MEMORANDUM OF DECISION AND ORDER
On December 26, 2013, the Plaintiff Sussman-Automatic Corp. (the “Plaintiff’) commenced this action against the Defendants Spa World Corporation d/b/a Steam Sauna Depot (“Spa World”) and its principals, Joseph Schwartz and Ira Schwartz (the “Individual Defendants”)(collectively the “Defendants”). According to the Plaintiff, the Defendants engaged in a “bait-and-switch” scheme, orchestrated by the Individual Defendants, whereby they purported to sell the Plaintiffs brand steam shower and spa products on their website and over the phone, but in reality, never actually stocked an inventory of those products. The Plaintiff further al
On March 19, 2014, the Plaintiff filed an amended complaint, asserting (1) trademark infringement under the Lanham Act, 15 U.S.C. § 1114(1); (2) unfair competition under the Lanham Act, 15 U.S.C. § 1125(a)(1)(a); (3) false advertising under the Lanham Act, 15 U.S.C. § 1125(a)(1)(B); (4) common law trademark infringement; (5) common law unfair competition; (6) dеceptive acts and practices under New York General Business Law § 349; and (7) trademark dilution under New York General Business Law § 360-1 et seq.
On April 1, 2014, the Defendants moved pursuant to Federal Rules of Civil Procedure (“Fed. R. Civ.P.”) 12(b)(6), 12(b)(1), and 9(b) to dismiss the complaint for failure to state a claim upon which relief can be granted.
For the following reasons, the motion is granted.
I. BACKGROUND
Unless stated otherwise, the following facts are drawn from the amended complaint and construed in a light most favorable to the non-moving party, the Plaintiff.
The Plaintiff is a New York corporation with its principal place of business in Long Island City, New York. The Plaintiff is an innovator of commercial and residential steam shower and spa equipment, and under its flagship brand, “Mr. Steаm,” sells high-technology steam shower generators and systems for both commercial and residential markets. The Plaintiff is the owner of three trademark registrations in the United States Patent and Trademark Office for variations of the trademark “Mr. Steam.” The Plaintiff sells its “Mr. Steam” products to resellers around the world, not including Spa World.
Spa World is a Delaware corporation with its principal place of business in Valley Stream, New York. Spa World operates a website called Steam Sauna Depot. Spa World, through Steam Sauna Depot, sells and distributes its products in interstate commerce throughout the United States.
The Individual Defendants are domiciled in Nassau County, New York and are the principal officers of Spa World and Steam Sauna Depot.
During the time period relevant herein, one of the brands Spa World purported to offer for sale on the Steam Sauna Depot website was the Plaintiff’s branded product, “Mr. Steam.” Spa World displayed “Mr. Steam” products on its website. Also, according to the Plaintiff, Spa World falsely represented to its customers, over the phone, that it sold “Mr. Steam” products.
However, in fact, Steam Sauna Depot did not maintain an inventory of “Mr. Steam” products. Nor was Steam Sauna Depot ever a distributor to which the Plaintiff sold “Mr. Steam” products for resale.
As noted above, whenever a customer expressed an interest in ordering a “Mr. Steam” product from Steam Sauna Depot, either over the phone or by placing that item in an online shopping cart after seeing the item offered for sale at Steam Sauna Depot, a Spa World employee con
The Plaintiff asserts that these representations were false in at least two respects. First, the statement was allegedly false in a literal sense because Spa World did not maintain an inventory of “Mr. Steam” products in the first instance. Second, it was impliedly false because it gave customers the false impression that, at one time, “Mr. Steam products” were in stock in Spa World’s inventory and that, in the future, they would be regularly stocked.
The Spa World employee would also allegedly tell the customer that Spa World would instead “upgrade” the customer to Spa World’s own SteamSpa brand product for the same or a lower price, and would encourage the customer to purchase the SteamSpa product as an alternative to “Mr. Steam.”
