S & L Vitamins v. Australian Gold - S & L Vitamins Trial Brief

Case 2:05-cv-01217-JS-MLO Document 150
Document Filed 01/05/2009

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UNITED
UNITED STATES
STATES DISTRICT
DISTRICTCOURT
COURT
DISTRICT OF
EASTERN DISTRICT OF NEW
NEW YORK
YORK
Ronald D. Coleman (RC 3875)

Joel G. MacMull
Joel G. MacMull
GOETZ FITZPATRICK
FITZPATRICK LLP
One
One Penn Plaza, Suite
Penn Plaza, Suite 4401
4401
New York, NYNY 10119
10119
(212)
(212) 695-8100
695-8100 Phone
Phone
Attorneys for Plaintiff S &
& LL Vitamins
Vitamins and
and
Third-Party
Third-Party Defendant
Defendant Larry
Larry Sagarin
Sagarin
S
S&& L VITAMINS,
VITAMINS, INC., CIVIL
CIVIL ACTION
ACTION NO.
NO.
Plaintiff, 05-CV-1217 (JS)

(JS) (MLO)
(MLO)
- vs.
vs. –-
AUSTRALIAN
AUSTRALIAN GOLD,
GOLD, INC.,
Defendant.
Defendant. TRIAL
TRIALMEMORANDUM
MEMORANDUMOF OFS&L
S&L
VITAMINS,
VITAMINS,INC.
INC.AND
ANDLARRY
LARRY
AUSTRALIAN SAGARIN
SAGARIN
AUSTRALIAN GOLD,
GOLD, INC.,
Third Party Plaintiff,

Party Plaintiff,
- vs.
vs. –-
LARRY
LARRY SAGARIN
SAGARINAND
ANDJOHN
JOHNDOES
DOES 1-10,
1-10,
Third Party
Third Party Defendants.
Defendants.
PRELIMINARY
PRELIMINARYSTATEMENT
STATEMENT
Plaintiff and
and counterclaim
counterclaim defendant
defendant S&L Vitamins,
Vitamins, Inc.
Inc.and
andcounterclaim
counterclaim defendant
defendant
Larry Sagarin, (jointly “S&L”)

Sagarin, (jointly “S&L”)hereby
herebysubmit
submitthis
thismemorandum
memorandum of law
law setting
setting forth
forth the
the facts
facts
which
which they
they intend
intend to
to establish
establish at trial
trial and
and the legal authority
authority supporting
supporting their
theirvarious
variousdefenses.
defenses.
On August
August 24,
24, 2005,
2005,Counterclaimant
Counterclaimant/ /third
thirdparty
partyplaintiff
plaintiffAustralian
AustralianGold,
Gold,Inc.
Inc.(“AG”)
(“AG”)
filed aa Second
Second Amended
Amended Answer,
Answer, etc.,
etc., containing
containing ten
tencounterclaims
counterclaims (plus
(plus aa demand
demand for
for
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“injunctive
“injunctive relief”
relief”styled
styledas
asaa separate counterclaim). In
separate counterclaim). In the
the course
course of two
two motions
motions to
to dismiss,
dismiss,
seven
seven of those,
those, including
including claims
claims for
forcopyright
copyrightinfringement,
infringement,false advertising,
false advertising,consumer
consumer
protection, various varieties of trademark

trademark infringement,
infringement, trademark
trademark dilution,
dilution,and
and conspiracy,
conspiracy, have
have
been dismissedbybythis
been dismissed thisCourt.
Court. What
What is left are
are AG’sclaims
AG’sclaims for (i)
(i)tortious
tortious interference
interference with
contract; (ii)
(ii) trademark
trademark infringement and
and unfair
unfair competition
competition under
under Section
Section 43(a) of the
the Lanham
Lanham
Act based upon S&L’s

based upon S&L’s use of AG’s
use of AG’s marks
marks on its website to sell AG products;
products; and (iii) aa Section
and (iii) Section
133 claim under New York

York General
General Business
Business Law against S&L that
against S&L that isis essentially
essentially the
the state
state law
cognate of claim
cognate of claim (ii).
(ii). See Australian Gold’s
See Australian Gold’s Claims
Claims For
For Relief
Relief (Dkt.
(Dkt. No.
No. 141)
141) at
at 2.
At trial,
trial, S&L
S&Lwill
willdemonstrate
demonstratethat
that(i)(i)AG
AGhashas
notnot
proved thethe
proved elements
elementsofof
tortious
tortious
interference with contract,

interference with contract, (ii)
(ii) AG’s
AG’s Lanham
Lanham Act
Act claims
claims are
are without
withoutmerit,
merit,asasAG
AGhas
hasnono
evidence of either
evidence of either aa likelihood
likelihood of confusion
confusion or damages; and(iii)
damages; and (iii) AG’s New
New York
York General
General
Business Law Section

Business Law Section 133
133 claim cannot
cannot be
be sustained becauseAG
sustained because AG cannot
cannot prove
prove that
that S&L
“intend[ed]
“intend[ed]to
todeceive
deceive or
or mislead
mislead the
the public,”
public,”as
asrequired
requiredunder
under the
the statute.
statute.
STATEMENT
STATEMENT OF
OF FACTS
FACTS
AG, which
which is
is in
inthe
the role
roleofofplaintiff
plaintiffatattrial,
trial,has
hasmaterially
materiallyaltered
altereditsitsconcept
concept ofofthe
the
factual premisefor
factual premise for the
the wrongs
wrongsdone
donetotoitit by
by S&L from
from the
the time
time of
ofits
itsfirst
firstcease
cease and
and desist
desist
letters, through two versions

versions of
of its
itspleadings,
pleadings, utterly
utterlyevasive
evasiveand
and never-supplemented
never-supplemented discovery
responses, countlesshearsay-laden,
responses, countless hearsay-laden,unsupported
unsupportedassertions
assertionstotothe
theCourt
Courtboth
bothorally,
orally, on
on the
the record
record
and off, and

and off, in writing, and
and in and finally not
not only through
through its submission
submission ofofits
its trial
trial brief
brief but
but in all
probability right through

through the
the trial of
of this
this matter.
matter. These
These evergreen versionsofofAG’s
evergreen versions AG’s “litigation
“litigation
truth”
truth” have
have morphed
morphed and
and strained
strained and doubled back
and doubled on themselves
back on themselves for
for the
the simple
simple reason that AG
reason that AG
seeks to find
seeks to find aa set
setof
of facts,
facts, some
someset
setofoffacts,
facts,that
thatititcan
canadjust
adjusttotowhat
whatlittle
littleisisleft
left of
of its claims in
this case.
case. The
The Court
Court has
has permitted AG
AG every
every conceivable
conceivable latitude
latitude to
to enunciate,
enunciate, however late in
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the process,
process,new
newand
andoften
often“creative”
“creative” theories
theories of
of liability,
liability, to
tocontinue
continuediscovery
discoveryand
andamendment
amendment
of the pretrial order essentially

essentially indefinitely
indefinitely –
- and
and despite AG’s proofs,
despite all this, AG’s proofs, combined with a
sober assessmentofofthe
sober assessment thelegal
legalstandards
standardsat attrial,
trial,will
will fail
fail completely
completely to meet
meet its
its burdens
burdens to
establish S&L’s liability.

establish S&L’s liability.
Yet precisely because AG’s factual

because AG’s factual claims
claims are
areaamoving
moving target
targetand
andititwill
will not be held to
finality
finality or
or accountability
accountability in
in its
its disparate ways of framing of them
disparate ways them right up
up through
through the day of
trial, S&L’s
S&L’s final
finalfactual
factual“case”
“case”must
must abide
abide that
that trial. This
Thisbrief
brieffocuses,
focuses, therefore,
therefore, mainly on
on
key legal principles

principles applicable
applicable to the
the broadest possible interpretation
broadest possible interpretationof
of AG’s factual
factual claims.
claims.
The following
following factual
factual outline,
outline, however,
however, can
can be confidently asserted
asserted –- for both the record
record of four
years of dispute,
years of dispute, plus
plus the
thefactual
factualreality,
reality, are
aresuch
suchthat
thatAG
AGwill
will not
not be
be able
ableto
torebut
rebutititatattrial.
trial. That
basic outline is this:
AG
AG has
has never identified, in
never identified, indiscovery
discoveryororotherwise,
otherwise,aasingle
singletransaction
transactionbased
based on
on aa sale
sale of
Product
Product by an
an AG
AGdistributor
distributortotoS&L.
S&L.AGAG
distributors are are
distributors contractually prohibited
contractually from
prohibited from
publicizing
publicizing their
their status asAG
status as AG distributors.
distributors. AG
AG has never informed
has never informed S&L
S&L –
- before,
before, during or after
this litigation
litigation -–that
thataaparty
partyfrom
fromwhich
whichititwas
wasmaking
makingpurchases
purchases of
of Product
Product was, in fact, an AG
distributor. S&L
S&Lhas
hasnever
neverknowingly,
knowingly,and
andbased
basedon
onthe
theevidence
evidence proposed
proposed to be
be proferred
proferred at
at
trial
trial by
by AG
AGititdoes
doesnot
notappear
appear that AG
AG can
can show that S&L
S&L ever
ever unknowingly,
unknowingly,purchased
purchased Product
from an AG distributor,
distributor, knowingly
knowingly received
received aa shipment
shipment of Product from an
Product from an AG distributor, or
ever engagedin
ever engaged in any
any transaction,
transaction,including
including placing
placing an
an order
order with
with or making
making aa payment
payment to, any
any
AG distributor.
distributor. S&L
S&Lmakes
makesititorders
ordersfor
forProducts
Products only
onlythrough
through persons
persons it knows
knows to be
be retail
salons. AG cannot
salons. AG cannot prove
prove any facts
facts recognized
recognized by any
any known
known legal
legal standard
standard that
that tend
tend toto
demonstrate S&L induced any

