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Trial Brief | S & L, Inc. v. Australian Gold, Inc. | Ronald Coleman - JDSupra
S & L, Inc. v. Australian Gold, Inc.Trial Brief
Self explanatory. The brief is somewhat rough, frankly, in large part because of pretrial "surprises" that are not worth laying out here. But the issues presented here are novel and interesting.
Download PDF 1 UNITED STATES DISTRICT COURT EASTERN DISTRICT OF NEW YORK Ronald D. Coleman (RC 3875) Joel G. MacMull GOETZ FITZPATRICK LLP One Penn Plaza, Suite 4401 New York, NY 10119 (212) 695-8100 Phone Attorneys for Plaintiff S & L Vitamins and Third-Party Defendant Larry Sagarin PRELIMINARY STATEMENT Plaintiff and counterclaim defendant S&L Vitamins, Inc. and counterclaim defendant Larry Sagarin, (jointly “S&L”) hereby submit this memorandum of law setting forth the facts which they intend to establish at trial and the legal authority supporting their various defenses. On August 24, 2005, Counterclaimant /third party plaintiff Australian Gold, Inc. (“AG”) filed a Second Amended Answer, etc., containing ten counterclaims (plus a demand for S & L VITAMINS, INC., Plaintiff, -vs. – AUSTRALIAN GOLD, INC., Defendant. CIVIL ACTION NO. 05-CV-1217 (JS) (MLO) TRIAL MEMORANDUM OF S&L VITAMINS, INC. AND LARRY AUSTRALIAN GOLD, INC., SAGARIN Third Party Plaintiff, -vs. – LARRY SAGARIN AND JOHN DOES 1-10, Third Party Defendants. Casse 2::05--ccvv--01217--JJS--MLO D o Dcuomcuemnte 1nt5 01 5F0il e d 0F1il/e0d5 /0210/059 /2P0a0g9e 1 oPf a2g6e 1 of 26 COURT OF YORK MacMull (MLO) -MEMORANDUM OF S&L INC. AND LARRY -AND JOHN DOES STATEMENT and counterclaim defendant Vitamins, Inc. and counterclaim defendant S&L”) hereby submit this memorandum setting the facts supporting their various defenses. Counterclaimant /third party plaintiff Australian Gold, Inc. (“AG”) a Second Amended Answer, etc., containing ten counterclaims demand for Document hosted at http://www.jdsupra.com/post/documentViewer.aspx?fid=5e8288cd-34bf-43e5-92bc-4b2c30a8abc62 “injunctive relief” styled as a separate counterclaim). In the course of two motions to dismiss, seven of those, including claims for copyright infringement, false advertising, consumer protection, various varieties of trademark infringement, trademark dilution, and conspiracy, have been dismissed by this Court. What is left are AG’sclaims for (i) tortious interference with contract; (ii) trademark infringement and unfair competition under Section 43(a) of the Lanham Act based upon S&L’s use of AG’s marks on its website to sell AG products; and (iii) a Section 133 claim under New York General Business Law against S&L that is essentially the state law cognate of claim (ii). See Australian Gold’s Claims For Relief (Dkt. No. 141) at 2. At trial, S&L will demonstrate that (i) AG has not proved the elements of tortious interference with contract, (ii) AG’s Lanham Act claims are without merit, as AG has no evidence of either a likelihood of confusion or damages; and (iii) AG’s New York General Business Law Section 133 claim cannot be sustained because AG cannot prove that S&L “intend[ed] to deceive or mislead the public,” as required under the statute. STATEMENT OF FACTS AG, which is in the role of plaintiff at trial, has materially altered its concept of the factual premise for the wrongs done to it by S&L from the time of its first cease and desist letters, through two versions of its pleadings, utterly evasive and never-supplemented discovery responses, countless hearsay-laden, unsupported assertions to the Court both orally, on the record and off, and in writing, and finally not only through its submission of its trial brief but in all probability right through the trial of this matter. These evergreen versions of AG’s “litigation truth” have morphed and strained and doubled back on themselves for the simple reason that AG seeks to find a set of facts, some set of facts, that it can adjust to what little is left of its claims in this case. The Court has permitted AG every conceivable latitude to enunciate, however late in Casse 2::05--ccvv--01217--JJS--MLO D o Dcuomcuemnte 1nt5 01 5F0il e d 0F1il/e0d5 /0210/059 /2P0a0g9e 2 oPf a2g6e 2 of 26 relief” styled as a separate the course motions to dismiss, those, including claims for copyright infringement, false advertising, consumer and conspiracy, dismissed by this Court. are (i) tortious interference trademark under S&a General Business that is essentially of claim Australian Gold’s Claims For trial, S&L will demonstrate that (i) AG has not proved the elements of tortious with (ii) Lanham Act claims are without merit, as AG has no of confusion and (iii) York General Law cannot sustained AG prove ed] to deceive or mislead the as required under the OF in the role of plaintiff at trial, has materially altered its concept of the for done to it from the time of its first cease and desist its pleadings, utterly evasive and never-supplemented countless hearsay-laden, unsupported assertions to the Court both orally, of its trial this matter. These evergreen versions of AG’s have morphed to find of some set of facts, that it can adjust to what little is left has every conceivable enunciate, Document hosted at http://www.jdsupra.com/post/documentViewer.aspx?fid=5e8288cd-34bf-43e5-92bc-4b2c30a8abc63 the process, new and often “creative” theories of liability, to continue discovery and amendment of the pretrial order essentially indefinitely – and despite all this, AG’s proofs, combined with a sober assessment of the legal standards at trial, will fail completely to meet its burdens to establish S&L’s liability. Yet precisely because AG’s factual claims are a moving target and it will not be held to finality or accountability in its disparate ways of framing of them right up through the day of trial, S&L’s final factual “case” must abide that trial. This brief focuses, therefore, mainly on key legal principles applicable to the broadest possible interpretation of AG’s factual claims. The following factual outline, however, can be confidently asserted – for both the record of four years of dispute, plus the factual reality, are such that AG will not be able to rebut it at trial. That basic outline is this: AG has never identified, in discovery or otherwise, a single transaction based on a sale of Product by an AG distributor to S&L. AG distributors are contractually prohibited from publicizing their status as AG distributors. AG has never informed S&L – before, during or after this litigation – that a party from which it was making purchases of Product was, in fact, an AG distributor. S&L has never knowingly, and based on the evidence proposed to be proferred at trial by AG it does not appear that AG can show that S&L ever unknowingly, purchased Product from an AG distributor, knowingly received a shipment of Product from an AG distributor, or ever engaged in any transaction, including placing an order with or making a payment to, any AG distributor. S&L makes it orders for Products only through persons it knows to be retail salons. AG cannot prove any facts recognized by any known legal standard that tend to demonstrate S&L induced any third person to breach its contract with AG. There is no proof that any third person actually did breach its contract with AG as a result of the actions of S&L. AG Casse 2::05--ccvv--01217--JJS--MLO D o Dcuomcuemnte 1nt5 01 5F0il e d 0F1il/e0d5 /0210/059 /2P0a0g9e 3 oPf a2g6e 3 of 26 new and often “to continue discovery and amendment indefinitely -and of the legal standards at trial, will meet burdens S&L’s liability. AG’s a moving target and it will or accountability its disparate up through final factual “case” must abide This brief focuses, therefore, the broadest of factual outline, however, -plus the factual reality, are such that AG will able to rebut it at trial. in discovery or otherwise, a single transaction based an AG distributor to S&L. AG distributors are contractually prohibited from AG distributors. informed S&-before, -that a party from which it was making purchases S&L has never knowingly, and based on the evidence proposed AG it does not appear ever purchased distributor, knowingly received in including placing order with S&L makes it orders for Products only through persons facts recognized any known legal standard that tend to S&to breach its contract with AG. actually did its contract with AG as a result of the actions of S&L. Document hosted at http://www.jdsupra.com/post/documentViewer.aspx?fid=5e8288cd-34bf-43e5-92bc-4b2c30a8abc64 cannot prove that an established retail salon is “in reality” not a salon at all, but is, rather, a “confederate” of S&L or that there is any other reason S&L is prohibited from buying from such a salon. There is no actual confusion arising from S&L’s use of any AG trademark on S&L’s website. There is proof that could tend to show a likelihood of confusion arising from S&L’s use of any AG trademark on S&L’s website. AG has not been damaged in the slightest by S&L’s sales of genuine AG Product under any theory of liability. ARGUMENT I. AUSTRALIAN GOLD’S CANNOT MEET THE LEGAL STANDARD TO DEMONSTRATE TORTIOUS INTERFERENCE WITH CONTRACT UNDER NEW YORK LAW. AG asserts that S&L has tortiously interfered with the contracts between AG and its various distributors which prohibit sales by distributors Australian Gold Products (“Products”) to persons reselling Products on the Internet. AG has no evidence of S&L contacting a distributor, making a purchase from a distributor, or communicating in any way with a distributor. AG nonetheless argues that S&L’s purchase of Products outside of its closed distribution system is an act of unlawful “diversion” properly captured by the tort of tortious interference with contract. See Australian Gold’s Trial Memorandum, dated January 2, 2009 (Dkt. No. 144) at 2. Based on the actual elements of this cause of action, however, AG will fail to sustain its legal burden. The