Second Circuit Holds That Shipping a Single Counterfeit Item to New York May Support Personal Jurisdiction When Combined with Other Business Activity in New York
On August 5, 2010, the Second Circuit issued an important decision affecting a brand owner’s ability to establish personal jurisdiction against out-of-state defendants involved in the online sale of counterfeit goods. In Chloe v. Queen Bee of Beverly Hills, LLC, the Second Circuit vacated a Southern District of New York (“SDNY”) decision dismissing an anti-counterfeiting case for lack of personal jurisdiction. See Chloe v. Queen Bee of Beverly Hills, LLC, 571 F. Supp. 2d 518 (S.D.N.Y. 2008) (hereafter “District Court op.”), vacated and remanded, 2010 U.S. App. LEXIS 16192 (2d Cir. 2010) (hereafter “Second Circuit op.”).
In Queen Bee, Chloe sued several defendants including Queen Bee of Beverly Hills, LLC and its partners Rebecca Rushing and Simone Ubaldelli for trademark infringement and counterfeiting arising out of the defendants’ sales of counterfeit Chloe® handbags. District Court Op. at 521. Individual defendant Ubaldelli moved to dismiss for lack of personal jurisdiction, arguing that one sale to an employee of the plaintiff’s attorneys’ law firm—a so-called “manufactured contact”—was insufficient to confer personal jurisdiction on him See id. at 524. The district court dismissed the claims against Ubaldelli, reasoning that, among other grounds, “it would violate due process to permit a plaintiff to manufacture personal jurisdiction by purchasing an allegedly infringing product in a plaintiff’s forum of choice.” Id. at 526 & 530. In its decision, the district court acknowledged the existence of conflicting precedent within the SDNY on that jurisdictional issue. While some SDNY decisions have held that personal jurisdiction in a trademark infringement case can not derive solely from Internet sales “manufactured” by the plaintiff or its representatives, see District Court Op. at 524-525; citing Mattel v. Anderson, No. 04 Civ. 5275, 2005 U.S. Dist. (S.D.N.Y. July 18, 2005), others have found personal jurisdiction based solely on the solicitation of Internet sales and a shipment into New York initiated by a plaintiff representative. See District Court Op. at 524-525, citing Mattel v. Procount Bus. Svcs., No. 03 Civ. 7234, 2004 U.S. Dist. LEXIS 3895 (S.D.N.Y. Mar. 10, 2004); Mattel v. Adventure Apparel, No. 00 Civ. 4085, 2001 U.S. Dist. LEXIS 3179 (S.D.N.Y. Mar. 22, 2001).
In an important win for brand owners, the Second Circuit vacated the district court’s decision and held that “Ubaldelli’s single act of shipping an item into New York combined with the substantial business activity of Queen Bee, the entity with which Ubaldelli was affiliated, involving New York, g[a]ve rise to personal jurisdiction over Ubaldelli.” Second Circuit Op. at *3. The Second Circuit found that both New York’s long arm statute and the Due Process Clause of the Constitution were satisfied. The court noted that defendants’ repeated sales of non-Chloe® designer merchandise to New York consumers showed that “the shipment of a counterfeit Chloe Bag was not . . . a ‘one-off transaction’ . . . but rather a part of a larger business plan purposefully directed at New York consumers.” Id. at *20. It also found that N.Y. C.P.L.R. Section 302(a)(1) was satisfied by Ubaldelli’s shipment of a counterfeit bag into the state and Queen Bee’s highly interactive website, which offered those bags for sale to New York consumers. See id. at *28. In addition, the court held that jurisdiction over Ubaldelli comported with due process requirements because “Queen Bee  developed and served a market for its products” in New York, and Ubaldelli’s “generalized complaints of inconvenience” arising from having to defend himself in New York did not render the assertion of jurisdiction unreasonable. Id. at *31 & * 37. The Court left unanswered, however, whether a single shipment to an agent of the plaintiff may “by itself, constitute an act of trademark infringement.” Id. at *14-*16 n.3.
The import of the jurisdictional issues at play in Queen Bee were further emphasized by attention the case received from the International Trademark Association. INTA filed an amicus brief in support of Chloe’s position, arguing that the Second Circuit should reverse the district court and find jurisdiction.