LY Berditchev, Corp. v. Truss Cosmetics Corp.
| Decision Date | 19 January 2023 |
| Docket Number | Civ. 22-04242 (KM) (CLW) |
| Parties | LY BERDITCHEV, CORP., Plaintiff, v. TRUSS COSMETICS CORP. and LOMA LICENCIAMENTO DE MARCAS LTDA, Defendants. |
| Court | U.S. District Court — District of New Jersey |
This dispute arises out of the defendants' submission of purportedly false reports of trademark infringement to online retailer Amazon. The plaintiff has sued the defendants for submitting false reports to Amazon once already; that litigation was settled in April 2021. In June 2022, however the defendants allegedly submitted additional false reports of trademark infringement to Amazon, which resulted in the removal of some of the plaintiff's product listings from the Amazon marketplace. The plaintiff brought this action in response, and the defendants have moved to dismiss the complaint. (DE 10.)[1]For the reasons set forth below, the motion to dismiss is DENIED.
Defendant Loma Licenciamento De Marcas ltda (“Truss Brazil”) is a business entity organized and existing under the laws of Brazil. (Compl. ¶15.) Truss Brazil manufactures and distributes hair care products, including products sold under its registered trademarks. (Id. ¶2.) Defendant TRUSS Cosmetics Corp. (“Truss USA”) is a Florida-based subsidiary of Truss Brazil. (Id. ¶14.) Truss USA distributes trademarked Truss products in the United States. (Id. ¶3.)
Plaintiff LY Berditchev, Corp. (“LYB”) is a New York corporation with a principal place of business in New Jersey. (Id. ¶13.) LYB's business consists of purchasing consumer goods and reselling them at a profit. (Id. ¶29.) LYB resells products through various channels, including its storefront on the Amazon marketplace. (Id. ¶4.) LYB has sold products through its Amazon storefront to hundreds of thousands of consumers. (Id. ¶31.)
The complaint alleges that in early 2021, Truss Brazil and Truss USA (collectively, “Truss”) submitted false reports to Amazon alleging that LYB's sale of Truss products on Amazon violated Truss Brazil's trademark rights. (Id. ¶6.) According to LYB, Amazon has a policy of acting on virtually any notice of intellectual property infringement, whether legitimate or not. (Id. ¶61.) An intellectual property owner who submits a complaint to Amazon must declare under penalty of perjury that the information contained in the complaint is correct, but the company does not independently verify the accuracy of the complaints it receives. (Id. ¶¶62, 68.) LYB claims that it only sells lawfully acquired, authentic Truss products through its Amazon storefront and thus its sales do not violate Truss's intellectual property rights. (Id. ¶¶58-59.)
In response to the reports submitted by Truss, LYB earlier sued Truss in this district for defamation, tortious interference with business relations, and trade libel. (Id. ¶¶7-8.) See LY Berditchev Corp. v. Truss Cosmetics Corp. et al, 2:21-cv-03420. The parties entered into a settlement agreement to resolve that dispute in April 2021. (Id. ¶9.)
As relevant here, the settlement agreement provides that Truss would “(1) forever cease submitting, directly or indirectly, Reports to third-party marketplaces, including Amazon, concerning LYB, LYB's listings for Truss Products, and/or Truss products sold by LYB; and (2) prevent its agents, attorneys, licensees and distributors from submitting, directly or indirectly, such Reports.” (Id. ¶36.) A liquidated damages clause in the agreement requires Truss to pay LYB $50,000 per violation of that obligation. (Id. ¶37.)
On June 8, 2022, more than a year after the parties settled the prior litigation, LYB received a notice from Amazon stating that Amazon had removed its listings for a Truss product because of a report that “they may violate the rights owner's intellectual property.” (Id. ¶¶70-71.) Counsel for LYB contacted counsel for Truss the following day to discuss the notices in relation to the 2021 settlement agreement. (Id. ¶82.) Counsel for Truss took the position that the filing of the complaints referenced in the notices did not violate the terms of the settlement agreement because the complaints did not target LYB specifically. (Id. ¶83.) LYB received another message from Amazon two days later notifying it that its listings for a different Truss product had been removed based on a report of intellectual property infringement. (Id. ¶76.)
