Case Information
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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LORD & TAYLOR ECOMM LLC,
Plaintiff, MEMORANDUM AND ORDER - against – 23 Civ. 6315 (NRB) CIRCLE BUSINESS S.A.,
ROCCO MENGA, and GIAN
LUIGI CACCHIARELLI,
Defendants.
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NAOMI REICE BUCHWALD
UNITED STATES DISTRICT JUDGE
Plaintiff Lord & Taylor EComm LLC (“L&T” or “plaintiff”) brings suit against one of its distributors, Circle Business S.A.
(“Circle”), after goods it purchased from Circle were examined by
an expert and determined to be counterfeit. Plaintiff seeks
monetary damages from Circle and its principals, Rocco Menga and
Gian Luigi Cacchiarelli (toge ther, “defendants”), for, inter alia,
breach of contract, intentional fraud, and tortious interference.
See SAC ¶¶ 90-117. Defendants have filed a motion to dismiss
plaintiff’s complaint in its entirety. See ECF Nos. 28-30. For
the reasons discussed herein, defen dants’ motion is granted in
part and denied in part.
BACKGROUND
I. Factual Background
In May 2021, L&T entered into an arrangement with Circle, a wholesale fashion distributor, to purchase designer merchandise
for resale on its e-commerce website. SAC ¶ 21. Under this
arrangement, L&T selected merchandise to purchase and wired
payment to Circle, which created a Purchase Order to memorialize
the transaction. Id. ¶ 25. Circle would then ship the items from
it s warehouse in the Netherlands to L&T’s warehouse in New
Brunswick, New Jersey via John F. Kennedy Airport in New York, New
York or Newark Airport in Newark, New Jersey. Id. After the items
were delivered, Circle would send L&T a “Declaration of
Authenti city” affirming that the items in the Purchase Order were
authentic. Id.
Between May 2021 and December 2022, L&T paid Circle $3,820,037.57 for 33 Purchase Orders containing a total of 7,557
items. Id. ¶¶ 22-23, 27. A Circle executive signed Declarations
of Authenticity affirming the authenticity of the merchandise
contained in each of these 33 Purchase Orders. Id. ¶¶ 25, 31, 48,
53, 55, 60, 65, Exs. K, Q, T, W, Z.
After L&T began to sell Circle merchandise on its website, some customers returned their purchases, with the majority of those
returns involving merchandise from Gucci and Yves Saint Laurent.
Id. ¶ 29. In late 2022 and early 2023, plaintiff received
complaints from customers that they had received counterfeit
items, all of which concerned merchandise that L&T had purchased
from Circle. Id. ¶ 30. Around this time, L&T also became aware
that customers had posted on blogs and internet message boards
about having received counterfeit merchandise from L&T. Id. ¶ 33,
Ex. B. On January 5, 2023, Circle sent a letter to L&T warranting
that all inventory it sold to L&T was “ authentic and not
counterfeit ” and agreeing to “indemnify L&T related to any breach
of such representation and warranty[. ]” Id. ¶ 31, Ex. A at 1.
On February 15, 2023, L&T hired an authentication expert, Luxury Appraisals & Authentication (“LA&A”) , to review and confirm
the authenticity of the merchandise it had purchased from Circle
and other vendors. Id. ¶ 36, Ex. C. On March 1, 2023, LA&A issued
a report to L&T stating that 116 of the 290 items it had examined
were counterfeit. Id. ¶¶ 38-40, Exs. D-G, L, U, X. All 116 items
had been sold to L&T by Circle, including 102 of 103 Gucci items
and all 14 Yves Saint Laurent items that LA&A examined. [3] Id. The
remaining items in the sample, which had been sold to L&T by non-
Circle vendors, were all determined to be authentic. Id. ¶ 41.
After receiving the LA&A report, L&T removed all Circle merchandise from its sales platforms. Id. ¶ 67. On March 14,
2023, L&T sent a letter to Circle sharing the results of LA&A’s
review and requesting that Circle pay L&T $2,388,205.98, the amount
L&T paid for the items identified as counterfeit, within ten days.
Id. ¶ 69, Ex. AA. Circle denied the counterfeiting allegations,
refused to pay L&T the requested amount, and then rejected a
subsequent settlement offer from L&T. Id. ¶¶ 70-72.
On June 15, 2023, plaintiff received a letter from counsel for Gucci America, Inc. (“Gucci”) stating that it had learned that
L&T was “trafficking in counterfeits” and requesting that L&T
“permanently cease all sales of Gucci brand products going
forward.” Id. ¶¶ 73-76, Ex. BB at 3. Gucci subsequently filed a
complaint against L&T for trademark violation in this District on
November 21, 2023. Id. ¶ 77, Ex. CC. All three items identified
as counterfeit in Gucci ’s complaint had been sold to L&T by Circle. [4]
Id. ¶¶ 78-81. In a default judgment order issued on August 16,
2024, the court found L&T liable for trademark infringement,
counterfeiting, and dilution. See Gucci America, Inc. v. Lord &
Taylor Ecomm LLC, et al., No. 23 Civ. 10239 (LGS), ECF No. 68
its complaint for a second time on or before September 9, 2024.
