Factory Direct Wholesale, LLC v. Itouchless Housewares & Prods., Inc.

• Decision Date: 23 October 2019
• Docket Number: Case No. 19-CV-01228-LHK
• Citation: 411 F.Supp.3d 905
• Court: U.S. District Court — Northern District of California
• Parties: FACTORY DIRECT WHOLESALE, LLC, Plaintiff, v. ITOUCHLESS HOUSEWARES & PRODUCTS, INC., Defendant.

411 F.Supp.3d 905

FACTORY DIRECT WHOLESALE, LLC, Plaintiff,

v.ITOUCHLESS HOUSEWARES & PRODUCTS, INC., Defendant.

Case No. 19-CV-01228-LHK

United States District Court, N.D. California, San Jose Division.

Signed October 23, 2019

Bryan G. Harrison, Michael Wolak, III, Pro Hac Vice; Locke Lord Bissell & Liddell LLP, Atlanta, GA, Nina Huerta, Daniel Anthony Solitro, Jamie Mei Cheng, Locke Lord Bissell & Liddell LLP, Los Angeles, CA, for Plaintiffs.

Brian Maschler, Brad Michael Weintraub, Michael D. Kanach, Gordon Rees Scully Mansukhani LLP, San Francisco, CA, for Defendants.

ORDER GRANTING IN PART AND DENYING IN PART MOTION TO DISMISS

LUCY H. KOH, United States District Judge

Plaintiff Factory Direct Wholesale ("Plaintiff") sued Defendant iTouchless Housewares & Products, Inc. ("Defendant") and alleged false advertising under the Lanham Act, intentional interference with contract, intentional interference with prospective economic advantage, negligent interference with prospective economic advantage, violations of California's Unfair Competition Law, and trademark infringement. Before the Court is Defendant's motion to dismiss. ECF No. 34. Having considered the submissions of the parties, the relevant law, and the record in this case, the Court GRANTS in part and DENIES in part Defendant's motion to dismiss.

I. BACKGROUND

A. Factual Background

As alleged in the First Amended Complaint ("FAC"), Plaintiff and Defendant are competing sellers on the Amazon e-commerce platform. ECF No. 28 ¶ 2 (FAC). Sellers on Amazon are subject to established rules and policies that govern their advertisements (i.e., listings) of their products on the website. Id. ¶ 20. For example, the Amazon Seller Agreement, which governs the seller's access and use of Amazon's online marketplace, requires the seller to represent and warrant that "any information provided...to Amazon...is at all times accurate and complete." Id. ¶¶ 20-21. Other policies, such as the Amazon Code of Conduct, requires that sellers "not engage in any ‘unfair behavior’ or activities that (a) intentionally damage another seller, including its listings or ratings, or (b) manipulate or game the Amazon.com selling or buying process, including Amazon's search results or sales rankings." Id. ¶ 24. "Sellers are further prohibited from contributing false, misleading or inauthentic content." Id. (citation omitted). The FAC alleges that both Plaintiff and Defendant agreed to these terms with Amazon in order to sell their products. Id. ¶¶ 22-23.

Products on Amazon are identified "through a unique combination of 10 letters and numbers, referred to as an Amazon Standard Identification Number or "ASIN" designation." Id. ¶ 31. "When a vendor uploads information for a new product for sale," "Amazon assigns that new product a unique ASIN," which appears in the product's details and can be used to search and find the product. Id. Plaintiff's products have various unique ASIN designations and are advertised on Amazon. Id. ¶¶ 32-33.

In the "summer of 2018," Plaintiff discovered that "false, deceptive, and unauthorized changes were being made" to its product advertisements and listings. Id. ¶¶ 34-35. These alterations included changing product descriptions, providing improper ASIN numbers, and changing the product's listing category (thereby moving the product from Amazon's Home & Kitchen category). Id. Plaintiff learned that a third party was requesting Amazon to make these changes, and as a result of Amazon's actions, Plaintiff's products' ASINs were being merged into other products. Id. ¶ 36.

Plaintiff reportedly discovered that Defendant was responsible for making these requests and filed suit in the Northern District of Georgia on August 29, 2018 (the "Georgia action"). Id. ¶¶38-42; see also Factory Direct Wholesale, LLC v. iTouchless Housewares & Prods. Inc. , Case No. 1:18-cv-04091-CAP, ECF No. 1 (N.D. Ga. Aug. 29, 2018); ECF No. 31-1 Ex. A. Around October 23, 2018, Plaintiff also discovered that Defendant was utilizing, without authorization or license, Plaintiff's BESTOFFICE trademark to advertise a 13-gallon trash can. FAC ¶ 73. Plaintiff is the owner of the trademark for BESTOFFICE ("Supplemental Mark") and has used the Supplemental Mark since December 7, 2013. Id. ¶ 65-66. Defendant had used the mark since no later than January 10, 2018 and sought to register the Supplemental Mark on September 10, 2018. Id. ¶¶ 68-69. The United States Patent and Trademark Office ("USPTO") rejected the registration on December 19, 2018 because the mark was too similar to Plaintiff's Supplemental Mark. Id. ¶ 75.¹ Plaintiff did not bring suit for trademark infringement in the Georgia action.

