Gizmocup LLC v. Medline Indus.
| Docket Number | 2:21-cv-00213 |
| Decision Date | 26 May 2023 |
| Parties | GIZMOCUP L.L.C., doing business as Northeast Pharma and Atlantic Pharma Co, LLC, Plaintiffs, v. MEDLINE INDUSTRIES INC., Defendant. |
| Court | U.S. District Court — District of Vermont |
(Doc. 40)
Plaintiffs Gizmocup L.L.C, d/b/a Northeast Pharma (“Northeast Pharma”) and Atlantic Pharma Co LLC (“Atlantic Pharma”) (collectively, “Plaintiffs”) bring this action against Defendant Medline Industries Inc. (“Medline”), alleging tortious interference with contractual relations and libel. Plaintiffs' claims stem from complaints that Medline filed with Amazon.com (“Amazon”) regarding Plaintiffs' sale of Medline's products on Amazon's website.
Pending before the court is Medline's motion to dismiss Plaintiffs' Amended Complaint (the “AC”) pursuant to Fed.R.Civ.P. 12(b)(2) and 12(b)(6). (Doc. 40.) Medline argues that this court lacks personal jurisdiction over it and seeks dismissal on that basis. In the alternative, it argues that Plaintiffs fail to state a claim upon which relief can be granted. Plaintiffs opposed the motion on July 15, 2022. On July 26, 2022, Medline replied. The court heard oral arguments on the motion to dismiss on October 20, 2022, at which point the court took the pending motion under advisement.
Plaintiffs are represented by David M. Pocius, Esq., Dustin A. Lane Esq., and James J. Becker, Esq. Medline is represented by Matthew B. Byrne, Esq., and Zachary M. Dayno, Esq.
Northeast Pharma filed its original Complaint on September 8, 2021. (Doc. 1.) Medline filed a motion to dismiss the original Complaint pursuant to Fed.R.Civ.P. 12(b)(2) and 12(b)(6) on October 29, 2021. (Doc. 13.) The motion was opposed on December 10, 2021 (Doc. 17), and Medline replied on January 5, 2022. (Doc. 23.) The court held a hearing on April 26, 2022, at which time it granted the motion to dismiss for lack of personal jurisdiction and granted Northeast Pharma leave to file the AC. On May 27, 2022, Plaintiffs filed the AC, which, among other things, added Atlantic Pharma as a co-Plaintiff.
Northeast Pharma is headquartered and incorporated in Vermont and specializes in the sale and distribution of consumer goods as a third-party seller on Amazon's website. In this capacity, Northeast Pharma is “a downstream purchaser that customarily listed and sold goods bearing the trademarks and other intellectual properties of manufacturers and other holders of intellectual property rights.” (Doc. 34 at 2-3, ¶ 7.) Plaintiffs contend that such sales are permitted by Amazon, provided the goods sold and delivered are authentic and intellectual property rights are not misused.
“Northeast Pharma routinely maintains over 500 product offerings or listings per day and averages between 1500 and 2000 orders per day” through the Atlantic Pharma storefront. Id. at 11, ¶ 38. To meet this demand, “it generally employs around [ten to fifteen] Vermont residents at a given time.” Id.
Atlantic Pharma, incorporated in Delaware, is a wholly-owned subsidiary of Northeast Pharma and “a flowthrough (pass-through) business entity that passes all its income, rights, assignments, and liabilities ... to Northeast Pharma.” Id. at 1, ¶ 2. Atlantic Pharma was “created by Northeast Pharma ... for storefront presentational purposes” on Amazon. Id. at 2, ¶ 3. Atlantic Pharma does not have employees, a bank account, or business operations, and is a “mere alter ego” of Northeast Pharma. (Doc. 34 at 2, ¶ 3.) Although Atlantic Pharma is “utilized” as the “namesake” for its sales on Plaintiffs' Amazon website, Plaintiffs assert that “all the contractual obligations and liabilities ... are assigned and assumed by Northeast Pharma[,]” rendering Northeast Pharma the “true party in interest to Amazon's Business Solutions Agreement[.]” Id. at 3, ¶ 8. Northeast Pharma is “the primary account manager for . . . Atlantic Pharma's storefront.” Id. at ¶ 9.
