Shetel Indus. LLC v. Adin Dental Implant Sys., Inc.

• Decision Date: 30 September 2020
• Docket Number: 17-CV-2505(SJF)(ARL)
• Parties: SHETEL INDUSTRIES LLC, Plaintiff, v. ADIN DENTAL IMPLANT SYSTEMS, INC., Adin Dental Solutions USA, Inc., and Jeremy Danzer, Defendants. Adin Dental Implant Systems, Inc., Adin Dental Solutions USA, Inc., and Jeremy Danzer, CounterClaimants and Third-Party Plaintiffs, v. Shetel Industries LLC, Osseogroup LLC, and Dr. Markus Weitz as Director and President of Shetel Industries LLC, and Individually, Counterclaim and Third-Party Defendants.
• Court: U.S. District Court — Eastern District of New York

493 F.Supp.3d 64

SHETEL INDUSTRIES LLC, Plaintiff,

v.ADIN DENTAL IMPLANT SYSTEMS, INC., Adin Dental Solutions USA, Inc., and Jeremy Danzer, Defendants.

Adin Dental Implant Systems, Inc., Adin Dental Solutions USA, Inc., and Jeremy Danzer, CounterClaimants and Third-Party Plaintiffs,

v.Shetel Industries LLC, Osseogroup LLC, and Dr. Markus Weitz as Director and President of Shetel Industries LLC, and Individually, Counterclaim and Third-Party Defendants.

17-CV-2505(SJF)(ARL)

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

Signed September 30, 2020

Bijan Amini, Noam Besdin, Amini LLC, Jason Brett Levin, Storch Amini Munves P.C., New York, NY, for Plaintiff, Counterclaim and Third-Party Defendant Shetel Industries LLC.

Jason Brett Levin, Storch Amini Munves P.C., Noam Besdin, Amini LLC, New York, NY, for Counterclaim and Third-Party Defendant Dr. Markus Weitz.

Steven J. Harfenist, Andrew C. Lang, Harfenist Kraut & Perlstein, LLP, Lake Success, NY, Gregory K. Mueller, Law Offices of Gregory K. Mueller, P.C., Matthew James Ross, Mueller Law Group, Tenafly, NJ, for Defendants, Counterclaimants and Third-Party Plaintiffs.

ORDER

FEUERSTEIN, District Judge:

I. Introduction

On or about April 26, 2017, plaintiff Shetel Industries LLC ("plaintiff" or "Shetel") commenced this action against defendants Adin Dental Implant Systems, Inc. ("Adin"), Adin Dental Solutions USA, Inc. ("Adin USA Newco"), and Jeremy Danzer ("Danzer") (collectively, "defendants" or the "Adin Parties"), alleging, inter alia , unfair competition and false advertising in violation of Section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a)(1)(B) ; and unfair competition, defamation per se , tortious interference with contract and tortious interference with prospective business relations under New York state law. On July 12, 2017, Shetel filed an amended complaint, inter alia , asserting additional claims against the Adin Parties for misappropriation of trade secrets under the Defend Trade Secrets Act ("DTSA"), 18 U.S.C. § 1836, et seq. , and New York state law; and for trespass to chattels and unjust enrichment under New York state law.

On August 9, 2017, the Adin Parties filed an answer to the amended complaint, asserting thirty-six (36) affirmative defenses and twenty-seven (27) counterclaims against Shetel for breach of contract; promissory estoppel; fraud; negligent misrepresentation; conversion; trademark infringement in violation of the Lanham Act, 15 U.S.C, § 1114 ; false designation of origin in violation of the Lanham Act, 15 U.S.C. § 1125(a) ; cybersquatting in violation of the Anticybersquatting Consumer Protection Act ("ACPA"), 15 U.S.C. § 1125(d) ; injury to business reputation and trademark dilution in violation of Section 360-l of the New York General Business Law ; deceptive business acts and practices in violation of Section 349 of the New York General Business Law ; false advertising in violation of Section 350 of the New York General Business Law ; use of name with intent to deceive in violation of Section 133 of the New York General Business Law ; unjust enrichment; tortious interference with a prospective economic advantage; trespass to chattels; common law unfair competition; an accounting; quantum meruit; and commissions due and owing pursuant to Section 191(c) of the New York State Labor Law. The Adin Parties also filed a third-party complaint against third-party defendants Osseogroup LLC ("Osseogroup") and Dr. Markus Weitz ("Weitz") (collectively, "third-party defendants") asserting claims: (i) for fraud, negligent misrepresentation, promissory estoppel and unjust enrichment against Weitz; (ii) for false advertising in violation of Section 350 of the New York General Business Law, use of name with intent to deceive in violation of Section 133 of the New York General Business Law, and an accounting against Osseogroup; and (iii) for trademark infringement and false designation of origin in violation of the Lanham Act, cybersquatting in violation of the ACPA, violations of Sections 349 and 360-l of the New York General Business Law, unjust enrichment, tortious interference with a prospective economic advantage, common law unfair competition, conversion, and trespass to chattels against both third-party defendants.

Pending before the Court is the motion of Shetel and the third-party defendants (collectively, the "Shetel Parties") seeking to dismiss twenty-three (23) of the twenty-seven (27) counterclaims against Shetel, and the third-party claims in their entirety, with prejudice pursuant to Rules 9(b) and 12(b)(6) of the Federal Rules of Civil Procedure, which, by order entered February 12, 2019, this Court converted to a motion for summary judgment pursuant to Rule 56 of the Federal Rules of Civil Procedure.¹ For the reasons set forth below, the motion is granted to the extent set forth below.