demonstrate S&L any third
third person
person to
to breach
breachits
itscontract
contractwith
withAG.
AG. There
There is no proof that
any third person actually did

person actually did breach
breachits
itscontract
contractwith
withAG
AG as
asaaresult
resultofofthe
theactions
actionsofofS&L.
S&L. AG
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cannot prove that

cannot prove that an
an established
establishedretail
retailsalon
salonisis“in
“in reality”
reality” not a salon at all, but
salon at but is,
is, rather,
rather, aa
“confederate” of S&L
S&Lor
orthat
that there
there is
is any
any other reason
reasonS&L
S&L is prohibited from buying from
from such
such
a salon.
a salon.
There is no
There is no actual
actual confusion
confusionarising
arisingfrom
from S&L’s
S&L’s use
use of
of any
any AG trademark on S&L’s
trademark on
website.
website. There
There is proof that could tend
tend to
to show
show aalikelihood
likelihood of
of confusion arising
arising from
from S&L’s
S&L’s use
use
of any
any AG
AG trademark
trademark on S&L’s
S&L’s website.
website. AG
AGhas
hasnot
notbeen
been damaged in the
damaged in the slightest
slightest by
by S&L’s
S&L’s
sales of genuine
sales of genuineAG
AG Product
Productunder
underany
anytheory
theoryofofliability.
liability.
ARGUMENT
ARGUMENT
I. AUSTRALIAN
AUSTRALIANGOLD’S
GOLD’SCANNOT
CANNOTMEET
MEETTHE
THELEGAL
LEGALSTANDARD
STANDARDTOTO
DEMONSTRATE
DEMONSTRATE TORTIOUS
TORTIOUSINTERFERENCE
INTERFERENCEWITH
WITHCONTRACT
CONTRACT
UNDER NEW YORK
YORK LAW.
LAW.
AG
AG asserts that S&L
asserts that S&L has tortiously interfered
has tortiously interfered with
withthe
the contracts
contracts between AG and its
various distributors which prohibit

prohibit sales
sales by distributors Australian Gold Products (“Products”) to
Products (“Products”)
persons reselling Products

persons reselling Productson
onthe
theInternet.
Internet. AG
AG has
has no
no evidence
evidenceof
ofS&L
S&L contacting aa distributor,
distributor,
making a purchase
purchasefrom
fromaadistributor,
distributor,or
orcommunicating
communicatingininany
anyway
waywith
withaadistributor.
distributor. AG
nonetheless arguesthat
nonetheless argues thatS&L’s
S&L’s purchase
purchase of
of Products
Products outside
outside of
of its
its closed
closed distribution
distribution system
system is
is
an act
act of
of unlawful
unlawful “diversion”
“diversion”properly
properlycaptured
captured by
by the
the tort
tort of
of tortious
tortious interference with contract.
interference with contract.
See Australian Gold’s

See Australian Gold’s Trial
TrialMemorandum,
Memorandum, dated
dated January 2, 2009
January 2, 2009 (Dkt.
(Dkt. No. 144) at 2. Based
Based on
the actual
actual elements
elementsof
of this
this cause
causeofofaction,
action,however,
however,AG
AGwill
will fail
fail to
to sustain
sustain its legal
legal burden.
The elementsof
The elements of tortious
interferencewith
with contract
contractclaim
claim under
underNew
New York
York law are: (1)
existence of a valid
existence of valid contract
contract between
between the
the plaintiff
plaintiffand
anda third party; (2) the
party;
a third the defendant's
defendant's
knowledge
knowledge of the contract; (3) the
the intentional procurement
procurement of a breach
breach of the contract
contract without
justification;
justification;(4)
(4)actual
actualbreach
breach of
of the
the contract and (5) damage
damageto
tothe
theplaintiff.
plaintiff. See
SeeCardiocall,
Cardiocall, Inc.
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v. Serling 492 F.Supp.2d

F.Supp.2d 139,
139, 151
151 -152
-152 (E.D.N.Y.
(E.D.N.Y. 2007) citing
citing Albert
Albert v.v. Loksen,
Loksen, 239
239 F.3d 256,
274 (2d Cir.2001);

Cir.2001); Advanced
Advanced Marketing
Marketing Group,
Group, Inc.
Inc.v.v.Business
BusinessPayment
Payment Systems,
Systems, LLC 481
481
F.Supp.2d 319,
F.Supp.2d 319, 324
324 (S.D.N.Y.2007).
(S.D.N.Y.2007). The third
third element,
element, the
the intentional
intentional procurement
procurement of
of aa breach
breach
of the contract without justification,

justification, isis also
also referred
referred to as “intentional
“intentional inducement”
inducement” by
by some
some New
York courts.
York courts. See
See American Bldg. Maintenance Co. of New
New York v.
v. Acme
Acme Property
Property Services,
Services, Inc.
515 F.Supp.2d
515 298, 314
F.Supp.2d 298, 314(N.D.N.Y.,2007)
(N.D.N.Y.,2007)citing
citing Lama
Lama Holding
Holding Co.
Co. v. Smith
Smith Barney
Barney Inc., 88
88
N.Y.2d 413,
N.Y.2d 413, 424,
424, 646 N.Y.S.2d
N.Y.S.2d 76, 668 N.E.2d 1370 (1996).
With respect
With respect to tortious interference with
with contract,
contract, S&L
S&Lasserts
asserts the following
following defenses
defenses on
its behalf,
behalf, which itit intends
intends to
todemonstrate at trial: (i)
demonstrate at (i)S&L
S&Lwas
wasnot
notaware
awareofofany
anyspecific
specific
underlying contract between AG and any identified third

between AG third party
partywhen
whenmaking
makingits
itspurchases,
purchases, and
and
upon multiple
multiple requests
requests for the
the identify
identifyofofthe
thesame
same(so
(sothat
thatany
anysupposed
supposed interference
interference could be
be
avoided) AG refused
avoided) refused to disclose
disclose it;
it; (ii)
(ii)S&L
S&Ldiddid
notnot
engage in any
engage act act
in any thatthat
qualified as as
qualified
intentional inducement
intentional inducementof
of aa third party to breach
breach a contract
contract with AG,
AG, because
because S&L and
and the
the
retailers it purchased from entered

purchased from entered into
into arm’s length transactions;
transactions; (iii)
(iii) there
there was in any
any event
event no
breach of
breach of any contract
contract involving S&L
S&Lbecause
because S&L
S&Lonly
onlypurchased
purchased Products
Products from
from retailers,
retailers,
precisely as
precisely as AG’s
AG’s distribution policy intends
intends and
and its distribution contracts provide; and
contracts provide; and(iv)
(iv) AG
cannot established
cannot established any
anylegally
legally cognizable
cognizable harm
harm or
or damage
damageto
toany
anyaction
actionof
of S&L.
S&L.
A. S&L Had
S&L Had No
No Knoweldge
Knoweldge Of Any Contract
Contract Between AG and
Between AG and Third
Third Parties
To sustain
sustain a claim
claim ofoftortious
tortiousinterference
interference with
withcontract,
contract,it itmust
mustbebeshown
shownthat a a
that
defendant knew about

defendant knew about aaplaintiff’s
plaintiff’s contracts with third
third parties.
parties. See Don King
See Don King Productions, Inc. v.
Douglas, 742 F.Supp.

F.Supp. 741,
741, 775
775(S.D.N.Y.
(S.D.N.Y. 1990).
1990). While
While the required
required level
level of
ofthat
that understanding
understanding
may be relatively
relatively low,
low,and
anddoes
does not
not necessitate
necessitate that aa defendant
defendant know
know all the precise details of a
plaintiff’s
plaintiff’sarrangement
arrangementwith
withaathird
thirdparty,
party,a adefendant
defendantmust
mustnevertheless
neverthelesspossess
possess some
some modicum
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of understanding concerning the

understanding concerning the existence
existenceofofaacontract
contractwith
withan
anidentified
identified third
third party in order to
be
be held
held liable for
for nonetheless conductinghimself
nonetheless conducting himselfinin aa way
way that could amount
amount to aa tortious
tortious
interference. See
Seeid.
id. (internal
(internal citations
citations omitted).
Thus
Thus it isis axiomatic,
axiomatic, and
and fundamentally
fundamentally just,
just, that
that aa party
party cannot
cannot be
be held
held liable
liablefor
for
interfering
interfering with
withaa contract
contract or
or other
other duty
duty between
between two parties if itit isis not
not aware
aware who
who the
the two
two parties
parties
are
are and,
and, of course,
course, what contractual
contractual relationship they have.
relationship they have. The
The burden
burden ofofproving
provingsuch
such
knowledge naturally lies with the

knowledge naturally the plaintiff,
plaintiff,and
andititisisimpermissible
impermissibletotospeculate
speculate the
the existence
existence of
such knowledge without

such knowledge without an
an appropriate
appropriatefactual
factualbase.
base. Thus
Thus the
the Second Circuit held
Second Circuit held that
that aa
photographic equipmentmanufacturer
photographic equipment manufacturerwas
wasnot
notliable,
liable,under
underNew
NewYork
Yorklaw,
law, to
to aa distributor
distributor for
interference with fiduciary
fiduciaryduty
dutybased
based on
onsecret
secret negotiations
negotiations between
between that distributor's
employee, competitor, and

employee, competitor, and manufacturer,
manufacturer,given
giventhat
that the
the plaintiff failed
failedtotoprove
provethat
thatthethe
manufacturer
manufacturer knew that relationship between employee and
between employee and distributor
distributor was
was fiduciary
fiduciary one,
one, rather
rather
than that he
he operated
operated under the assumption
assumption that the
the employee
employee represented
represented aa distinct corporate
corporate
entity separate from distributor. “To

separate from “To assume
assume that Yamaguchi understood there to
understood there to be
be aa fiduciary,
fiduciary,
rather
rather that contractual, relationship between
contractual, relationship Salvo and
between Salvo and Hannex
Hannex would be
be entirely
entirely speculative.
speculative.
Accordingly,
Accordingly, this
this portion
portion of
ofthe
the claim
claim was
was properly
properly dismissed.”
dismissed.” Hannex Corp. v. GMI, Inc., 140
140
F.3d 194, 204-205 (2d Cir. 1998).
Here
Here it was impossible for S&L
impossible for S&L to
to know
knowthat
thatititshould
shouldavoid
avoidpurchasing
purchasing Products
Products from
any party, because AG made

because AG madeitit impossible
impossible for
for anyone
anyone outside
outsideits
its distribution
distribution network
network to know
who those distributors are.

