER, Circuit Judges, and STEIN, District Judge.*

DEBRA ANN LIVINGSTON, Circuit Judge:

We consider whether a prior litigation between the parties resolving claims of trademark infringement and other unfair business practices, and stemming from earlier conduct, bars the present suit of PlaintiffAppellant TechnoMarine SA (“TechnoMarine” or Plaintiff) over similar conduct that occurred after the settlement of the earlier suit. The district court (Batts, J.) granted a motion to dismiss by DefendantAppellant Giftports, Inc. (“Giftports” or Defendant), holding that TechnoMarine's claims are barred by res judicata and, in the alternative, that TechnoMarine has failed to state a claim. The district court denied Plaintiff leave to amend its complaint a second time on the ground that it would be futile in light of the res judicata bar. We conclude that res judicata does not bar the alleged trademark and other unfair business practice claims that arose after the original settlement agreement between the parties. Nonetheless, we affirm the dismissal of the complaint on the basis of the district court's alternate holding that TechnoMarine has failed to state a claim upon which relief may be granted. We also affirm the district court's denial of Plaintiff's request to amend its complaint because Plaintiff has failed to indicate how further amendment would cure its pleading deficiencies.

BACKGROUND 1
A. Parties

TechnoMarine is a Swiss designer, manufacturer, and distributor of watches, and it holds various trademark and copyright registrations for its word mark, logo, and watch dial. TechnoMarine has sold hundreds of millions of dollars of watches globally. TechnoMarine closely controls distribution and sale of its watches through authorized dealer agreements that expressly prohibit dealers from transshipping and selling TechnoMarine watches to unauthorized third-party retailers.

Giftports is a New York corporation that sells premium brand watches at discounted prices on the internet. Giftports is not an authorized retailer for TechnoMarine watches but, nonetheless, Giftports has “purchased, advertised, offered for sale, and/or sold watches bearing the TechnoMarine marks on its website.”

B. Prior Litigation and Settlement

In December 2008, TechnoMarine brought a prior suit against Giftports in the District Court for the Southern District of New York (Kaplan, J.). In March 2009, TechnoMarine filed a second amended complaint in that case, bringing three causes of action:

1. Copyright infringement under 17 U.S.C. § 101 et seq., based on Giftports's alleged unauthorized use of photographs of TechnoMarine brand watches;

2. Unfair competition under the Lanham Act, 15 U.S.C. § 1125(a), based on allegations that Giftports intended purchasers to believe it was “an authorized source for TechnoMarine watches” and that Giftports was selling TechnoMarine watches “without the benefit of the warranty and after sales service that TechnoMarine provide[s] for such products”; and

3. Alleged interference with TechnoMarine's contractual relations with “authorized retailers and/or distributors.”

The parties resolved this earlier case through a “Litigation Settlement Agreement and Mutual Release” (“Settlement Agreement”) that was executed on April 24, 2009. Pursuant to the Settlement Agreement, the parties submitted to the district court a stipulation of dismissal with prejudice, which was entered on April 27, 2009.

In the Settlement Agreement, Giftports agreed to pay TechnoMarine $5,000 and TechnoMarine agreed to dismiss the action with prejudice. Giftports represented in the Settlement Agreement that it had “ceased all use of any copies of Plaintiff's Copyrighted Work ... at least as of January 16, 2009.” 2 The Settlement Agreement made clear that it should not be construed “as a license, implied or otherwise, by and between Plaintiff and Defendant to use the Copyrighted Work.”

Giftports denied any intentional infringement of TechnoMarine's rights in the Settlement Agreement, and the agreement was altogether silent as to whether the conduct alleged by TechnoMarine was unlawful. Neither party admitted liability or wrongdoing. The agreement's release of liability was broad and unqualified, providing that the parties agreed, in pertinent part, to:

release ... one another ... from any and all liability, ... causes of action, suits or obligations of any nature, ... whether known or unknown, ... which the parties ... now have, may have or may hereafter assert against one another, relating to the claims alleged in the Civil Action or arising from the facts alleged therein....

J.A. 70.

