Monahan Prods. LLC v. Sam's E., Inc.
| Decision Date | 20 May 2020 |
| Docket Number | Civil Action No. 18-11561-FDS |
| Citation | 463 F.Supp.3d 128 |
| Parties | MONAHAN PRODUCTS LLC d/b/a UPPAbaby, Plaintiff, v. SAM'S EAST, INC. and Sam's West, Inc., Defendants. |
| Court | U.S. District Court — District of Massachusetts |
Craig R. Smith, Nathan T. Harris, Lando & Anastasi, LLP, Cambridge, MA, Peter J. Evangelatos, Eric P. Carnevale, Lando & Anastasi, LLP, Boston, MA, for Plaintiff.
Anthony F. Lo Cicero, Pro Hac Vice, Marc J. Jason, Pro Hac Vice, Amster Rothstein & Ebenstein LLP, New York, NY, Adam L. Littman, Arent Fox LLP, Boston, MA, for Defendants.
MEMORANDUM AND ORDER ON MOTIONS FOR SUMMARY JUDGMENT
This is an action for trademark infringement and false advertising. Plaintiff Monahan Products LLC ("UPPAbaby") makes and sells baby strollers under the UPPAbaby brand. Defendants Sam's East, Inc. and Sam's West, Inc. operate Sam's Club, a chain of membership-only retail warehouse stores.1
Sam's Club is not an authorized UPPAbaby retailer. Nevertheless, it acquired and sold UPPAbaby strollers. UPPAbaby alleges that those sales violated state and federal trademark and unfair competition laws. That is not because the strollers sold at Sam's Club were counterfeits or stolen property, or knock-offs marketed under a confusingly similar name. In fact, they were authentic UPPAbaby strollers, sold by the company to an authorized wholesaler. Instead, UPPAbaby characterizes the strollers as "gray market" goods—that is, products that were only intended for distribution and sale in foreign countries.
The strollers were not, however, tangibly inferior or different versions of the products sold domestically; indeed, they were physically identical. UPPAbaby nonetheless contends that there were three post-manufacture differences in the strollers that were likely to cause consumer confusion and injure its brand. First, it contends that it maintains strict quality control in its domestic distribution chain, while Sam's Club does not. Second, it contends that only its authorized retailers provide appropriate customer support, and that Sam's Club is not such a retailer. Third, the warranty protection provided by UPPAbaby does not apply if the product is sold by an unauthorized retailer such as Sam's Club.
The parties have cross-moved for summary judgment. UPPAbaby seeks summary judgment on its claims of trademark infringement, and Sam's Club seeks summary judgment as to the claims for money damages and the claim of a violation of Mass. Gen. Laws ch. 93A. For the following reasons, the motion of UPPAbaby will be denied and the motion of Sam's Club will be granted in part and denied in part.
The following facts are as set forth in the record and are undisputed except as noted.
UPPAbaby was founded in 2006 by Bob and Lauren Monahan. (See Monahan Dep. at 7:6-19). It makes and sells baby strollers. (Id. at 7:21-8:4, 10:1-5). It owns and uses several registered federal trademarks for its strollers, including the name UPPAbaby and the names of several of its stroller models. (Def. Resp. to Pl. SMF ¶¶ 1-7).
UPPAbaby is not a retailer—in other words, it does not sell strollers directly to consumers. (Monahan Dep. at 7:21-8:4). Instead, it sells its strollers at wholesale to be sold by retailers in both the United States and foreign countries. (Id. ). The strollers are manufactured overseas, shipped to UPPAbaby's warehouse in Rockland, Massachusetts, and then distributed from there. (Apotheloz Dep. at 26:12-25).
UPPAbaby distributes strollers that are to be sold to customers in the United States only to authorized retailers. (See Monahan Dep. at 14:8-19, 43:19-44:3). Those authorized retailers include Amazon as well as various luxury department stores and smaller boutiques. (Id. at 14:8-19; Apotheloz Dep. at 9:12-19). According to UPPAbaby's employees, it employs teams of sales representatives that train authorized retailers on how to assemble, sell, and service the strollers. (Apotheloz Dep. at 10:12-11:6, 70:7-71:4). UPPAbaby also sets minimum prices at which authorized retailers can sell its strollers—a practice that it refers to as its "manufacturer advertised pricing" or "MAP" policy. (Id. at 31:6-19).
UPPAbaby also sells some of its strollers for international distribution. It sells those strollers to authorized distributors, rather than directly to retailers. (See Monahan Dep. at 7:21-8:4; 22:4-7). Those authorized distributors in turn sell the strollers to retailers abroad. (See Apotheloz Dep. at 44:2-8). UPPAbaby's authorized distributors are required by their contracts with UPPAbaby to sell the strollers they receive only within their selected market areas, and not in the United States. (See, e.g. , id. at 102:23-103:5).
UPPAbaby offers a two-year manufacturer's warranty on all models of its strollers. (Id. at 65:14-66:8). It extends the warranty to three years for customers who register their product with the company within three months of purchase. (Id. ).