those distributors are. This
This was
was not
not mere
mere oversight:
oversight: The
Thecontracts
contracts between
between AG and
and its
distributors includedon
distributors included onAG’s
AG’s exhibit
exhibit list specifically provide that
specifically provide that aa distributor
distributor isis prohibited
prohibited
from
from advertising that itit is
is a licensed reseller of
licensed reseller of AG’s
AG’s Products, to wit:
Products, to wit:
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Distributor is
is neither
neither permitted
permitted nor required
required by the
the provisions of
of this
this Agreement
Agreement
to advertise
advertise itself
itself as
as an
an “authorized distributor” of
“authorized distributor” of Australian
Australian Gold
Goldororthethe
Products.
Products.
See Article II,

See Article II, Section 2.2 and
Section 2.2 andArticle
Article III,
III, Section 3.2 of Australian
Section 3.2 Gold’s Exhibits
Australian Gold’s Exhibits WWWW,
YYYY
YYYYand
andZZZZ.
ZZZZ.Thus
Thuseven
evenif ifAG
AGhad eyewitness
had eyewitnessororrecorded
recordedevidence
evidence of
ofaarepresentative
representative of
S&L
S&L communicating
communicating with an AG distributor
distributor -–or
oreven
even testimony
testimony from aa distributor
distributor or
or other
other or
even circumstantial evidence

even circumstantial evidencethat
thatS&L
S&L had
had done
doneso
so–- itit would not only
only lack
lack the
the factual
factual basis
basis for
a
a claim that S&L
S&L knew
knew ititwas
was doing
doing so
so (never
(never mind
mind the
the other
other issues of inducement,
issues of inducement,etc.):
etc.): It
would in
in theory
theory constitute aa prima
prima facie
facie violation
violation of this contract, and“inducement”
contract, and “inducement” by
by S&L
S&L by
virtue of asking,
asking, for such
such a distributor to identify
identify himself
himself as
as such
such in order
order to prevent
prevent this tort
from occurring!
Indeed, the evidence

Indeed, the evidence shows
shows that
that when
when S&L
S&L first
first received
received AG’s
AG’scease
cease and
and desist
desist letters
letters
back
back in January
January of 2004 (Exh. E)
E) which
whichincluded
includedaccusations
accusations that
that S&L
S&Lwas
wasmaking
makingpurchases
purchases
from unidentified
unidentified distributors,
distributors, itit did
didnot
notidentify
identifywho
whothose
thosedistributors
distributorswere,
were, and
and failed
failed to
to do
do so
so
through the course

through the course of
of all
all subsequent communications– -thus
subsequent communications thusmaking
makingitit impossible
impossiblefor
for S&L
S&L to
stop buying from any

stop buying any party
party ititeven
even inintheory
theory“should
“shouldnot
nothave
havebeen”
been”buying.
buying.Furthermore,
Furthermore,
Australian
Australian Gold’s Responses
Responses totoS&L’s
S&L’s First
First Set
Set of Interrogatories could not
Interrogatories could not identify aa single
single
party
party in response to a request
response to that it name
request that name “all
“alldistributors
distributors from
fromwhom
whomdefendant
defendantcontends
contends
plaintiffs
plaintiffsobtained
obtained defendant’s
defendant’s products.”
products.” See Australian Gold’s Responses
See Australian Responses totoS&L’s
S&L’s First Set of
Interrogatories,Exh.
Interrogatories, Exh.No.
No. 88 at
at5.
5. InInresponding,
responding, AG
AGmerely
merely replied,
replied, “Australian
“Australian Gold
Gold does
does not
know the identity of the

the distributors at
at this
this time,
time, but
but its
its investigation
investigation continues.”
continues.”Id.,
Id., at
at6.
6. This
“investigation” never
“investigation” never ended;
ended; Consequently,
Consequently, but
but for
forthe
the knowledge
knowledge that
that S&L
S&Lhas
has acquired
acquired from
discovery in this case,

case, S&L
S&Lwas,
was,and
andcontinues
continues to
to be,
be, unaware
unaware of any
any contracts
contracts AG purports to
7
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Page
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have
have with its
its exclusive
exclusive distributors,
distributors,and
and remains
remains unaware
unaware of
of aa single
single purchase
purchase alleged
alleged to have
have
been madeby
been made byS&L
S&L from
from such
such aa person
person–- knowingly
knowingly or otherwise.
Suggestions have also

Suggestions have alsobeen
beenmade
madeininrecent
recentcommunications
communicationswith
with the
the Court
Court that
that AG can
can
show that S&L

S&L “must
“must have
have known”
known”that
thatititwas
wasatatsome
some point
point at
at least
least receiving Products
Products directly
from aa distributor
distributor (which,
(which,as
asshown
shownbelow,
below,isishardly
hardlyinducement
inducementtotobreach
breachaacontract),
contract),because
because
supposedly aninvoice
supposedly an invoiceororpacking
packingslip
slipprovided
providedthis
thisinformation.
information. Not
Not only
only will
will AG
AGbe
be unable
unable to
show, at
at trial, the existence of such
existence of such “knowledge”
“knowledge” by testimony
testimony or otherwise,
otherwise, even
even if itit had
had such
such
proof
proof it would
would still
stillbe
beutterly
utterlyunable
unable to
to show
show that
that S&L
S&Lknew,
knew, when
when ititsaw
sawthe
the name
name on
on the
the
shipping invoice, that

shipping invoice, that itit was
was the
the name
name of an
an AG
AG distributor
distributor- –because
because this
thiswas,
was, and
and remains,
remains,
“classified information”
information”that
that was
was never disclosed
disclosed to
toS&L!
S&L!
Because S&L does

Because S&L not possess
does not possessany
anyknowledge
knowledgeofofwhom
whom AG
AG utilizes as
as its exclusive
exclusive
distributors
distributors for AG’s
AG’s Products,
Products, AG’s claims of tortious interference will fail
interference will fail as
as a matter
matter of law.
S&L Failed
S&L Failed to Intentionally
Intentionally Induce
Induce Any
Any Distributor
Distributorofof
B. AG Cannot Prove
Prove that
that S&L
S&L Induced Any
Any Distributor
Distributor of
of
Australian Gold to Breach A
Australian A Contract with Australian
Australian Gold
On this record, to permit
record, to permit AG’s tortious interference claim to
interference claim to go
go to
to the
the jury would be to
introduce into New York

Yorklaw
lawaaper
perse
se tort
tortdevoid
devoidofofthe
theneed
need for
foraa showing
showing of
ofeven
even negligence,
negligence,
much less
much less scienter,
scienter,and
andwould
wouldpermit
permit aa party
party such
suchas
asAG
AG to
to set
set up
up an
aninvisible
invisible “net” of
of secret
secret
contracts and contract

contracts and contractparties
partiesthat
thatthe
theunwary,
unwary,or
or even
eventhe
theinquisitive,
inquisitive, would
would have
have no
no way
way of
detecting until found liable in

detecting until in court
court for
for inducing
inducingtheir
theirbreach.
breach. That
Thatisisbecause,
because, in addition to the
previous
previous point regarding
regarding “knowledge,”
“knowledge,” to
to establish
establish aa claim
claimfor
fortortious
interferencewith
with
contract, AG must also

contract, AG also show
show not
not only
only that
that S&L was
was aware
aware of that contract,
contract, but
but that
that S&L
S&L acted
intentionally
intentionally to
toinduce
induceaa third
third party
party to
to breach its contract
breach its contractwith
withAG.
AG. This itit will
willnot
notbe
be able
able to
do at
at trial.
trial.
8
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It is
is well
wellrecognized
recognized that, under New York law, “[i]n
under New “[i]naatortious
interference action,
action, the
the
plaintiff
plaintiffmust
mustshow
showthat
thattortfeasor's
tortfeasor's actions
actions were
were the
the proximate cause
cause of the breach
breach of
of contract.”
Don King
King Productions,
Productions, Inc.
Inc. v.v. Douglas,
Douglas, 742
742 F.Supp.
F.Supp. 741,
741, 774
774 (S.D.N.Y.
(S.D.N.Y. 1990).
1990). Furthermore,
Furthermore,
New York
York courts
courts have
have routinely
routinely emphasized requirement of
emphasized the requirement of intentional conduct in evaluating
this claim under

under New York
Yorklaw.
law.See,
See, e.g.,
e.g., Health-Chem
Health-Chem Corp. v. Baker,
Baker, 915
915 F.2d 805, 809 (2d
Cir.1990) ("the
("the interference
interference must
must be intentional
intentional and
and not
not incidental
incidentaltotosome
someother
otherlawful
lawful
purpose"); AutomaticFindings,
purpose"); Automatic Findings,Inc.
Inc. v. Miller 232 A.D.2d 245,
v. Miller 245, 245, 648 N.Y.S.2d 90, 90 (1st
Dep’t. 1996)
1996) (no intent
intent to
to procure
procure a breach of contract
breach of contract by a third party;
party; dismissing
dismissing the claim);
Winicki
Winicki v.
v. City
City of
of Olean,
Olean, 203
203 A.D.2d
A.D.2d893,
893, 894,
894, 611
611 N.Y.S.2d
N.Y.S.2d 379,
379, 380
380 (4th
(4th Dep’t.
Dep’t. 1994)
1994) (same)
(same)
citing Guard-Life
Guard-Life Corp.
Corp. v.
v. Parker
Parker Hardware
Hardware Mfg.
Mfg.Corp.,
Corp.,50
50 N.Y.2d
N.Y.2d183,
183, 189-190,
189-190, 428 N.Y.S.2d
628, 406 N.E.2d