See ECF No. 20.
Plaintiff filed its Second Amended Complaint on September 10, 2024. See SAC. Plaintiff attached to the SAC more than 115 pages
of exhibits, including, inter alia: the January 5, 2023 letter it
received from Circle, id. Ex. A; screenshots of online complaints
regarding counterfeit merchandise purchased from L&T, id. Ex. B;
L&T’s c ontract with LA&A, id. Ex. C; the list of items examined by
LA&A, id. Ex. D, and excerpts from LA&A’s report, id. Exs. E-G, L,
U, X, DD-EE; and the Purchase Orders, payment records, and
Declarations of Authenticity for the items that LA&A determined to
be counterfeit, id. Exs. H-K, M-T, V-W, Y-Z, FF-GG.
On October 31, 2024, defendants moved to dismiss the SAC pursuant to Fed R. Civ. P. 12(b)(6). ECF Nos. 28-30. Plaintiff
filed its opposition on December 3, 2024, ECF No. 35 (“Opp.”) , and
the motion was fully briefed on December 19, 2024, ECF No. 36
( “ Reply ” ).
LEGAL STANDARD
To withstand a motion to dismiss under Rule 12(b)(6), a non- movant’s pleading “must contain sufficient factual matter,
accepted as true, to ‘state a claim to relief that is plausible on
its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting
Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). “A claim
has facial plausibility when the [pleaded] fact[s] . . . allow[]
the court to draw the reasonable inference that the [movant] is
liable f or the misconduct alleged.” Id.
A court must “ accept[] as true all factual allegations in the complaint and draw[] all reasonable inferences in [plaintiff ’ s]
favor [.]” Acticon AG v. China N.E. Petrol. Holdings Ltd., 692
F.3d 34, 37 (2d Cir. 2012). “ Threadbare recitals of the elements
of a cause of action, supported by mere conclusory statements, do
not suffice[.] ” Brown v. Daikin Am., Inc., 756 F.3d 219, 225 (2d
Cir. 2014) (quoting Iqbal, 556 U.S. at 678).
In ruling on a 12(b)(6) motion to dismiss, a court may also consider “documents attached to the complaint as an exhibit or
incorporated in it by reference, . . . [and] documents either in
plaintiff[’s] possession or of which plaintiff[] had knowledge and
relied on in bringing suit.” Brass v. Am. Film. Techs., Inc., 987
F.2d 142, 150 (2d Cir. 1993).
DISCUSSION
Defendants move to dismiss plaintiff’s claims in full. We address each of defendants’ arguments in turn.
I. Claims against Individual Defendants
As an initial matter, defendants contend that plaintiff has insufficiently pled its claims against individual defendants Rocco
Menga and Gian Luigi Cacchiarelli, asserting that the SAC fails to
attribute any unlawful or fraudulent conduct to either defendant.
ECF No. 30 ( “ Mot. ” ) at 10-11. Plaintiff, meanwhile, maintains
that its claims against Menga and Cacchiarelli are “ sufficient[]
. . . to pierce the corporate v[ei]l[, ]” asserting that it has
adequately alleged “bad faith misrepresentations by [Menga and
Cacchiarelli] via Circle business regarding the authenticity of
the counterfeit goods sold to L&T.” Opp. at 16.
New York courts disregard the corporate form only “reluctantly [.] ” Gartner v. Snyder, 607 F.2d 582, 586 (2d Cir.
1979). To pierce the corporate veil, a plaintiff must establish:
(i) “that the owner exercised complete domination over the
corporation with respect to the transaction at issue” and (2) “that
such domination was used to commit a fraud or wrong that injured
the part y seeking to pierce the veil.” Thrift Drug, Inc. v.
Universal Prescription Adm’rs , 131 F.3d 95, 97 (2d Cir. 1997)
(quoting American Fuel Corp v. Utah Energy Dev. Co., 122 F.3d 130,
134 (2d Cir. 1997)).
Plaintiff ’s claims do not make it past the first step of this analysis. Plaintiff has failed to plead facts sufficient to show
that Menga and Cacchiarelli exercised any control over Circle in
its dealings with L&T , much less the “complete domination” required
to disregard Circle’s corporate structure . Id. In fact, the SAC
mentions Menga and Cacchiarelli only twice – - once when
establishing the existence of diversity jurisdiction, and again
when listing the names and residences of the parties. SAC ¶¶ 3,
8-9. Nor did either Menga or Cacchiarelli sign any of the letters
sent to L&T or other documents attached as exhibits to the SAC.
See, e.g., SAC Exs. A, K, T, W, Z.
