Zagg Inc. v. TX Trading, Inc.

District Court, S.D. Florida·Decided April 25, 2024·No. 1:23-cv-20304·Unknown

Opinion

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF FLORIDA

CASE NO. 23-cv-20304-ALTMAN/Reid

ZAGG INC.,

Plaintiff,

v.

TX TRADING, INC., d/b/a AMAZON RESELLER MAC N CHEESE, et al.,

Defendants. _____________________________________/ ORDER ON OBJECTIONS TO MAGISTRATE JUDGE’S NON-DISPOSITIVE ORDER

One of our Defendants, DVG Trade LLC (“DVG”), has filed Objections [ECF No. 145] to Magistrate Judge Reid’s November 14, 2023 Order, which (1) denied DVG’s Motion to Compel and (2) granted the Plaintiff ZAGG Inc.’s Ore Tenus Motion to Quash subpoenas to third parties (the “November 14 Order”) [ECF No. 132]. Because DVG hasn’t shown that Judge Reid committed any clear errors of law or fact, we OVERRULE its Objections. THE LAW “Pursuant to the Federal Magistrate’s Act, a district court reviews a magistrate judge’s ruling on non-dispositive matters under the clearly-erroneous or contrary-to-law standard.” Jordan v. Comm’r, Miss. Dep’t of Corr., 947 F.3d 1322, 1327 (11th Cir. 2020) (citing 28 U.S.C. § 636(b)(1)(A)); see also FED. R. CIV. P. 72(a) (“When a pretrial matter not dispositive of a party’s claim or defense is referred to a magistrate judge to hear and decide . . . [t]he district judge in the case must consider timely objections and modify or set aside any part of the order that is clearly erroneous or is contrary to law.”). And “a routine pretrial discovery motion . . . is not included in [28 U.S.C. § 636(b)(1)(A)’s] list of dispositive motions.” Jordan, 947 F.3d at 1327; see also Maynard v. Bd. of Regents of Div. of Univs. of Fla. Dep’t of Educ. ex rel. Univ. of S. Fla., 342 F.3d 1281, 1286 (11th Cir. 2003) (“We review the district court’s rulings on discovery issues for abuse of discretion.”). This is an “exacting standard.” Cox Enters., Inc. v. News-J. Corp., 794 F.3d 1259, 1272 (11th Cir. 2015). “To be clearly erroneous, a decision must strike us as more than just maybe or probably wrong; it must . . . strike us as wrong with the force of a five-week-old, unrefrigerated dead fish.” Id. at 1272 n.92 (quoting Parts & Elec. Motors, Inc. v. Sterling Elec., Inc., 866 F.2d 228, 233 (7th Cir. 1988)). “In the

absence of a legal error, a district court may reverse only if there was an ‘abuse of discretion’ by the magistrate judge.” S.E.C. v. Merkin, 283 F.R.D. 699, 700 (S.D. Fla. 2012) (Graham, J.) (citing Cooter & Gell v. Hartmarx Corp., 496 U.S. 384, 401 (1990)). “A magistrate judge’s order is ‘contrary to law when it fails to apply or misapplies relevant statutes, case law, or rules of procedure.’” Bradford Emergency Grp., LLC v. Blue Cross & Blue Shield of Fla., Inc., 2022 WL 4545177, at *1 (S.D. Fla. Sept. 29, 2022) (Singhal, J.) (quoting Pigott v. Sanibel Dev., LLC, 2008 WL 2937804, at *5 (S.D. Ala. July 23, 2008)). BACKGROUND On March 31, 2023, ZAGG Inc. (“ZAGG”) filed its Second Amended Complaint against the Defendants, asserting claims of “trademark counterfeiting and infringement, false advertising, and unfair competition under the Lanham Act, 15 U.S.C. § 1051, et seq.” Second Amended Complaint (the “SAC”) [ECF No. 26] ¶ 1. ZAGG is a manufacturer and seller of “screen protectors, power management solutions, mobile keyboards, cases, and personal audio products.” Id. ¶ 11. ZAGG seeks

injunctive and monetary relief from the Defendants (Menachem Mendel Ichilevici, TX Trading Inc., and DVG), who sell ZAGG products “to customers within the State of Florida and this District through various online commerce sites, including, but not limited to, Amazon.com.” Id. ¶¶ 12–14. According to ZAGG, the Defendants “represent that the ZAGG Products they offer for sale on the Internet are ‘new,’ yet the products actually sold by Defendants and received by consumers are in ‘used,’ rather than ‘new,’ condition” under Amazon’s definitions1 of those terms. Id. ¶¶ 43, 47. Specifically, ZAGG alleges that the Defendants are buying used ZAGG products “at liquidation,” meaning that the products “have been purchased and sold once previously, are often used and/or returned products, and may be in damaged condition[.]” Id. ¶ 44. Since these liquidated ZAGG products aren’t “new,” and “[b]ecause Defendants are not authorized to sell ZAGG Products[,] . . . . [t]he ZAGG Products offered for sale and sold by Defendants are not covered—and cannot be

covered—by the ZAGG [Manufacturer’s] Warranty.” Id. ¶¶ 47–48. The Defendants are thus “falsely advertis[ing] the ZAGG Products they offer for sale to consumers as ‘new,’ when they are not,” because “Amazon.com’s Terms and Conditions require that products advertised as ‘new’ carry the manufacturer’s warranty.” Id. ¶ 4. ZAGG also alleges that DVG “intentionally cover[s] and/or damage[s]” the serial numbers on used ZAGG products “[i]n an effort to hide Defendants’ nefarious acts[.]” Id. ¶ 52. ZAGG adds that the “Defendants’ resale of ZAGG Products with serial numbers and warning labels intentionally covered and mutilated product packaging results in a poor brand experience and harms ZAGG’s reputation as customers likely believe that it is ZAGG that caused this harm to the product packaging.” Id. ¶ 67. DVG tells a very different story. In its view, ZAGG’s “true motivation” in bringing this “sham litigation” is to “eliminate smaller sellers of Zagg Products” and to “chas[e] off independent merchants, like DVG, [so that] Zagg can maintain inflated retail prices and avoid refunding money to

retailers.” Objections at 5–6. DVG therefore counterclaims “for: (1) a declaratory judgment of non- infringement; (2) defamation; (3) false or misleading representation, unfair competition, and product disparagement pursuant to 15 U.S.C. § 1125; (4) civil conspiracy; and (5) violations of the Florida

1 This seemingly minor point—that the critical allegation in our case is about Amazon’s definition of what constitutes a “new” product for items that are sold on Amazon’s website—lies at the heart of this Order. Deceptive & Unfair Trade Practices Act (‘FDUTPA’).” Id. at 7; see also Defendants’ Answer to Second Amended Complaint, Affirmative Defenses, and Counterclaims (the “Counterclaims”) [ECF No. 41] at 13–55. On October 27, 2023, DVG moved to compel ZAGG to “produce its agreements with its retailers . . . . including the mobile carriers (e.g., Verizon, AT&T and T-Mobile) and big box retailers (e.g., Best Buy)—at the center of each of its theories of liability.” DVG’s Motion to Compel ZAGG

Inc. to Produce Certain Agreements (the “Motion to Compel”) [ECF No. 122] at 3. DVG also served subpoenas on five of ZAGG’s mobile carriers and retailers,2 demanding “[a]ll communications with ZAGG concerning the sale of ZAGG products” and “[d]ocuments sufficient to identify each ZAGG Product that you have sold since January 1, 2021.” November 14 Order at 5.

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