628, 406 N.E.2d 445
445 (1980);
(1980); Israel v. Wood Dolson Co.,
Wood Dolson Co., 1 N.Y.2d 116,
116, 120,
120, 151 N.Y.S.2d 1,
134 N.E.2d 97 (1956).
Moreover,
Moreover, in New
New York
Yorkthe
thelevel
levelofofintent
intentrequired
requiredtotosustain
sustaina aclaim forfor
claim tortious
tortious
interference with contract

interference with contract is “exclusive malicious
malicious motivation.”
motivation.” See
See Allworld
AllworldCommunications
Communications
Network, L.L.C. v.
Network, L.L.C. v. MCI
MCI Worldcom,
Worldcom, Inc.
Inc. 2000 WL 1013956, at *5
1013956, at *5 (S.D.N.Y.
(S.D.N.Y. 2000)
2000) citing
citing Elliott
Elliott
Associates, L.P. v.
Associates, L.P. v. Republic
Republic of
of Panama,
Panama,975
975F.Supp.
F.Supp.332,
332,341-342
341-342(S.D.N.Y.
(S.D.N.Y.1997).
1997). The act of
inducement mustbe
inducement must be“malicious
“maliciousororcarried
carriedout
outwith
with the
theintent
intentto
to harm
harmthe
theplaintiff.”
plaintiff.” Ultramar
Energy Ltd. v. Chase

Chase Manhattan Bank,
Bank, N.A.,
N.A., 179
179 A.D.2d
A.D.2d 592, 579 N.Y.S.2d 353, 354 (1st Dep't
1992). The
1992). The action
action must have been
must have been taken
takenby
by the
the defendant
defendant“without
“without justification,
justification, for the
the sole
sole
purpose of harming
purpose of harming the
the plaintiffs.”
plaintiffs.” Benjamin
Benjamin Goldstein Productions, Ltd.
Goldstein Productions, Ltd. v.
v. Fish, 198 A.D.2d
137, 603 N.Y.S.2d 849, 851 (1st Dep't 1993).
Here, notwithstanding the

Here, notwithstanding theimpossibility
impossibility of
of S&L’s
S&L’s intentional
intentional inducement
inducement of a third party
to breach its agreement

breach its agreementwith
with AG,
AG, as
as S&L
S&L never purchased
purchasedProducts
Productsdirectly
directly from
from aa distributor
distributor to
9
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begin with, AG
AG has
has neither
neither alleged,
alleged, nor can it demonstrate at trial,
demonstrate at trial, that S&L
S&L acted
acted in
in aa manner
manner
with the
the intent
intent to
to exclusively
exclusively harm
harm AG.
AG. Rather,
Rather, what is clear from the
the record to date, and will
date, and will
once again become

once again becomeapparent
apparentatattrial,
trial,isisthat
thatS&L
S&L acted
actedinin aa manner
mannertotofurther
further its
its own
own lawful
economic
economic interests,
interests, which
whichdoes
doesnotnot
make S&L’sS&L’s
make conduct unlawful.
conduct See Allworld
unlawful. See Allworld
Communications Network,
Communications Network, L.L.C.,
L.L.C., 2000
2000 WL
WL 1013956, at
at *5.
*5.
The legality
legality of
of S&L’s
S&L’sconduct
conductininrelation
relationtotoitsitsown
owneconomic
economicself
selfinterest
interestwas
wasaddressed
addressed
by the U.S.
U.S. District Court for the District of
of Arizona
Arizona in
in Designer
Designer Skin,
Skin, LLC v. S
S & LL Vitamins,
Vitamins,
Inc., No.
Inc., No. CV 05-3699-PHX-JAT, 2008
CV 05-3699-PHX-JAT, 2008 WL
WL 4174882
4174882 (D.Ariz., Sept.
Sept. 5,
5, 2008),
2008),where,
where, on
on
precisely identical facts, District Judge JamesA.

Judge James A.Teilborg
Teilborg dismissed
dismissedplaintiff’s
plaintiff’s claims of tortious

interference with contract because
becauseplaintiff
plaintifffailed
failed to
to prove
prove that
that S&L
S&L had any way
had any way of affecting,
affecting,
much less inducing,

much less inducing, plaintiff’s
plaintiff’s transactions with its distributors. The
transactions with Thestandards
standards in Arizona
Arizona and
and
New York
York law
lawas
astotothe
theelements
elements ofoftortious
interference with
withcontract
contractare
arethe
thesame.
same. Judge
Judge
Teilborg wrote:
The natural
natural implication
implication to be drawn from these
be drawn thesefacts
factsisisnot
notthat
thatSS&& LL Vitamins
had the right to control
had the control the
the tanning
tanning salons'
salons' transactions with the
transactions with the distributors,
distributors, …
but rather
rather that
that S && LLVitamins
Vitaminsand andthe
thetanning
tanningsalons
salons[it[itpurchased
purchased Products
Products
from] entered into arms-length
entered into arms-lengthtransactions,
transactions, witheach
with eachentity
entityacting
actingout
out of
of its
own self-interest. A reasonable jury could not conclude otherwise.
self-interest. A reasonable jury could not conclude otherwise. Therefore, Therefore,
Designer
Designer Skin's agency theory fails as as aa matter
matter of
of law.
Designer Skin,
Skin, LLC,
LLC, 560 F.Supp.2d
F.Supp.2d at
at826
826(emphasis
(emphasisadded).
added).The
Thelegitimacy
legitimacyof
ofthis
this“motivation
“motivation
for profit”
profit”perspective
perspective isis not
notsome
some obscure doctrine or technicality. Indeed,
obscure doctrine the legitimacy of a
Indeed, the
defendant’s actions under

defendant’s actions under New York
York law
lawwas
wasperhaps
perhaps never
never better
better expressed than in Benton v.
expressed than
Kennedy–Van
Kennedy -Van Saun
SaunMfg.
Mfg.&& Eng’g
Eng’g Corp.,
Corp., 22 A.D.
A.D. 2d 27, 152
2d 27, 152 N.Y.S.2d
N.Y.S.2d 955
955 (1(1st
st Dep’t 1956),
Dep’t 1956), a
a
case on which
case on which both
both this
this Court and
and AG
AG have consistently relied.
have consistently relied. In
InBenton,
Benton, the
the court
court reserves
reserves of
the
the possibility that
that some
some set
set of
of circumstances
circumstances could
could exist
exist wherein,
wherein, absent direct proof of
absent direct of
inducement, someset
inducement, some setofof facts
facts could
could make
make out
out aa finding of
ofinducement
inducement by
by “circuitousness”
“circuitousness”
10
10
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means.
means. But
But this
this statement was merely
statement was merely dictum,
dictum, and
and was
was based
basedon
onno
noother
otherauthority.
authority. In
In fact, in
the previous paragraph,

the previous paragraph,the
thecourt
courtruled
ruled–- in language far more
language far more applicable
applicable to
to the
the reality
reality of the
the
facts here
here –- as
as follows:
follows:
It is
is clear
clear from
from this
this andand similar
similar allegations
allegations that the primary objective objective of
defendant
defendant was was to
to take
takeover
overthethepotentially
potentially profitable
profitable work to to be
be performed
under
under plaintiff's contract.
contract. IfIfthisthiswere
weredefendant's
defendant's purpose,
purpose, andand we maymay
draw
draw no no other
otherinference,
inference,it did not constitute
it did the malicious
not constitute and and
the malicious
unjustifiable attempt to injure plaintiff
plaintiffthat
thatisisan
anessential
essential ingredient in an an
action
action for ‘prima
‘prima facie’
facie’ tort.
tort.Intent
Intenttotobypass,
bypass, circumvent,
circumvent, or or to
to destroy
destroy
plaintiff's contract
contract there
there may
may havehave been;
been; butbut ifif carried
carried outoutbybylawful
lawful
means, motivated chiefly
means, motivated chiefly byby aa desire
desire to
to make profits, there
make profits, there is
is no
no actionable
actionable
wrong, even though
though there
there is
is aa callous
callous disregard
disregardof of the
the incidental
incidental injury
injury to
plaintiff which
whichwould
wouldnecessarily
necessarilyfollow. Defendant's
follow. Defendant's self-interest
self-interest
negatives
negatives malice,
malice, eveneven though
thoughthe themeans
meansemployed
employedmight mightbe of
be of
questionable morality and
questionable morality and ethical
ethicalvalidity.
validity.Competition
Competitionasassuch, such,nono
matter
matter howhow vigorous
vigorous or or even
even ruthless, is not not aa tort
tort at common law.
Benton, 22 A.D.2d
A.D.2dat,
at,29
29(emphasis
(emphasis added).
added).
Indeed,
Indeed, in Designer
Designer Skin,
Skin, Judge
Judge Teilborg specifically
specificallyaddressed
addressed the inadequacy
inadequacy of the
the
decision Mitchell Sys.