The Spa World employee would also allegedly claim that SteamSpa wаs a superi- or product to “Mr. Steam”; that its products were made in the United States; were certified by the “Underwriters Laboratories” (“UL”); and were of high quality. The Plaintiff alleges that these statements were literally false because SteamSpa products were manufactured and assembled in China — not the United States— from inferior materials, such as plastics; exhibited inferior workmanship relative to “Mr. Steam” products; and were not UL certified.
On the Plaintiffs information and belief, employees of Spa World were specifically instructed and trained to “convert” prospective buyers of “Mr. Steam” products into buyers of SteamSpa products. The Plaintiff alleges that this “conversion” not only included the above-described “bait- and-switch” scheme and false “puffing” of Spa World’s products, but included maligning the Plaintiffs Mr. Steam products.
The Plaintiff also alleges that it first learned of the “bait-and-switch” scheme when a sales manager at a “Mr. Steam” re-seller attempted to purchase a “Mr. Steam” product from the Steam Sauna Depot website, and was told that the website did not have the “Mr. Steam” products in stock. The Plaintiff asserts that the manager could not complete the sale because, in fact, Spa World never maintained an inventory of “Mr. Steam” products, nor did Spa World intend to maintain such an inventory in the future. The Plaintiff further alleges that some of its employees verified the Defendants’ practices by placing similar phone calls, and received the same treatment.
The Plaintiff asserts that the Defendants’ “bait-and-switch” scheme resulted in customer confusion and lost sales.
As previously mentioned, on December 26, 2013, the Plaintiff commenced the instant action. On February 27, 2014, the Defendants moved to dismiss the complaint for failure to state a claim upon which relief can be granted.
On March 19, 2014, the Plaintiff filed an amended complaint. As stated above, the amended complaint raised causes of action for (1) trademark infringement under the Lanham Act; (2) unfair competition under the Lanham Act; (3) false advertising under the Lanham Act; (4) common law trademark infringement; (5) common law unfair competition; (6) deceptive acts and practices under New York General Business Law § 349; and (7) trademark dilution under New York General Business Law § 360-1 et seq.
On April 1, 2014, prior to discovery, the Defendants moved to dismiss the amended complaint for failure to state a claim upon which relief can be granted.
In this case, the Defendants filed a second motion to dismiss directed at the amended complaint. Therefore, the Court finds that any consideration of the initial complaint and motion to dismiss is unnecessary and denies that motion as moot.
The Court now turns to the operative second motion to dismiss.
II. DISCUSSION
A. The Legal Standard for a Motion to Dismiss
To survive a Rule 12(b)(6) motion to dismiss, the complaint must plead “enough facts to state a claim to relief that is plausible on its face.” Bell Atlantic Corp. v. Twombly,
B. The Pleading Standard for the Lan-ham Act Claims
To state a claim sounding in fraud or mistake, Rule 9(b) of the Federal Rules of Civil Procedure imposes a heightened pleading standard: “[A] party must state with particularity the circumstances constituting fraud or mistake.” Fed.R.Civ.P. 9(b). The Second Circuit has read Rule 9(b) to require that a complaint “(1) specify the statements that the plaintiff contends were fraudulent, (2) identify the speaker, (3) state where and when the statements were made, and (4) explain why the statements were fraudulent,” in order to survive a motion to dismiss. Rombach v. Chang,
“Authorities differ as to whether th[is] heightened pleading standard applies to Lanham Act claims.” Wellness Pub. v. Barefoot, CIV.A. 02-3773(JAP),
The Defendants fail to cite a single case within this Circuit that applied a Fed.
C. The Trademark Infringement Claim Under the Lanham Act
“Courts employ substantially similar standards when analyzing claims for trademark infringement under the Lan-ham Act, 15 U.S.C. § 1114(l)(a) ... trademark infringement under New York common law; and unfair competition under New York common law.” Van Praagh v. Gratton, 13-CV-375 (ADS)(AKT),
In this regard, “[t]o prevail on an infringement action [under the Lanham Act, 15 U.S.C. § 1114(l)(a) ], a plaintiff must demonstrate: (1) ‘that it has a valid mark entitled to protection,’ and (2) ‘that the defendant’s use of that mark is likely to cause confusion.’ ” Juicy Couture v. Bella Intern. Ltd.,
Here, the Court finds that the Plaintiff has adequately alleged that it has a valid trademark entitled to protection under the Lanham Act.