Given plaintiff’s failure to allege any improper behavior by Menga and Cacchiarelli, much less facts sufficient to establish
their complete control over Circle’s interactions with L&T, we
decline to pierce the corporate veil and hold them individually
accountable for the company’s actions at this time. Accordingly,
all claims against Menga and Cacchiarelli are dismissed without
prejudice.
II. Breach of Contract Claim (First Cause of Action)
Next, L&T claims that Circle breached its express warranty by providing counterfeit goods. SAC ¶¶ 90-93. Circle contends,
however, that plaintiff has failed to sufficiently plead that it
is entitled to damages under a breach of contract theory, asserting
that plaintiff failed to provide Circle with timely notice of the
breach “within a reasonable time after [it] discover[ed] or should
have discovered [the] breach[.]” Mot. at 11-12. Specifically,
Circle notes that the SAC states that L&T received returns of
Circle products soon after it began to sell them in May 2021 and
subsequently received complaints about counterfeit Circle
products, yet continued to place orders with the company until
December 2022. Mot. at 12 (citing SAC ¶¶ 29-30).
Under New York law, a breach of contract claim premised on a breach of express warranty requires : “ (i) a material statement
amounting to a warranty; (ii) the buyer’s reliance on this warranty
as a basis for the contract with his immediate seller; (iii) the
breach of this warranty; and (iv) injury to the buyer caused by
the breach.” Lugones v. Pete and Gerry’s Organic, LLC , 440 F.
Supp. 3d 226, 244 (S.D.N.Y. 2020) (internal citations and
quotations omitted).
To assert such a claim , “a buyer must [have] provide[d] the seller with timely notice of the alleged breach of warranty.”
Quinn v. Walgreen Co., 958 F. Supp. 2d 533, 544 (S.D.N.Y. 2013)
(citing N.Y. U.C.C. § 2-607(3)(a)). What constitutes “ timely
notice ” “depends on the nature, purpose and circumstances of such
action.” Tomasino v. Estee Lauder Companies Inc., 44 F. Supp. 3d
251, 260 (E.D.N.Y. 2014) (quoting N.Y. U.C.C. § 1-204(2)). Where
“‘ only one inference may be drawn as to the reasonableness of the
time . . . , it becomes a question of law ’ that can be resolved on
a motion to dismiss.” Maroney v. Woodstream Corp., 695 F. Supp.
3d 448, 465 (S.D.N.Y. 2023) (quoting Telit Wireless Sols., Inc. v.
Axesstel, Inc., No. 15 Civ. 5278 (KBF), 2016 WL 1587246, at *6
(S.D.N.Y. Apr. 18, 2016)).
Plaintiff has adequately pled breach of contract by Circle.
Circle expressly represented that the merchandise it sold to L&T
was authentic, providing Declarations of Authenticity guaranteeing
the legitimacy of the items later found to be counterfeit, see,
e.g., SAC Exs. K, Q, T, W, Z, and signing an indemnification letter
“represent[ing] and warrant[ing] that all [inventory purchased by
L&T from Circle] [would] . . . be authentic and not counterfeit[,]”
id. Ex. A. The SAC further alleges that L&T reasonably relied on
these representations when reselling the products it purchased
from Circle to its customers, id. ¶ 101, and that LA&A conclusively
determined that certain goods provided by Circle to L&T were
counterfeit, id. Exs. E-G, L, U, X, DD-EE. The requisite financial
harm flows naturally from the pled elements of the claim. Id. ¶¶
90-93.
Defendants do not dispute these allegations, contending only that L&T failed to plead its entitlement to damages in light of
U.C.C. § 2-607(3)(a), which requires plaintiff to provide notice
of a breach “within a reasonable time” after discovery. “ [T]he
sufficiency and timeliness of [plaintiff’s] notice is generally a
question for the jury[.]” Maroney, 695 F. Supp. 3d 448, 465
(S.D.N.Y. 2023) (quotation and citation omitted). Given the
limited factual record presently before the Court, we cannot
determine at this time how long it should reasonably have taken
L&T to discover that Circle had sold it counterfeit goods. In
this regard, it should be recalled that the SAC and accompanying
exhibits sufficiently establish that Circle repeatedly assured L&T
that the items it had sold were authentic, including in a letter
dated January 5, 2023, see, e.g., SAC Exs. A, K, Q, T, W, Z, and
the mere fact that customers may have returned goods that L&T had
purchased from Circle before it commissioned the LA&A report does
not conclusively indicate that L&T knew or should have known those
goods were counterfeit, SAC ¶ 29. Moreover, L&T sent a letter to
Circle notifying it of LA&A’s findings on March 14, 2023, only two
weeks after it received the LA&A report. See SAC ¶¶ 38, 69, Ex.
AA. Taken together, this evidence demonstrates that this is not
a scenario in which “only one inference may be drawn as to the
reasonableness” of plaintiff’s notice to Circle. Maroney, 695 F.