decision in John Paul Mitchell Sys. V. Pete-N-Larry’s Inc., 862 F. Supp. 1020 (W.D.N.Y.
Supp. 1020 (W.D.N.Y. 2004)
and the dictum

and the dictum of
of Benton,
Benton, 22 A.D.
A.D. 2d
2d 27, 152 N.Y.S.2d
27, 152 N.Y.S.2d 955
955 (1
(1st
st Dep’t 1956). In declining to
Dep’t 1956). In declining to
adopt the proposition

adopt proposition that
that undefined,
undefined, subjective
subjective “circuitous” conduct
conduct may
may give
giverise
risetotoa a
defendant’s liability
defendant’s liability for
fortortious
interferencewith
withcontract,
contract,Judge
Judge Teilborg
Teilborgnoted
notedthe
theabsence
absence of
any legal standard

standardfor
for such
suchaafinding
finding –- hardly surprising
surprising because nocourt
because no courthas
hasever
everfound
foundit.it. In
both Pete-N-Larry,
both Inc. and
Pete-N-Larry, Inc. and Benton,
Benton, no tortious
contract claim could
could be
be
sustained on the
sustained on the facts
facts or
or allegations
allegations before
before the
the courts.
courts. See
SeePete-N-Larry’s
Pete-N-Larry’s Inc., 862 F. Supp.
Supp. at
Benton, 22 A.D.2d
1029; Benton, A.D.2d at
at 29,
29, 152
152N.Y.S.2d
N.Y.S.2datat958-959.
958-959. Thus the suggestion
suggestionby
byAG
AG that
that“S&L
“S&L
Vitamins’ action
action meet
meet the
the standard
standard for [circuitous]
[circuitous] tortious
tortious interference set forth in
interference set in Pete-N-
Pete-N-
Larry’s, Inc.”
Larry’s, Inc.”isispreposterous,
preposterous, as
as the
the Pete-N-Larry’s
Pete-N-Larry’s Inc.
Inc. court
court declined
declined to
to enunciate
enunciate anything
anything
like aa “standard”
like “standard”and,
and, again,
again, its
its vague
vague suggestion
suggestion that
that there
there could be
be one is no more than dictum.
11
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See Australian Gold’s Trial
Trial Memorandum (Dkt. No.
Memorandum (Dkt. No. 144)
144) at 11; Pete-N-Larry’s
Pete-N-Larry’s Inc., 862 F.
Supp. at 1029.
Supp. at 1029.
Indeed, AG cites no legal

Indeed, AG legal authority
authority either in its recent Trial Memorandum or in any of the
recent Trial
extensive briefing in previous motions in this case

extensive briefing to any
case to anycourt’s
court’s “standard”
“standard” or
or identification
identification of a
“circuitous”
“circuitous” tortious
interference claim (much less one absent
less one absentknowledge).
knowledge). Moreover,
Moreover, S&L’s
S&L’s
survey
survey of jury
jury instructions
instructions for
for tortious
interference with
with contract,
contract, which
which includes
includes instructions
instructions
from both
both the
the Second and Ninth Circuits that
Second and that have
have actually been submitted to
been submitted to juries,
juries, fails to
contain even
even aa single
single discussion
discussionof
of the
theapplicability
applicability of “circuitousness”
“circuitousness” or
or any
any facts
facts that
that amount
amount
to “circuitousness”
“circuitousness” to
to aa jury
jury asked
asked consider this tort.
Not only
only does
doesno
nocourt define “circuitous tortious
courtdefine tortious interference,”
interference,” the
theRestatement
Restatement
(Second) of Torts
(Second) of Torts §766
§766 and
andcomment
commentnn–-specifically
specifically cited
citedby
by the
thecourt
courtininPete-N-Larry’s
Pete-N-Larry’s Inc.
Inc. –-
unequivocally stands
stands for the precisely opposite conclusion here: that the conduct
conduct AG complains
of here is not
here is not unlawful,
unlawful, as
as follow:
follow:
One who intentionally

One intentionally andand improperly
improperly interferes
interferes with
withthe
theperformance
performance ofofa a
contract (except
contract (except aa contract
contract toto marry) between another and
between another and aa third person
person by
inducing or otherwise
inducing otherwise causing the third
causing the third person not to perform
person not perform the
the contract,
contract, is
subject to
subject to liability
liability to
to the
the other
other for
forthe
the pecuniary
pecuniary loss
loss resulting to the other from
the failure of
of the
the third
third person
person to perform
perform the
the contract.
** ** **
n. Making
Making agreement
agreement withwith knowledge
knowledge of of the
the breach.
breach. One
One does
does not induce
induce another
another
to commit aa breach
breach of contract
contract with a third person under
a third person under the rule stated
stated in this
when he
Section when he merely
merely enters
entersinto
into anan agreement
agreementwith withthe
theother
otherwith
with knowledge
other cannot
that the other cannot perform
perform both
both itit and
and his
his contract
contract with
with the third person. … For
instance, B
instance, B is under
under contract
contract to
to sell
sell certain
certain goods
goods toto C.
C. He
He offers
offers to
to sell
sell them
them to
to A,
A,
who knows of of the
the contract.
contract. AA accepts
accepts the offer
offer and
and receives the the goods.
goods. A A has
has not
induced the
the breach
breach and
and isisnot
not subject
subjectto toliability
liability under the rule stated in this
Section.
Section. In some
some cases, however,BB may
cases, however, may be be enjoined
enjoined at at the
the suit ofof CCfrom
from
performing
performing for A, A, or
or BBmay
maybe becompelled
compelled specifically
specifically toto perform
perform the
the contract
contract
with C. …
12
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See REST2d
See REST 2dTorts
Torts§§ 766,
766, comment
commentn.n.(Emphasis
(Emphasisadded).
added). Applied
Applied to the instant facts, itit is
instant facts,
worth noting
noting that
that while
whilethe
the Restatement
Restatement may provide for AG’s
AG’srecourse
recourse against
against its distributors,
through an
through an injunction or compelling
compelling specifically
specifically performance,
performance, it specifically
specifically exonerates
exonerates S&L
from any liability,

from liability,on
onthese
these facts
facts as alleged by
as alleged by AG.
AG.
Absent aa single
Absent single legal
legalprecedent
precedentfinding
findinga aparty
partyliable
liablefor
for“circuitous
“circuitoustortious
tortiousliability”
liability” in
New York
York or
or any
any other
other state,
state, AG’s
AG’s claims
claims of
of tortious
interference with
with contract
contract amount
amount to the
the
oft-mocked “I
“I know
knowititwhen
whenI Isee
see it”
it”test
testfor
forobscenity
obscenityofofJustice
Justice Stewart's
Stewart's in Jacobellis v. Ohio,
378 U.S. 184,

378 U.S. 184, 197,
197, 84
84 S.Ct.
S.Ct. 1676,
1676,1683,
1683,12
12L.Ed.2d
L.Ed.2d793
793(1964)
(1964)(Stewart,
(Stewart,J.,J.,concurring).
concurring). If
If
only because
because itit is impossible
impossible for a person to avoid committing a wrong that
person to that the
the law
law does
does not
define in advance of his

advance of his actions,
actions,New
NewYork
York courts
courts routinely
routinely reject
reject the
the impulse
impulse to
to impose
imposeliability
liability
for novel
novel torts
torts based
based on inarticulable
inarticulable standards. See,e.g.,
standards. See, e.g.,Chris-Craft
Chris-Craft Industries,
Industries, Inc.
Inc. v. Piper
Aircraft
Aircraft Corp.,
Corp., 480
480 F.2d
F.2d 341,
341, 397-398 (2d Cir. 1973); JA Apparel Corp. v. Abboud
397-398 (2d 2008 WL
Abboud , 2008
2329533, *32
2329533, *32 at n. 38
38 (S.D.N.Y.
(S.D.N.Y. 2008);
2008); Envirokare
EnvirokareTech,
Tech, Inc.
Inc.v.v.Pappas,
Pappas, 420
420 F.Supp.2d
F.Supp.2d 291,
291,
294 (S.D.N.Y. 2006).
Becausethere
Because thereexists
existsno
nofoundation
foundationfor
for aa doctrine
doctrine of
of “circuitous”
“circuitous” conduct
conduct amounting
amounting to
interference with contract in New
New York
Yorkororany
anyother
otherstate
statefor
forthat
thatmatter,
matter,and
andbecause
because
AG cannot
cannot prove that there
there was ever aa single
was ever single act
act of inducement
inducement by S&L
S&L directed,
directed, much
much less
less
knowingly, to any AG distributor, AG will

willfail
failas
asaa matter
matter of
of law
law to
to meet
meet its burden of trial to
burden of
standard of
meet the legal standard of carrying
carrying such
such aa claim.
claim.
C. There Is No Underlying
Underlying Breach of Contract
Obviously tortious
interference with
withcontract
contractrequires
requires an
an actual
actual breach
breach of
of contract.
contract. See
See
D'Andrea v. Rafla-Demetrious, 146 F.3d

