Zelouf Int'l Corp. v. Na El, Inc., 1:13-cv-01788 (ALC) (JCF)

• Decision Date: 28 March 2014
• Docket Number: 1:13-cv-01788 (ALC) (JCF)
• Parties: ZELOUF INTERNATIONAL CORP., Plaintiff, v. NA EL, INC. and LITO CHILDREN'S WEAR, INC., Defendants.
• Court: U.S. District Court — Southern District of New York

ZELOUF INTERNATIONAL CORP., Plaintiff, v. NA EL, INC. and LITO CHILDREN'S WEAR, INC., Defendants.

1:13-cv-01788 (ALC) (JCF)

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK

Dated: March 28, 2014

OPINION AND ORDER

ANDREW L. CARTER, JR., United States District Judge:

Plaintiff Zelouf International Corp. ("Zelouf") brought this case against Na El, Inc. ("Na El") and Lito Children's Wear, Inc. ("Lito") (collectively "Defendants") for copyright infringement. Na El seeks to dismiss the complaint against it for lack of personal jurisdiction pursuant to Federal Rule of Civil Procedure 12(b)(2). Lito has not challenged Zelouf's assertion that it is subject to personal jurisdiction in New York. For the reasons set forth below, Na El's Motion to Dismiss (ECF No. 16) is DENIED.

I. Background

Zelouf designs, manufactures, and sells textile fabrics. (Compl. ¶ 7, ECF No. 1). When Zelouf creates an original design, it registers the design for copyright protection with the United States Copyright Office. (See generally Compl, ECF No. 1). Zelouf alleges that "Na El supplied fabric bearing two original [copyrighted] Zelouf designs to defendant Lito, who in turn manufactured and then sold substantial quantities of children's apparel bearing the infringing fabric throughout the country, including in New York." (Opp'n Mot. Dismiss 2, ECF No. 25).

Na El is a California corporation that operates in Los Angeles County. (Compl. ¶ 4, ECF No. 1; Mot. Dismiss 5, ECF No. 16). It conducts all business, including "development andcreation of designs, client solicitations, meetings, exhibition of samples, and logistics," from Los Angeles. (Mot. Dismiss 6, ECF No. 16). It has no tangible connection to New York—no license or registration to conduct business in New York; no properties or real estate holdings in New York; no employees, sales agents, or representatives in New York; and no bank accounts in New York. (Saghian Decl. ¶ 2, ECF No. 16-1). Nor does Na El have any mobile or web presence accessible from New York. (Saghian Decl. ¶ 3, ECF No. 16-1).

Na El has, however, done business with customers in New York. From September 2010 to September 2013, Na El sold merchandise worth $23,007.16 to New York customers in twenty-five different transactions. (Goldberg Decl. Ex. F, ECF No. 24-2). Over the same period, Na El sold merchandise worth $271,452.18 to customers outside California (including New York). (Goldberg Decl. Exs. E, F, ECF No. 24-2). Na El's total sales during that period amounted to $1,746,165.05, (Goldberg Decl. Ex. G, ECF No. 24-2), with sales to Lito totaling $208,969.48. (Goldberg Decl. Ex. B, ECF No. 24-2).

Na El sold the allegedly infringing fabric to Lito in California. Na El asserts that all aspects of this sale to Lito, from negotiations for the sale to payment on the contract, took place in California. (Saghian Decl. ¶ 4, ECF No. 16-1). Zelouf does not claim otherwise. (See Opp'n Mot. Dismiss 5, ECF No. 25 ("[T]here is no dispute that the sale of the fabric bearing the [infringing] [d]esigns took place outside of New York (namely in California).")).

II. Discussion

Na El asks the Court to dismiss Zelouf's case against it for lack of personal jurisdiction, pursuant to Federal Rule of Civil Procedure 12(b)(2), or in the alternative, to transfer it. (Mot. Dismiss, ECF No. 16). The parties agree that Na El is not subject to general jurisdiction in New York. (See Mot. Dismiss, ECF No. 16; Opp'n Mot. Dismiss, ECF No. 25). Na El, however,argues that neither the statutory inquiry, nor the constitutional inquiry subject it to specific personal jurisdiction in the state of New York. (Mot. Dismiss, ECF No. 16).

On a motion to dismiss for lack of personal jurisdiction under Federal Rule of Civil Procedure 12(b)(2), the plaintiff bears the burden of establishing the court's jurisdiction over the defendant. In re Magnetic Audiotape Antitrust Litig., 334 F.3d 204, 206 (2d Cir. 2003). After engaging in jurisdictional discovery, the plaintiff must make a factually supported prima facie showing of jurisdiction. Id. (internal quotation marks and citations omitted). "Personal jurisdiction is necessarily a fact-sensitive inquiry dependent on the particulars of the case before the court." Gucci Am., Inc. v. Frontline Processing Corp., 721 F. Supp. 2d 228, 240 (S.D.N.Y. 2010) (citations omitted). Nevertheless, while the court may consider materials outside the pleadings, it must not make factual determinations where defendant's affidavits and evidence contradict that of the plaintiff. Dorchester Fin. Sec, Inc. v. Banco BRJ. S.A.. 722 F.3d 81, 86 (2d Cir. 2013). Instead, the court must construe "the pleadings and affidavits in the light most favorable to [the] plaintiff[], resolving all doubts in [its] favor." S. New England Tel. Co. v. Global NAPs Inc., 624 F.3d 123, 138 (2d Cir. 2010) (internal quotation marks and citations omitted).