Supp. 3d at 465.
While we expect that discovery will further inform the parties as to who knew what, and when, the facts in the current record are
more than sufficient to avoid dismissal. Accordingly, the Court
declines to dismiss plaintiff’s breach of contract claim at this
time.
III. Fraud Claim (Second Cause of Action)
Circle next asserts that plaintiff’s fraud claims should be dismissed because the SAC does not meet the more stringent pleading
requirements of Fed. R. Civ. P. 9(b), claiming plaintiff makes
only “conclusory statements of the defendants’ intent” and fails
to adequately link the alleged counterfeit items to individual
products that L&T purchased from Circle. Mot. at 13.
To establish a claim for common law fraud under New York law, a plaintiff must allege: “(1) a material misrepresentation or
omission of fact, (2) knowledge of that fact’s falsity, (3) an
intent to induce reliance, (4) justifiable reliance by the
plaintiff, and (5) damages.” Loreley Fin. (Jersey) No. 3 Ltd. v.
Wells Fargo Secs., LLC, 797 F.3d 160, 170 (2d Cir. 2015) (citing
Eurycleia Partners, LP v. Seward & Kissel, LLP, 12 N.Y.3d 553, 559
(2009)).
In addition, plaintiff’s common law fraud claim must satisfy the heightened pleading standard under Fed. R. Civ. P. 9(b), which
requires a plaintiff to “state with particularity the
circumstances constituting fraud or mistake. ” See Matana v.
Merkin, 957 F. Supp. 2d 473, 484 (S.D.N.Y. 2013) (quoting Fed. R.
Civ. P. 9(b)). Accordingly, a complaint alleging fraud must: “(1)
detail the statements (or omissions) that the plaintiff contends
are fraudulent, (2) identify the speaker, (3) state where and when
the statements (or omissions) were made, and (4) explain why the
statements (or omissions) are fraudulent.” Eternity Glob. Master
Fund Ltd. v. Morgan Guar. Tr. Co. of N.Y., 375 F.3d 168, 187 (2d
Cir. 2004) (citation omitted).
“ Malice, intent, knowledge, and other conditions of a person’s mind may be alleged generally.” Fed. R. Civ. P. 9(b).
However, a plaintiff must still “allege facts that give rise to a
strong inference of fraudulent intent” by “ show[ing] that
defendants had both motive and opportunity to commit fraud, or .
. . by alleging facts that constitute strong circumstantial
evidence of conscious misbehavior or recklessness.” Lerner v.
Fleet Bank, N.A., 459 F.3d 273, 290-91 (2d Cir. 2006) (internal
citations and quotations omitted).
Plaintiff adequately alleges that Circle misrepresented the authenticity of its products, attaching to the SAC numerous
documents containing explicit statements by defendants warranting
that the products sold to L&T were authentic, see, e.g., SAC Exs.
A, K, Q, T, W, Z, and a report prepared by an expert indicating
that some, if not all, of those statements were false, see, e.g.,
id. Exs. E-G, L, U, X, DD-EE. Plaintiff further adequately alleges
that it relied on these representations when selling the products
it purchased from Circle to its customers. Id. ¶ 101.
Moreover, we see no basis for defendants’ contention that plaintiff has failed to satisfy the requirements of Fed. R. Civ.
P. 9(b). Under Rule 9(b), “intent . . . may be averred generally.”
Although Circle repeatedly represented to L&T over the course of
nearly two years that the products it provided w ere “genuine” and
“authentic [,] ” SAC Exs. A, the LA&A report demonstrates that at
least some of those statements were false. Nothing more is
required at this stage of the litigation.
Accordingly, the Court declines to dismiss plaintiff’s common law fraud claim against Circle.
IV. Tortious Interference (Third Cause of Action)
Defendants further claim that the SAC has not adequately pled a claim for tortious interference, asserting that plaintiff failed
to identify any specific contract with a third party or any
contractual language that was breached as a result of its actions.
Mot. at 13-14.
We note that defendants appear to have misread the SAC, as plaintiff has pled a claim for tortious interference with business
relations, rather than contractual relations, SAC ¶¶ 103-106, and
“ [t]he lack of a valid contract . . . is not a barrier to a claim
for tortious interference with business relations[,] ” Scutti
Enteprises, LLC v. Park Place Entertainment Corp., 322 F.3d 211,
215 (2d Cir. 2003) (citing Hannex Corp. v. GMI, Inc., 140 F.3d
194, 205 (2d Cir. 1998)). To state a claim for tortious
interference with business relations under New York law, a
plaintiff must prove that: “(i) the plaintiff had business
relations with a third party; (ii) the defendants interfered with
those business relations; (iii) the defendants acted for a wrongful
purpose or used dishonest, unfair, or improper means; and (iv) the
defendants’ acts injured the relationship.” Lombard v. Booz-Allen
& Hamilton, Inc., 280 F.3d 209, 214 (2d Cir. 2002). “[C]onduct
constituting tortious interference with business relations is, by
definition, conduct directed not at the plaintiff itself, but at
the party with which the plaintiff has or seeks to have a
relationship.” Carvel Corp. v. Noonan, 818 N.E.2d 1100, 1104 (N.Y.
