Tymar Distribution LLC v. Mitchell Grp. USA, LLC

• Decision Date: 08 September 2021
• Docket Number: CASE NO. 21-21976-CIV-ALTONAGA/Torres
• Parties: TYMAR DISTRIBUTION LLC, Plaintiff, v. MITCHELL GROUP USA, LLC ; et al., Defendants.
• Court: U.S. District Court — Southern District of Florida

558 F.Supp.3d 1275

TYMAR DISTRIBUTION LLC, Plaintiff,

v.MITCHELL GROUP USA, LLC ; et al., Defendants.

CASE NO. 21-21976-CIV-ALTONAGA/Torres

United States District Court, S.D. Florida.

Signed September 8, 2021

Daniel Gielchinsky, Meera Khan, Daniel Y. Gielchinsky, P.A., Bay Harbor Islands, FL, Mark Schlachet, Pro Hac Vice, Law Offices of Mark Schlachet, New York, NY, for Plaintiffs.

David Michael Rogero, Coral Gables, FL, James J. McGuire, Thomas & LoCicero PL, Tampa, FL, for Defendant Mitchell Group USA, LLC.

James J. McGuire, Mark Richard Caramanica, Thomas & LoCicero PL, Tampa, FL, for Defendant Rivelle Products, Inc.

ORDER

CECILIA M. ALTONAGA, CHIEF UNITED STATES DISTRICT JUDGE

THIS CAUSE came before the Court on Defendants, Mitchell Group USA, LLC ("MGU") and Rivelle Products, Inc.’s Joint Motion to Dismiss the Complaint [ECF No. 24], filed on July 15, 2021. Plaintiff, Tymar Distribution LLC, filed a Response [ECF No. 26]; to which Defendants filed a Reply [ECF No. 34]. The Court has carefully considered the Complaint [ECF No. 1], the parties’ written submissions, the record, and applicable law. For the following reasons, the Motion is granted.

I. BACKGROUND

This action arises from Defendants’ brand-protection practices, which are allegedly aimed at insulating Defendants’ system of minimum-advertised pricing from intrabrand competition, to the harm of Plaintiff and Florida consumers. (See generally Compl.). Plaintiff is a Rhode Island limited liability company with its principal place of business in Rhode Island. (See id. ¶ 13). MGU is a Florida limited liability company with its principal place of business in Florida. (See id. ¶ 14). At the time of the events at issue, Rivelle Products, Inc. was a California corporation; on January 19, 2021, it merged into a Florida corporation bearing the same name. (See id. ¶ 15).

Plaintiff is an Amazon seller (see id. ¶ 42) that in 2018 "listed approximately 300 brand names on amazon.com[ ] and sold over 150,000 units of product to customers on Amazon with a 99% lifetime positive feedback rating" (id. ¶ 43 (alterations added)). "MGU is the exclusive United States distributor of certain French-made personal care products" from the brand Fair & White ("F&W"), through its Amazon merchant store, Beauty Dreams. (Id. ¶ 24). Rivelle is the exclusive Fulfilled-by-Amazon distributor of many F&W products for MGU's Amazon store and generally serves as "a mail order source of health and beauty products[.]" (Id. ¶ 26 (alteration added)). Rivelle also "added ‘electronic shopping’ [services] as a second endeavor" (id. (alteration added)), including the brand-protection services that form the basis of Plaintiff's Complaint (see id. ¶ 27; see generally id. ).

Plaintiff operates in a so-called "grey market," which Plaintiff defines as "trade of a commodity through distribution channels that are not authorized by the original manufacturer or trade mark [sic] proprietor." (Id. ¶ 7 n.5 (quotation marks and citation omitted)). On Amazon, companies who deal in the grey market, such as Plaintiff, "sourc[e] products at wholesale, from an authorized distributor of a manufacturer, [ ]from the manufacturer itself, or from a downstream purchaser, and sell[ ] it [sic] at an enhanced retail price point online, but often at a cheaper price than other sellers are selling it [sic], thus benefiting consumers, who get authentic product[s] at a discount." (Id. ¶ 5 (alterations added)). These activities, while not violative of Amazon policy (see id. ¶¶ 38–39), "threaten the profits of manufacturers who attempt to maintain a system of [m]inimum[-a]dvertised [p]ricing" (id. ¶ 7 (alterations added)). To combat grey-market dealers, some companies, including Rivelle, offer brand-protection services. (See id. ¶¶ 26–27; 49). These services include policing the grey market by identifying unauthorized sellers on Amazon so the intellectual property ("IP") owner may enforce its rights via Amazon's infringement notification protocols. (See id. ¶¶ 8, 35, 36).

After purchasing F&W inventory from MGU on May 3, 2018, Plaintiff began selling F&W products soon thereafter. (See id. ¶¶ 53–54). Despite selling at prices below MGU's system of minimum-advertised pricing, Plaintiff's F&W profit margin was 22.1 percent. (See id. ¶¶ 43–44). Unbeknownst to Plaintiff, around May 2018, MGU formed a business relationship with Rivelle, "established [Rivelle] as its Amazon brand protector[;] and gave [it] exclusive or substantially exclusive access ... to the most popular F&W products." (Id. ¶ 60 (alterations added)). On May 29, 2018, MGU — or, according to Plaintiff, Rivelle in disguise — sent Plaintiff a warning under the Digital Millennium Communications Act, complaining of copyright infringement and offering to withdraw the notice if Plaintiff refrained from selling F&W products on Amazon. (See id. ¶ 55).