However, there is “an essential distinction” “between a deliberate attempt to deceive and a deliberate attempt to compete. Absent confusion, imitation of certain successful features in another’s product is not unlawful and to that extent a ‘free ride’ is permitted.” George Bosch Co. v. Blue Coral, Inc.,
This type of confusion occurs where “рotential consumers initially are attracted to the junior user’s mark by virtue of its similarity to the senior user’s mark, even though these consumers are not actually confused at the time of purchase.” Jordache Enterprises, Inc. v. Levi Strauss & Co.,
With respect to determining whether the use of a mark by the defendant will cause confusion,
[cjourts look to the following factors ...: (1) the strength of the plaintiff’s mark; (2) the similarity of the marks; (3) the compеtitive proximity of the products in the marketplace; (4) the likelihood that the senior user will “bridge the gap” by moving into the junior’s product market; (5) evidence of actual confusion; (6) the junior user’s bad faith in adopting the mark; (7) the respective quality of the products; and (8) the sophistication of the consumers in the relevant market.
Juicy Couture,
It is not clear how an analysis of the eight Polaroid factors interacts with the theory of “initial customer confusion.” Compare Malletier,
In any event, “an application of the so-called Polaroid fаctors on [a] motion to dismiss would be inappropriate because it would involve premature factfinding. See Eliya, Inc. v. Kohl’s Dep’t Stores, No. 06-CV-195 (GEL),
At this juncture of the litigation, the parties dispute the requisite elements for a claim for “initial interest confusion” under the Lanham Act. The Defendants maintain that the Plaintiff has failed to allege confusion as a result of similarity between the Plaintiffs and the Dеfendants’ trademarks, and, therefore, fails to state a claim based on the theory of “initial interest confusion.” On the other hand, the Plaintiff asserts that no such allegation is necessary. Rather, the Plaintiff counters, “initial interest confusion” turns on a defendant’s unauthorized use of the plaintiffs trademark to divert prospective customers from the Defendant to the Plaintiff. With regard to these assertions, the Court agrees with the Defendants.
Although the term “initial interest confusion” was coined in a Ninth Circuit case, Brookfield Communications, Inc. v. West Coast Entertainment Corp.,
For example, in Grotrian, Helfferich, Schulz, Th. Steinweg Nachf,
Similarly, in Mobil Oil Corp.,
It is true, as the Plaintiff contends, that each of these cases, as in this case, concerned a defendant’s use of the plaintiffs trademark, or something resembling that mark, to divert prospective customers looking for a plaintiffs product into the arms of the defendant-competitor. However, the Plaintiff confuses necessity and sufficiency. To state an “initial interest confusion” theory of relief, the Plaintiff must not only allege the Defendant’s unauthorized use of the Plaintiffs trademark, or something resembling that mark, but also a similarity between the parties’ respective marks.
Contrary to the contention of the Plaintiff, neither Cartier nor Brookfield dictate otherwise. In fact, as noted above, Cartier cites Jordache Enterprises, Inc. for the proposition that “initial interest confusion” requires that potential consumers be attracted to the junior user’s mark “by virtue of its similarity to the senior user’s mark.”
In Brookfield,
Here, by contrast, there is no allegation regarding the Defendants’ trademarks, much less that they resembled the Plaintiff’s marks. To the contrary, the amended complaint, in fact, undercuts a theory of “initial customer confusion” inasmuch as the Plaintiff alleges that the Defendants maligned the Plaintiffs “Mr. Steam” products as inferior to the Defendants’ products. In other words, the Defendants’ purpоrted acts in distinguishing the Plaintiffs products from the Defendants’ products renders implausible any inference that there could be confusion about the source of the product. For these reasons, the Court dismisses the Plaintiffs trademark infringement claim under the Lanham Act.