2004) (citations omitted).
The SAC alleges that, by supplying counterfeit goods to L&T and making material misrepresentations regarding their
authenticity, Circle “wrongfully interfered with L&T’s business
relations with its customers and L&T’s relations with
designers[,]” asserting that “[c]ompanies such as Gucci will not
let L&T sell their merchandise on its website.” SAC ¶ ¶ 103-106.
However, p laintiff’s failure to specifically identify the business
relationships with which it alleges Circle tortiously interfered
is fatal to its tortious interference claim. See, e.g.,
Plasticware, LLC v. Flint Hills Res., LP, 852 F. Supp. 2d 398, 402
(S.D.N.Y. 2012) (“Plaintiff has not adequately alleged specific
business relationships with which [d]efendant allegedly
interfered.”) (emphasis in original). A relationship with “the
public” at large is not the sort of continuing business
relationship that can be the subject of a tortious interference
claim. See Nourieli v. Lemonis, No. 20 Civ. 8233 (JPO), 2021 WL
3475624, at *6 (S.D.N.Y. Aug. 6, 2021) (dismissing plaintiff’s
claim for tortious relations with its “customers” because “these
types of generalized allegations about hypothetical business
relations are not enough”) ; see also Universal Marine Med. Supply,
Inc. v. Lovecchio, 8 F. Supp. 2d 214, 221 (E.D.N.Y. 1998)
(similar).
Moreover, while L&T specifically contends that Gucci no longer permits L&T to sell their merchandise on its website
following Circle’s tortious interference , SAC ¶ 105, L&T does not
allege that it had any formal or informal business relationship
with Gucci before it received a letter from the company on June
15, 2023 requesting that L&T cease all sales of Gucci brand
products, SAC ¶¶ 73-76, Ex. BB. The SAC also fails to allege that
Circle “directed” its conduct at Gucci or intended to interfere
with L&T ’ s business relations with Gucci. See B&M Linen, Corp. v.
Kannegiesser, USA, Corp., 679 F. Supp. 2d 474, 485 (S.D.N.Y. 2010)
( “ [T]he defendant must direct some activities towards the third
party and convince the third party not to enter into a business
relationship with the plaintiff[.] ” ) (internal quotation and
citation omitted); see also Hadami, S.A. v. Xerox Corp., 272 F.
Supp. 3d 587, 602 (S.D.N.Y. 2017) (dismissing tortious
interference claims where plaintiff failed to allege that “the
target of [defendants’] conduct was [plaintiff’s] contractual
arrangements with” a third party). Accordingly, p laintiff’s claim
for tortious interference against Circle is dismissed.
V. Indemnification (Fourth Cause of Action)
Next, Circle asserts that the SAC does not sufficiently plead a claim for common law indemnification because plaintiff
participated in the sale of counterfeit goods on its site,
contending that L&T cannot “ claim indemnification against Circle
based on [its] own asserted conduct. ” Mot. at 14-15.
“The principle of common law, or implied, indemnification permits one who has been compelled to pay for the wrong of another
to recover from the wrongdoer the damages it paid to the injured
party.” Protostorm, LLC v. Antonelli, Terry, Stout & Kraus, LLP,
834 F. Supp. 2d 141, 161 (E.D.N.Y. 2011) (quoting Bedessee Imports,
Inc. v. Cook, Hall & Hyde, Inc., 45 A.D. 3d 792, 796 (2d Dep’t
2007)). A party who “committed no wrong, but by virtue of some
relationship with the tort-feasor or obligation imposed by law,
was nevertheless held liable to the injured party” is entitled to
common law indemnification. In re Houbigant Inc., 914 F. Supp.
964, 992 (S.D.N.Y. 1995) (quoting D’Ambrosio v. City of New York,
55 N.Y.2d 454, 461 (1982)). However, w here a party has “itself
participated to some degree in the wrongdoing [it] cannot receive
the benefit of the [common law indemnity] doctrine[.] ” Fagan v.
AmerisourceBergen Corp., 356 F.Supp. 2d 198, 221 (S.D.N.Y. 2004)
(quoting Durabla Mfg. Co. v. Goodyear Tire and Rubber Co., 992 F.
Supp. 657, 660 (S.D.N.Y. 1998) (citations omitted)).
Plaintiff seeks indemnification for “any liabiliti es, claims, losses damages, injuries, costs, or expenses made against or
claimed by Gucci or others[,]” SAC ¶ 112, claiming that, due to
defendants’ conduct, it is now “subject to claims from the brands
and designers of the merchandise at issue, including . . .