II. Background

A. Factual Allegations.²

1. The Parties

Shetel was formed on May 12, 2011 and is a distributor of dental implants

and related products in the United States. (56.1, ¶ 1; Supp. 56.1, ¶ 1)³ . Weitz is one of the two principals of Shetel, along with non-party Jeremy Frenkel ("Frenkel"). (56.1, ¶ 11; Supp. 56.1, ¶ 107). Frenkel "ran the day-to-day operations" of Shetel. (Declaration of Noam Besdin in Further Support of Motion for Summary Judgment ["Besdin Decl."], Ex. H at 24:2-4; Ex. M at 46:5-23, 53:1-4).

Weitz and Frenkel are also principals of Osseogroup, which was incorporated in March 2016. (56.1, ¶ 12; Declaration of Matthew J. Ross, Esq., in Support of Defendants’ Brief in Response to the Motion for Summary Judgment ["Ross Decl."], Ex. 80; Ex. 35 at 15:21-16:20). Frenkel testified that he has been a fifty percent (50%) owner of both Shetel and Osseogroup since their inception; and that he did not purchase his interest in those companies, but obtained his interest when the companies were formed. (Ross Decl., Ex. 35 at 14:13-16:20).

The Adin Parties submit two (2) documents designating the same address, 657 Central Avenue, Cedarhurst, New York 11516, for both Shetel, upon its formation, and Weitz's dental practice, South Island Periodontics and Implants ("SiPi"). (Ross Decl., Ex. 109 and 110). The commercial property at 657 Central Avenue, Cedarhurst, New York, is owned by 657 Central Owner LLC, and Weitz is identified by the New York Department of State as that company's agent for service. (Supp. 56.1, ¶ 122).

In addition, the Adin Parties contend that Weitz intermingled the funds of his dental practice, SiPi, with the funds of Shetel. (See Ross Decl., Ex. 76 [email Weitz sent to Frenkel on September 18, 2016 indicating, in relevant part, "BTW - I ordered Ti-Oss - I wired $$ from SiPi. If we sell it - then SiPi will get paid back. If not then SiPi will take the product. That way, we could keep Jack and Dani for now - to liquidate implants...."]; Ex. 77 and 78 [Shetel's Balance Sheets as of February 10, 2017 and January 18, 2019, respectively, indicating, inter alia , a current liability "Due to/from SiPi."]).

However, Weitz asserts, in pertinent part:

"In the early months prior to Shetel's formation and in the immediate months following, SIPI essentially loaned that amount to Shetel, in that it paid for a host of necessary startup costs such as, but not limited to, travel expenses to, from and in Israel, legal fees and initial inventory purchases. This amount was booked as a liability of Shetel's, and appears as such on Shetel's 2012 Form 1065 ... [which] indicates a $33,539 ‘liability’ that was ‘due to’ SIPI. Furthermore, that amount was never paid to SIPI or anyone else. The attached tax records reflect that liability staying on Shetel's books through 2018; each of those Form 1065s has a nearly identical amount, each listed as a liability due to SIPI on Statement 4 of those documents. To this day, that remains a liability of Shetel, and has never been paid to SIPI."⁴

(Declaration of Markus Weitz in Further Support of Motion For Summary Judgment ["Weitz Decl."], ¶¶ 11-12).

Shetel and Osseogroup use the same address at 123 Grove Avenue, Suite 109, Cedarhurst, New York 11516, (Amended Complaint ["Am. Compl."], ¶ 12; Third-Party Complaint ["TPC"], ¶ 8; Ross Decl., Ex. 104, 105); and those premises are owned by an entity named 123 Grove LLC. (Ross Decl., Ex. 73). Weitz is a member of 123 Grove LLC, and that company identifies Weitz's post office box, P.O. Box 423, Cedarhurst, New York 11516, as its address. (Supp. 56.1, ¶ 124). In addition, Weitz used 123 Grove LLC as the organization that registered the website URL, www.adinimplants.com. (Id. , ¶ 125). Shetel and Osseogroup also shared a telephone number and a facsimile number. (Ross Decl. at Ex. 104, 105 and 107).

However, Weitz asserts that he and Frenkel founded Osseogroup in March 2016 for the purpose of forming a marketing company, but "those plans never took off the ground, and [he] cannot think of anything that entity has done beyond formally existing since that time." (Weitz Decl., ¶ 13). According to Weitz, "[a]ll of the finances, inventory, staff and assets connected to Shetel in any way have always been maintained on Shetel's books." (Id. ).

Weitz also asserts that "[i]n 2017, as Shetel's relationship with Adin had terminated, Shetel began ordering certain dental components from manufacturers for sale under the Osseogroup brand name[,]" and he and Frenkel "began to rebrand Shetel's activities away from an association with Adin[,]" by, inter alia , "using the Osseogroup and Osseo-related brands, which is how Shetel's staff began referring to it in phone and email communications." (Weitz Decl., ¶ 14). Weitz maintains that "[t]his shift reflected the change in Shetel's relationship with Adin, as well as Shetel's venture into its own branded products[;]" and that "[t]he use of the Osseogroup brand does not change the fact that all operations continued to run in and out of Shetel, not Osseogroup." (Id. , ¶ 15).

The Adin Parties submit, inter alia , (i) an email Jenna Riservato ("Riservato"),...