During the pendency of the Georgia action, Plaintiff alleges that the "knowingly false and deceptive changes" to its listings ceased. However, beginning in February 2019, after the filing of the Georgia action, Defendant allegedly "renewed its conduct in requesting that Amazon make changes to [Plaintiff's] product listings that are knowingly false, deceptive and unauthorized, and that mislead the consuming public by misrepresenting Defendant's advertised products as well as [Plaintiff's] products and listings." Id. ¶ 46.

For example, in late February 2019, Defendant allegedly requested unauthorized changes to one of Plaintiff's listings, the "4ZB4 Listing."² As a result of these requests, Amazon altered the 4ZB4 Listing such that it falsely advertised the 4ZB4 product as a "product manufactured and branded by Defendant". Id. ¶ 49; see id. ¶ 50 (Defendant "caused Amazon to make changes to the product image, title, and description that falsely and deceptively changed FDW's 4ZB4 Listing from the original 13-gallon trash can to an ‘iTouchless EcoWise Compost Bin Container Dual Deodorizer Activated Carbon Filters, 1.32 Gallon Kitchen Trash Can, Stainless Steel Lid, Odor-Stopping Power White/Cream Buck.’ ").

Plaintiff alleges that during this time period starting in February 2019, Defendant attempted to make additional and similar false and deceptive changes to other product listings belonging to Plaintiff. See id. ¶¶ 54-64. According to Plaintiff, Defendant "falsely represented to Amazon that [Plaintiff's] 4ZB4 Listing was a duplicate listing that should be merged into [Defendant's] Listing." Id. ¶ 54. Amazon merged the two listings such that the 4ZB4 Listing "no longer appeared in customer searches on" Amazon. Id. ¶ 55.

Defendant also allegedly "attempted to falsely and deceptively" merge two of Plaintiff's listings—the "FQWE Listing" and the "JYK7 Listing," both of which are unrelated to the 4ZB4 Listing. Id. ¶¶ 59-62. Plaintiff, however, does not allege that Defendant's efforts were successful. Id .. Finally, Plaintiff alleges that Defendant made additional requests to Amazon in 2019, including (1) "[f]alse and deceptive changes to the image(s) in [Plaintiff's] listing; (2) "[f]alse and deceptive changes to the description in [Plaintiff's] listing; (3) "[f]alsely submitted an unfavorable review for [Plaintiff's] listing; (4) [f]alsely and deceptively removing [Plaintiff] from Amazon's vendor control." Id. ¶ 63.

B. Procedural History

1. The Georgia Action

On August 29, 2018, Plaintiff sued Defendant in the Northern District of Georgia. ECF No. 31-1 Ex. A (the "Georgia complaint"). Plaintiff claimed that Defendant requested unauthorized changes to Plaintiff's listings, including providing improper ASIN variances, but the Complaint did not allege that any of the changes were deceptive or misleading. Id. ¶¶ 8-22. Plaintiff sued pursuant to product listings with ASINs B071KZ91K1, B0727VDHZQ, B072F1WBXW, and B07BTHQMPQ.³ Id. ¶ 11. Plaintiff sued under the Lanham Act, the Georgia Uniform Deceptive Trade Practices Act, and the Georgia Fair Business Practices Act. Id. ¶¶ 23-36. Plaintiff also alleged Georgia claims for tortious interference with contractual relations and tortious interference with business relations. Id. ¶¶ 37-49. For relief, Plaintiff sought damages, costs, fees, and injunctive relief. Id. at 11-15 ¶¶ A-Z.

On November 29, 2018, the court in the Georgia action granted Defendant's motion to dismiss all claims with prejudice. ECF No. 31-1 Ex. B ("Georgia Order"). As to the Lanham Act claim, the court held that plaintiff "allege[d] no facts regarding the defendant's advertisements" and "ma[de] no allegation that the changes made by Amazon at the defendant's request deceived or had the capacity to deceive consumers." Id. at 4. As to the state statutory claims, the court in the Georgia action concluded that the requested changes "d[id] not even hint at deception." Id. at 5. Specifically, the court determined that the complaint never alleged that the changes resulted in some falsity or misrepresentation to the consuming public, that defendant "misrepresented itself to Amazon as the plaintiff," or that the changes defendant requested were false or deceptive. Id. at 5-6. As to the remaining tortious interference claims, the court disposed of them by finding plaintiff did not allege "improper conduct or wrongful actions by the defendant." Id. at 7.

2. The N.D. Cal. Action

On March 6, 2019, Plaintiff filed a complaint in the instant action. ECF No. 1. After Defendant filed a motion to dismiss on April 16, 2019, ECF No. 20, Plaintiff filed the First Amended Complaint ("FAC") on May 7, 2019, ECF No. 28. Compared to the complaint in the Georgia action, the FAC in the instant action contains additional detail about Amazon's rules and policies, FAC ¶¶ 20-30, and provides more specific allegations about Defendant's purported actions and how the changes to Plaintiff's listings "falsely advertised" or misrepresented Plaintiff's products as products "manufactured and branded by Defendant" id. ¶ 49; see id. ¶¶ 50-64.

For example, Plaintiff alleges that Defendant requested that Amazon make changes to Plaintiff's products and listings to falsely advertise Plaintiff's 4ZB4 product "as a product manufactured and branded by Defendant." Id. ¶ 49...