Gucci[, ]” id. ¶ 111. The only specific action cited by plaintiff
in support of its claim is the suit brought by Gucci against L&T
in this District, in which Gucci alleged that L&T “willfully and
intentionally” counterfeited Gucci’s trademarked products. See
Gucci America, Inc., 23 Civ. 10239 (LGS), ECF No. 68 at 3. The
court granted default judgment in favor of Gucci on August 23,
2024, id., and referred the case to a magistrate judge for a
damages inquest, id., ECF No. 69. On April 9, 2025, Magistrate
Judge Robyn F. Tarnofsky issued an Amended Report and
Recommendation recommending, inter alia, that the court award
Gucci $1,300,000 in statutory damages under the Lanham Act, 15
U.S.C. §§ 1117(c)(2). Gucci America, Inc., 23 Civ. 10239 (LGS)
(RFT), ECF No. 84 at 12-19. As of the date of this Order, this
report has not yet been adopted by the court.
“[A] party’s default is deemed to constitute a concession of all well pleaded allegations of liability[.]” See Greyhound
Exhibitgroup, Inc. v. E.L.U.L. Realty Corp., 973 F.2d 155, 158 (2d
Cir. 1992), cert. denied, 506 U.S. 1080 (1993). Accordingly, the
order granting default judgment in Gucci America established L&T’s
liability in connection with Gucci’s claims under the Lanham Act,
15 U.S.C. §§ 1114(1), 1125(a), 1125(c), as well as its state law
claims for trademark infringement, unfair competition, and
dilution. 23 Civ. 10239 (LGS), ECF No. 68 at 3. As defendants
note, common law indemnification is not available to reimburse a
defendant for losses attributable to violation of the Lanham Act.
See Zino Davidoff SA v. Selective Distribution Intern. Inc., No.
07 Civ. 10326 (MHD), 2013 WL 1245974, at *4-5 (S.D.N.Y. Mar. 8,
2013) (collecting cases), report and recommendation adopted, 2013
WL 1234816 (S.D.N.Y. Mar. 27, 2013); see also Morgan Art Foundation
Ltd. v. McKenzie, 18 Civ. 4438 (AT), 2019 WL 2725625, at *19
(S.D.N.Y. July 1, 2019); Chen v. New Trend Apparel, Inc., No. 11
Civ. 324 (GBD) (MHD), 2014 WL 13180992, at *4 (S.D.N.Y. Aug. 6,
2014), report and recommendation adopted, 2014 WL 13108990
(S.D.N.Y. Sept. 24, 2014).
Next, we turn to L&T’s effort to seek indemnification in connection with Gucci’s state - law claims. “[A] defendant who
defaults thereby admits all well-pleaded factual allegations
contained in the complaint[, ]” City of New York v. Mickalis Pawn
Shop, LLC, 645 F.3d 114, 137 (2d Cir. 2011) (internal quotation
and citation omitted), and it is well established that “a party
who has itself participated to some degree in the wrongdoing cannot
receive the benefit of the [common law indemnification]
doctrine[,] ” Durabla, 992 F. Supp. at 660 (internal quotation and
citation omitted). By defaulting in the Gucci case, L&T admitted
that it “willfully and intentionally” infringed upon the Gucci
trademark by reselling counterfeit products. Gucci America, Inc.,
ECF No. 68 at 3. This suffices to establish that L&T “participated
to some degree in the wrongdoing [.]” Innovation Ventures, LLC v.
Ultimate One Distributing Corp., Nos. 12 Civ. 5354, 13 Civ. 6397
(KAM), 2016 WL 1317524, at *5 (E.D.N.Y. Mar. 31, 2016) (quotation
omitted) (citing Durabla , 992 F. Supp. at 660 (“[T]here is nothing
passive about the role of a distributor of a defective . . .
product[.]”)). Indemnification is not available under such
circumstances. [11]
Accordingly, defendants’ motion to d ismiss L&T’s claim for common law indemnification is granted. [12]
VI. Lost Reputation (Fifth Cause of Action)
Finally, Circle contends that the SAC does not state a claim for loss of reputation, asserting that plaintiff’s claim must be
dismissed because it “is not a cognizable claim of liability, but
. . . a mere assertion of damages under some other theory of
liability [.]” Mot. at 15. In response, plaintiff argues only
that its allegations are sufficient to support this claim,
asserting that L&T “had an esteemed reputation which [d]efendants
have seriously damaged by causing [p]laintiff to sell counterfeit
goods [.]” Opp. at 21. Neither party cites any case law to support
its position.
New York does not recognize an independent cause of action for loss of reputation. de Rothschild v. Serlin, No. 19 Civ. 11439
(PGG), 2021 WL 860227, at *6, n. 5 (S.D.N.Y. Mar. 8, 2021). Rather,
“a ny such claim is treated as a claim for defamation.” Id. (citing
Cohen v. Avanade, Inc., 874 F. Supp. 2d 315, 324-25 (S.D.N.Y.