elements of tortious interference with contract claim under New York law are: (1) existence of a valid contract between the plaintiff and a third party; (2) the defendant's knowledge of the contract; (3) the intentional procurement of a breach of the contract without justification; (4) actual breach of the contract and (5) damage to the plaintiff. See Cardiocall, Inc. Casse 2::05--ccvv--01217--JJS--MLO D o Dcuomcuemnte 1nt5 01 5F0il e d 0F1il/e0d5 /0210/059 /2P0a0g9e 4 oPf a2g6e 4 of 26 that an established retail salon is “in reality” rather, or that there S&arising from S&L’s a likelihood use trademark website. AG has not been damaged by of AG Product under any theory of liability. GOLD’S CANNOT MEET THE LEGAL STANDARD TO INTERFERENCE WITH CONTRACT S&the contracts reselling Products on the Internet. no evidence of S&from a distributor, or communicating in any way with a distributor. argues that S&L’s of outside of of properly captured Australian Memorandum, dated (Based of this cause of action, however, AG will to sustain of with claim under New York of valid contract between the plaintiff and a third party; the defendant's (4) actual breach to the plaintiff. Cardiocall, Document hosted at http://www.jdsupra.com/post/documentViewer.aspx?fid=5e8288cd-34bf-43e5-92bc-4b2c30a8abc65 v. Serling 492 F.Supp.2d 139, 151 -152 (E.D.N.Y. 2007) citing Albert v. Loksen, 239 F.3d 256, 274 (2d Cir.2001); Advanced Marketing Group, Inc. v. Business Payment Systems, LLC 481 F.Supp.2d 319, 324 (S.D.N.Y.2007). The third element, the intentional procurement of a breach of the contract without justification, is also referred to as “intentional inducement” by some New York courts. See American Bldg. Maintenance Co. of New York v. Acme Property Services, Inc. 515 F.Supp.2d 298, 314 (N.D.N.Y.,2007) citing Lama Holding Co. v. Smith Barney Inc., 88 N.Y.2d 413, 424, 646 N.Y.S.2d 76, 668 N.E.2d 1370 (1996). With respect to tortious interference with contract, S&L asserts the following defenses on its behalf, which it intends to demonstrate at trial: (i) S&L was not aware of any specific underlying contract between AG and any identified third party when making its purchases, and upon multiple requests for the identify of the same (so that any supposed interference could be avoided) AG refused to disclose it; (ii) S&L did not engage in any act that qualified as intentional inducement of a third party to breach a contract with AG, because S&L and the retailers it purchased from entered into arm’s length transactions; (iii) there was in any event no breach of any contract involving S&L because S&L only purchased Products from retailers, precisely as AG’s distribution policy intends and its distribution contracts provide; and (iv) AG cannot established any legally cognizable harm or damage to any action of S&L. A. S&L Had No Knoweldge Of Any Contract Between AG and Third Parties To sustain a claim of tortious interference with contract, it must be shown that a defendant knew about a plaintiff’s contracts with third parties. See Don King Productions, Inc. v. Douglas, 742 F.Supp. 741, 775 (S.D.N.Y. 1990). While the required level of that understanding may be relatively low, and does not necessitate that a defendant know all the precise details of a plaintiff’s arrangement with a third party, a defendant must nevertheless possess some modicum Casse 2::05--ccvv--01217--JJS--MLO D o Dcuomcuemnte 1nt5 01 5F0il e d 0F1il/e0d5 /0210/059 /2P0a0g9e 5 oPf a2g6e 5 of 26 139, 151 -152 (E.D.v. Loksen, Cir.2001); Advanced Group, Inc. v. Business Payment Systems, element, procurement a breach is also courts. 2d 298, 314 (N.D.N.Y.,2007) citing S.L asserts defenses it intends to demonstrate (i) S&L was not aware of any specific party when making its purchases, requests of the same (so that any supposed refused disclose (ii) S&L did not engage in any act that qualified as of breach AG, because and into S&L because S&L only purchased Products retailers, AG’s (iv) any legally to any action of S&sustain claim of tortious interference with contract, it must be shown that a a plaintiff’s parties. 741, 775 (S.D.N.Y. required of that understanding low, and does not necessitate arrangement with a third party, a defendant must nevertheless possess Document hosted at http://www.jdsupra.com/post/documentViewer.aspx?fid=5e8288cd-34bf-43e5-92bc-4b2c30a8abc66 of understanding concerning the existence of a contract with an identified third party in order to be held liable for nonetheless conducting himself in a way that could amount to a tortious interference. See id. (internal citations omitted). Thus it is axiomatic, and fundamentally just, that a party cannot be held liable for interfering with a contract or other duty between two parties if it is not aware who the two parties are and, of course, what contractual relationship they have. The burden of proving such knowledge naturally lies with the plaintiff, and it is impermissible to speculate the existence of such knowledge without an appropriate factual base. Thus the Second Circuit held that a photographic equipment manufacturer was not liable, under New York law, to a distributor for tortious interference with fiduciary duty based on secret negotiations between that distributor's employee, competitor, and manufacturer, given that the plaintiff failed to prove that the manufacturer knew that relationship between employee and distributor was fiduciary one, rather than that he operated under the assumption that the employee represented a distinct corporate entity separate from distributor. “To assume that Yamaguchi understood there to be a fiduciary, rather that contractual, relationship between Salvo and Hannex would be entirely speculative. Accordingly, this portion of the claim was properly dismissed.” Hannex Corp. v. GMI, Inc., 140 F.3d 194, 204-205 (2d Cir. 1998). Here it was impossible for S&L to know that it should avoid purchasing Products from any party, because AG made it impossible for anyone outside its distribution network to know who those distributors are. This was not mere oversight: The contracts between AG and its distributors included on AG’s exhibit list specifically provide that a distributor is prohibited from advertising that it is a licensed reseller of AG’s Products, to wit: Casse 2::05--ccvv--01217--JJS--MLO D o Dcuomcuemnte 1nt5 01 5F0il e d 0F1il/e0d5 /0210/059 /2P0a0g9e 6 oPf a2g6e 6 of 26 the existence of a contract with an identified third nonetheless himself in tortious id. (internal is axiomatic, and fundamentally that a party cannot be held liable for a contract is not course, contractual The burden of proving such and it is impermissible to speculate the existence without factual base. Circuit manufacturer was not liable, under New York law, to fiduciary duty based on secret negotiations competitor, and given that failed to prove that the distributor employee from assume fiduciary, speculative. of the claim was dismissed.” to know that it should avoid purchasing Products AG made it for outside its distribution are. was mere The contracts between included on AG’s is of Document hosted at http://www.jdsupra.com/post/documentViewer.aspx?fid=5e8288cd-34bf-43e5-92bc-4b2c30a8abc67 Distributor is neither permitted nor required by the provisions of this Agreement to advertise itself as an “authorized distributor” of Australian Gold or the Products. See Article II, Section 2.2 and Article III, Section 3.2 of Australian Gold’s Exhibits WWWW, YYYY and ZZZZ. Thus even if AG had eyewitness or recorded evidence of a representative of S&L communicating with an AG distributor – or even testimony from a distributor or other or even circumstantial evidence that S&L had done so – it would not only lack the factual basis for a claim that S&L knew it was doing so (never mind the other issues of inducement, etc.): It would in theory constitute a prima facie violation of this contract, and “inducement” by S&L by virtue of asking, for such a distributor to identify himself as such in order to prevent this tort from occurring! Indeed, the evidence shows that when S&L first received AG’s cease and desist letters back in January of 2004 (Exh. E) which included accusations that S&L was making purchases from unidentified distributors, it did not identify who those distributors were, and failed to do so through the course of all subsequent communications – thus making it impossible for S&L to stop buying from any party it even in theory “should not have been” buying. Furthermore, Australian Gold’s Responses to S&L’s First Set of Interrogatories could not identify a single party in response to a request that it name “all distributors from whom defendant contends plaintiffs obtained defendant’s products.” See Australian Gold’s Responses to S&L’s First Set of Interrogatories, Exh. No. 8 at 5. In responding, AG merely replied, “Australian Gold does not know the identity of the distributors at this time, but its investigation continues.” Id., at 6. This “investigation” never ended; Consequently, but for the knowledge that S&L has acquired from discovery in this case, S&L was, and continues to be, unaware of any contracts AG purports to Casse 2::05--ccvv--01217--JJS--MLO D o Dcuomcuemnte 1nt5 01 5F0il e d 0F1il/e0d5 /0210/059 /2P0a0g9e 7 oPf a2g6e 7 of 26 neither this Agreement advertise as an of Australian Gold or the Article Article and ZZZZ. Thus even if AG had eyewitness or recorded evidence of a representative communicating -or even testimony that S&L done so -it knew it was doing so (never the of etc.): “by S&asking, such himself as that when received AG’s cease and desist E) which included accusations L was making purchases did not identify who those distributors were, and of communications -thus making it impossible for S&it even in theory “should not have been” buying. Furthermore, to S&L’s single response name all distributors from whom defendant contends obtained defendant’s to S&Exh. No. 8 at 