CLIENT ALERT: Second Circuit Reverses Chloé v. Queen Bee – Finds Personal Jurisdiction Over Internet Counterfeiter
The Second Circuit Court of Appeals has reversed the controversial decision in the Chloé v. Queen Bee case, in which the U.S. District Court for the Southern District of New York refused to exercise jurisdiction over an Internet counterfeiter located in California (Chloé v. Queen Bee of Beverly Hills, LLC, 571 F.Supp.2d 518 (S.D.N.Y.2008)).
Plaintiff Chloé, the luxury handbag maker, had sued defendants Queen Bee of Beverly Hills and its principal Simone Ubaldelli in New York for trademark infringement and counterfeiting, based on the defendants’ shipment of a single counterfeit Chloé handbag from California to New York. The shipment was a “trap sale” orchestrated by Chloé’s attorneys, located in New York. Although Chloé provided evidence that the defendants had made numerous sales of other (non-Chloé) goods to customers located in New York, the district court found such sales were not sufficiently related to Chloé’s claims for trademark infringement to satisfy New York’s long-arm statute or due process under the Constitution, and ultimately declined to exercise jurisdiction over Ubaldelli based on the single New York transaction.
The Second Circuit Court of Appeals reversed, finding that the district court had too narrowly construed the nexus requirement for personal jurisdiction. The Second Circuit went so far as to say that the defendant’s single act of shipping a counterfeit Chloé bag to a customer in New York might be sufficient, by itself, to subject the defendant to jurisdiction under section 302(a)(1) of the New York long-arm statute. However, the Court said that it did not need to resolve this issue because the evidence established that the defendant did have minimum contacts with New York: the defendant operated a “highly interactive” website that offered Chloé bags for sale to New York consumers and that permitted New York consumers to purchase such goods, and the defendant had engaged in over fifty other transactions with customers located in New York. “Viewed in their totality” the court said, “these contacts sufficiently demonstrate [defendant’s] availment of the benefits of transacting business in New York.” The Court was not troubled by the fact that the defendant’s additional sales to New York were not of Chloé products, viewing them as evidence of the defendant’s larger business plan that was purposefully directed at New York consumers.
Although Chloé also argued that jurisdiction was proper under the Supreme Court’s Calder v. Jones “effects test,” on the basis that trademark infringement is a tort and its effects will be felt in New York where the trademark owner Chloé is located, the Court of Appeals declined to decide the jurisdictional issue under this theory.
In a case involving similar facts, the District of Massachusetts denied a motion to dismiss for lack of personal jurisdiction filed by a defendant accused of sellingcounterfeit goods whose only contact with the forum consisted of maintaining an eBay posting that made the allegedly counterfeit goods available to prospective customers in Massachusetts, and a single sale of an allegedly counterfeit product to plaintiff’s agent in Massachusetts. The Massachusetts court went on to note that had there been no sales by the defendant in Massachusetts, the defendant would still be subject to jurisdiction there because the plaintiff trademark owner is located in Massachusetts. The Court relied on Venture Tape Corp. v. McGills Glass Warehouse, 292 F.Supp.2d 230 (D. Mass. 2003), which found a defendant should reasonably anticipate being haled into court in Massachusetts if it is accused of committing the tort of trademark infringement against a Massachusetts-based company.
The decision is Chloé v. Queen Bee, 09-3361-cv (2nd Circuit, Aug. 5, 2010). The Massachusetts decision is Bose Corp. v. John Neher, et al., 09-11479-PBS (D. Mass., July 13, 2010).