2012)). To establish a claim for defamation under New York law,
a plaintiff must be able to prove the existence of “a false
statement, published without privilege or authorization to a third
party, constituting fault . . . [that] must either cause special
harm or constitute defamation per se.” See Peters v. Baldwin Union
Free School Dist., 320 F.3d 164, 169 (2d Cir. 2003) (citing Dillon
v. City of New York, 704 N.Y.S. 2d 1, 5 (1999)).
Plaintiff has not established the existence of any of the elements of a defamation claim under New York law. Accordingly,
plaintiff’s cause of action for lost reputation is dismissed.
CONCLUSION
For the reasons stated above , defendants’ motion to dismiss is granted in part and denied in part. Specifically, the following
claims are dismissed in their entirety: (i) all claims against
defendants Menga and Cacchiarelli; (ii) plaintiff’s tortious
interference claim against Circle (Count Three); (iii) plainti ff’s
common law indemnification claim against Circle (Count Four); and
(iv) plaintiff’ s loss of reputation claim against Circle (Count
Five). Defendants’ motion to dismiss plaintiff’s breach of
contract claim against Circle (Count One) and fraud claim against
Circle (Count Two) is denied.
The Clerk of Court is respectfully directed to terminate the motion pending at ECF Nos. 28-30.
SO ORDERED.
Dated: April 14, 2025
New York, New York
____________________________ NAOMI REICE BUCHWALD UNITED STATES DISTRICT JUDGE
[1] Lord & Taylor, a department store chain, filed for bankruptcy in August 2020. ECF No. 25, Second Amended Complaint (“ SAC ”) ¶¶ 10-15. Saadia Group, LLC subsequently purchased Lord & Taylor’s intellectual property and e -commerce assets in a bankruptcy auction for $12,000,000, and launched L&T, an e-commerce site, using the Lord & Taylor brand name. Id. ¶¶ 18, 20.
[2] The facts herein are drawn from plaintiff’s Second Amended Complaint and the exhibits attached thereto, see SAC, which the Court finds incorporated by reference. See DeLuca v. AccessIT Grp., Inc., 695 F. Supp. 2d 54, 60 (S.D.N.Y. 2010). For the purposes of the Court’s ruling on the instant motion, the Co urt draws all reasonable inferences in plaintiff’s favor. See Koch v. Christie’s Int’l PLC , 699 F.3d 141, 145 (2d Cir. 2012).
[3] The items determined to be fraudulent included: black Gucci Horsebit Men’s Jordaan Loafers and Leather Horsebit Slippers, SAC ¶¶ 44-48, Exs. F-K; a black Yves Saint Laurent Lou bag, id. ¶¶ 49-55, Exs. L-T; a black Gucci Marmont Camera Bag, id. ¶¶ 56-60, Exs. U-W; and a black Gucci Slim Double G Belt, id. ¶¶ 61- 66, Exs. X-Z.
[4] The three items that Gucci identified in its complaint were: a Red Marmot Bag, shipped as part of PO # 48708, SAC ¶ 79, Exs. V-W; a Black Gucci Marmont
(S.D.N.Y. Aug. 16, 2024).
[5] II. Procedural History On July 21, 2023, a little over one month after Gucci filed suit against L&T, plaintiff filed the instant suit against defendants, alleging breach of contract, fraud, tortious interference, indemnification, and lost reputation claims and seeking damages of not less than $10 million. See ECF No. 1. Plaintiff filed an amended complaint on January 18, 2024. See ECF No. 14. On May 28, 2024, defendants filed a letter requesting a pre-motion conference to discuss a proposed motion to dismiss plaintiff’s claims. See ECF No. 18. After holding this conference, the Court issued an order permitting plaintiff to amend Flap Bag, shipped as part of PO # 48708, id. ¶ 80, Exs. V-W, DD; and a White Gucci Horsebit 1955 Camera Bag, shipped as part of PO # 1840478, id. ¶ 81, Exs. EE-FF.
[5] The court subsequently referred the case to a magistrate judge for a damages inquest. See Gucci America, Inc., ECF No. 69. On April 9, 2025, Magistrate Judge Robyn F. Tarnofsky issued an Amended Report and Recommendation recommending that the Court issue a final judgment of default in favor of Gucci, permanently enjoin L&T from infringing Gucci’s mark s, and award Gucci statutory damages in the amount of $1,300,000 under the Lanham Act, 15 U.S.C. § 1117(c)(2). Id., ECF No. 84. As of the date of this order, the court has not yet adopted Judge Tarnofsky’s Report and Recommendation.
[6] Plaintiff initially attempted to file the SAC on September 9, 2024, but the Clerk of C ourt’s office determined that the pleading was deficient. ECF Nos. 21-24.