Rafla-Demetrious, 146 F.3d 63,
63, 65-66
65-66 (2d
(2d Cir.
Cir. 1998)
1998) (“we decline to hold that
that the
the
New York
York courts
courts would
would recognize
recognize an exception to the
exception to the rule
rule requiring ‘actual breach’ in order to
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state
state aa claim
claim for tortious
interference with
withcontractual
contractualrelations.
relations.Because
Because there
there was no breach
breach of
contract
contract in the
the instant
instant case, [appellant’s] tortious interference
case, [appellant’s] interference with contractual
contractual relations
relations claim
must fail.”);
fail.”); see Cardiocall, Inc.,
see also Cardiocall, Inc., 492
492 F.Supp.2d at 151.
F.Supp.2d at 151. It
It is
is certainly
certainly noteworthy
noteworthy that,
that, after
four years of claiming

claiming that
that S&L
S&Lhas
has induced
induced one
one or more AG
AG distributors
distributors to
to aa breach
breach of contract,
not aa single
single AG
AG distributor has
has been
beensued
suedbybyAG
AGfor
forallegedly
allegedlyselling
sellingProducts
ProductstotoS&L.
S&L. At
At trial
AG
AG will
willbe
beunable
unabletotoprove
proveaabreach
breachof
ofcontract
contractininthe
theinstant
instantcase,
case, and
and absent
absent proof of
of aa breach
breach
of contract,
contract, there
there can be no inducement of that
that breach.
breach. “Plaintiff
“Plaintiff has
has suffered an injury,
suffered an injury, but
but it
appears thatits
appears that its clearest
clearestrecourse
recourseis isagainst
againstthethe contracting
contracting party
party . .. .. .and
andperhaps
perhaps. .. . . its
principals. [Plaintiff]
[Plaintiff]has
hasnot
notshown
shownaa likelihood
likelihoodofofsuccess
success on
on the
the merits
merits on
on its
its claim
claim against
against the
the
third party Quality King

King for
fortortious
interference with
with contract.”
contract.” John
JohnPaul
PaulMitchell
MitchellSystems
Systems v.
Quality
Quality King
King Distributors,
Distributors,Inc.,
Inc.,106
106F.Supp.2d
F.Supp.2d 462,
462, 476-477 (S.D.N.Y. 2000).
Here, again, AG’s

Here, again, AG’s counterclaim
counterclaim for tortious interference is premised
interference is premisedon
onthe
theinviolability
inviolability
of its
its highly
highlycontrolled
controlled (and
(and highly
highlyprofitable)
profitable) distribution
distribution system,
system, whereby
whereby it sells
sells only
only toto
distributors, which contractually

distributors, which contractuallymay
maysell
sellonly
only to
to retail
retail tanning
tanning salons.
salons. But the
the proofs
proofs will
will
demonstrate thatS&L
demonstrate that S&L purchases
purchasesitsitslotions
lotions only
only from retail
retail tanning
tanning salons,
salons, and
and not
not from
from
distributors.
distributors. These salons are
These salons are not
not parties
parties to
to the
the distributorship contracts
contracts at all, and
and hence
hence the
the
existence of these
existence of these contracts
contractsisisirrelevant
irrelevant to
to AG’s
AG’s counterclaim; they simply
simply were
were not
not breached
breached by
any party.
AG attempts
attempts to circumvent
circumvent this difficulty
difficulty by
byimagining
imaginingthat
thatS&L
S&Lhas
hasbeen
beensecretly
secretly
controlling
controlling aa salon
salon -–an
anutter
utterfantasy
fantasy first
firstalleged
allegedininyears
yearsago
ago and
and never
never remotely
remotely proved,
proved, and
and
which
which AG
AG now
nowclaims
claimstotobelieve
believeit it
willwill
finally establish
finally in itsinforthcoming
establish supplemental
its forthcoming supplemental
depositions. Theuncontroverted
depositions. The uncontroverted1
1 evidence,
evidence, however,
however, is, and
is, and will will remain
remain through
through trial,trial,
that that
S&L
S&L
11 Despite the absence of a single shred of contrary proof on the parties’ cross motions for
Despite the absence of a single shred of contrary proof on the parties’ cross motions for summary judgment, AG
summary
refused
refused judgment,
concede
to concede this factAG
this fact in its response to S&L’s
response to S&L’s Rule
Rule 56.1
56.1 statements.
statements.
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14
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does not now, nor did

does not did ititever
evercontrol
controlthe
thetransactions,
transactions,business,
business, personnel
personnel or any other aspect
aspect of
any
any tanning salons, and that
salons, and that all
all transactions between
between S&L
S&L and
and its
its salon-suppliers
salon-suppliers are
are arms-length
arms-length
transactions, anddo
transactions, and donot
notinin any
any way
way amount
amount to,
to, imply
imply or otherwise
otherwise involve aa breach
breach of any
any
contract
contract between AG and
between AG and any
any other
other person.
person. See,
See, Designer
Designer Skin,
Skin, 560
560 F.Supp.2d
F.Supp.2d at 825-26.
at 825-26.
D. AG Cannot Prove Any

Any Damage Due to
Damage Due to S&L’s
S&L’s Actions
Finally, even
even ififAG’s
AG’stortious
interferenceclaim
claimcould surmount
could surmountallall
thethe
obstacles
obstacles
indentified
indentified above, AG’s claim will
above, AG’s willultimately
ultimatelyfail
failupon
uponthe
thelast,
last,and
andperhaps
perhaps most
most important,
important,
element: the existence

element: the existenceofofharm.
harm. At
At no
no time
time ininthis
thislitigation
litigationhas
hasAG
AGpresented
presentedany
anyevidence,
evidence,
beyond conclusory allegations, that itit suffered

suffered any
any legally
legallycognizable,
cognizable,or
orany
anyother,
other,damage
damage as
as a
result of S&L’s actions.

result of actions. At
Attrial,
trial,too,
too,ititwill
willfailfail
to to
dodo
so,so,
regardless
regardlessofofhow
howmuch
much distracting
distracting
information
information AG
AGattempts
attemptsto
toenter
enter into
intothe
the record
record regarding
regarding S&L’s
S&L’sown
ownbusiness
businesssuccess.
success.
Indeed, S&L’s action

Indeed, S&L’s action -– that
thatis,
is,selling
sellinga amanufacturer’s
manufacturer’s products
products -–isisone
onewhich
whichisis
ordinarily considered
considered aa benefit,
benefit, not
not an
an injury,
injury, to the company. As
the company. As the
the Court
Court wrote
wrote in
in Pete-N-
Pete-N-
Larry’s Inc.,
Larry’s Inc.,rejecting
rejectingaatortious
interferenceclaim
claimbased
based on
on “circuitousness,”
“circuitousness,”courts
courts across
across the
country “have
country “have been
been suspicious of the claim
suspicious of claim that
that disruption
disruption ofofthese
these exclusive
exclusive distribution
distribution
arrangements causes
arrangements causesany
anypecuniary
pecuniaryinjury
injury . . . .”
.” 106
106 F.Supp.2d at 475,
F.Supp.2d at 475, citing H.L.
H.L. Hayden
Hayden Co.
v. Siemens Medical Sys.,

Siemens Medical Sys.,Inc.,
Inc.,879
879F.2d
F.2d 1005,
1005,1024
1024(2d
(2d Cir.
Cir. 1989),
1989), Graham
Graham Webb
Webb Int'l
Int'l Ltd.
Partnership v. Emporium Drug Mart,

Mart, Inc.,
Inc., 916
916 F.Supp.
F.Supp. 909, 918
918 (E.D. Ark.
Ark. 1995)
1995) (no
(no basis
basis for
concluding that [any]

[any] lost
lostsales
sales would
wouldbe
be greater
greater than
than the
the increased
increased revenue resulting from the
revenue resulting
availability
availability of
of the
the product
product in
in ordinary retail
retail outlets).
The
The simple
simple fact
fact here
here isisthat
thatS&L
S&Lis is
accused
accusedof of
selling AG’s
selling Products
AG’s Products -– genuine
genuine
merchandise thatoriginated
merchandise that originatedwith
withAG,
AG,and
andwhich
whichAG
AG sold
sold to
to its
its own distributors at aa price
distributors at price it
chose. AG
chose. AG has
has been paid richly
been paid richly for the stuff itit sells.
sells. By
Bywhat
whattheory
theoryofofdamages
damages can
can itit be
be paid
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15
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again?
again? Indeed,
Indeed, AG
AGsuggests
suggests repeatedly that its “damages” under its vague
vague theories of harm
harm can
can
be somehow to
be tied somehow to sales
salesby
byS&L
S&L of
of AG
AG merchandise.
merchandise. This would only make
make sense
sense ifif S&L
S&L not
only had no right to buy this merchandise andresell

merchandise and resellit,
it, but
butifif either
either (a)
(a) AG
AG itself
itself also
also were in the
business of
business of selling
selling Products
Products and
and S&L’s
S&L’s sales had deprived
sales had deprived itit of revenue
revenue it would
would otherwise
otherwise have
have
made, or
made, or (b) this action had been brought by
been brought by aa retailer
retailer asserting
assertingaa“right”
“right” to
to exclusive
exclusive sales
sales of
Products of
Products of which
which it was deprived
deprived by S&L.
S&L. But
Buthow
howcan
canthe
themanufacturer
manufacturer recover
recover the value of
its
its merchandise once upon
merchandise once upon selling
selling it
it and
and another time upon
another time upon another person selling
another person selling it?
it?
In the
the summary judgment ruling in this
summary judgment this case, the Court found an
case, the earlier version
an earlier version of this
argument
argument unavailing,
unavailing, stating,
stating, “AG
“AG has
has submitted
submittedaffidavits
affidavitsabout
aboutthethe
damage
damageto AG's
to AG's
reputation,damage
reputation,damage totoAG's
AG's investment
investmentinin the
the exclusive
exclusive distribution
distribution system, and the
system, and the costly
costly
investments AG has
investments AG made in
has made in protecting
protecting this exclusive distribution
distribution system
system and preventing online
sales of its Products.