5. In responding, AG merely replied, “Australian Gold does continues.” Id., at 6. never Consequently, but for the knowledge L has S&L was, and continues to be, Document hosted at http://www.jdsupra.com/post/documentViewer.aspx?fid=5e8288cd-34bf-43e5-92bc-4b2c30a8abc68 have with its exclusive distributors, and remains unaware of a single purchase alleged to have been made by S&L from such a person – knowingly or otherwise. Suggestions have also been made in recent communications with the Court that AG can show that S&L “must have known” that it was at some point at least receiving Products directly from a distributor (which, as shown below, is hardly inducement to breach a contract), because supposedly an invoice or packing slip provided this information. Not only will AG be unable to show, at trial, the existence of such “knowledge” by testimony or otherwise, even if it had such proof it would still be utterly unable to show that S&L knew, when it saw the name on the shipping invoice, that it was the name of an AG distributor – because this was, and remains, “classified information” that was never disclosed to S&L! Because S&L does not possess any knowledge of whom AG utilizes as its exclusive distributors for AG’s Products, AG’s claims of tortious interference will fail as a matter of law. S&L Failed to Intentionally Induce Any Distributor of B. AG Cannot Prove that S&L Induced Any Distributor of Australian Gold to Breach A Contract with Australian Gold On this record, to permit AG’s tortious interference claim to go to the jury would be to introduce into New York law a per se tort devoid of the need for a showing of even negligence, much less scienter, and would permit a party such as AG to set up an invisible “net” of secret contracts and contract parties that the unwary, or even the inquisitive, would have no way of detecting until found liable in court for inducing their breach. That is because, in addition to the previous point regarding “knowledge,” to establish a claim for tortious interference with contract, AG must also show not only that S&L was aware of that contract, but that S&L acted intentionally to induce a third party to breach its contract with AG. This it will not be able to do at trial. Casse 2::05--ccvv--01217--JJS--MLO D o Dcuomcuemnte 1nt5 01 5F0il e d 0F1il/e0d5 /0210/059 /2P0a0g9e 8 oPf a2g6e 8 of 26 exclusive distributors, and remains unaware a single purchase made by S&L person -knowingly have also been made in recent communications with must have that it was at some at least (which, as shown below, is hardly inducement to breach a contract), because an invoice or packing slip provided this information. AG be unable “had would still be utterly unable to show that S&L knew, when it saw the name the was the name an AG distributor -because this was, and remains, that was to S&S&L any knowledge of whom AG exclusive will as of that S&claim law a per se tort devoid of the need for a showing of even negligence, and would permit a party such as AG to up an invisible secret contract parties that the unwary, or even the inquisitive, would inducing their breach. That is because, regarding establish a claim for tortious interference with to induce a third party with AG. not be able Document hosted at http://www.jdsupra.com/post/documentViewer.aspx?fid=5e8288cd-34bf-43e5-92bc-4b2c30a8abc69 It is well recognized that, under New York law, “[i]n a tortious interference action, the plaintiff must show that tortfeasor's actions were the proximate cause of the breach of contract.” Don King Productions, Inc. v. Douglas, 742 F.Supp. 741, 774 (S.D.N.Y. 1990). Furthermore, New York courts have routinely emphasized the requirement of intentional conduct in evaluating this claim under New York law. See, e.g., Health-Chem Corp. v. Baker, 915 F.2d 805, 809 (2d Cir.1990) ("the interference must be intentional and not incidental to some other lawful purpose"); Automatic Findings, Inc. v. Miller 232 A.D.2d 245, 245, 648 N.Y.S.2d 90, 90 (1st Dep’t. 1996) (no intent to procure a breach of contract by a third party; dismissing the claim); Winicki v. City of Olean, 203 A.D.2d 893, 894, 611 N.Y.S.2d 379, 380 (4th Dep’t. 1994) (same) citing Guard-Life Corp. v. Parker Hardware Mfg. Corp., 50 N.Y.2d 183, 189-190, 428 N.Y.S.2d 628, 406 N.E.2d 445 (1980); Israel v. Wood Dolson Co., 1 N.Y.2d 116, 120, 151 N.Y.S.2d 1, 134 N.E.2d 97 (1956). Moreover, in New York the level of intent required to sustain a claim for tortious interference with contract is “exclusive malicious motivation.” See Allworld Communications Network, L.L.C. v. MCI Worldcom, Inc. 2000 WL 1013956, at *5 (S.D.N.Y. 2000) citing Elliott Associates, L.P. v. Republic of Panama, 975 F.Supp. 332, 341-342 (S.D.N.Y. 1997). The act of inducement must be “malicious or carried out with the intent to harm the plaintiff.” Ultramar Energy Ltd. v. Chase Manhattan Bank, N.A., 179 A.D.2d 592, 579 N.Y.S.2d 353, 354 (1st Dep't 1992). The action must have been taken by the defendant “without justification, for the sole purpose of harming the plaintiffs.” Benjamin Goldstein Productions, Ltd. v. Fish, 198 A.D.2d 137, 603 N.Y.S.2d 849, 851 (1st Dep't 1993). Here, notwithstanding the impossibility of S&L’s intentional inducement of a third party to breach its agreement with AG, as S&L never purchased Products directly from a distributor to Casse 2::05--ccvv--01217--JJS--MLO D o Dcuomcuemnte 1nt5 01 5F0il e d 0F1il/e0d5 /0210/059 /2P0a0g9e 9 oPf a2g6e 9 of 26 well recognized i]n a tortious interference action, must show that tortfeasor's actions Productions, v. Douglas, 742 F.Supp. 741, 774 (S.1990). Furthermore, courts have emphasized law. See, e.interference intentional and not incidental to some other lawful Findings, Inc. v. Miller procure of Olean, 203 D.2d 893, 894, 611 Y.S.2d 379, 1994) (same) v. Mfg. Corp., 50 N.Y.2d 183, 189-York the level of intent required to sustain a claim for tortious with exclusive malicious motivation.” See Allworld Communications MCI Inc. *D.N.Y. citing L.P. v. Republic of 975 F.Supp. 332, 341-342 (S.D.N.Y. 1997). must be “malicious or carried out with the intent to harm the plaintiff.” taken by “without sole of the impossibility intentional with Products directly from Document hosted at http://www.jdsupra.com/post/documentViewer.aspx?fid=5e8288cd-34bf-43e5-92bc-4b2c30a8abc610 begin with, AG has neither alleged, nor can it demonstrate at trial, that S&L acted in a manner with the intent to exclusively harm AG. Rather, what is clear from the record to date, and will once again become apparent at trial, is that S&L acted in a manner to further its own lawful economic interests, which does not make S&L’s conduct unlawful. See Allworld Communications Network, L.L.C., 2000 WL 1013956, at *5. The legality of S&L’s conduct in relation to its own economic self interest was addressed by the U.S. District Court for the District of Arizona in Designer Skin, LLC v. S & L Vitamins, Inc., No. CV 05-3699-PHX-JAT, 2008 WL 4174882 (D.Ariz., Sept. 5, 2008), where, on precisely identical facts, District Judge James A. Teilborg dismissed plaintiff’s claims of tortious interference with contract because plaintiff failed to prove that S&L had any way of affecting, much less inducing, plaintiff’s transactions with its distributors. The standards in Arizona and New York law as to the elements of tortious interference with contract are the same. Judge Teilborg wrote: The natural implication to be drawn from these facts is not that S & L Vitamins had the right to control the tanning salons' transactions with the distributors, … but rather that S & L Vitamins and the tanning salons [it purchased Products from] entered into arms-length transactions, with each entity acting out of its own self-interest. A reasonable jury could not conclude otherwise. Therefore, Designer Skin's agency theory fails as a matter of law. Designer Skin, LLC, 560 F.Supp.2d at 826 (emphasis added). The legitimacy of this “motivation for profit” perspective is not some obscure doctrine or technicality. Indeed, the legitimacy of a defendant’s actions under New York law was perhaps never better expressed than in Benton v. –Saun Mfg. & 2d 955 (1st Dep’t 1956), a case on which both this Court and AG have consistently relied. In Benton, the court reserves of the possibility that some set of circumstances could exist wherein, absent direct proof of inducement, some set of facts could make out a finding of inducement by “circuitousness” Casse 2::05--ccvv--01217--JJS--MLO D o Dcuomcuemnte 1n5t 01 5F0il e d 0F1il/e0d5 /0210/095 /P20a0g9e 1 0 P oaf g2e6 10 of 26 has neither acted a manner Rather, will become apparent at trial, is that S&L acted in a to further its interests, which does not make S&L’s conduct unlawful. See Allworld S&L’s conduct in relation to its own economic self interest was addressed Arizona in Designer Vitamins, No. CV PHX-JAT, 2008 4174882 Sept. 5, 2008), where, on A. Teilborg dismissed plaintiff’s with plaintiff failed to that S&The standards and law as to the elements of tortious interference with contract are the same. Judge facts is not that S & control the tanning salons' with L Vitamins and the tanning salons [it purchased Products length transactions, with each entity acting out A reasonable could not conclude otherwise. Therefore, 2d at 826 (emphasis added). The legitimacy of this “perspective is not some obscure law was perhaps never better expressed Kennedy -Van Saun Mfg. & Eng’g Corp., 2 A.D. 2d 27, 152 N.Y.S.2d 955 (1st Dep’t 1956), aon which In Benton, the court reserves that some set of circumstances wherein, of some set of of inducement by “circuitousness” Document hosted at http://www.jdsupra.com/post/documentViewer.aspx?fid=5e8288cd-34bf-43e5-92bc-4b2c30a8abc611 means. But this statement was merely dictum, and was based on no other authority. In fact, in the previous paragraph, the court ruled – in language far more applicable to the reality of the facts here – as follows: It is clear from this and similar allegations that the primary objective of defendant was to take over the potentially profitable work to be performed under plaintiff's contract. If this were defendant's purpose, and we may draw no other inference, it did not constitute the malicious and unjustifiable attempt to injure plaintiff that is an essential ingredient in an action for ‘prima facie’ tort. Intent to bypass, circumvent, or to destroy plaintiff's contract there may have been; but if carried out by lawful means, motivated chiefly by a desire to make profits, there is no actionable wrong, even though there is a callous disregard of the incidental injury to plaintiff which would necessarily follow. Defendant's self-interest negatives malice, even though the means employed might be of questionable morality and ethical validity. Competition as such, no matter how vigorous or even ruthless, is not a tort at common law. Benton, 2 A.D.2d at, 29 (emphasis added). Indeed, in Designer Skin, Judge Teilborg specifically addressed the inadequacy of the decision in John Paul Mitchell Sys. V. Pete-N-Larry’s Inc., 862 F. Supp. 1020 (W.D.N.Y. 2004) 2 A.1st Dep’t 1956). adopt the proposition that undefined, subjective “circuitous” conduct may give rise to a defendant’s liability for tortious interference with contract, Judge Teilborg noted the absence of any legal standard for such a finding – hardly surprising because no court has ever found it. In both Pete-N-Larry, Inc. and Benton, no tortious interference with contract claim could be sustained on the facts or allegations before the courts. See Pete-N-Larry’s Inc., 862 F. Supp. at 1029; Benton, 2 A.D.2d at 29, 152 N.Y.S.2d at 958-959. Thus the suggestion by AG that “S&L Vitamins’ action meet the standard for [circuitous] tortious interference set forth in Pete-NLarry’s, Inc.” is preposterous, as the Pete-N-Larry’s Inc. court declined to enunciate anything like a “standard” and, again, its vague suggestion that there could be one is no more than dictum. Casse 2::05--ccvv--01217--JJS--MLO D o Dcuomcuemnte 1n5t 01 5F0il e d 0F1il/e0d5 /0210/095 /P20a0g9e 1 1 P oaf g2e6 11 of 26 statement based on no other authority. the court ruled -to -follows: is clear from this and similar allegations to take over the potentially contract. this were defendant's purpose, no other inference, it did not constitute the malicious and that is an essential prima facie’ tort. Intent to bypass, circumvent, to destroy contract carried out by lawful motivated disregard of the incidental injury which would necessarily follow. Defendant's self-interest even though the means employed might be of and ethical validity. Competition as such, no 2 A.D.2d at, 29 (emphasis specifically addressed N-Larry’s (and the dictum of Benton, 2 A.D. 2d 27, 152 N.Y.S.2d 955 (Dep’t 1956). In declining to proposition that undefined, subjective conduct may give rise to a for tortious interference with contract, Judge Teilborg noted the absence for a finding -no court has ever found it. N-Larry, tortious interference contract could be on Pete-N-Larry’s 2 A.29, 152 N.Y.S.2d at 958-959. by AG that “action meet standard tortious interference Pete-Inc.” is preposterous, as court declined to enunciate standard” and, again, vague Document hosted at http://www.jdsupra.com/post/documentViewer.aspx?fid=5e8288cd-34bf-43e5-92bc-4b2c30a8abc612 See Australian Gold’s Trial Memorandum (Dkt. No. 144) at 11; Pete-N-Larry’s Inc., 862 F. Supp. at 1029. Indeed, AG cites no legal authority either in its recent Trial Memorandum or in any of the extensive briefing in previous motions in this case to any court’s “standard” or identification of a “circuitous” tortious interference claim (much less one absent knowledge). Moreover, S&L’s survey of jury instructions for tortious interference with contract, which includes instructions from both the Second and Ninth Circuits that have actually been submitted to juries, fails to contain even a single discussion of the applicability of “circuitousness” or any facts that amount to “circuitousness” to a jury asked consider this tort. Not only does no court define “circuitous tortious interference,” the Restatement (Second) of Torts §766 and comment n – specifically cited by the court in Pete-N-Larry’s Inc. – unequivocally stands for the precisely opposite conclusion here: that the conduct AG complains of here is not unlawful, as follow: One who intentionally and improperly interferes with the performance of a contract (except a contract to marry) between another and a third person by inducing or otherwise causing the third person not to perform the contract, is subject to liability to the other for the pecuniary loss resulting to the other from the failure of the third person to perform the contract. * * * n. Making agreement with knowledge of the breach. One does not induce another to commit a breach of contract with a third person under the rule stated in this Section when he merely enters into an agreement with the other with knowledge that the other cannot perform both it and his contract with the third person. … For instance, B is under contract to sell certain goods to C. He offers to sell them to A, who knows of the contract. A accepts the offer and receives the goods. A has not induced the breach and is not subject to liability under the rule stated in this Section. In some cases, however, B may be enjoined at the suit of C from performing for A, or B may be compelled specifically to perform the contract with C. … Casse 2::05--ccvv--01217--JJS--MLO D o Dcuomcuemnte 1n5t 01 5F0il e d 0F1il/e0d5 /0210/095 /P20a0g9e 1 2 P oaf g2e6 12 of 26 Australian Gold’s (Dkt. to any court’s “tortious interference knowledge). instructions for tortious interference contract, which includes instructions to of the applicability circuitousness” any facts asked only does no court define tortious interference,” the Restatement of 766 and comment n -specifically cited by the court in Pete-N-Larry’s Inc. -not follow: intentionally and improperly interferes with the performance of a between person contract, to the other for the pecuniary person agreement knowledge the breach. One does a third person into an agreement with the other with perform to C. He offers the accepts A and is not subject to liability some however, B C from or B may be compelled specifically to perform the contract Document hosted at http://www.jdsupra.com/post/documentViewer.aspx?fid=5e8288cd-34bf-43e5-92bc-4b2c30a8abc613 See REST 2d Torts § 766, comment n. (Emphasis added). Applied to the instant facts, it is worth noting that while the Restatement may provide for AG’s recourse against its distributors, through an injunction or compelling specifically performance, it specifically exonerates S&L from any liability, on these facts as alleged by AG. Absent a single legal precedent finding a party liable for “circuitous tortious liability” in New York or any other state, AG’s claims of tortious interference with contract amount to the oft-mocked “I know it when I see it” test for obscenity of Justice Stewart's in Jacobellis v. Ohio, 378 U.S. 184, 197, 84 S.Ct. 1676, 1683, 12 L.Ed.2d 793 (1964) (Stewart, J., concurring). If only because it is impossible for a person to avoid committing a wrong that the law does not define in advance of his actions, New York courts routinely reject the impulse to impose liability for novel torts based on inarticulable standards. See, e.g., Chris-Craft Industries, Inc. v. Piper Aircraft Corp., 480 F.2d 341, 397-398 (2d Cir. 1973); JA Apparel Corp. v. Abboud , 2008 WL 2329533, *32 at n. 38 (S.D.N.Y. 2008); Envirokare Tech, Inc. v. Pappas, 420 F.Supp.2d 291, 294 (S.D.N.Y. 2006). Because there exists no foundation for a doctrine of “circuitous” conduct amounting to tortious interference with contract in New York or any other state for that matter, and because AG cannot prove that there was ever a single act of inducement by S&L directed, much less knowingly, to any AG distributor, AG will fail as a matter of law to meet its burden of trial to meet the legal standard of carrying such a claim. C. There Is No Underlying Breach of Contract Obviously tortious interference with contract requires an actual breach of contract. See D'Andrea v. Rafla-Demetrious, 146 F.3d 63, 65-66 (2d Cir. 1998) (“we decline to hold that the New York courts would recognize an exception to the rule requiring ‘actual breach’ in order to Casse 2::05--ccvv--01217--JJS--MLO D o Dcuomcuemnte 1n5t 01 5F0il e d 0F1il/e0d5 /0210/095 /P20a0g9e 1 3 P oaf g2e6 13 of 26 REST 2d Torts § 766, comment n. (Emphasis added). that the Restatement recourse compelling specifically performance, specifically exonerates on these legal precedent finding a party liable for “circuitous tortious liability” or any other state, claims of tortious interference contract amount know it when I see it” test for obscenity of Justice Stewart's Ct. 1676, 1683, 12 L.Ed.2d 793 (1964) (Stewart, J., concurring). it does of New York impulse to impose liability novel torts based standards. e.g., Chris-Craft Corp., 480 F.