677 F.Supp.3d 186
S.D.N.Y.2023Background:
- Plaintiff Unlimited Cellular, a non-authorized online reseller, sold products on eBay; Defendants Red Points Solutions SL and Red Points Inc. provide automated brand‑protection software that files VeRo infringement reports to e‑commerce platforms.
- Red Points’ VeRo reports trigger automatic removal of listed items from eBay without pre‑submission proof; reports include a certification of good faith.
- In November 2021 Red Points flagged two of Plaintiff’s listings as counterfeit; eBay removed both listings; Red Points later retracted one report but refused to retract the other despite Plaintiff providing proof of authenticity.
- Plaintiff sued asserting defamation, tortious interference with prospective business relations, false advertising under the Lanham Act, violations of N.Y. GBL § 349, and aiding and abetting common law unfair competition.
- Defendants moved to dismiss the Third Amended Complaint under Fed. R. Civ. P. 12(b)(6); the Court denied dismissal of defamation and Lanham Act claims, and granted dismissal (without prejudice) of tortious interference, GBL § 349, and aiding/abetting claims; fee request under N.Y. Civ. Rights § 70‑a denied.
Issues:
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Defamation | VeRo reports falsely accused Plaintiff of selling counterfeits, published to eBay, caused reputational and business harm | Reports are privileged/common‑interest or mere opinion; not actionable | Denied dismissal — plausible defamation and defamation per se pled; privilege and opinion defenses not resolved at 12(b)(6) |
| Tortious interference with prospective business relations | Removal of listings injured Plaintiff’s relationship with eBay and prospective sales | Listing removals do not injure the underlying business relationship with eBay | Granted — plaintiff failed to plead injury to the underlying relationship |
| Lanham Act (false advertising) | Red Points’ commercial claims that their software reliably detects/removes counterfeits are false/misleading and caused removal of authentic listings, injuring Plaintiff | Advertising not actionable or causation too attenuated | Denied dismissal — standing, falsity, commerciality, materiality, interstate commerce, and proximate causation sufficiently alleged |
| N.Y. Gen. Bus. Law § 349 | Defendants’ consumer‑oriented deceptive advertising injured Plaintiff | Plaintiff’s harm is derivative of consumer deception and lacks standing | Granted — § 349 claim dismissed for lack of standing because injury is derivative |
| Aiding & abetting common‑law unfair competition | Red Points aided clients in making false reports | Plaintiff fails to allege clients committed the underlying tort or acted in bad faith | Granted — aiding/abetting claim dismissed for failure to plead underlying tort and bad faith |
| Fee‑shifting under N.Y. Civ. Rights Law § 70‑a | Defendants sought mandatory fees | State procedural fee statute inapplicable in federal court; belated reliance on § 76‑a raised in reply | Denied — § 70‑a inapplicable; fee arguments in reply not considered |
Key Cases Cited
- Ashcroft v. Iqbal, 556 U.S. 662 (establishes plausibility pleading standard)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (pleading must nudge claim from conceivable to plausible)
- Lexmark Int'l, Inc. v. Static Control Components, Inc., 134 S. Ct. 1377 (Lanham Act standing: zone of interests and proximate causation)
- Electra v. 59 Murray Enters., 987 F.3d 233 (defamation elements under New York law)
- Zherka v. Amicone, 634 F.3d 642 (defamation per se; damages presumed)
- Biro v. Condé Nast, 963 F. Supp. 2d 255 (refusal to retract can inform fault/malice analysis)
- Tiffany (NJ) Inc. v. eBay, Inc., 600 F.3d 93 (Lanham Act falsity/likelihood to mislead standard)