sales of Products. AG
AG claims
claims that
that by maintaining this exclusive distribution
distribution system,
system, AG can
can
provide
provide accurate counselingtotoconsumers
accurate counseling consumersabout
abouttheir
theirProducts.”
Products.”But
But as
as S&L
S&L urged
urged in that
that
motion,
motion, AG’s
AG’s affidavits
affidavits were
were entirely
entirelyconclusory,
conclusory, as
as has
has been
been any
any response
response in discovery
discovery to
inquiries
inquiries by S&L
S&L requesting
requesting an
an enunciation
enunciation of damages suchthat
damages such thatS&L
S&L could
could fairly
fairly defend
defend
against suchaaclaim
against such claimatattrial.
trial. It
It is
is well
wellestablished
established that merely claiming “we’ve
“we’vebeen
been damaged”
damaged” is
not adequate to lay

adequate to lay the
the factual
factual predicate for a jury’s
predicate for jury’s consideration
consideration of aa damage
damage award.
award. See
See
Rodonich v. House
House Wreckers
WreckersUnion
Union Local
Local 95
95 of
of Laborers'
Laborers' Intern. Union,
Union, 817
817 F.2d
F.2d 967,
967, 978 (2d.
Cir. 1987)
1987) citing
citing Bise
Bise v.
v. International
International Brotherhood
Brotherhood of
of Electrical
ElectricalWorkers,
Workers, 618
618 F.2d
F.2d 1299,
1299, 1305
1305
(9th Cir.1979)
Cir.1979) (jury's
(jury'saward
award of
ofdamages
damages for
for emotional
emotionaldistress
distress vacated
vacated where evidence
evidence failed
failed to
show
show actual harm), cert. denied,
denied, 449 U.S. 904 (1980).
Thus
Thus in Designer
Designer Skin,
Skin, the
the failure of
of plaintiff
plaintifftotopresent
presentany
anycompetent
competent evidence
evidence of
monetary damageslinked
monetary damages linkedcoherently
coherentlytotoactions
actionstaken
takenbybyS&L
S&Lled
ledthe
theDistrict
District of
of Arizona to
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dismiss outright plaintiff’s

dismiss outright plaintiff’s unfair
unfaircompetition
competitionclaim
claimand
andcopyright
copyrightinfringement
infringementdamages
damages claims
under
under a copyright
copyright theory
theory against
against S&L,
S&L,including
includingallall
actual damages
actual damagesand
andclaims forfor
claims the the
disgorgement of profits.
disgorgement of profits. See
See Transcript
Transcriptof
of the
the Honorable
Honorable James
JamesA.
A. Teilborg’s
Teilborg’s Oral
Oral Order
Order in
connection with
with defendant’s
defendant’s Rule 50 Motion,
Motion,dated
dated July
July 16,
16, 2008
2008 is
is attached hereto as
attached hereto asExhibit
Exhibit A.
In his ruling,
ruling, the
the court
court stated:
stated:
All
Allright.
right.The
TheCourt
Courthas,
has,obviously,
obviously,heard
heardthe
theevidence
evidenceand
andheard
heard the
the arguments
arguments
of counsel
counsel and
and I have
have previously
previously granted the motion
granted the motion to strike
strike certain
certain of
of the
the
damage evidence from Miss Romero and set forth my reasons why. The
damage evidence from Miss Romero and set forth my reasons why. The Court has Court has
now granted the unopposed
unopposed motion
motion to dismiss
dismiss the
the claim for
for statutory
statutory damages.
damages. I
now grant
grant the Rule 50 motion with respect to actual damages on the bases
the Rule 50 motion with respect to actual damages on the bases that
there has been
there has been nono showing
showing of actual
actual damages suffered as
damages suffered as aa result
result of the
the alleged
alleged
copyright infringement. . . .
[T]he references
[T]he references to S &
& L's
L'sprofits
profitsare
aresimply,
simply,again,
again,gross
grossreferences
references to
to revenues
revenues
and
and ultimately to profits without any reasonable basis
profits without any reasonable basis to differentiate how much
much
of that
that isis attributable
attributable to
to the
the copyright
copyrightinfringement
infringement as
as opposed
opposed to the
the product
product
sales. .
sales. . . .
.
And the
the suggestion, setting aside
suggestion, setting aside the
the lack
lack of
of connection
connection to the infringement, the
suggestion that
suggestion that somehow
somehowthe thejury
jury could
could take
take the
the box car numbers
numbers [of sales
sales by
S&L]
S&L] that are in evidence and somehow calculate what a license fee might be
that are in evidence and somehow calculate what a license fee might be or
or aa
royalty might
might be
be would
would simply
simplybe betotoinvite
invitethem
themtotoengage,
engage, again,
again, in
in the
the rankest
rankest
form
form of
of speculation
speculation and literally
literally creating
creating out
out of
of whole
wholecloth
clothsome
some type
type of ofdamage
damage
number.
number.
So
So for these
these reasons, the Court
reasons, the Court concludes that there
concludes that there is
is simply an
an absence
absence of
evidence to connect
evidence to connect the
the infringement
infringement with
with actual
actual damages that would
damages that would allow aa
reasonable jury to have a legally sufficient basis to award damages.
reasonable jury to have a legally sufficient basis to award damages.
Id.
Id. at.
at. 12,
12, 18-19
18-19 and 33-36.
and 33-36.
Here,
Here, S&L has
has repeatedly
repeatedly requested, in discovery,
requested, in both proof of
discovery, both of damages
damages and
and the
the
articulation
articulation of aa theory
theoryofofdamages;
damages; AG
AGhas
hasprovided
providednone.
none.AG’s responses
AG’s to S&L’s
responses to S&L’s
interrogatories were unresponsive

interrogatories were on the
unresponsive on the issue
issue of
of damages
damages and
and were
were never
neversupplemented.
supplemented.
Further,
Further, AG
AG has
has produced
produced no
no expert
expert report,
report, no
no financial
financialrecords,
records, no
no evidence
evidence of
of lost
lostsales,
sales, and
and no
no
evidence of the
evidence of the value
value of
of its vaunted distribution network or of
vaunted distribution of its
its assertion
assertion that that distribution
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network was in any way disrupted

disrupted by
by S&L’s
S&L’s actions.
actions. Indeed,
Indeed, the
the only
only numbers
numbers produced by AG
produced by
at any point in this litigation

litigationisisaavague
vague chart
chart entitled
entitled “Damages
“Damages Worksheet,”
Worksheet,” which
whichappears
appears to be
a conclusory summary, unaccompanied by backup

unaccompanied by backup or reference
reference to
to specific sources, of sums
sources, of sums AG
AG
has spent in
has spent in various
various categories
categories related
related to
to its
its sales efforts.
sales efforts.
Thus the only evidence that AG

AG intends
intends to
to provide
provide at
at trial
trialon
onthe
theissue
issue of
ofdamages
damages is the
testimony
testimony of Australian Gold’s
Gold’s employees
employees limited to executives Leslie Hartlieb, John
executives Leslie John Kieffner,
and Tracey Ring,

and Tracey Ring, so
so that
that each in turn can
each in can comment on “…the harm
comment on harm caused by the
caused by the sale
sale of
products over the internet, and damages AG has

damages AG has sustained
sustainedas
asaaresult
resultof
ofthe
theconduct
conductof
of S&L
S&L and
Sagarin.” SeeJoint
Sagarin.” See JointPretrial
PretrialOrder,
Order,dated
datedMarch
March24,
24,2008
2008(Dkt.
(Dkt.No.
No.129)
129)atat 8-9.
8-9. Absent
Absent the
the
presentation of evidence
presentation of evidence quantifying
quantifying the
the harm
harm AG allegedly
allegedly experienced becauseof
experienced because of S&L’s
S&L’s
alleged interference with

alleged interference with its distributors,
distributors, which
which isis an
an analysis
analysis that
that none
none of
of the
the aforementioned
aforementioned
AG
AG employees
employees is qualified to
to make
make and upon which there is no documentation
documentation in the record
record for
them
them to rely,
rely, any
any such
such testimony
testimony will
will be
be atatbest,
best, ininJudge
Judge Teilborg’s
Teilborg’s words,
words, tantamount
tantamount to
“invit[ing
“invit[ingthe
thejury]
jury]totoengage,
engage,again,
again, in
in the
the rankest
rankest form of
of speculation
speculation and literally creating
and literally creating out
of whole
whole cloth
cloth some
some type of
of damage
damage number.”
Because AG cannot
Because AG cannot prove
prove damages
damagesfrom
fromthe
thealleged
allegedtortious
interferenceby
byS&L,
S&L, AG’s
AG’s
claim of
of tortious
tortious interference with contract
interference with contract will
willfail
failtotostate
stateaa claim
claimas
as a matter of law.
II.
II. AUSTRALIAN
AUSTRALIANGOLD’S
GOLD’SCANNOT
CANNOTMEET
MEETTHE
THELEGAL
LEGALSTANDARD
STANDARDTOTO
SUCCEED ON ITS
SUCCEED ON ITS TRADEMARK
TRADEMARK AND
ANDUNFAIR
UNFAIRCOMPETITION
COMPETITION
CLAIMS
CLAIMSAT
ATTRIAL.
TRIAL.
A. AG
AGCannot UseUse
Cannot Trademark ClaimsClaims
Trademark As Proxies
As for Copyright
Proxies for Copyright
Infringement
Infringement
To a large extent
extent AG’s
AG’s trial
trial brief
briefsuggests
suggests that it hopes the Court
hopes the Court will
will pay
pay no
no heed
heed to its
earlier rulings dismissing