(S.2008); Envirokare Tech, Inc. v. Pappas, 420 F.Supp.there exists no foundation for a doctrine of conduct York or any other state for that matter, and because cannot directed, much less fail as a matter law to meet of interference contract requires an actual breach of contract. See (2d Cir. courts recognize Document hosted at http://www.jdsupra.com/post/documentViewer.aspx?fid=5e8288cd-34bf-43e5-92bc-4b2c30a8abc614 state a claim for tortious interference with contractual relations. Because there was no breach of contract in the instant case, [appellant’s] tortious interference with contractual relations claim must fail.”); see also Cardiocall, Inc., 492 F.Supp.2d at 151. It is certainly noteworthy that, after four years of claiming that S&L has induced one or more AG distributors to a breach of contract, not a single AG distributor has been sued by AG for allegedly selling Products to S&L. At trial AG will be unable to prove a breach of contract in the instant case, and absent proof of a breach of contract, there can be no inducement of that breach. “Plaintiff has suffered an injury, but it appears that its clearest recourse is against the contracting party . . . and perhaps . . . its principals. [Plaintiff] has not shown a likelihood of success on the merits on its claim against the third party Quality King for tortious interference with contract.” John Paul Mitchell Systems v. Quality King Distributors, Inc., 106 F.Supp.2d 462, 476-477 (S.D.N.Y. 2000). Here, again, AG’s counterclaim for tortious interference is premised on the inviolability of its highly controlled (and highly profitable) distribution system, whereby it sells only to distributors, which contractually may sell only to retail tanning salons. But the proofs will demonstrate that S&L purchases its lotions only from retail tanning salons, and not from distributors. These salons are not parties to the distributorship contracts at all, and hence the existence of these contracts is irrelevant to AG’s counterclaim; they simply were not breached by any party. AG attempts to circumvent this difficulty by imagining that S&L has been secretly controlling a salon – an utter fantasy first alleged in years ago and never remotely proved, and which AG now claims to believe it will finally establish in its forthcoming supplemental The uncontroverted1 evidence, however, is, and will remain through trial, that S&L 1 Despite the absence of a single shred of contrary proof on the parties’ cross motions for summary judgment, AG refused to concede this fact in its response to S&L’s Rule 56.1 statements. Casse 2::05--ccvv--01217--JJS--MLO D o Dcuomcuemnte 1n5t 01 5F0il e d 0F1il/e0d5 /0210/095 /P20a0g9e 1 4 P oaf g2e6 14 of 26 interference contractual relations. Because see L has induced to a been sued by AG for allegedly selling Products to S&L. At be unable to prove a breach of contract in the instant case, and a that breach. has that its clearest recourse is against the contracting party . . and perhaps . has not shown a likelihood of success on the against for tortious interference contract.” John Paul Mitchell Systems Distributors, Inc., 106 F.Supp.AG’s on the inviolability its highly controlled (and highly profitable) distribution system, whereby sells only to which may sell only to the proofs that S&L its lotions only retail tanning salons, not from are not and hence contracts is irrelevant to AG’s were breached attempts by imagining that S&L has been secretly a -an utter fantasy first alleged in years ago and never remotely proved, now claims to believe it will finally establish in its forthcoming supplemental depositions. The uncontroverted1 evidence, however, is, and will remain through trial, that S&L Despite the absence of a single shred of contrary proof on the parties’ cross motions for rseufumsemd ator yco jnucdedgem theisn fta, cAt iGn Rule 56.1 statements. Document hosted at http://www.jdsupra.com/post/documentViewer.aspx?fid=5e8288cd-34bf-43e5-92bc-4b2c30a8abc615 does not now, nor did it ever control the transactions, business, personnel or any other aspect of any tanning salons, and that all transactions between S&L and its salon-suppliers are arms-length transactions, and do not in any way amount to, imply or otherwise involve a breach of any contract between AG and any other person. See, Designer Skin, 560 F.Supp.2d at 825-26. D. AG Cannot Prove Any Damage Due to S&L’s Actions Finally, even if AG’s tortious interference claim could surmount all the obstacles indentified above, AG’s claim will ultimately fail upon the last, and perhaps most important, element: the existence of harm. At no time in this litigation has AG presented any evidence, beyond conclusory allegations, that it suffered any legally cognizable, or any other, damage as a result of S&L’s actions. At trial, too, it will fail to do so, regardless of how much distracting information AG attempts to enter into the record regarding S&L’s own business success. Indeed, S&L’s action – that is, selling a manufacturer’s products – is one which is ordinarily considered a benefit, not an injury, to the company. As the Court wrote in Pete-NLarry’s Inc., rejecting a tortious interference claim based on “circuitousness,” courts across the country “have been suspicious of the claim that disruption of these exclusive distribution arrangements causes any pecuniary injury . . . .” 106 F.Supp.2d at 475, citing H.L. Hayden Co. v. Siemens Medical Sys., Inc., 879 F.2d 1005, 1024 (2d Cir. 1989), Graham Webb Int'l Ltd. Partnership v. Emporium Drug Mart, Inc., 916 F.Supp. 909, 918 (E.D. Ark. 1995) (no basis for concluding that [any] lost sales would be greater than the increased revenue resulting from the availability of the product in ordinary retail outlets). The simple fact here is that S&L is accused of selling AG’s Products – genuine merchandise that originated with AG, and which AG sold to its own distributors at a price it chose. AG has been paid richly for the stuff it sells. By what theory of damages can it be paid Casse 2::05--ccvv--01217--JJS--MLO D o Dcuomcuemnte 1n5t 01 5F0il e d 0F1il/e0d5 /0210/095 /P20a0g9e 1 5 P oaf g2e6 15 of 26 it ever control the transactions, business, and do not in to, otherwise breach any See, to S&even if AG’s tortious interference claim could surmount all the obstacles ultimately fail upon the last, and perhaps most important, existence of harm. no time in this litigation has AG presented any evidence, cognizable, or any other, damage as At trial, too, it will fail to do so, regardless of how much distracting AG attempts to enter into the record regarding S&L’s own business success. S&L’s -that is, selling a manufacturer’s products -is one which is a benefit, injury, the Pete-Inc., rejecting a tortious interference claim based on “circuitousness,” courts across of claim that disruption of these exclusive distribution causes any pecuniary injury Medical Sys., Inc., 879 F.2d 1005, 1024 (2d Cir. Int'l Inc., 916 F.any] lost sales would be greater than the increased of the here is that S&L is accused of selling AG’s Products -genuine that originated with AG, and which AG to has paid richly sells. By what theory of damages Document hosted at http://www.jdsupra.com/post/documentViewer.aspx?fid=5e8288cd-34bf-43e5-92bc-4b2c30a8abc616 again? Indeed, AG suggests repeatedly that its “damages” under its vague theories of harm can be tied somehow to sales by S&L of AG merchandise. This would only make sense if S&L not only had no right to buy this merchandise and resell it, but if either (a) AG itself also were in the business of selling Products and S&L’s sales had deprived it of revenue it would otherwise have made, or (b) this action had been brought by a retailer asserting a “right” to exclusive sales of Products of which it was deprived by S&L. But how can the manufacturer recover the value of its merchandise once upon selling it and another time upon another person selling it? In the summary judgment ruling in this case, the Court found an earlier version of this argument unavailing, stating, “AG has submitted affidavits about the damage to AG's reputation,damage to AG's investment in the exclusive distribution system, and the costly investments AG has made in protecting this exclusive distribution system and preventing online sales of its Products. AG claims that by maintaining this exclusive distribution system, AG can provide accurate counseling to consumers about their Products.” But as S&L urged in that motion, AG’s affidavits were entirely conclusory, as has been any response in discovery to inquiries by S&L requesting an enunciation of damages such that S&L could fairly defend against such a claim at trial. It is well established that merely claiming “we’ve been damaged” is not adequate to lay the factual predicate for a jury’s consideration of a damage award. See Rodonich v. House Wreckers Union Local 95 of Laborers' Intern. Union, 817 F.2d 967, 978 (2d. Cir. 1987) citing Bise v. International Brotherhood of Electrical Workers, 618 F.2d 1299, 1305 (9th Cir.1979) (jury's award of damages for emotional distress vacated where evidence failed to show actual harm), cert. denied, 449 U.S. 904 (1980). Thus in Designer Skin, the failure of plaintiff to present any competent evidence of monetary damages linked coherently to actions taken by S&L led the District of Arizona to Casse 2::05--ccvv--01217--JJS--MLO D o Dcuomcuemnte 1n5t 01 5F0il e d 0F1il/e0d5 /0210/095 /P20a0g9e 1 6 P oaf g2e6 16 of 26 Indeed, suggests damages” to sales by S&L of if and resell it, but if also of S&deprived it a “exclusive of But how can the manufacturer recover this case, stating, has submitted affidavits about the damage to AG's damage to AG's investment in in system of AG system, counseling to consumers about their Products.” But as S&L affidavits were entirely conclusory, as has been any response requesting enunciation such that S&L defend a claim at trial. established we’ve been to consideration a damage See Wreckers Union Local Bise Brotherhood of Electrical Workers, 618 F.2d 1299, (jury's award of damages emotional distress Designer plaintiff to present any competent evidence linked coherently to actions taken by S&L led the District Document hosted at http://www.jdsupra.com/post/documentViewer.aspx?fid=5e8288cd-34bf-43e5-92bc-4b2c30a8abc617 dismiss outright plaintiff’s unfair competition claim and copyright infringement damages claims under a copyright theory against S&L, including all actual damages and claims for the disgorgement of profits. See Transcript of the Honorable James A. Teilborg’s Oral Order in connection with defendant’s Rule 50 Motion, dated July 16, 2008 is attached hereto as Exhibit A. In his ruling, the court stated: All right. The Court has, obviously, heard the evidence and heard the arguments of