[7] Defendants also contend that plaintiff has not stated a claim for breach of contract because its allegations that Circle’s products were counterfeit are “conclusory[,]” claiming that the SAC states only that Circle was the “primary[,]” rather than the sole, vendor of the types of products that L&T claims were shown to be counterfeit, and that the items identified as counterfeit by LA&A were not conclusively established to have been provided to L&T by Circle. Mot. at 12-13. However, plaintiff alleges that Circle was L&T ’ s primary vendor of Gucci footwear, belts, and bags, and Yves Saint Laurent bags, and that they “ could only have come from Circle[.] ” SAC ¶¶ 85-86. Further, the exhibits attached to the SAC clearly demonstrate that the items that LA&A determined to be counterfeit were identical to those purchased from Circle. See, e.g., SAC ¶¶ 44-66, H-K, M-T, V-W, Y-Z, FF-GG . Accordingly, defendants’ position is not persuasive.
[8] We note also that Circle does not allege that any delay in notice resulted in harm to Circle or its executives. Rather, Circle continued to sell products to L&T, presumably at a profit, through December 2022. SAC ¶¶ 22, 27. Defendants also assert that a retailer “has a duty to inspect and discover those defects that are discoverable by reasonable physical inspection[,] ” Mot. at 11 (quoting Rienzi & Sons v. I Bunoatavola Sini S.R.L., 20 Civ. 5704 (ERK) (SJB), 2024 WL 3965989, at *7-8 (E.D.N.Y. Aug. 27, 2024) (internal quotations omitted)), and that plaintiff should be barred from recovery because the SAC did not allege that L&T inspected the products it received, id. at 11-12. However, “when a defect is discoverable only by . . . an expert’s examinatio n, a retailer will generally not be held liable for failure to discover[.]” Topliff v. Wal-Mart Stores East LP, No. 04 Civ. 0297, 2007 WL 911891, at *44 (N.D.N.Y. Mar. 22, 2007) (quotations omitted). Nothing in the record presently before us indicates that L&T knew or should have known that the products it received from Circle were counterfeit, and defendants have not presented evidence sufficient to show that the defects were discoverable through reasonable physical inspection. Accordingly, we decline to dismiss plaintiff’s breach of contract claim on this basis.
[9] Defendants argue that plaintiff is “ [un]able to verify whether the products it accepted from Circle were the same products it believes are counterfeit[,]” contending that plaintiff failed to allege “how and by whom” the merchandise was transported from the airport to L&T’s warehouses. Reply at 3. However, as stated supra n. 7, the extensive factual record attached to the SAC clearly establishes that the items examined by LA&A can be easily matched with items that Circle delivered to plaintiff, and plaintiff represents that L&T only purchased those types of items from Circle. SAC ¶¶ 85-86.
[10] Specifically, Gucci alleged that L&T’s use of the GUCCI Mark constituted “trademark counterfeiting and infringement, unfair competition, false designation of origin, and trademark dilution under the Lanham Act, 15 U.S.C. §§ 1114(1), 1125(a), 1125(c); trademark infringement and unfair competition under the common law of the State of New York; and dilution under New York General Business Law § 360- L.” Gucci America, Inc., 23 Civ. 10239 (LGS), ECF No. 68 at 3.
[11] We do not intend to imply that any contemporaneous evidence exists to show that L&T deliberately re-sold goods knowing that they were counterfeit. Rather, this holding is based solely upon L&T’s default in Gucci America, Inc., 23 Civ. 10239 (LGS). At this point in the proceedings, the Court has not reviewed any evidence suggesting that L&T re-sold counterfeit goods knowingly or deliberately.
[12] We note that this does not preclude plaintiff from subsequently seeking common law indemnification in connection with any other action brought against it as a result of defendants’ conduct. However, at present, the Court is not aware of any other cases pending against L&T that are premised on facts similar to those in the Gucci America, Inc. action. Accordingly, plaintiff lacks standing to seek indemnification in connection with any prospective judgment in any hypothetical case brought by another party. See Davis v. Fed. Election Comm’n, 554 U.S. 724, 734 (“A party facing prospective injury has standing to sue where the thr eatened injury is real, immediate, and direct.”); see also Olsen v. Steris Corp., No. 17 Civ. 4522 (SJF), 2018 WL 10676902, at *7 (E.D.N.Y. June 18, 2018) (An injury that “ is entirely contingent on future events, which may or may not materialize, [] cannot be said to be actual or imminent .” ).
[13] Dismissal of this claim does not preclude plaintiff from seeking damages for loss of reputation in connection with its breach of contract action. Although New York law generally does not permit recovery for loss of reputation in a breach of contract action, Karetsos v. Cheung, 670 F. Supp. 111, 115 (S.D.N.Y. 1987), some courts have allowed such damages where a plaintiff can prove “specific business opportunities lost as a result of [its] diminished reputation, ” I.R.V. Merch. Corp. v. Jay Ward Prods., Inc., 856 F. Supp. 168, 175 (S.D.N.Y. 1994).