Famous Horse Inc. v. 5th Ave. Photo Inc.

• Decision Date: 21 October 2010
• Docket Number: Docket No. 08-4523-cv.
• Citation: 624 F.3d 106
• Parties: FAMOUS HORSE INC., d/b/a/ V.I.M., Plaintiff-Appellant, v. 5TH AVENUE PHOTO INC., M & B Suit Warehouse Inc., ID-Dealz, Inc., Mike Bouskilla, Moshe Bouskilla, Defendants-Appellees, NJ French Kiss, Inc., Florentin Fashions, Inc., Defendants.
• Court: U.S. Court of Appeals — Second Circuit

624 F.3d 106

FAMOUS HORSE INC., d/b/a/ V.I.M., Plaintiff-Appellant,

v. 5TH AVENUE PHOTO INC., M & B Suit Warehouse Inc., ID-Dealz, Inc., Mike Bouskilla, Moshe Bouskilla, Defendants-Appellees,NJ French Kiss, Inc., Florentin Fashions, Inc., Defendants.

Docket No. 08-4523-cv.

United States Court of Appeals,Second Circuit.

Argued: Oct. 1, 2009.

Decided: Oct. 21, 2010.

Clifford Y. Chen, Watkins, Bradley & Chen LLP, New York, NY (Stephen E. Feldman, Feldman Law Group, P.C., New York, NY, on the brief), for Plaintiff-Appellant.

Jeffrey S. Dweck, The Law Firm of Jeffrey S. Dweck, P.C., New York, NY, for Defendants-Appellees.

Before: SACK, LIVINGSTON, and LYNCH, Circuit Judges.

Judge LIVINGSTON files a separate opinion concurring in part and dissenting in part.

GERARD E. LYNCH, Circuit Judge:

Appellant Famous Horse, Inc., operates a chain of clothing stores in the New York area called V.I.M. that sell name-brand jeans and sneakers for relatively low prices. Appellees offered to supply several clothing stores, including V.I.M., with Rocawear brand jeans at a discounted price. After purchasing jeans from Appellees in 2006, V.I.M. discovered that the jeans were counterfeit and stopped selling them. Appellees, however, allegedly continued selling the counterfeit jeans to other clothing stores, and in the course of pursuing such sales told other potential customers that V.I.M. was a satisfied customer.

Famous Horse filed a complaint against Appellees in September 2007, and a subsequent amended complaint in February 2008, asserting claims under § 32 and § 43(a) of the Lanham Act, as well as related state law claims. In May 2008, the district court dismissed Famous Horse's Lanham Act claims for failure to state a claim pursuant to Federal Rule of Civil Procedure 12(b)(6), and declined to exercise jurisdiction over the remaining state law claims. Famous Horse twice sought leave to amend its complaint to remedy the district court's concerns, which the district court denied. The district court also dismissed the complaint against two defendants-N.J. French Kiss, Inc. and Florentin Fashions, Inc.-for failure to serve those defendants with the February 2008 amended complaint. This appeal followed.

I. Standard of Review

We review the district court's grant of a Rule 12(b)(6) motion to dismiss de novo, accepting all factual claims in the complaint as true, and drawing all reasonable inferences in the plaintiff's favor. See Goldstein v. Pataki, 516 F.3d 50, 56 (2d Cir.2008). We review the district court's denial of leave to amend a complaint for abuse of discretion. See, e.g., Jin v. Metro. Life Ins. Co., 310 F.3d 84, 101 (2d Cir.2002).

II. Lanham Act Trademark Infringement Claims

The district court ruled that in order to plead a trademark infringement claim under § 32 of the Lanham Act, “a plaintiff must allege facts establishing, inter alia, that a defendant's use of plaintiff's registered mark is likely to cause confusion as to the source of a product,” and that to plead a false endorsement claim under § 43(a), “a plaintiff must demonstrate that there exists a likelihood of confusion between its product and the alleged infringer's product.” Famous Horse Inc. v. 5th Ave. Photo Inc., No. 07 Civ. 7818(WHP), 2008 WL 2156727, at *1 (S.D.N.Y. May 19, 2008) (internal quotation marks omitted). The court then concluded that because “Famous Horse fails to allege any facts establishing consumer confusion as to the source of its products,” its Lanham Act claims failed. Id. After Famous Horse twice sought to amend its complaint, the district court found that the proposed amended complaints “recite[d] the same arguments” and “d[id] not cure the defects identified by the Court.” The district court erred both in dismissing the amended complaint, and in denying Famous Horse leave to amend its complaint further.

It is true that a Lanham Act claim must be predicated on a likelihood of customer confusion. The consumer confusion triggering the Lanham Act, however, need not be solely as to the origin of the product. Confusion as to the origin of goods or services is indeed the basis for one type of Lanham Act claim. See 15 U.S.C. § 1125(a)(1)(A); see also, e.g., Standard & Poor's Corp., Inc. v. Commodity Exch., Inc., 683 F.2d 704, 708-09 (2d Cir.1982) (holding that Commodity Exchange's proposed “Comex 500 Stock Index” violated the Lanham Act by tending to cause consumers to confuse the Comex 500 Stock Index and the Standard & Poor 500 Index). Neither § 32 nor § 43(a), however, speaks solely to confusion about the origin of goods or services. Famous Horse asserted claims arising under both § 32 and § 43(a).

