United States District Court, E.D. New York
INNOVATION VENTURES, LLC; LIVING ESSENTIALS, LLC; and INTERNATIONAL IP HOLDINGS, LLC, Plaintiffs,
ULTIMATE ONE DISTRIBUTING CORP., et al., Defendants. MIDWEST WHOLESALE DISTRIBUTORS, INC.; WALID JAMIL; and JUSTIN SHAYOTA, Counter-Plaintiffs,
INNOVATION VENTURES, LLC; LIVING ESSENTIALS, LLC; INTERNATIONAL IP HOLDINGS, LLC; and ROBERT McCORMACK
MEMORANDUM AND ORDER
KIYO A. MATSUMOTO, District Judge.
Plaintiffs Innovation Ventures, LLC; Living Essentials, LLC; and International IP Holdings, LLC (collectively, "plaintiffs" or "Living Essentials") commenced this action against defendants, various individuals and businesses involved in the manufacturing and distribution of 5-hour ENERGY, raising trademark infringement and other claims pursuant to the Lanham Act, 15 U.S.C. § 1051 et seq., the Copyright Act, 17 U.S.C. § 106, as well as New York statutory and common law. ( See generally ECF No. 291, Seventh Am. Compl. filed 12/28/12 ("Seventh Am. Compl.").) Among the defendants named in the complaint are Midwest Wholesale Distributors, Inc.; Walid Jamil also known as Wally Jamil; and Justin Shayota (collectively, the "Midwest Parties" or "counter-plaintiffs"). In their first amended answer to Living Essentials' seventh amended complaint, the Midwest Parties bring, inter alia, (1) counterclaims against Living Essentials, alleging that Living Essentials engaged in fraudulent misrepresentation and innocent misrepresentation in violation of unspecified state law (ECF No. 499, Midwest Parties' First Am. Answer, First Am. Counterclaim against Living Essentials filed 4/5/13 ("Am. Counterclaim"), at 36-41), and (2) a third-party complaint against impleaded third-party defendant Robert McCormack ("McCormack"), a "high-ranking employee of Living Essentials, " alleging counts of fraudulent misrepresentation, innocent misrepresentation, silent fraud, indemnification, and contribution. (ECF No. 499, Midwest Parties' First Am. Answer, First Am. Third-Party Complaint filed 4/5/13 ("Third-Party Compl.") at 46-50.)
Pending before the court are Living Essentials' and McCormack's (collectively, the "Living Essentials Parties") motions to dismiss the Midwest Parties' First Amended Counterclaim against Living Essentials and the First Amended Third-Party Complaint against McCormack pursuant to Federal Rules of Civil Procedure 12(b)(6) and 9(b). (ECF Nos. 608 and 609, Notices of Motions dated 6/28/13; ECF No. 610, Living Essentials' and McCormack's Combined Memorandum of Law in Support of Motions to Dismiss dated 6/28/13 ("LE's Mem.").)
For the following reasons, Living Essentials and McCormack's motions to dismiss are both granted in their entirety. Accordingly, Midwest's first amended counterclaim against Living Essentials, and Midwest's first amended thirdparty complaint against McCormack, are dismissed with prejudice.
I. Statement of Facts
The following facts from the Midwest Parties' First Amended Answer are assumed to be true for the purposes of Living Essentials' and McCormack's motions to dismiss.
Counter-plaintiff Midwest Wholesale Distributors, Inc. ("Midwest"), is a re-packer and wholesale distributor of daily household products in Michigan and California. (Am. Answer at 37, ¶ 9.) Midwest is a Michigan corporation with its principal places of business located in Troy, Michigan, and San Diego, California. ( Id. at 36, ¶ 1.) Counter-plaintiff Justin Shayota is the owner of Midwest, and is the nephew of counter-plaintiff Walid Jamil ("Jamil"). ( Id. at 36, ¶¶ 10-11.) Jamil assisted Justin Shayota in "getting Midwest's business off the ground" and Jamil's personal residence serves as the resident agent office for the company, but Jamil is not an officer, director, or shareholder of Midwest Wholesale. ( Id. at 37, ¶ 11.)
"At some point between May and July of 2011, " Jamil "participated" in a telephone conference with Robert McCormack, a "high-ranking" employee of Living Essentials, and Justin Shayota, the owner of defendant Baja Exporting, LLC and Tradeway International, Inc., d/b/a Baja Exporting (collectively, "Baja"). ( Id. at 37, ¶ 12.) At the time of the conference call, Baja was an authorized distributor of 5-hour ENERGY with "exclusive rights to distribute and sell [5-hour ENERGY] in Mexico, and non-exclusive rights to distribute and sell [the product] in the United States." ( Id. at 37, ¶ 14.) During the telephone conference, Joseph Shayota informed McCormack that it was difficult to sell 5-hour ENERGY in Mexico. ( Id. at 38, ¶ 15.) According to the Midwest Parties, McCormack then directed Joseph Shayota "to arrange for transportation of the 5 Hour from Mexico to the United States and to engage a company to re-label and re-package 5 Hour from Spanish/Mexican labels to English/United States labels for sale in the United States." ( Id. at 38, ¶ 16.)