To determine whether it has personal jurisdiction over a non-domiciliary in a diversity action, a district court must engage in a two-step inquiry.¹ First, the court must decide if the defendant is subject to personal jurisdiction under the law of the forum state; here, New York's long-arm statute. N.Y. C.P.L.R. § 302 (McKinney 2013); Bank Brussels Lambert v. Fiddler Gonzalez & Rodriguez, 305 F.3d 120, 124 (2d Cir. 2002). If it is, then the court must considerwhether the exercise of that jurisdiction comports with the Due Process Clause of the Fourteenth Amendment. Bank Brussels, 305 F.3d at 124.

A. Long Arm Statute

Although New York's long-arm statute provides for jurisdiction on multiple grounds, Zelouf specifically asserts that Na El is subject to long-arm jurisdiction under C.P.L.R. § 302(a)(3)(ii). This provision confers personal jurisdiction over an out-of-state defendant who commits a tortious act outside New York that causes injury to "person or property" in New York, if the defendant "expects or should reasonably expect the act to have consequences in [New York] and derives substantial revenue from interstate or international commerce." N.Y. C.P.L.R. § 302(a)(3)(ii).

As an initial matter, Na El concedes, for the purpose of this motion, that it is an out-of-state defendant who has committed a tortious act outside New York, causing an injury in New York. (Reply Mot. Dismiss 3, ECF No. 28). But the parties contest the remaining elements. (Reply Mot. Dismiss 3, ECF No. 28). Whether a defendant expected, or should have expected, his actions to have consequences in New York is determined objectively. Gucci Am., 721 F. Supp. 2d at 242 (citations omitted). New York courts require a plaintiff to demonstrate '"tangible manifestations of a defendant's intent to target New York, or . . . concrete facts known to the [defendant] that should have alerted it to the possibility of being brought before a court in ... New York."' DH Svcs., LLC v. Positive Impact, Inc., 12 Civ. 6153 (RA), 2014 WL 496875, at *13 (S.D.N.Y. Feb. 5, 2014) (citations omitted). To be clear, a defendant need only "foresee that its tortious act will have some consequences in New York, . . . not necessarily the exact consequences that occurred." Gucci Am., Inc., 721 F. Supp. 2d at 242. "Applying this provision in the context of trademark and copyright infringement claims, courts have examined whether the defendantknew (or should have known) that a New York company or individual held the intellectual property rights, . . . and whether defendant made a 'discernible effort to directly or indirectly serve the New York market.'" DH Svcs., LLC, 2014 WL 496875, at *13 (citations omitted).

Na El's allegedly tortious conduct created a foreseeable risk of having to defend its actions in a New York court. In its Complaint, Zelouf alleged specific ways that Na El had access to its designs. (¶¶ 13, 18, 23, 28, ECF No. 1). For instance, samples of the infringing designs were available in Zelouf's showroom and design library. (Compl. ¶¶13, 18, 23, 28, ECF No. 1). Moreover, Zelouf even distributed samples of these designs to its customers. (Opp'n Mot. Dismiss 2-3, ECF No. 25). As a result, it is conceivable that Na El knew that Zelouf, a New York company, had intellectual property rights in these designs. Na El also made a discernable effort to serve the New York market. In addition to a few direct sales to New York customers, it did a large volume of business with Lito. (See Goldberg Decl. Ex. B, ECF No. 24-2). Lito accounted for 12% of its business, or $208,969.48, over a three year period. (Goldberg Decl. Ex. B, ECF No. 24-2). As Zelouf has shown, Lito is a national retailer that serves its market through the internet. (See Goldberg Decl. Exs. C, D, ECF No. 24-2). Its website proclaims that it sells its products in all fifty states. (Goldberg Decl. Ex. C, ECF No. 24-2). It even sells its products through international retailers like Amazon and Walmart. (Goldberg Decl. Ex. D, ECF No. 24-2). It can certainly be expected that a "small" company like Na El would be familiar with the business of one of its largest customers. (See Mot. Dismiss 6, ECF No. 16). Consequently, Na El not only took steps to target the New York market, but also could have foreseen that it may need to defend itself in a New York court.

Lastly, a business must be of an interstate or international nature to be subject to jurisdiction under the statute. Bensusan Rest. Corp. v. King, 136 F.3d 25, 29 (2d Cir. 1997)(discussing the statute's legislative history). Although a business must "derivef] substantial revenue" from its interstate or international activities, "no specific dollar threshold" fulfills this requirement. Hamilton v. Accu-Tek, 32 F. Supp. 2d 47, 68 (E.D.N.Y. 1998). "Revenue from interstate and international commerce may be analyzed as a percentage of total revenues or as an absolute number, but neither approach is binding and each case should be decided on its own facts." Gucci Am., Inc., 721 F. Supp. 2d at 242; Hamilton, 32 F. Supp. 2d at 68-69 (collecting cases).

A...