counsel and I have previously granted the motion to strike certain of the damage evidence from Miss Romero and set forth my reasons why. The Court has now granted the unopposed motion to dismiss the claim for statutory damages. I now grant the Rule 50 motion with respect to actual damages on the bases that there has been no showing of actual damages suffered as a result of the alleged copyright infringement. . . . [T]he references to S & L's profits are simply, again, gross references to revenues and ultimately to profits without any reasonable basis to differentiate how much of that is attributable to the copyright infringement as opposed to the product sales. . . . And the suggestion, setting aside the lack of connection to the infringement, the suggestion that somehow the jury could take the box car numbers [of sales by S&L] that are in evidence and somehow calculate what a license fee might be or a royalty might be would simply be to invite them to engage, again, in the rankest form of speculation and literally creating out of whole cloth some type of damage number. So for these reasons, the Court concludes that there is simply an absence of evidence to connect the infringement with actual damages that would allow a reasonable jury to have a legally sufficient basis to award damages. Id. at. 12, 18-19 and 33-36. Here, S&L has repeatedly requested, in discovery, both proof of damages and the articulation of a theory of damages; AG has provided none. AG’s responses to S&L’s interrogatories were unresponsive on the issue of damages and were never supplemented. Further, AG has produced no expert report, no financial records, no evidence of lost sales, and no evidence of the value of its vaunted distribution network or of its assertion that that distribution Casse 2::05--ccvv--01217--JJS--MLO D o Dcuomcuemnte 1n5t 01 5F0il e d 0F1il/e0d5 /0210/095 /P20a0g9e 1 7 P oaf g2e6 17 of 26 unfair competition claim and copyright infringement damages copyright theory against S&L, including all actual damages and claims for the of Transcript of A. Teilborg’s dated 16, Exhibit the right. The Court has, obviously, heard the evidence and heard the arguments counsel have previously granted strike certain of the from motion statutory damages. 50 motion with respect to actual damages on the bases no he L's profits are simply, again, gross references to revenues without any reasonable that is attributable to the copyright infringement as opposed the product .the lack that somehow the jury sales that are in evidence and be simply be to invite them to engage, again, the rankest speculation creating whole cloth some type of damage these reasons, an absence that would jury basis to award damages. has repeatedly in of damages the a theory of damages; AG has provided none. AG’s responses to S&L’s on issue of damages and were never supplemented. has records, no evidence lost sales, its assertion Document hosted at http://www.jdsupra.com/post/documentViewer.aspx?fid=5e8288cd-34bf-43e5-92bc-4b2c30a8abc618 network was in any way disrupted by S&L’s actions. Indeed, the only numbers produced by AG at any point in this litigation is a vague chart entitled “Damages Worksheet,” which appears to be a conclusory summary, unaccompanied by backup or reference to specific sources, of sums AG has spent in various categories related to its sales efforts. Thus the only evidence that AG intends to provide at trial on the issue of damages is the testimony of Australian Gold’s employees limited to executives Leslie Hartlieb, John Kieffner, and Tracey Ring, so that each in turn can comment on “…the harm caused by the sale of products over the internet, and damages AG has sustained as a result of the conduct of S&L and Sagarin.” See Joint Pretrial Order, dated March 24, 2008 (Dkt. No. 129) at 8-9. Absent the presentation of evidence quantifying the harm AG allegedly experienced because of S&L’s alleged interference with its distributors, which is an analysis that none of the aforementioned AG employees is qualified to make and upon which there is no documentation in the record for them to rely, any such testimony will be at best, in Judge Teilborg’s words, tantamount to “invit[ing the jury] to engage, again, in the rankest form of speculation and literally creating out of whole cloth some type of damage number.” Because AG cannot prove damages from the alleged tortious interference by S&L, AG’s claim of tortious interference with contract will fail to state a claim as a matter of law. II. AUSTRALIAN GOLD’S CANNOT MEET THE LEGAL STANDARD TO SUCCEED ON ITS TRADEMARK AND UNFAIR COMPETITION CLAIMS AT TRIAL. A. AG Cannot Use Trademark Claims As Proxies for Copyright Infringement To a large extent AG’s trial brief suggests that it hopes the Court will pay no heed to its earlier rulings dismissing virtually all of AG’s trademark-based claims. In fact, in its Order of September 30, 2007, the Court dismissed AG’s false designation of origin claim, AG’s false Casse 2::05--ccvv--01217--JJS--MLO D o Dcuomcuemnte 1n5t 01 5F0il e d 0F1il/e0d5 /0210/095 /P20a0g9e 1 8 P oaf g2e6 18 of 26 Indeed, numbers is a vague chart “Damages which appears in at trial on the issue of damages employees can the harm caused AG as a result of the conduct of S&Joint Pretrial Order, dated March 24, 2008 (Dkt. No. 129) at 8-9. Absent of quantifying allegedly experienced of with is an analysis that none the aforementioned any such be at best, in Judge Teilborg’s words, tantamount ing the jury] to engage, again, in the rankest speculation some AG prove damages from the alleged tortious interference by S&L, AG’s fail to state a claim as GOLD’S CANNOT MEET THE LEGAL STANDARD TO ITS AND UNFAIR COMPETITION AT TRIAL. AG Cannot Use Trademark Claims As Proxies for Copyright brief suggests pay virtually trademark-claims. 30, 2007, the Court dismissed AG’s designation of origin Document hosted at http://www.jdsupra.com/post/documentViewer.aspx?fid=5e8288cd-34bf-43e5-92bc-4b2c30a8abc619 advertising claim, AG’s trademark dilution claim, and AG’s unfair competition claim. AG seems to believe, however, that if it parrots the Court’s permissive language, finding the existence of a triable issue on the question of whether photographs of AG products on the S&L website cause consumer confusion, it can “back in” the full panoply of claims sounding in trademark and unfair competition. Obviously the Court will not permit this. Pushing past its broad-brush assertion of injury, however, it can be perceived that essentially AG claims that S&L has copied photographs of Product bottled from the AG website, and that this is likely to cause consumer confusion. See Australian Gold’s Trial Memorandum, dated January 2, 2009 (Dkt. No. 144) at 7-8, 19. It should be noted at this juncture, of course, that to the extent any aspect of AG’s claim is construed as sounding in copyright, it is not part of this case. That is true for two reasons. One is that, in its summary judgment ruling, the Court, in addition to dismissing the counterclaims of AG set out above (as well as its claims for conspiracy and intereference with prospective business advantage) also dismissed AG’s copyright claims. The second is that the courts do not permit claims of “false association” based on unauthorized copying, and which are fundamentally premised on the wrongfulness or unauthorized nature of that copying, to masquerade as trademark claims. There can be no claim for “unfair competition” arising out of what is essentially an allegation of copyright infringement. 17 U.S.C. § 301(a). Indeed even the states are precluded from enforcing penalties for copyright violations if the intellectual property at issue falls within the "subject matter of copyright" as defined by federal law and if the claimed property rights are "equivalent to" the exclusive rights provided by federal copyright law. Crow v. Wainwright, 720 F.2d 1224, 1225 (11th Cir. 1983), cert. denied, 469 U.S. 819 (1984). To the extent any of AG’s claims, including Casse 2::05--ccvv--01217--JJS--MLO D o Dcuomcuemnte 1n5t 01 5F0il e d 0F1il/e0d5 /0210/095 /P20a0g9e 1 9 P oaf g2e6 19 of 26 claim, dilution competition AG to that it parrots the Court’s permissive language, finding the of of AG S&consumer confusion, it can “back in” the full claims sounding and unfair competition. brush assertion of injury, can be perceived that has to cause confusion. Australian Memorandum, 2, 2009 (Dkt. No. 144) It should be noted at this juncture, course, aspect of AG’s as sounding in copyright, it two reasons. its summary addition to dismissing the conspiracy and advantage) also dismissed AG’s copyright is permit claims of “false association” based on which are fundamentally premised on the wrongfulness or to masquerade competition” arising out of what is essentially an allegation of copyright S.301(Indeed even the states the intellectual property the "subject the claimed Wainwright, 720 F.2d 1224, U.819 (1984). any of AG’s Document hosted at http://www.jdsupra.com/post/documentViewer.aspx?fid=5e8288cd-34bf-43e5-92bc-4b2c30a8abc620 its claim under Section 133 claim under New York General Business Law, amounts to no more than a copyright claim in disguise, AG should not even be permitted to mention it in its opening statement, elicit testimony regarding it or otherwise prejudice the jury by placing before it the alleged “wrongfulness” of S&L’s use of any copyrighted work by virtue of copying or publishing it without authorization. B. AG Cannot Prove A Likelihood of Confusion Section 32(1) of the Lanham Act, 15 U.S.C. § 1114(1), provides that: (1) Any person who shall, without the consent of the registrant-(a) use in commerce any reproduction, counterfeit, copy, or colorable imitation of a registered mark in connection with the sale, offering for sale, distribution, or advertising of any goods or services on or in connection with which such use is likely to cause confusion, or to cause mistake, or to