Medline is “a healthcare business that manufacturers and distributes medical supplies under several brand names including the ‘Medline' brand” which is headquartered in Illinois and “purportedly incorporated in Delaware.” Id. at 2, ¶ 4.
Plaintiffs allege that from April 2020 through February 2021, Northeast Pharma purchased over 10,000 Medline branded perineal bottles from non-party Health Products for You (“HPFY”), which is located in Fairfield, Connecticut. HPFY advertised itself as “an Authorized Medline Retailer[,]''and Plaintiffs relied on this representation to “avoid any possibility of purchasing inauthentic or counterfeit products.” Id. at 3-4, ¶¶ 10-11 (citation omitted).
Northeast Pharma ordered Medline perineal bottles through HPFY account representative Andy Mercier. Its initial purchase on April 9, 2020 was for 6,000 “Medline Perineal Cleansing Bottle With Screw Top.” Id. at 5, ¶ 15. “All 120 cases[,]” each case holding fifty bottles, were shipped to “Vermont, freight prepaid, directly from Medline to Northeast Pharma in Vermont.” Id. Due to the quantity of bottles ordered, Plaintiffs assert “it was evident that Northeast Pharma was purchasing” Medline products for resale. Id. at 4, ¶ 13. In fact, “Northeast Pharma specifically disclosed to Mr. Mercier that the products would be resold” and no HPFY representative “object[ed to] or warn[ed] against this practice.” Id.
Because HPFY does not maintain an inventory of Medline perineal bottles, each of Plaintiffs' orders were directly shipped from Medline's warehouses to Northeast Pharma in Vermont. Id. at ¶ 12.[1] Plaintiffs allege that Medline filled Plaintiffs' orders of perineal bottles on four occasions. “At no point... did either HPFY or Medline ever directly inform or notify Northeast Pharma that the Medline perineal bottles purchased may be counterfeit.” Id. at 5, ¶ 18.[2]
In December 2020, Northeast Pharma began to offer Medline perineal bottles for resale in packs of three on Amazon's website. Plaintiffs allege that:
Northeast Pharma believed it was purchasing authentic Medline perineal bottles from Medline, via its authorized retailer HPFY, in bulk. In turn, Northeast Pharma then assembled those perineal bottles in 3-pack quantity packages, which consisted of three individual Medline brand perineal bottles that remained in their original labeling and condition as received directly from Medline. Northeast Pharma then affixed a required unique sticker, assigned by Amazon.com only to Northeast Pharma for this specific product offering, to the product for identification and tracking purposes. Amazon.com requires this type of labeling for the vast majority of health and personal care products for safety compliance issues.
Northeast Pharma allegedly did not ‘“rebrandf]' any Medline product or attempt[] to sell a counterfeit Medline product.” Id. at ¶ 21. Rather, Plaintiffs assert that their resale practice “is a routine and customary practice performed by third party sellers, as well as Amazon itself, on the Amazon marketplace.” Id.
On February 23, 2021, Northeast Pharma received an Amazon-generated email with the subject line: “Notice: Policy Waming[.]” (Doc. 34-14 at 2.) The email stated:
(Doc. 34-13 at 2) (the “February Amazon Email”).
Thereafter, Amazon removed Northeast Pharma's listing from its website. Northeast Pharma immediately pursued both avenues for appeal set forth in the February Amazon Email.
On February 25, 2021, James Becker, Director of Business Development for Northeast Pharma, sent an email to Mr Murphy, stating that Northeast Pharma was willing to provide Medline with invoices and the names of the account representatives at HPFY who originally sold the products to it. When no response was received, Mr. Becker sent a follow-up email on March 3, 2021. At the same time, Northeast Pharma pursued Amazon's appeal process and provided Amazon with invoices demonstrating that the products were originally purchased from an “authorized Medline reseller.” (Doc. 34 at 8, ¶ 30.) It provided a Bill of Lading for each shipment directly from Medline to Northeast...
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