C. Present Litigation

More than two and a half years after the 2009 settlement, TechnoMarine brought the present action against Giftports.3 In its First Amended Complaint, filed in April 2012, TechnoMarine asserted six causes of action:

1. Trademark infringement, pursuant to 15 U.S.C. § 1114;

2. False designation of origin, pursuant to 15 U.S.C. § 1125(a);

3. Trademark dilution, pursuant to 15 U.S.C. § 1125(c);

4. Tortious interference with contractual relations;

5. Common law unfair competition; and

6. Copyright infringement, pursuant to 17 U.S.C. § 501.

The conduct alleged to be unlawful, according to TechnoMarine's amended complaint in this case, is similar to the conduct that TechnoMarine alleged to be unlawful in its first, previously settled lawsuit. The gravamen of TechnoMarine's complaint in this case is that Giftports—although not an authorized retailer—purchased and sold watches bearing TechnoMarine marks on its website. The complaint alleges that it is “reasonable to conclude” that these watches are “either counterfeit” or they were “obtained from entities who are [contractually] prohibited from selling” these watches to Giftports. These allegations are, in substance, additional instances of the same type of conduct alleged in the litigation settled in 2009. Nonetheless, the First Amended Complaint in the present case inexplicably fails to mention the previous lawsuit and settlement. Further, it does not distinguish between conduct that occurred prior to, as compared to following, the previous litigation between the parties.

Giftports moved in the district court to dismiss TechnoMarine's First Amended Complaint in May 2012. TechnoMarine opposed the motion; additionally, it requested leave to amend [i]n the event [the district court found] that Plaintiff's allegations are insufficient to sustain any of its claims.” In September 2012, the district court granted the motion to dismiss, holding that Plaintiff's claims are barred by res judicata due to TechnoMarine's 2009 lawsuit and settlement. It alternatively held, under Rule 12(b)(6), that TechnoMarine failed to state a valid cause of action for any of its claims. The district court also denied Plaintiff's request for leave to amend its complaint a second time, ruling that any amendment would be futile in light of the district court's res judicata holding. Judgment was entered on September 18, 2012, and TechnoMarine filed this timely appeal.

DISCUSSION

We review de novo the dismissal of a complaint under Rule 12(b)(6), accepting all allegations in the complaint as true and drawing all inferences in favor of the plaintiff. Walker v. Schult, 717 F.3d 119, 124 (2d Cir.2013). Our review of a district court's application of res judicata is also de novo. Duane Reade, Inc. v. St. Paul Fire & Marine Ins. Co., 600 F.3d 190, 195 (2d Cir.2010). A court may consider a res judicata defense on a Rule 12(b)(6) motion to dismiss when the court's inquiry is limited to the plaintiff's complaint, documents attached or incorporated therein, and materials appropriate for judicial notice. See, e.g., Day v. Moscow, 955 F.2d 807, 811 (2d Cir.1992) ([W]hen all relevant facts are shown by the court's own records, of which the court takes notice, the defense [of res judicata ] may be upheld on a Rule 12(b)(6) motion without requiring an answer.”).

I.

“Under the doctrine of res judicata, or claim preclusion, a final judgment on the merits of an action precludes the parties or their privies from relitigating issues that were or could have been raised in that action.” St. Pierre v. Dyer, 208 F.3d 394, 399 (2d Cir.2000) (quoting Federated Dep't Stores, Inc. v. Moitie, 452 U.S. 394, 398, 101 S.Ct. 2424, 69 L.Ed.2d 103 (1981)) (brackets and internal quotation marks omitted). “To prove the affirmative defense [of res judicata ] a party must show that (1) the previous action involved an adjudication on the merits; (2) the previous action involved the plaintiffs or those in privity with them; [and] (3) the claims asserted in the subsequent action were, or could have been, raised in the prior action.” Monahan v. N.Y.C. Dep't of Corr., 214 F.3d 275, 285 (2d Cir.2000).

The first two elements of this test are satisfied and are not in dispute here.4 The only issue in this appeal is the third element—whether “the claims asserted” in this action “were, or could have been, raised in the prior action.” Monahan, 214 F.3d at 285. Whether a claim that was not raised in the previous action could have been raised therein “depends in part on whether the same transaction or connected series of transactions is at issue, whether the same evidence is needed to support both claims, and whether the facts essential to the second were present in the first.” Woods v. Dunlop Tire Corp., 972 F.2d 36, 38 (2d Cir.1992) (internal quotation marks omitted). To determine...

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