deceive … shall be liable in a civil action by the registrant for the remedies hereinafter provided. It is, however, one thing to complain of a “reproduction,” etc. of a trademark, and quite another to seek damages for a photograph of a product being sold which may bear that trademark. There is simply no legal basis for suggesting that juxtaposing the name of a retailer that sells a product with an image of that product itself is an unlawful suggestion of “affiliation” that can give rise to likelihood of confusion, the signal test for trademark infringement. As S&L noted in its summary judgment motion, if this Court is to hold otherwise, every supermarket and department store circular would be a trademark infringement! Indeed, since the time of this Court’s summary judgment ruling on September 30, 2007, this very issue was played out at trial in Designer Skin. Considering the same issue – a claim of “false association” by the plaintiff based on S&L’s display of photographs of the merchandise it was offering for sale – Judge Teilborg ruled as follows: Casse 2::05--ccvv--01217--JJS--MLO D o Dcuomcuemnte 1n5t 01 5F0il e d 0F1il/e0d5 /0210/095 /P20a0g9e 2 0 P oaf g2e6 20 of 26 General Business amounts elicit it the jury S&L’s use of any copyrighted work by virtue of copying or person the consent commerce counterfeit, copy, or imitation mark with offering any goods connection such to cause action by the registrant the remedies a “reproduction,” etc. of a trademark, and quite another for a photograph of a product being sold which no legal basis suggesting unlawful of “that can of confusion, the this Court is to hold otherwise, every supermarket and department store be a trademark Court’s summary on September the same issue -a claim of by it was offering -Judge ruled as Document hosted at http://www.jdsupra.com/post/documentViewer.aspx?fid=5e8288cd-34bf-43e5-92bc-4b2c30a8abc621 Alternatively, and now having heard the evidence and seen the evidence and seen the website presentations, it is clear to me that the portraying of Designer Skin's product images on the website next to the S & L logo cannot cause any confusion that somehow S & L is associated with Designer Skin or is a so-called authorized distributor. And again, we must remind ourselves that S & L --though much to the chagrin of Designer, S & L had a perfect right to sell this product, and the mere fact the S & L logo is next to the product does not and I believe could not result in any bases for confusion. In my judgment, this is no different than if this product had been sold on the Macy's or Nordstrom's website with Nordstrom's and Macy's logos sprinkled throughout. That would not be the basis for a claim of confusion. And obviously, retailers and Internet purveyors of products are doing this regularly and it cannot and should not be actionable. Honorable James A. Teilborg’s Oral Order in connection with defendant’s Rule 50 Motion, dated July 16, 2008 at p. 37. Furthermore, AG has never produced either admissible evidence of actual confusion nor evidence, much less an expert’s opinion, that S&L’s actions could lead to a likelihood of confusion. No consumer has ever inquired whether, much less been misled even momentarily on the spurious grounds of “initial interest” confusion that, S&L is an “authorized” seller of the Products or is otherwise affiliated with AG. This is hardly surprising – the S&L website features products of almost every manufacturer. In the absence of evidence of actual confusion, the burden is on AG to produce evidence of a likelihood of confusion – but, as AG urged on summary judgment, “it is certainly proper for the trial judge to infer from the absence of actual confusion that there was also no likelihood of confusion.” Inc. Publishing Corp. v. Manhattan Magazine, Inc., 616 F.Supp. 370, 386 (S.D.N.Y.1985), citing McGregor-Doniger Inc. v. Drizzle Inc., 599 F.2d 1126, 1136 (2d Cir.1979). AG has no proof of a likelihood of confusion has no survey or other expert testimony on point to present at trial. When asked in discovery “to [s]tate in detail each fact or circumstance Casse 2::05--ccvv--01217--JJS--MLO D o Dcuomcuemnte 1n5t 01 5F0il e d 0F1il/e0d5 /0210/095 /P20a0g9e 2 1 P oaf g2e6 21 of 26 and now having heard the evidence and seen the evidence and seen it is logo cannot cause is associated a that S & product, is next to the product does believe could not result in any bases judgment, no different than if this product had been Nordstrom's Nordstrom's logos sprinkled for claim A. Teilborg’s much less an expert’s opinion, that S&L’s likelihood of No consumer has whether, much grounds of “authorized” the or is otherwise affiliated with This is hardly surprising -the S&L website features In the absence evidence actual confusion, to produce of confusion -but, as AG urged on “the judge to infer from the absence was also no likelihood Manhattan 370, 386 (S.D.N.Y.1985), citing McGregor-Doniger of confusion has no survey other When asked discovery to [s]tate in detail each fact or circumstance Document hosted at http://www.jdsupra.com/post/documentViewer.aspx?fid=5e8288cd-34bf-43e5-92bc-4b2c30a8abc622 which defendant contends or shows that a likelihood of confusion exists between defendant and plaintiffs because of plaintiffs’ use of the marks at issue in this action …,” AG was unresponsive. See Australian Gold’s Responses to S&L’s First Set of Interrogatories, No. 3 at 3-4, attached hereto as Exhibit B. In fact, in answering S&L interrogatories, AG stated: “Australian Gold has not yet identified an expert witness who may be called upon to offer expert testimony in this area.” Id. In doing so, AG acknowledged that it would need to present expert testimony to succeed on a trademark infringement claim. But there is no expert, just as there is no likelihood of confusion, and hence there is no bona fide claim for trademark infringement. Instead, as this case approaches the eve of trial, AG intends to only offer the testimony of its employees to so that they may offer their own subjective views on “the harm caused by the sale of products over the internet . . . ” See Joint Pretrial Order, dated March 24, 2008 (Dkt. No. 129) at 8-9. Indeed, even if it AG sought to introduce such “lay expert” opinion, AG’s failure to amend their interrogatory answers to disclose that intention precludes it from proffering such testimony at trial under Fed. R. Civ. P. 26(a)(2) and Fed. R. Civ. P. 37(c)(1). But even if it were admissible, such testimony would be legally inadequate as competent evidence of a likelihood of confusion. The lack of an expert opinion, given the lack of proof of actual confusion, is legally fatal to AG’s trademark claim. The courts in this Circuit have, logically, concluded that the “failure to offer a survey showing the existence of confusion is evidence that the likelihood of confusion cannot be shown.” Essence Communications, Inc. v. Singh Industries, Inc. 703 F.Supp. 261 (S.D.N.Y. 1988). See also E.S. Originals Inc. v. Stride Rite Corp., 656 F.Supp 484 (S.D.N.Y. 1987), noting that the failure to conduct a survey was especially telling because the plaintiff had plenty of time to do so: Casse 2::05--ccvv--01217--JJS--MLO D o Dcuomcuemnte 1n5t 01 5F0il e d 0F1il/e0d5 /0210/095 /P20a0g9e 2 2 P oaf g2e6 22 of 26 of confusion exists between defendant because use of the marks AG was unresponsive. Australian to S&L’s Interrogatories, at 3-4, attached Exhibit In fact, in answering L interrogatories, stated: Australian Gold has In doing so, AG acknowledged that it would need to present expert testimony on a trademark infringement claim. is is no bona fide claim this case approaches the eve of trial, AG intends to only offer subjective “the harm caused March (if “lay to that intention it such R. Civ. 37(c)(if evidence of a likelihood The courts this Circuit have, concluded that the likelihood Inc. v. F.See v. Stride Rite Corp., 656 F.conduct the plaintiff Document hosted at http://www.jdsupra.com/post/documentViewer.aspx?fid=5e8288cd-34bf-43e5-92bc-4b2c30a8abc623 Furthermore, it is significant that Stride Rite did not undertake a consumer survey, a failure which strongly suggests that a likelihood of confusion cannot be shown. This is especially true since this case was not tried on an emergency basis, and there was therefore ample opportunity to undertake such a survey. Id. at 490 (citations omitted). This, of course, is perfectly analogous to the events here; this case has been ongoing for nearly four years, and AG has been aware of S&L’s business for at least five years, because it sent its original cease and desist letter claiming trademark infringement in January 2004. Accordingly, AG had “ample opportunity” to prepare a survey, and failed to do so. Because AG has not produced any evidence of actual confusion or a likelihood of confusion, or any evidence of damages arising from trademark infringement under the Lanham Act, it will not be able to sustain its claim for trademark infringement at trial. C. AG Cannot Prove Any Trademark Damages Due to S&L’s Actions To be awarded profits under the Lanham Act, a plaintiff must show that an infringer acted with willful deception, in addition to showing (1) the defendant's unjust enrichment; (2) the plaintiff's damages from the infringement; or (3) that an accounting for profits is necessary to deter future willful infringement. George Basch Co. v. Blue Coral, Inc., 968 F.2d 1532, 1537 (2d Cir.1992); see also Gidatex, S.r.L. v. Campaniello Imps., Ltd., 82 F.Supp.2d 136, 141 (S.D.N.Y.2000). Along with showing defendant's willful deception, the plaintiff must prove defendant's sales in order to recover defendant's profits. See 15 U.S.C. § 1117(a); Basch, 968 F.2d at 1539; Ahava (USA), Inc. v. J.W.G., Ltd., 286 F.Supp.2d 321, 324 (S.D.N.Y.2003); Gidatex, 82 F.Supp.2d at 141-42. But to recover their own damages, including those lost profits, see Basch, 968 F.2d at 1540 (observing that