Rainbow Apparel Distribution Center Corp. v. Gaze U.S.A., Inc.

295 F.R.D. 18, 2013 WL 5880587
CourtDistrict Court, E.D. New York
DecidedOctober 30, 2013
DocketNo. 13-CV-3640
StatusPublished
Cited by7 cases

This text of 295 F.R.D. 18 (Rainbow Apparel Distribution Center Corp. v. Gaze U.S.A., Inc.) is published on Counsel Stack Legal Research, covering District Court, E.D. New York primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Rainbow Apparel Distribution Center Corp. v. Gaze U.S.A., Inc., 295 F.R.D. 18, 2013 WL 5880587 (E.D.N.Y. 2013).

Opinion

MEMORANDUM & ORDER

JACK B. WEINSTEIN, Senior District Judge.

I. Introduction......................................21

II. Facts and Procedural History...............................................22

III. Motion to Dismiss for Failure to State a Claim................................23

A. Legal Standard for a 12(b)(6) Motion ....................................23

B. Application of Law to Facts ............................................23

1. Claims for Declaratory Relief.......................................23

2. Claim for Breach of Contract........................................24

IV. Motion to Dismiss for Lack of Personal Jurisdiction ...........................24

A. Standard of Review for a 12(b)(2) Motion.................................24
B. Personal Jurisdiction: Law.............................................25

1. Transaction of Business within New York.............................25

2. Imputing Jurisdiction through an Agent..............................25

3. Claims Arising from New York Transactions..........................25

4. Due Process Considerations.........................................26

C. Application of Law to Facts ............................................26

1. Gaze is Hong’s Agent..............................................26

2. Plaintiffs’ Claims Arise from the New York Transactions................27

3. Due Process is Satisfied............................................27

V. Conclusion....................... ......................................28
I. Introduction

Plaintiffs sue apparel importer Gaze U.S.A., Inc., (“Gaze”) and its sole shareholder and president, Ji S. Hong a/k/a Jay Hong (“Hong”) (collectively “defendants”), seeking a declaratory judgment in a trademark dispute and damages for breach of contract. See Compl., ECF No. 1, June 27, 2013 (“Compl.”). Gaze counterclaims for breach of contract and unjust enrichment. See Def. Gaze U.S.A., Inc.’s Answer and Countercl. (“Answer”) ¶¶ 17-18, ECF No. 29.

Gaze moves to dismiss the complaint for failure to state a claim upon which relief can be granted. Hong moves to dismiss for lack of personal jurisdiction. As in many personal jurisdiction long-arm cases, the special [22]*22factual circumstances of this case make precedents of limited value.

While applicable statutes and cases do not explicitly recognize the factor, much depends on practical aspects of litigation such as would a finding of personal jurisdiction or of no personal jurisdiction: substantially add to the cost and inconvenience of the individual and of others to try the case in the venue chosen by the plaintiff; do critical aspects— such as choice of law — make the case against the individual more conveniently tried in the venue chosen by the plaintiff; and would failure to find personal jurisdiction over one of the defendants require a separate trial elsewhere, leading to repetitive discovery, extended trial time, and possible inconsistent verdicts. These factors require the court to consider the practical judgment of experienced litigators and judges as well as the criteria supplied by appellate courts and statutes. See Part IV.C.3, infra.

Although a close question, personal jurisdiction over Hong in New York, in this case, is proper.

The motion to dismiss for failure to state a claim and the motion to dismiss for lack of personal jurisdiction are denied.

II. Facts and Procedural History

Rainbow Apparel Distribution Center Corp. (“Rainbow”) and The New 5-7-9 and Beyond, Inc., (“The New 5-7-9”) (collectively “plaintiffs”) are affiliated businesses organized under New Jersey and New York law, respectively, with their principle places of business in New York. Compl. ¶¶ 7, 9. They are apparel distributors who advertise and supply garments to retail establishments. Id. at ¶¶ 8,10.

Defendant Gaze is a California corporation, with an address in Los Angeles, California, that imports garments for sale to apparel distributors, including plaintiffs. Id., at ¶¶ 11-13. Gaze admits that it is subject to personal jurisdiction in New York. See Answer ¶ 25 (“Defendant admits jurisdiction in the Eastern District of New York is appropriate for adjudication of the claims brought ... against [Gaze.]”).

Defendant Hong resides in California. See Deel. of Ji S. Hong in Supp. of Mot. to Dismiss (“Hong Deck”) ¶ 3, ECF No. 18. He is the president of Gaze and is its sole shareholder. Mot. to Dismiss Hr’g Tr. (“Hr’g Tr.”) 8:11, 9:23, Oct. 10, 2013, ECF No. 34. As chief operation officer, Hong has travelled to New York approximately three times per year since 2011 to meet with the corporation’s clients, including plaintiffs. Hr’g Tr. 13:6-14:25. He executes contracts on behalf of Gaze. See Hr’g Tr. 22:15-28:25; Compl. Ex. B.

Plaintiffs allege that Hong was deeply involved in “significant commercial activities” with Gaze. Pis.’ Mem. in Opp’n to Mot. to Dismiss for Lack of Personal Jurisdiction 7, ECF No. 25. Specifically, plaintiffs purchased apparel from Gaze under purchase orders authorized by Hong. Compl. ¶ 15. Gaze shipped the apparel to plaintiffs in New York for resale under the parties’ Minimum Maintained Markup Agreement (the “Markup Agreement”). Compl. ¶¶ 15-17. Some of the apparel shipped by Gaze to plaintiffs bore the mark “URVANA,” a mark Hong owned in his own name. Hr’g Tr. 25:21-22. URVANA is a portmanteau of “urban” and “nirvana.” Hr’g Tr. 11:9-11.

The present matter arises, in part, out of plaintiffs’ resale of goods bearing the URVANA mark after Gaze and Rainbow terminated their contractual relationship in August or September 2012. Hr’g Tr. 27:25-28:1. Hong asserts ownership in the URVANA mark pursuant to U.S. Trademark Registration Number 4,110,244, registered on March 6, 2012 with a first use date of August 1, 2011. Compl. Ex. A. According to Hong, Gaze imports apparel bearing the mark under an oral license with Hong; plaintiffs were only allowed to sell URVANA marked apparel that they received from Gaze. Hr’g Tr. 12:9-21. Hong contends that after Gaze stopped shipping URVANA marked apparel to plaintiffs, they purchased URVANA marked apparel from another source and resold those garments, infringing upon his trademark. Hr’g Tr. 27:13-20. When Hong became aware of the alleged infringement, he sent a cease and desist letter to plaintiffs; received on June [23]*2320, 2013. Hr’g Tr. 12:9-14; Compl. ¶ 35, Ex. A.

Plaintiffs brought the present action on June 27, 2013, seeking a Declaration of non-infringement, invalidity, unenforceability, and ownership of the URVANA mark and to cancel the URVANA mark as invalid. Compl. ¶¶ 14, 31, 33, 55, 59. Alternatively, plaintiffs ask for a declaration that they had an actual or implied license to use the mark. Id. at ¶¶ 62-64.

Plaintiffs also assert a breach of contract claim for $545,000 pursuant to the Markup Agreement. The Agreement between Gaze and Rainbow guaranteed plaintiffs at least a 50 percent markup on all goods shipped by Gaze.

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Bluebook (online)
295 F.R.D. 18, 2013 WL 5880587, Counsel Stack Legal Research, https://law.counselstack.com/opinion/rainbow-apparel-distribution-center-corp-v-gaze-usa-inc-nyed-2013.