Law School Case Brief
Gucci Am., Inc. v. Frontline Processing Corp. - 721 F. Supp. 2d 228 (S.D.N.Y. 2010)
To satisfy due process, a party seeking the exercise of jurisdiction over an out-of-state defendant must demonstrate that the assertion of jurisdiction comports with traditional notions of fair play and substantial justice - that is, whether it is reasonable under the circumstances of the case. Five factors are considered to determine the reasonableness of jurisdiction: (1) the burden of jurisdiction on the defendant; (2) the interest of the forum in adjudicating the case; (3) the plaintiff's interest in convenient and effective relief; (4) the judicial system's interest in obtaining the most efficient resolution of the dispute; and (5) the shared interests of the states in furthering "social substantive policies." Where the other elements for jurisdiction have been met, dismissals on reasonableness grounds should be "few and far between."
This case arises out of Gucci America, Inc.'s (Gucci) attempts to eliminate online sales of counterfeit products and the unauthorized use of the Gucci Marks. In Gucci America, Inc., et al. v. Laurette Company, Inc., et al., No. 08 Civ. 5065(LAK), Gucci brought suit in the federal district against certain defendants, collectively known as the "Laurette Counterfeiters" or "Laurette," for the sale of counterfeit Gucci products on a website called "TheBagAddiction.com." Through this website, the Laurette Counterfeiters sold a variety of "replica" luxury products, and, in particular, sold replica Gucci products under the Gucci name, with the various Gucci registered trademarks, and at fractions of the retail price for an authentic version. Eventually, Laurette consented to the entry of judgment and admitted liability for counterfeiting activities.
Gucci brought the present action against three companies, Durango Merchant Services, Frontline Processing Corporation, and Woodforest National Bank, who allegedly assisted the Laurette Counterfeiters and other similar website operators.
Should the motion to dismiss be granted on personal jurisdiction and failure to state a claim grounds?
N.Y. C.P.L.R. 302(a)(3)(ii) jurisdiction was proper over defendants because (1) the manufacturer's claims arose from their torts committed outside New York, (2) a New York company was hurt, (3) each had substantial revenue from interstate commerce, and (4) each knew their business with the seller would have New York consequences. Personal jurisdiction did not offend due process because they had minimum New York contacts, purposefully availed themselves of doing business there, and jurisdiction was reasonable. They were not directly or vicariously liable for infringement because they (1) did not use a mark in commerce, and (2) were not the seller's partner. A processor's contributory liability was pled because (1) serving high risk clients induced infringement, and (2) it helped avoid customers knowing the goods were fakes, but the other processor and the bank did not help set up the seller's credit card processing. The bank's and the other processor's contributory liability was pled because they (1) knew or were blind to infringement, and (2) could stop the seller's sales.
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