LUV N'CARE, LTD. v. Walgreen Co.

• Decision Date: 19 March 2010
• Docket Number: No. 08 Civ. 4457(DC).,08 Civ. 4457(DC).
• Parties: LUV N' CARE, LTD. and Admar International, Inc., Plaintiffs, v. WALGREEN CO. and Kmart Corp., Defendants.
• Court: U.S. District Court — Southern District of New York

695 F. Supp.2d 125

LUV N' CARE, LTD. and Admar International, Inc., Plaintiffs, v. WALGREEN CO. and Kmart Corp., Defendants.

No. 08 Civ. 4457(DC).

United States District Court, S.D. New York.

March 19, 2010.

Pearl Cohen Zedek & Latzer LLP, by Morris E. Cohen, Esq., New York, NY, and Feldman Gale, P.A., by James A. Gale, Esq., Miami, FL, for Plaintiffs.

Schlam Stone & Dolan LLP, by Bennette Deacy Kramer, Esq., New York, NY, and Christopher & Weisberg, P.A., by Jason R. Buratti, Esq., Alan M. Weisberg, Esq., Jeffrey H. Kamenetsky, Esq., Garrett A. Barten, Esq., Fort Lauderdale, FL, and Wiley, Rein & Fielding LLP, by Floyd B. Chapman, Esq., Robert J. Scheffel, Esq., Washington, DC, for Defendant Walgreen Co.

OPINION

CHIN, District Judge.

Plaintiffs Luv N' Care, Ltd. ("LNC") and Admar International, Inc. ("Admar") market baby products under the mark NUBY. Defendant Walgreen Co. ("Walgreens") was a retailer of plaintiffs' products. Plaintiffs allege that Walgreens sold "knock-off" copies of two of plaintiffs'"sippy cups." Plaintiffs further allege that Walgreens perpetrated a "bait and switch" scheme on LNC customers by shelving the look-a-like products next to LNC products and below signs identifying them as LNC products. Walgreens then terminated its relationship with LNC while continuing to sell the allegedly infringing sippy cups.

Plaintiffs bring the following claims against Walgreens: (1) unfair competition and trademark infringement under § 43(a) of the Lanham Act, 15 U.S.C. § 1125; (2) federal trademark dilution; (3) unfair competition under New York common law; and (4) violation of New York General Business Law ("NYGBL") § 349. Plaintiffs move for summary judgment on their first, third, and fourth causes of action. Walgreens moves for summary judgment dismissing plaintiffs' claims on the grounds that plaintiffs have not established protectable trade dress, secondary meaning, or non-functionality. For the reasons set forth below, I hold that (1) substantial issues of material fact remain as to plaintiffs' federal claims and state unfair competition claim, and (2) plaintiffs have not pled a cognizable claim under NYGBL § 349. Accordingly, plaintiffs' motion for summary judgment is denied and Walgreens's motion for summary judgment is granted only as to plaintiffs' NYGBL claim.

BACKGROUND

A. Facts

On a motion for summary judgment, the Court construes the evidence in the light most favorable to the non-moving party. For purposes of these cross-motions for summary judgment, when considering each side's motion, I construe the facts in the light most favorable to the other party.

The following facts are drawn from the deposition transcripts, affidavits, declarations, and exhibits submitted by the parties. Certain undisputed facts are drawn from the parties' Rule 56.1 statements.

LNC is a baby product company that sells certain products under the trademark NUBY, which is owned by Admar. (Pls. Add'l 56.1 Facts ¶¶ 1-2; Def. Response to Pls. Add'l 56.1 Facts at 1; Def. Add'l 56.1 Facts ¶ 64). Walgreens was a retailer of NUBY products, including the two sippy cups at issue in this suit. (Pls. 56.1 Facts ¶ 3; Def. Response to Pls. 56.1 Facts at 2-3).

In early 2006, Walgreens invited LNC's then-president and sales representative to a meeting. (Pls. Add'l 56.1 Facts ¶ 88; Def. Response to Pls. Add'l 56.1 Facts at 66). Plaintiffs allege that, at this meeting, Walgreens gained confidential information regarding plaintiffs' products. (Jack Hakim Decl. ¶ 33, 35-36; McQuillen Decl. ¶ 26, 30).

In April 2006, in response to escalating oil prices, plaintiffs proposed a price increase to Walgreens. (Pls. Add'l 56.1 Facts ¶ 89; Def. Response to Pls. Add'l 56.1 Facts at 67). Walgreens accepted this proposed price increase, and plaintiffs then agreed to provide Walgreens with two additional shipments of LNC sippy cups at the un-escalated price. (Jack Hakim Decl. ¶ 43; McQuillen Decl. ¶ 39 & Ex. 2).¹ As a rationale for needing the two additional shipments, Walgreens told plaintiffs that (1) it is fair business practice to allow a buyer a final opportunity to buy the product at the old price and (2) Walgreens had already planned certain advertisements for the sippy cups at the previous price. (Pls. Add'l 56.1 Facts ¶ 91; Def. Response to Pls. Add'l 56.1 Facts at 68).