Further, even if the unauthorized use of the Plaintiffs branded products may have helped the Defendants gain “crucial credi
To be sure, the Plaintiff alleges tangible confusion on the part of consumers who may have been under the false impression that the Defendant maintained a regular inventory of the “Mr. Steam” products; that the Plaintiff approved of and endorsed the Defendants’ “resale” of the Plaintiffs products; and that the Defendants effectively traded on the goodwill of the Plaintiffs products. However, the confusion at issue did not result from uncertainty regarding the source of a product, either prior to or at the point-of-sale. To the extent the Plaintiffs allegation suggest an inference of fraud, any such cause of action, which in federal terms would be subject to a heightened pleading standard under Rule 9(b), is not currently before the Court.
D.The Claim for Trаdemark Infringement Under New York State Common Law
“[T]he standards for trademark infringement ... under New York common law are essentially the same as under the Lanham Act.” Twentieth Century Fox Film Corp. v. Marvel Enters., Inc.,
The Court has granted the Defendants’ motion to dismiss the Plaintiffs trademark infringement claim under the Lanham Act. Accordingly, the Court also grants the Defendants’ motion to dismiss the Plaintiffs New York State law trademark infringement claim.
E. The Claim for False Advertising Under the Lanham Act
A person is liable under section 43(a)(1)(B) of the Lanham Act if “in connection with any goods or services ... [he] uses in commerce any ... false designation of origin, false оr misleading description of fact, or false or misleading representation of fact, which ... in commercial advertising or promotion, misrepresents the nature, characteristics, qualities, or geographic origin of his or her or another person’s goods, services, or commercial activities.” 15 U.S.C. § 1125(a)(1)(B). Suit may be brought by “any person who believes that he or she is or is likely to be damaged by such act.” Id. The Second Circuit has identified a “materiality” requirement that the misrepresentation go to an “ ‘inherent quality or characteristic’ of the product.” S.C. Johnson & Son, Inc. v. Clorox Co.,
1. False or Misleading Statement
The false or misleading representation element is shown if either (1) the “challenged advertisement is literally false, i.e., false on its face” or (2) “the advertisement, while not literally false, is nevertheless likely to mislead or confuse customers.” Tiffany (NJ) Inc. v. eBay, Inc.,
At the outset, the Court notes that the amended complaint essentially speaks to four distinct types of alleged “false or misleading rеpresentations” on the part of the Defendants’ or their employees, namely: (1) the display of “Mr. Steam” products on the Defendants’ website; (2) the assertion that the Defendants were temporarily out of the “Mr. Steam” products; (3) positive representations about the Defendants’ products; and (4) negative representations about the Plaintiffs products.
As to the first two categories of representations, the Court finds that the Plaintiff has adequately alleged their falsity for purposes of the Lanham Act. The fact that the Defendant promoted the "Mr. Steam" products on its website, while not false in the literal sense, could imply a false message that the Defendants carried "Mr. Steam" products in its inventory. Similarly, the Court finds that an assertion by an employee of Spa World that the Defendants were temporarily out of stock of the “Mr. Steam” Products could imply a false message that the Defendants carried or intended to carry “Mr. Steam” products in its inventory.
The Defendants contend that positive representations made by Spa World employees about the Defendants’ products are mere puffery: “[s]ubjective claims about products, which cannot be proven either true or false, [that] are not actionable under the Lanham Act.” Lipton v. Nature Co.,
“Puffery is distinguishable from misdescriptions or false representations of specific characteristics of a product.” Castrol Inc.,
Here, although the Plaintiff concedes that the Defendants engaged in some “puffing,” (Amended Compl., at ¶ 26), the Court finds that the Plaintiff alleges sufficient facts to support the inference that the Defendant made “false or misleading representations” in violation of the Lanham Act. In particular, the amended complaint alleges that Spa World employees falsely rеpresented to prospective “Mr. Steam” customers that Spa World products were manufactured in the United States and were “UL” certified (Id. at ¶ 25.); see In re Xerox Corp. Sec. Litig.,
The Defendants submitted documentary evidence disputing these allegations. However, on a motion to dismiss, the Court declines to consider matters beyond the four corners of the complaint, with certain exceptions not applicable here. DiFolco v. MSNBC Cable L.L.C.,
The Court further finds that the allegations concerning negative representations made by Spa World employees about the Plaintiffs products suffice to state the element of “false or misleading representations.” Aсcording to the Plaintiff, “Spa World routinely tells customers that Mr. Steam’s products are of poor quality, are unreliable and sluggish, and are inferior to SteamSpa products.” (Amended Compl., at ¶ 26.) In the Court’s view, these allegations satisfy the element of “false or misleading representations” for a claim of false advertising under the Lan-ham Act.
