TheECheck.com, LLC v. NEMC Financial Services Group Inc.
1:16-cv-08722
S.D.N.Y.Jun 16, 2017Background
- Plaintiff TheECheck.com, LLC (ECheck) sued NEMC Financial Services Group, Cyberbox Technology, Inc., and three individuals alleging a smear campaign and unpaid contract obligations; suit filed Nov. 9, 2016.
- Key factual nucleus: a May 20, 2013 Ripoff Report post by a user identified as “Nemc” disparaging ECheck; Ripoff Report also contained a rebuttal from an author linked to ECheck.
- ECheck alleges Lanham Act false advertising (15 U.S.C. § 1125(a)) and multiple New York common-law claims (trade libel, unfair competition, tortious interference, breach of non-solicitation), plus breach of contract and unjust enrichment based on a merchant services agreement alleging $60,000 unpaid.
- Clerk entered defaults for several defendants; ECheck moved for default judgment against corporate defendants (NEMC, Cyberbox) and individuals (Pichardo, Ojay).
- Court found Complaint suffers from group pleading and conclusory alter-ego allegations as to the individuals and Cyberbox, and dismissed or denied default relief as to them.
- Court granted default judgment as to liability only against NEMC on (1) Lanham Act false advertising (finding Complaint plausibly alleges NEMC was the “Nemc” poster) and (2) breach of contract; other claims were denied as duplicative or time-barred.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether default judgment may be entered against individual defendants | Individuals participated in smear, are alter egos of NEMC, and engaged in defamatory conduct | Complaint fails to plead individualized conduct or particularized alter-ego facts | Denied — complaint engages in impermissible group pleading and lacks alter-ego factual allegations |
| Whether default judgment may be entered against Cyberbox | Cyberbox signed an agreement with ECheck and participated in wrongful conduct | Complaint does not allege specific acts by Cyberbox or link it to the Ripoff Report posting | Denied — no factual allegations tying Cyberbox to the challenged publication or breaches |
| Whether NEMC is liable under Lanham Act §43(a) for false advertising | The Ripoff Report post by “Nemc” was commercial, disparaging, and intended to divert customers — NEMC (defaulting) admitted allegations | N/A (default) | Granted as to liability — Complaint plausibly alleges NEMC posted false/derogatory statements constituting commercial advertising/promotional activity |
| Whether NEMC breached the merchant services agreement | NEMC entered contract and failed to pay >$60,000 as alleged | N/A (default) | Granted as to liability — breach alleged and claim timely; unjust enrichment claim denied as duplicative |
| Timeliness of trade libel, unfair competition, tortious interference claims | Injuries from 2013 Ripoff Report; equitable tolling or longer periods apply | Statutes of limitations bar these tort claims (one- and three-year periods) | Denied as time-barred — trade libel (1-year) and tortious interference (3-year) untimely; unfair competition dismissed as untimely |
Key Cases Cited
- City of New York v. Mickalis Pawn Shop, LLC, 645 F.3d 114 (2d Cir.) (default admits well-pleaded factual allegations but court must assess legal sufficiency)
- Finkel v. Romanowicz, 577 F.3d 79 (2d Cir.) (court must determine whether allegations establish liability before entering default judgment)
- Ashcroft v. Iqbal, 556 U.S. 662 (plausibility standard for pleadings)
- Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (plausibility standard and pleading requirements)
- Lexmark Int’l, Inc. v. Static Control Components, Inc., 134 S. Ct. 1377 (Lanham Act protects commercial actors against unfair competition)
- Boule v. Hutton, 328 F.3d 84 (2d Cir.) (elements for commercial advertising or promotion)
- Conopco, Inc. v. Campbell Soup Co., 95 F.3d 187 (2d Cir.) (Lanham Act false-advertising governed by six-year limitations period)