On June 27, 2006, Walgreens notified plaintiffs that it had found an "alternative source" for the sippy cups that would allow Walgreens to maintain its current price points, and thus it would no longer be purchasing the relevant sippy cups from LNC. (Pls. Add'l 56.1 Facts ¶ 95; Def. Response to Pls. Add'l 56.1 Facts at 71). This alternate source was Royal King Baby Product Co. ("Royal King"), a manufacturer contracted through Walgreens's import agent. (Pls. Add'l 56.1 Facts ¶ 96; Def. Response to Pls. Add'l 56.1 Facts at 71-72). These Royal King sippy cups are sold under Walgreens's WAGI brand. (Pls. Add'l 56.1 Facts ¶ 99; Def. Response to Pls. Add'l 56.1 Facts at 73). Plaintiffs allege (but Walgreens denies) that Royal King is a "known intellectual pirate" that produces look-a-likes of the LNC sippy cups. (Pls. Add'l 56.1 Facts ¶ 96; Nouri Edward Hakim Decl. ¶¶ 44, 77; Jack Hakim Decl. ¶ 46; McQuillen Decl. ¶ 46).

Plaintiffs allege that Walgreens used the additional two shipments provided by LNC to carry out a "bait and switch" scheme, whereby Walgreens commingled Royal King sippy cups with LNC sippy cups, and placed Royal King sippy cups above LNC signs. (Nouri Edward Hakim Decl. ¶¶ 57-58 & Ex. 4; Jack Hakim Decl. ¶¶ 57-61 & Ex. 1; McQuillen Decl. ¶ 58 & Ex. 7). An LNC customer testified that she was tricked into purchasing Royal King products instead of LNC products. (Nouri Edward Hakim Decl. Ex. 5 (Brandy Thomas Affidavit); Nouri Edward Hakim Supp. Decl. ¶¶ 2-4).

B. Procedural History

On May 13, 2008, plaintiffs filed suit against Walgreens and Kmart Corp. ("Kmart") claiming that defendants were "using plaintiffs' product designs and packaging to trade off of plaintiffs' reputation and goodwill and to create deception in the marketplace." (Compl. ¶ 65). Plaintiffs alleged that Kmart sold infringing copies of the following LNC products and their packaging: the sports sipper cup, the gripper cup (the "soft spout cup"), the flip-it sports sipper cup, and a comb and brush set. (Id. ¶¶ 30-43, 49-56). Plaintiffs further alleged that Walgreens sold infringing copies and packaging of the soft spout cup and the no-spill cup (the "hard spout cup"). (Id. ¶¶ 39-48; Nouri Edward Hakim Decl. ¶ 57).

On May 20, 2009, plaintiffs voluntarily dismissed all claims against Kmart with prejudice. (5/20/09 Stip.). Accordingly, only the claims against Walgreens regarding the hard and soft spout cups and their packaging remain.²

On June 8, 2009, the parties filed the instant cross-motions for summary judgment. Plaintiffs additionally filed a motion to amend their complaint or, in the alternative, to transfer the case. On February 4, 2009, I denied plaintiffs' motion to amend/transfer in all respects. Luv N' Care, Ltd. v. Walgreen Co., No. 08 Civ. 4457(DC), 2010 WL 396094, 2010 U.S. Dist. LEXIS 11011 (S.D.N.Y. Feb. 4, 2010). I now consider the parties' motions for summary judgment.

DISCUSSION

A. Summary Judgment Standard

The standards governing motions for summary judgment are well-settled. A court may grant summary judgment only where there is no genuine issue of material fact and the moving party is therefore entitled to judgment as a matter of law. See Fed R. Civ. P. 56(c); accord Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 585-87, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). Summary judgment should be denied "if the evidence is such that a reasonable jury could return a verdict" in favor of the non-moving party. See NetJets Aviation, Inc. v. LHC Commc'ns, LLC, 537 F.3d 168, 178-79 (2d Cir.2008).

In deciding a motion for summary judgment, the Court must construe the evidence in the light most favorable to the non-moving party and draw all reasonable inferences in the non-moving party's favor. In re "Agent Orange" Prod. Liab. Litig., 517 F.3d 76, 87 (2d Cir.2008). A court faced with cross-motions for summary judgment need not "grant judgment as a matter of law for one side or the other," but "`must evaluate each party's motion on its own merits, taking care in each instance to draw all reasonable inferences against the party whose motion is under consideration.'" Heublein, Inc. v. United States, 996 F.2d 1455, 1461 (2d Cir.1993) (quoting Schwabenbauer v. Bd. of Educ. of Olean, 667 F.2d 305, 313-14 (2d Cir.1981)).

B. Trademark Infringement Under the Lanham Act

To prevail on a trademark infringement claim based on an unregistered mark, a plaintiff must prove that (1) the trade dress is distinctive as to the source of the good, (2) there is a likelihood of confusion between its good and defendant's, and (3) the trade dress is not functional. Wal-Mart Stores, Inc. v. Samara Bros., Inc., 529 U.S. 205, 210-12, 120 S.Ct. 1339, 146 L.Ed.2d 182 (2000); Cartier, Inc. v. Sardell Jewelry, Inc., 294 Fed.Appx. 615, 617 (2d Cir.2008) (noting that burden is on plaintiff to show non-functionality).

The standards for proving the first element, distinctiveness, differ for plaintiffs claiming infringing packaging from those claiming infringing product design:

Where the mark is ... product packaging the plaintiff may prove distinctiveness by showing either that the "intrinsic nature" of the mark serves to identify a particular source (what is known as "inherent distinctiveness") or that "in the minds of the public, the primary significance of the mark is to identify the source of the product rather than the product itself" (what is known as "acquired distinctiveness" or "secondary meaning"). The product design plaintiff, however, must always make the second, more difficult showing.

Yurman Design, Inc. v. PAJ, Inc., 262 F.3d 101, 115 (2d Cir.2001) (quoting ...