plaintiff's lost profits “have been traditionally compensable as an element of plaintiff's damages”), plaintiffs are required to prove – with some specificity – what their actual damages are. See, e.g., PPX Enters. v. Audiofidelity Enters., 818 Casse 2::05--ccvv--01217--JJS--MLO D o Dcuomcuemnte 1n5t 01 5F0il e d 0F1il/e0d5 /0210/095 /P20a0g9e 2 3 P oaf g2e6 23 of 26 that Stride Rite did not undertake a strongly suggests confusion cannot especially true since this case tried on an emergency basis, undertake This, of course, is perfectly analogous to the events here; this case ongoing for of business years, it its and desist letter claiming infringement 2004. had “ample opportunity” to prepare a AG any evidence of actual confusion or a not be able to sustain Damages to S&Act, deception, in addition to showing (1) the defendant's damages that an accounting profits is necessary infringement. George Basch Inc., 968 F.2d Gidatex, S.r.L. v. Campaniello Imps., Ltd., F.Supp.Y.Along with showing defendant's deception, must prove sales in v. J.W.G., Ltd., 286 F.Supp.321, 324 (S.D.N.Y.2003); including 968 F.2d at that plaintiff's “have been as an element of plaintiff's damages”), plaintiffs required to prove -some -what their actual damages are. See, Document hosted at http://www.jdsupra.com/post/documentViewer.aspx?fid=5e8288cd-34bf-43e5-92bc-4b2c30a8abc624 F.2d 266, 271 (2d Cir.1987) (noting that “the quantum of damages, as distinguished from entitlement, must be demonstrated with specificity”). Some reasonable basis of computation has to be used, even though the proof may be only approximate. See GTFM, Inc. v. Solid Clothing, Inc., 215 F.Supp.2d 273, 305 (S.D.N.Y.2002). AG has provided, in discovery or otherwise, no reasonable basis on which a jury could make such a calculation. Similarly, a plaintiff must demonstrate that defendants' infringing conduct had some effect on its own sales or otherwise caused plaintiffs economic harm. See, e.g., Burndy Corp. v. Teledyne Indus., Inc., 748 F.2d 767, 771-73 (2d Cir.1984). “A plaintiff who establishes false advertising in violation of § 43(a) of the Lanham Act will be entitled only to such damages as were caused by the violation.” Burndy Corp. v. Teledyne Industries, Inc., 748 F.2d 767, 771 (2d Cir 1984), citing, Quabaug Rubber Co. v. Fabiano Shoe Co., Inc., 567 F.2d 154, 161 (1st Cir.1977); Invicta Plastics (USA), Ltd. v. Mego Corp., 523 F.Supp. 619 (S.D.N.Y.1981). A court may not engage in any degree of speculation in computing the amount of damages unless and until causation of damages is first established. Story Parchment Co. v. Paterson Parchment Paper Co., 282 U.S. 555, 562 (1931). In an “evidentiary vacuum” such as the one here, “there is no basis to award plaintiffs any damages under the Lanham Act.” Merchant Media, LLC v. H.S.M. Intern., 2006 WL 3479022 (S.D.N.Y. 2006), citing Gidatex, S.r.L. v. Campaniello Imports, Ltd., 82 F.Supp.2d 136, 141-142 (S.D.N.Y. 2000 (evidentiary record did not support an award of profits where plaintiffs failed to demonstrate lost sales and merely showed defendant's intent to divert sales) On this record, AG cannot proffer competent evidence of the causation of damages, much less a guideline as to their amount even if they theoretically existed, with respect to its Lanham Act claims. While AG originally “reserved its right” to “designate an expert witness to testify as Casse 2::05--ccvv--01217--JJS--MLO D o Dcuomcuemnte 1n5t 01 5F0il e d 0F1il/e0d5 /0210/095 /P20a0g9e 2 4 P oaf g2e6 24 of 26 Cir.1987) (noting that “the quantum of damages, as distinguished with Some reasonable though the proof GTFM, Inc. 2d 273, 305 (S.D.N.Y.2002). has discovery otherwise, basis on which jury a plaintiff must demonstrate that defendants' conduct had some sales economic Indus., Inc., plaintiff who establishes false § 43(a) of the Lanham will be entitled only to such damages as Burndy Corp. v. Teledyne 1984), citing, Quabaug Rubber Fabiano Shoe D.computing the amount of damages unless causation damages established. Story Parchment Co. v. Paterson Parchment evidentiary vacuum” such under the Lanham Act.” H.S.Intern., 2006 WL Gidatex, Ltd., 82 F.Supp.of demonstrate cannot competent evidence of the causation damages, to if respect originally “reserved its right” to “designate an expert witness as Document hosted at http://www.jdsupra.com/post/documentViewer.aspx?fid=5e8288cd-34bf-43e5-92bc-4b2c30a8abc625 to the monetary damages of Australian Gold’s goodwill and reputation,” it never supplemented its response by naming such an expert. See Australian Gold’s Responses to S&L’s First Set of Interrogatories, No.4,and 6 at 4-5, attached hereto as Exhibit B. Rather, once again, AG instead insists that by merely insisting “we’ve been damaged,” it hopes that such a plea, will, by itself be enough to assert liability against S&L. Consistent with its now long held approach to the issue of proof of damages, AG’s recently filed Trial Memorandum once again states in conclusory fashion the astonishing claim that its actual damages “average almost $700,000 per year,” but even at this late date AG fails to explain how such an amount was arrived at. It merely states that this reflects the “costs of fighting product diversion on the internet and the training and management of the distributor relationships were previously submitted to the Court in Australian Gold’s response to S&L’s motion for summary judgment.” See Australian Gold’s Trial Memorandum, dated January 2, 2009 (Dkt. No. 144) at 25. In reviewing the evidence AG points to from its summary judgment motion, such “evidence” is nothing more than self-serving affidavits submitted by AG employees, which do not even specifically address the issue of actual damages for trademark infringement, but were instead offered in support of AG’s damages arising from S&L’s tortious interference with contract, i.e., an entirely different claim. See Australian Gold’s Memorandum of Law In Opposition to S&L’s Vitamins Motion for Summary Judgment (Dkt. No. 106), at 23. As to AG’s New York law claims, the standard of proof mirrors that of a Lanham Act claim, except that a claim of unfair competition under New York law also requires evidence of defendant's bad faith. Louis Vuitton Malletier v. Dooney & Bourke, Inc. (Vuitton I), 340 F.Supp.2d 415, 436 (S.D.N.Y.2004), vacated in part, Vuitton II 454 F.3d 108; Cartier Int'l B.V. v. BenMenachem, No. 06 Civ. 3917, 2008 WL 64005, at *13 (S.D.N.Y. Jan. 3, 2008) (“The same Casse 2::05--ccvv--01217--JJS--MLO D o Dcuomcuemnte 1n5t 01 5F0il e d 0F1il/e0d5 /0210/095 /P20a0g9e 2 5 P oaf g2e6 25 of 26 of Australian and reputation,” it never supplemented by See Australian Gold’s to S&L’s hereto as Exhibit B. Rather, once we’ve been a plea, will, liability S&with held approach proof of damages, Trial Memorandum once again states “almost $700,000 per year,” at this late date AG was arrived at. merely states product diversion on the internet and the training and management were previously submitted to the Court to summary See Australian Gold’s Trial Memorandum, dated January In reviewing the evidence points from its summary such nothing more than self-serving affidavits submitted by AG which even address actual damages trademark offered in of arising from S&See Memorandum Vitamins Motion for Summary Judgment No. 106), New York law claims, the standard a law also requires evidence bad faith. v. Dooney & Bourke, Inc. 2d 415, 436 (S.D.N.Y.2004), vacated in part, Vuitton II F.3d 108; Cartier No. 06 Civ. Jan. The same Document hosted at http://www.jdsupra.com/post/documentViewer.aspx?fid=5e8288cd-34bf-43e5-92bc-4b2c30a8abc626 acts that constitute trademark counterfeiting and unfair competition under federal laws give rise to [p]laintiffs' claims of common law trademark infringement and unfair competition, as well as unfair competition under New York law.”). AG will not be able to meet this standard at trial either – it has no proof of bad faith on the part of S&L. CONCLUSION For the foregoing reasons, S&L intends to demonstrate at trial, upon the submission of all of AG’s proofs, AG will not have sustained its burden on prosecution of its counterclaims as a matter of law, and that it will be able, in the event the Court determines otherwise, that S&L’s proofs will rebut any such proofs also to the extent that S&L should be granted judgment as a matter of law. Dated: New York, New York January 5, 2009 Respectfully submitted, GOETZ FITZPATRICK LLP By: ______/s/________________ Ronald D. Coleman (RC 3875) One Penn Plaza GOETZ FITZPATRICK LLP New York, NY 10110 Telephone: (212) 695-8100 Facsimile: (212) 629-4013 Attorney for S&L Vitamins, Inc. and Larry Sagarin Casse 2::05--ccvv--01217--JJS--MLO D o Dcuomcuemnte 1n5t 01 5F0il e d 0F1il/e0d5 /0210/095 /P20a0g9e 2 6 P oaf g2e6 26 of 26 counterfeiting unfair claims of common law trademark infringement and competition, as as New York law.”). AG will not be able to meet this standard -has of S&S&trial, proofs, AG will not have sustained its burden on prosecution of its counterclaims as be able, in the event the Court determines S&rebut any such proofs also to the extent that S&L should be granted judgment as LLP ______/LLP Document hosted at http://www.jdsupra.com/post/documentViewer.aspx?fid=5e8288cd-34bf-43e5-92bc-4b2c30a8abc6Casse 2::05--ccvv--01217--JJS--MLO D o Dcuomcuemnte 1nt5 1 5F1il e d 0F1il/e0d6 /0210/069 /2P0a0g9e 1 oPf a5g3e 1 of 53 Document hosted at http://www.jdsupra.com/post/documentViewer.aspx?fid=5e8288cd-34bf-43e5-92bc-4b2c30a8abc6Casse 2::05--ccvv--01217--JJS--MLO D o Dcuomcuemnte 1nt5 1 5F1il e d 0F1il/e0d6 /0210/069 /2P0a0g9e 2 oPf a5g3e 2 of 53 Document hosted at http://www.jdsupra.com/post/documentViewer.aspx?fid=5e8288cd-34bf-43e5-92bc-4b2c30a8abc6Casse 2::05--ccvv--01217--JJS--MLO D o Dcuomcuemnte 1nt5 1 5F1il e d 0F1il/e0d6 /0210/069 /2P0a0g9e 3 oPf a5g3e 3 of 53 Document hosted at 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