LYB alleges that the “false reports are part of an ongoing and continuous course of conduct by [Truss] to interfere [with LYB's] ability to resell Truss products.” (Id. ¶81.) Moreover, according to LYB these efforts have succeeded. LYB's listings for certain Truss products have been suspended, resulting in an immediate loss of revenue. (Id. ¶86.) The complaints have also damaged LYB's metrics and caused it to lose the Amazon “buy box” feature, which allows consumers to add a product to their cart directly from the product page, on many of its product listings. (Id. ¶97.)
LYB commenced this action in June 2022, seeking monetary and injunctive relief, as well as a declaratory judgment. The complaint raises claims of breach of contract, defamation and tortious interference with business relations. In August 2022, Truss moved to dismiss the entire complaint pursuant to Fed.R.Civ.P. 12(b)(6).
Rule 12(b)(6) provides for the dismissal of a complaint if it fails to state a claim upon which relief can be granted. The defendant, as the moving party, bears the burden of showing that no claim has been stated. Animal Science Products, Inc. v. China Minmetals Corp., 654 F.3d 462, 469 n.9 (3d Cir. 2011). For the purposes of resolving a Rule 12(b)(6) motion to dismiss, the court must accept the facts alleged in the complaint as true and draw all reasonable inferences in favor of the plaintiff. New Jersey Carpenters & the Trustees Thereof v. Tishman Const. Corp. of New Jersey, 760 F.3d 297, 302 (3d Cir. 2014).
The Federal Rules of Civil Procedure do not require that a complaint contain detailed factual allegations. See Fed.R.Civ.P. 8(a). Nevertheless, “a plaintiff's obligation to provide the ‘grounds' of his ‘entitlement to relief' requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007); see Phillips v. Cnty. of Allegheny, 515 F.3d 224, 232 (3d Cir. 2008) . Thus, the complaint's factual allegations must be sufficient to raise a plaintiff's right to relief above a speculative level, so that a claim is “plausible on its face.” Twombly, 550 U.S. at 570. That facial-plausibility standard is met “when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Twombly, 550 U.S. at 556).
Count 1 of the complaint alleges that Truss violated its obligation under the settlement agreement to cease filing reports to Amazon “concerning [LYB], [LYB's] listings for Truss products, and/or Truss products sold by [LYB].” (Compl. ¶44.) Truss argues that this count should be dismissed because the complaint shows that the reports submitted by Truss to Amazon in June 2022 were not specific to LYB or LYB's listings for Truss products. (Mot. 18-21.)
Much of Truss's argument is premised on more than ten pages of background information it included in its moving brief regarding the Amazon platform and Amazon's policies for third-party sellers. (Mot. 1-16.) This information is extrinsic to the complaint and cannot be considered at the motion to dismiss stage. Cf. In re Rockefeller Ctr. Properties, Inc. Sec. Litig., 184 F.3d 280, 287 (3d Cir. 1999) (). Nonetheless, because Truss's argument is more comprehensible in light of this background information, I will provide a brief summary here.
According to Truss, every product sold on the Amazon platform has a dedicated “Product Detail Page” (“PDP”), and each PDP is associated with a unique Amazon Standard Identification Number, or “ASIN.” (Mot. 1-2.) Amazon does not allow multiple ASINs for the same product to exist on its platform, nor does it allow a specific product to be sold on the Amazon platform anywhere aside from the product's dedicated PDP. (Id.) As a result, every third-party seller who wishes to offer a specific product must list its offer on the same PDP and associate it with the same ASIN. Pursuant to Amazon's “Duplicate ASIN creation policy,” creating a new ASIN when the product already exists in Amazon's catalog is prohibited and can result in a seller's privileges being temporarily suspended or permanently removed. (Id. 3.)
Truss claims that it recently learned that an unknown party had created “duplicate listings” for nineteen Truss products sold on Amazon. (Id. 5.) In other words Truss products were apparently being offered on Amazon under ASINs that were duplicative of preexisting ASINs for those products, in violation of Amazon's “Duplicate ASIN creation policy.” According to Truss, when a rights owner reports allegations of trademark infringement to Amazon, the owner has the option of reporting a specific third-party seller offer or just reporting the Offending PDP/ASIN. (Id. 9.) Truss claims that the reports it submitted in June 2022 cited the entire PDP/ASIN for nineteen Truss products, rather than targeting LYB's offers for any of those products. Consequently, Truss argues, LYB has failed to plausibly allege that Truss breached its obligations under the settlement agreement....
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