A trademark infringement action can be brought against an out-of-state employee of an online retailer who sent a bogus handbag to a Bronx, N.Y., address from a website that offered merchandise to New York consumers, a federal appeals court has ruled.
Simone Ubaldelli, a California resident and principal of Queen Bee of Beverly Hills, contended that the fashion company Chloé could not sue him in New York based on the one-time Internet-based sale of the fake designer purse.
Reversing a judgment of the district court, the U.S. Court of Appeals for the Second Circuit held that Mr. Ubaldelli's single act, combined with the fact that Queen Bee had made at least 50 sales of non-Chloé merchandise to New Yorkers through its online site, gave rise to personal jurisdiction under the state's long-arm statute.
Queen Bee's "additional contacts show that the shipment of a counterfeit Chloé bag was not, as the district court thought, a 'one-off transaction'…but rather a part of a larger business plan purposefully directed at New York consumers," Judge Peter W. Hall wrote in Chloé v. Queen Bee of Beverly Hills, LLC, 09-3361-cv.
In 2005, Chloé discovered that Queen Bee, an online retail discount designer incorporated in Alabama, was hawking counterfeit copies of the French designer's $1,600 leather handbag on its Web site.
Chloé's law firm, Kalow & Springut, directed a paralegal to place an online order for a Chloé "Paddington" bag and have the purse sent to her Bronx address.
The bag, which later proved to be phony, arrived with a shipping label bearing the Beverly Hills address of Mr. Ubaldelli, one of two principals of Queen Bee.
According to the decision, at least 52 other non-Chloé items were sent from Queen Bee's website to New York consumers.
Chloé sued Mr. Ubaldelli and five other defendants for trademark infringement in New York.
While the suit was stayed against Queen Bee, which filed for bankruptcy, Mr. Ubaldelli moved to dismiss the action for lack of personal jurisdiction.
On June 29, 2009, Southern District Judge Richard J. Holwell granted Mr. Ubaldelli's motion, finding that "a single internet-based sale of a counterfeit retail product is insufficient to establish personal jurisdiction over an out-of-state defendant."
The judge agreed that evidence detailing 52 instances in which Queen Bee shipped merchandise to New York "indicate[d] Queen Bee's purposeful availment of the New York forum for some business activity."
However, he held that the website did not support the exercise of personal jurisdiction since it "did not target New York residents specifically, but made products available for sale to consumers worldwide."
The Second Circuit disagreed.
After finding that Mr. Ubaldelli either shipped or was responsible for the shipment of the bogus Chloé bag to New York, the circuit reviewed Queen Bee's contacts with the state.
"We think the district court's characterization of Defendants' non-Chloé sales as constituting purposeful availment of New York only for 'some business activity,' but not for 'the purpose of selling Chloé handbags…' too narrowly construes the nexus requirement, which merely requires the causes of action to 'relate to' defendant's minimum contacts with the forum," Judge Hall wrote.
He concluded that Queen Bee's New York activities could be imputed to Mr. Ubaldelli, who split the profits from the bags sold by Queen Bee, had joint access to the company's bank account, and "shared in the decision-making and execution of the purchase and sale of handbags."
"Viewed in totality, these contacts sufficiently demonstrate Ubaldelli's purposeful availment of the benefits of transacting business in New York," Judge Hall wrote.
In addition to upholding jurisdiction based on §302(a) of the state's long-arm statute, the circuit found that it did not "offend due process to require Ubaldelli to answer in New York for the consumer confusion allegedly caused there through his purposeful direction of bags into the state."
Judges Reena Raggi and Gregory W. Carman of the U.S. Court of International Trade, sitting by designation, joined the decision.
Milton Springut and Tal S. Benschar of Kalow & Springut represented Chloé.
Michael Konopka, who represented Mr. Ubaldelli, said that while he was disappointed with the decision, he expects his client will prevail at trial.
David H. Bernstein and Christopher J. Hamilton of Debevoise & Plimpton, as well as Steven B. Pokotilow of Stroock & Stroock & Lavan and John W. Crittenden of Cooley Godward Kronish represented the International Trade Association, which submitted an amicus brief on behalf of Chloé.
"The decision makes clear that online counterfeiters can't avoid jurisdiction by claiming that they are not physically present in New York," Mr. Bernstein said in an interview.