A. Section 43(a) False Endorsement Claim

Section 43(a) specifically prohibits false or misleading representation producing many different types of consumer confusion. It prohibits the use in commerce of:

any word, term, name, symbol, or device, or any combination thereof, or any false designation of origin, false or misleading description of fact, or false or misleading representation of fact, which-

(A) is likely to cause confusion, or to cause mistake, or to deceive as to the affiliation, connection, or association of such person with another person, or as to the origin, sponsorship, or approval of his or her goods, services, or commercial activities by another person.

15 U.S.C. § 1125(a)(1) (emphasis added).

Section 43(a) thus specifically defines misrepresentation causing confusion as to affiliation, association, or sponsorship as infringing activity. A consumer “need not believe that the owner of the mark actually produced the item and placed it on the market” in order to satisfy § 43(a)'s confusion requirement. Dallas Cowboys Cheerleaders, Inc. v. Pussycat Cinema, Ltd., 604 F.2d 200, 204 (2d Cir.1979). “The public's belief that the mark's owner sponsored or otherwise approved the use of the trademark satisfies the confusion requirement.” Id. at 205 (emphasis added).

We have applied this principle specifically to claims that one company had falsely portrayed another as a satisfied customer. The defendant in Courtenay Commc'ns Corp. v. Hall, 334 F.3d 210 (2d Cir.2003), had placed on its website plaintiff's trademark and a quotation, purportedly by the plaintiff company's President, praising the services provided by the defendant. Id. at 212. We held that the plaintiff had sufficiently alleged false endorsement to overcome a motion to dismiss. See id. at 214 n. 1; see also Allen v. Nat'l Video, Inc., 610 F.Supp. 612, 617, 625-31 (S.D.N.Y.1985) (finding Lanham Act violation based on portrayal in advertisement of a look-alike of plaintiff Woody Allen as “satisfied holder” of defendant's product).

Famous Horse brought a similar “satisfied customer” false endorsement claim here. Famous Horse alleged in its complaint that “Defendants stated and implied to its customers and prospective customers, and [to] V.I.M.'s customers and potential customers, that V.I.M. was a satisfied customer of its Rocawear jeans.” In its amended complaint, Famous Horse repeated that the defendants “used the V.I.M. trademark to advertise that V.I.M. was a satisfied customer of its services and Rocawear jeans.” The amended complaint also explained that the defendants “falsely stated to customers, potential customers, suppliers and potential suppliers of both Defendants and Plaintiff, that Plaintiff is a satisfied customer of Defendants, and that they are associated with the marks.” Famous Horse therefore alleged in its complaint that Appellees used a “word, term, name, symbol,” or a “false or misleading representation of fact, which is likely ... to deceive as to the ... sponsorship, or approval of [its] goods ... by another person.” 15 U.S.C. § 1125(a)(1)(A).

B. Section 32 Trademark Infringement

Section 32, in contrast, does not prohibit causing confusion specifically as to association or sponsorship of commercial activities. Rather, the language of § 32 is more general: it prohibits “us[ing] in commerce any reproduction, counterfeit, copy, or colorable imitation of a registered mark in connection with the sale, offering for sale, distribution, or advertising of any goods or services on or in connection with which such use is likely to cause confusion, or to cause mistake, or to deceive” without defining the types of confusion that might be caused. 15 U.S.C. § 1114(1)(a). Nevertheless, Famous Horse expressly alleges that Appellees used its marks in connection with the false representation that it was a satisfied customer, a use that is plainly likely to deceive and create confusion and mistake regarding the relationship between Appellees' goods and services and Famous Horse. The complaint therefore adequately alleges a sufficient likelihood of confusion resulting from Appellees' actions under § 32.

C. Use in Commerce

Both § 32 and § 43(a) prohibit the “use in commerce” of a registered mark or false description of fact, respectively. The phrase “use in commerce” is defined in 15 U.S.C. § 1127, and distinguishes between uses in commerce that relate to goods and those that relate to services. See Rescuecom Corp. v. Google Inc., 562 F.3d 123, 139 (2d Cir.2009). A mark is used in commerce on goods when “it is placed in any manner on the goods or their containers or the displays associated therewith or on the tags or labels affixed thereto, or if the nature of the goods makes such placement impracticable, then on documents associated with the goods or their sale,” and on services “when it is used or displayed in the sale or advertising of services and the services are rendered in commerce.” 15 U.S.C. § 1127. Famous Horse does not claim that Appellees attached the V.I.M. mark to the goods they were selling. Famous Horse thus did not state a claim for trademark infringement under § 32 with respect to Appellees' sale of goods.

In the amended complaint, however, Famous Horse claims that Appellees “used the V.I.M. trademark to advertise that V.I.M. was a...