Plaintiff did not heed MGU's warnings. (See id. ). When Plaintiff would not comply, MGU upped the ante and lodged IP complaints with Amazon in late June 2018, "alleging copyright infringement and trademark infringement." (Id. ¶ 58). Plaintiff continued selling F & W products, so MGU/Rivelle upped the ante once again in July 2018, filing additional IP complaints which alleged "a far more serious charge of counterfeiting" — even though the listed F & W products were purchased from MGU. (Id. ¶ 62). Per Amazon policy, the F&W listings were removed pending investigation. (See id. ).

To substantiate the products’ authenticity, Plaintiff produced its invoices from MGU to Amazon, and Amazon reversed its decisions and restored the listings. (See id. ¶¶ 62, 65). This cycle persisted for several months, culminating in 41 total IP complaints. (See id. ¶ 65). After Rivelle/MGU's "relentless pursuit" of Plaintiff, Amazon finally suspended Plaintiff's account on October 18, 2018, following an October 2, 2018 counterfeiting complaint. (Id. ¶ 70).

"Amazon stated that it took Defendants’ accusations very seriously" (id. ¶ 86), and "it would act favorably if MGU would retract its accusations" (id. ¶ 87). "Without a seller retraction[, Plaintiff] was helpless to prove its case." (Id. ¶ 73 (alteration added)). Thus, "[w]ith its entire business shut down, [Plaintiff] had no alternative, in mitigation of its damages, but to hire a consultant ... and thereafter agree to cease its sales of F&W products on Amazon in exchange for MGU's retraction of [the] IP [c]omplaints and concomitant account reinstatement." (Id. ¶ 74 (alterations added)). Plaintiff and MGU agreed that MGU/Rivelle would retract the IP complaints if Plaintiff ceased sales of F&W products on Amazon. (See id. ¶ 75; see also generally id. , Ex. 10 [ECF No. 1-10]). Sure enough, Plaintiff's account suspension was lifted after 18 days. (See id. ¶¶ 87–88).

Plaintiff highlights price increases of three F&W products resulting from MGU/Rivelle's brand-protection practices: (1) F&W Original Serum One, which "sold for between $6[.00] and $14.50 since 2014[,]" but later increased in price to sell for "between $14 and $39.99"; (2) F&W So White Skin Perfector Lightening Cream, which "generally sold for between $4[.00] and $12[.00] since 2012" and later increased to a range "between $14.32 and $14.99"; and (3) F&W Original Lightening

& Brightening Glycerin

Lotion, which "sold for between $7[.00] and $10[.00] since 2016" but increased to $18.99. (Id. ¶ 79 (alterations added)). Plaintiff alleges these price increases have stabilized at artificially high levels. (See id. ¶ 78).

Plaintiff filed its Complaint asserting two claims against Defendants: Count I alleges tortious interference with existing and prospective business relationships, and Count II alleges a violation of the Florida Deceptive and Unfair Trade Practices Act ("FDUTPA"). (See generally id. ). Defendants move to dismiss Plaintiff's claims under Federal Rule of Civil Procedure 12(b)(1) for lack of subject matter jurisdiction and, alternatively, under Rule 12(b)(6) for failure to state claims for relief. (See generally Mot.).

II. STANDARDS

Rule 12(b)(1) — Subject Matter Jurisdiction . "Federal courts are courts of limited jurisdiction." Kokkonen v. Guardian Life Ins. Co. of Am. , 511 U.S. 375, 377, 114 S.Ct. 1673, 128 L.Ed.2d 391 (1994). Thus, subject matter jurisdiction must be established before a case can proceed on the merits. See Steel Co. v. Citizens for a Better Env't , 523 U.S. 83, 93–95, 118 S.Ct. 1003, 140 L.Ed.2d 210 (1998). It is presumed that a federal court lacks jurisdiction in a case until the plaintiff demonstrates the court has jurisdiction over the subject matter. See Kokkonen , 511 U.S. at 377, 114 S.Ct. 1673 (citing Turner v. Bank of N. Am. , 4 U.S. (4 Dall.) 8, 11, 1 L.Ed. 718 (1799) ; McNutt v. Gen. Motors Acceptance Corp. of Ind. , 298 U.S. 178, 182–83, 56 S.Ct. 780, 80 L.Ed. 1135 (1936) ). "[B]ecause a federal court is powerless to act beyond its statutory grant of subject matter jurisdiction, a court must zealously insure that jurisdiction exists over a case[.]" Smith v. GTE Corp. , 236 F.3d 1292, 1299 (11th Cir. 2001) (alterations added; citations omitted).

Under Rule 12(b)(1), a defendant may lodge a facial or factual attack on the court's subject matter jurisdiction. See Menchaca v. Chrysler Credit Corp. , 613 F.2d 507, 511 (5th Cir. 1980). A facial attack asserts that a plaintiff has failed to allege a basis for subject matter jurisdiction in the complaint. See id. In a facial attack, the plaintiff's allegations are taken as true, and the plaintiff is afforded safeguards like those provided in challenging a Rule 12(b)(6) motion raising the failure to state a claim for relief. See Lawrence v. Dunbar , 919 F.2d 1525, 1529 (11th Cir. 1990) (citation omitted).

By contrast, a factual attack "challenges the existence of subject matter jurisdiction in fact, irrespective of the pleadings, and matters outside the pleadings, such as testimony and affidavits, are considered." Menchaca , 613 F.2d at 511 (citation omitted). In a factual...