2. In Commercial Advertising or Promotion
The Defendants further contend that the Plaintiff fails to state that the Defendants’ alleged false or misleading representations were made “in commercial advertising or promotion.” The commercial advertising or promotion element is established if “the contested representations are part of an organized campaign to penetrate the relevant market”; “[p]roof of widespread dissemination within the relevant industry is a normal concomitant of meeting this requirement.” Fashion Boutique of Short Hills, Inc. v. Fendi USA, Inc.,
In any event, the Court finds that the unspecified number of phone calls and interactions between the Defendants' employees and prospective "Mr. Steam" consumers and the online display of the Plaintiffs products on the Spa World website, both albeit without a clear time frame, is sufficient to infer an “organized campaign” on the part of the Defendants.
That said, the Court finds that the Plaintiff makes no attempt to define or allege a “relevant market” for purposes of the false advertising claim. However, the Court finds that affording the Plaintiff leave to replead the facts in support of this element may not be futile. Accordingly, the Plaintiff may file a second amended complaint as to the false advertising claim within thirty days of the date of this order. Because the Court finds that the Plaintiffs false advertising claim fails to state a “relevant market,” the Court declines to consider the remaining elements required to state such a claim.
F. The Claim for Unfair Competition Under the Lanham Act
The Plaintiff also alleges a separate cause of action for unfair competition under the Lanham Act. “Yet under Section 43 of the Act, there is no specific Federal cause of action for unfair competition. Instead unfair competition under the Lan-ham Act is a category of claims consisting primarily of causes of action for false designation of origin and false advertising.” Pot Luck, L.L.C. v. Freeman, 06 CIV. 10195 (DAB),
G. The Claim for Unfair Competition under New York State Common Law
The elements of unfair competition under New York State common law closely parallel the elements of unfair competition under the Lanham Act, except that a plaintiff must show “either actual confusion or a likelihood of confusion, and there must be ‘some showing of bad faith’ on the part of the defendants.” Medisim Ltd. v. BestMed LLC,
H. The New York State Statutory Claims
The Court also raises claims under New York General Business Law § 349 and New York General Business Law § 360-1 et seq. The Judicial Code states that a district court “may decline to exercise supplemental jurisdiction over a claim under subsection (a) if ... the district court has dismissed all claims over which it has original jurisdiction ...” 28 U.S.C. § 1367(c)(3).
Having dismissed the Lanham Act claims, the Court declines to exercise supplemental jurisdiction over the remaining New York State statutory claims pursuant to 28 U.S.C. § 1367(c)(3). The Court addressed the Plaintiffs New York State common law claims because they are decided under nearly indistinguishable standards as the Lanham Act claims. In this regard, nothing in the text of 28 U.S.C. § 1367(c)(3) prevents a Court from exercising supplemental jurisdiction over some, but not all, of the relevant state law claims. Rather, 28 U.S.C. § 1367(c)(3) merely requires the dismissal of all claims over which the Court had original jurisdiction, a precondition satisfied here.
However, the Court notes that, if the Plaintiff files a second amеnded complaint reasserting the claim for false advertising under the Lanham Act, the Plaintiff may also reassert these New York State statutory claims.
III. CONCLUSIONS
In sum, the Court denies as moot the motion to dismiss the initial complaint. The Court grants the motion to dismiss the amended complaint and the amended complaint is dismissed in its entirety. The Plaintiffs false advertising claim under the Lanham Act and the New York State statutory claims are dismissed without prejudice. The Plaintiff is given thirty days from the date of this order to file a second amended complaint with regard to the causes of action for false advertising under the Lanham Act and the New York State statutory claims. If the Plaintiff fails to
SO ORDERED.