According to the terms of the warranty, it has several limitations. It covers only manufacturing defects. (Id. at 66:10-18; Am. Compl., Ex. 2 ("UPPAbaby Warranty")). It is not valid outside of the country where the stroller was originally purchased. (UPPAbaby Warranty). And, importantly for present purposes, it is not valid for strollers bought from an unauthorized retailer. (Id. ).2
UPPAbaby characterizes its strollers as premium products. Its authorized retailers include "smaller boutique stores" and "higher-end department stores." (Apotheloz Dep. at 9:14-19). According to Lauren Monahan, one of the company's founders, the UPPAbaby "brand and [its] products have a reputation and an assumption by a consumer of certain quality and services"—a reputation that she said could be harmed if the strollers were sold by unauthorized retailers who lack "the same level of knowledge and service" as authorized retailers or who sell the strollers at lower prices. (Monahan Dep. at 43:12-44:17).
Sam's East, Inc., and Sam's West, Inc. are subsidiaries of Walmart Inc. (See Jason Decl., Ex. 10 at 12). They operate Sam's Club, a chain of membership-only retail warehouse stores throughout the United States. (See id. ). Sam's Club is not and never has been an authorized retailer of UPPAbaby strollers. (Monahan Dep. at 81:23-82:13).
Nevertheless, Sam's Club acquired several models of UPPAbaby strollers at some point before 2017. It bought them from Akstrom Imports Inc., a company based in Montreal, Canada. (Claypool Dep. at 31:11-24, 36:16-24; Def. Resp. to Pl. SMF ¶ 31). Sam's Club routinely buys products from Akstrom that it cannot obtain directly from a manufacturer. (See Claypool Dep. at 31:11-24; Def. Resp. to Pl. SMF ¶ 32). Akstrom had acquired the strollers from Global Branding, an UPPAbaby distributor for Central or South America. (Apotheloz Dep. at 42:5-43:10).3 Akstrom told Sam's Club that the strollers would not be covered by the manufacturer's warranty if they were resold in the United States. (Olivero-Sanchez Dep. at 136:9-139:24).
The parties dispute exactly how the strollers made their way from UPPAbaby's warehouse in Massachusetts to Sam's Club's customers. UPPAbaby alleges that the strollers were exported and then re-imported into the United States by either Akstrom or Sam's Club at a shipping center in New York. (See Pl. SMF ¶ 34). Sam's Club says that the strollers were shipped by UPPAbaby to warehouses in the United States and then transferred to Sam's Club warehouses, and that therefore they never left the country. (Def. Resp. to Pl. SMF ¶ 34). Based on the evidence in the record, it appears that at least some of the strollers were sent directly from UPPAbaby's warehouses to addresses in the United States. (See Jason Decl., Ex. 3 at 3, Jason Decl., Ex. 4 at 9-10). In any event, the strollers were eventually sent by Akstrom to a shipping receiver in New York, then to a Sam's Club warehouse in Searcy, Arkansas, and then to Sam's Club "fulfillment centers," where they were shipped to customers. (See Claypool Dep. at 58:10-59:18).
The parties also dispute whether the strollers were unpacked or re-packaged by Sam's Club along the way. UPPAbaby alleges that when the strollers arrived at the Sam's Club warehouse in Arkansas, employees may have removed them from their shipping pallets or opened their packaging and then put them on new pallets or repackaged them before shipping them to a fulfillment center. (Pl. SMF ¶¶ 37-38). Sam's Club disputes those allegations. (Def. Resp. to Pl. SMF ¶¶ 37-38). At least some, but not all, merchandise that arrives at Sam's Club's warehouse in Arkansas is taken off shipping pallets—but not repackaged—for inspection. (See Claypool Dep. at 63:13-18). Whether that happened to any of the UPPAbaby strollers at issue here is not clear on the present record.
Between 2017 and 2019, Sam's Club advertised and sold the UPPAbaby strollers to customers in the United States. (Def. Resp. to Pl. SMF ¶ 40; see, e.g. , Am. Compl., Ex. 3). Sam's Club also offered the strollers for sale on its website at samsclub.com. (Am. Compl., Ex. 3; Def. Resp. to Pl. SMF ¶ 42). It did so at prices that were below those permitted by UPPAbaby's MAP policy. (See Jason Decl., Ex. 1).4
In total, Sam's Club sold at least 1,336 UPPAbaby strollers to customers in the United States. (Olivero-Sanchez Dep. at 89:11-17; Jason Decl., Ex. 12). It made approximately $30,000 in profits on those sales. (See Jason Decl., Ex. 12).
Unlike authorized retailers, Sam's Club does not provide replacement parts or repair services for UPPAbaby strollers. (See Olivero-Sanchez Dep. at 170:18:-171:1; Def. Resp. to Pl. SMF ¶ 48). Similarly, Sam's Club employees are not specially trained on how to sell or service the strollers. (Def. Resp. to Pl. SMF ¶ 48).
The parties dispute whether the UPPAbaby strollers...
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