At an unspecified later date, Baja hired Midwest for the re-labeling and re-packaging work. (Am. Answer at 38, ¶ 16.) Midwest, in turn, hired Leslie Roman ("Roman") to supply 5-Hour labels and boxes. ( Id. at ¶ 19.) Roman represented to Jamil that Roman was the owner of One Stop Label and that the company made official 5-hour labels and boxes, and Midwest understood Roman to be an authorized supplier of 5-hour labels and boxes. ( Id. at ¶ 17-18).
In or around October 2011, Roman "directed" Midwest to purchase a printer and other equipment, for a total cost of $50, 000, for the purposes of "coding and printing expiration dates." ( Id. at ¶ 20.) In November and December of 2011, Midwest issued invoices to Baja for $451, 500. ( Id. at ¶¶ 22-23.) In late 2011 or early 2012, Joseph Shayota told Jamil that Baja had lost its exclusive distributorship rights for 5-hour ENERGY in Mexico, and directed Midwest to find a replacement "packer, " someone who could manufacture or make the 5-hour product from scratch. ( Id. at 39, ¶ 24.) Roman represented to Jamil that Roman's partner, Juan Romero ("Romero"), was an authorized 5-hour packer, and Midwest relied on this information to hire Romero. ( Id. at ¶¶ 25-26.)
Romero began delivering the 5-hour product to Midwest in unmarked bottles, which Midwest labeled and packed using the labels and boxes supplied by One Stop Label and Roman. ( Id. at ¶¶ 26-27.) Midwest then delivered the 5-hour product to Baja for further distribution. ( Id. at ¶ 27.)
In May 2012, Midwest was directed by Baja and Joseph Shayota to continue labeling and packaging the 5-hour product manufactured by Romero, but to deliver the product to Baja and to Dan-Dee Company ("Dan-Dee"), a distributor in California. ( Id. at ¶ 28.) Dan-Dee's owners represented that Dan-Dee was an authorized 5-hour distributor. ( Id. at ¶ 29.) Midwest continued engaging in its labeling and packaging activities until late October or early November of 2012. ( Id. at ¶ 30.)
II. Procedural History
On October 25, 2012, Living Essentials filed a complaint in the Eastern District of New York alleging that various defendants engaged in the manufacture and distribution of 5-hour ENERGY had counterfeited the trademarked product. ( See ECF No. 1, Compl. filed 10/25/12.) The Midwest Parties were not named in the complaint. On October 29, 2012, Living Essentials executed seizure orders in a similar action that was originally filed in the Northern District of California. (See ECF No. 16, Second Am. Compl. filed 11/1/12.) Through the execution of these seizure orders, Living Essentials learned of the existence of the Midwest Parties and named Justin Shayota and Midwest as defendants in their Second Amended Complaint in this action. (Second Am. Compl. at 8-9.) Jamil was named as a defendant in Living Essentials' Third Amended Complaint. (ECF No. 26, Third Am. Compl. filed 11/6/12.)
On February 19, 2013, the Midwest Parties filed their first Answer to Living Essentials' Seventh Amended Complaint, bringing counterclaims against Living Essentials as well as a third-party complaint against McCormack. ( See ECF No. 392, Midwest Answer dated 2/19/13.) In response to Living Essentials' letter requesting a pre-motion conference for a motion to dismiss the counterclaims pursuant to Rule 12(b)(6) and Rule 9(b), the Midwest Parties dismissed a number of frivolous counterclaims and filed the First Amended Answer, First Amended Counterclaim against Living Essentials, and First Amended Third-Party Complaint against McCormack that are at issue in the pending motions. ( See ECF No. 422, LE's Letter Requesting Pre-Motion Conference dated 2/28/13; Am. Answer.) The Midwest Parties bring counterclaims of fraudulent misrepresentation and innocent misrepresentation against Living Essentials, and allege that McCormack is liable for fraudulent misrepresentation, innocent misrepresentation, silent fraud, indemnification, and contribution. ( See Am. Answer.)
I. Standard of Review under Rule 12(b)(6)
To survive a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), "a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its fact.'" Ashcroft v. Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). This standard is met "when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. A court should not dismiss a complaint for failure to state a claim if the factual allegations sufficiently "raise a right to relief above the speculative level." Twombly, 550 U.S. at 555. In deciding a motion to dismiss pursuant to Rule 12(b)(6), the court "accept[s] as true all factual statements alleged in the complaint and draw[s] all reasonable inferences in favor of the non-moving party." McCarthy v. Dun & Bradstreet Corp., 482 F.3d 184, 191 (2d Cir. 2007). The court's function "is merely to assess the legal feasibility of the complaint, not to assay the weight of the evidence which might be offered in support thereof." Geisler v. Petrocelli, 616 F.2d 636, 639 (2d Cir. 1980). "[T]he issue is not whether a plaintiff will ultimately prevail but whether the claimant is entitled to offer evidence to support the claims." Todd v. Exxon Corp., ...