earlier rulings dismissingvirtually
virtually all
all of AG’s
AG’s trademark-based claims. In
trademark-based claims. In fact,
fact, in its Order of
September 30,2007,
September 30, 2007,the
theCourt
Courtdismissed
dismissedAG’s
AG’s false
false designation
designationofoforigin
origin claim,
claim, AG’s false
false
18
18
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advertising claim, AG’s

advertising claim, AG’s trademark dilution claim,
trademark dilution claim, and
and AG’s unfair
unfair competition
competition claim.
claim. AG
AG
seems to believe,
seems to believe, however,
however, that
that if
if ititparrots
parrots the
theCourt’s
Court’spermissive
permissive language,
language, finding
finding the
the
existence of aa triable issue

existence of issue on
on the
the question
question of
of whether
whether photographs
photographsof
ofAG
AG products
products on
on the
the S&L
S&L
website causeconsumer
website cause consumerconfusion,
confusion,it itcan
can“back
“backin”
in” the
the full
full panoply
panoply of claims
claims sounding
sounding in
trademark andunfair
trademark and unfaircompetition.
competition. Obviously the
the Court
Court will
will not permit this.
Pushing past its

Pushing past its broad-brush assertionofof injury,
broad-brush assertion injury, however,
however, it can
can be
be perceived
perceived that
that
essentially AG claims that S&L

S&Lhas
has copied
copied photographs of Product
photographs of Product bottled
bottled from the AG website,
website,
and that this

and that this is likely
likely to
to cause
cause consumer confusion. See
consumer confusion. Australian Gold’s Trial
See Australian Trial Memorandum,
Memorandum,
dated January2,2,2009
dated January 2009(Dkt.
(Dkt.No.
No.144)
144) at 7-8, 19. ItItshould
shouldbe
benoted
noted at
at this
this juncture,
juncture, of
of course,
course,
that to the extent

extent any
any aspect
aspectofofAG’s
AG’s claim
claim is construed
construed as
assounding
soundinginincopyright,
copyright,itit is
is not
not part of
this case.
case. That is true for
for two
tworeasons.
reasons.
One
One is that,
that, in its
its summary
summary judgment
judgment ruling, the
the Court,
Court, in
in addition
addition to
to dismissing
dismissing the
the
counterclaims of AG set
counterclaims of set out above
above (as
(as well as
as its claims
claims for
for conspiracy
conspiracy and
and intereference
intereference with
prospective business advantage)

prospective business advantage)also
alsodismissed
dismissedAG’s
AG’s copyright
copyright claims.
claims.
The
The second
second isis that
that the
the courts
courts do not
not permit
permit claims
claims of
of“false
“falseassociation”
association” based
based on
on
unauthorized copying, and

unauthorized copying, and which
which are
arefundamentally
fundamentallypremised
premisedonon
thethe
wrongfulness or or
wrongfulness
unauthorized nature
nature of that copying,
copying, to
to masquerade as trademark
masquerade as trademark claims.
claims. There
There can
can be
be no
no claim
for “unfair competition”

competition” arising
arisingout
outof what is essentially
of what an allegation
is essentially of copyright
an allegation of copyright
infringement.
infringement. 17
17 U.S.C.
U.S.C. §§ 301(a).
301(a). Indeed
Indeedeven
eventhe
thestates
states are precluded
precluded from enforcing
enforcing penalties
penalties
for copyright
copyright violations
violations ifif the
the intellectual
intellectual property
property at
at issue
issue falls within
within the
the "subject
"subject matter
matter of
copyright" as
as defined
defined by federal
federal law and if the
and if the claimed
claimed property
property rights are
are "equivalent
"equivalent to" the
the
exclusive rights provided

exclusive rights provided by federal copyright law. Crow v.
federal copyright v. Wainwright,
Wainwright, 720
720 F.2d
F.2d 1224,
1224, 1225
1225
(11th Cir. 1983), cert. denied, 469 U.S.

denied, 469 U.S. 819
819(1984).
(1984). To the
the extent
extent any
anyof
of AG’s
AG’s claims, including
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19
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its claim
claim under
under Section
Section 133 claim under
under New
New York
YorkGeneral
General Business
Business Law,
Law, amounts
amounts to no more
more
than aa copyright
copyright claim in disguise,
disguise, AG should
should not even be
be permitted
permitted to
to mention
mention itit in its
its opening
opening
statement, elicit testimony

statement, elicit testimony regarding
regardingitit or
or otherwise
otherwise prejudice
prejudice the
the jury
jury by placing before
before it the
the
alleged
alleged “wrongfulness”
“wrongfulness” of S&L’s
S&L’suse
useofofany copyrighted
any work
copyrighted by virtue
work of copying
by virtue or or
of copying
publishing it without
without authorization.
authorization.
B. AG Cannot Prove A
A Likelihood
Likelihood of Confusion
Section 32(1) of the Lanham Act, 15 U.S.C. § 1114(1), provides that:
(1) Any
Any person
person who shall, without
withoutthe
the consent
consent of the registrant-
(a) use
use in commerce
commerce any any reproduction, counterfeit,copy,
reproduction, counterfeit, copy,oror colorable
colorable imitation
imitation of aa
registered mark in
registered mark in connection
connection with
with the sale,
sale, offering
offering for sale, distribution, or advertising
advertising
of any
any goods
goods or services on or
services on or in connection
connection with which
which such
such use
use is likely
likely to
tocause
cause
confusion, or to cause mistake, or to deceive
confusion, or to cause mistake, or to deceive … …
shall be liable in a civil

civil action
actionby
bythe
the registrant
registrant for
forthe
the remedies
remedies hereinafter provided.
It is,
is, however,
however, one thing to complain
complain of
of aa “reproduction,”
“reproduction,”etc.
etc.ofofaatrademark,
trademark, and
and quite
quite another
another
to seek damagesfor
seek damages for aaphotograph
photographof
of aaproduct
productbeing
being sold
sold which
which may bear
bear that
that trademark.
trademark. There
is simply
simply no
no legal
legal basis
basis for
for suggesting
suggesting that juxtaposing
juxtaposing the
the name
name of a retailer that
that sells a product
with
with an
an image of that product
product itself
itself is an
an unlawful
unlawful suggestion
suggestionof
of“affiliation”
“affiliation” that
that can
can give rise
rise to
likelihood
likelihood of
ofconfusion,
confusion, the
the signal
signal test for trademark infringement. As S&L
S&L noted
noted in
in its
its summary
summary
judgment motion, ifif this

judgment motion, thisCourt
Courtisistotohold
holdotherwise,
otherwise,every
everysupermarket
supermarketand
anddepartment
department store
store
circular would be
be aa trademark
trademark infringement! Indeed, since the
Indeed, since the time
time of this
this Court’s
Court’s summary
summary
judgment ruling
ruling on
on September
September 30, 2007, this very issue was played
issue was played out
out at
at trial
trial in Designer
Designer Skin.
Skin.
Considering the same

Considering the sameissue
issue– -aa claim
claim of
of “false
“false association” by the
association” by the plaintiff based on S&L’s
based on
display
display of photographs of the
photographs of the merchandise
merchandise itit was
was offering
offering for sale
sale –- Judge
Judge Teilborg
Teilborg ruled
ruled as
as
follows:
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20
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Alternatively, and
Alternatively, andnow
nowhaving
havingheard
heardthe
theevidence
evidenceand andseen
seenthe theevidence
evidence andand seen
seen
the website
website presentations,
presentations,itit is
is clear
clear to
to me
me that
that the
the portraying of Designer
Designer Skin's
product images on the the website
website next
next to the
the SS& & LL logo
logocannot
cannot cause
cause any confusion
that somehow
somehow SS & & LL is
is associated
associated with Designer
Designer SkinSkin oror is
is aa so-called
so-called authorized
distributor.
And again, we must remind ourselves
ourselves that
that SS& &L L -- though much to the chagrin of
Designer, S
Designer, S&&L L had
had a perfect right toto sell
sell this
this product,
product, and
and the meremere fact thethe SS &
&
L logo
logo isis next
next to
tothe
the product
product does
does not
not and
and II believe
believe could
could not
not result
result ininany
anybases
bases
for confusion.
In my
my judgment,
judgment, this is nono different
different than
than ififthis
thisproduct
product had
had been
been sold
sold onon the
the
Macy's
Macy's or Nordstrom's
Nordstrom's website
website with Nordstrom's
Nordstrom's and and Macy's
Macy's logos
logos sprinkled
sprinkled
throughout. That would not be the
throughout. That the basis
basisfor
for aa claim
claim of
of confusion.
confusion. And
And obviously,
retailers and
and Internet
Internet purveyors
purveyors ofof products
products areare doing
doing this regularly and itit cannot
cannot
and should not be actionable.
and should not be actionable.
Honorable JamesA.
Honorable James A. Teilborg’s
Teilborg’s Oral
Oral Order
Order in connection
connection with defendant’s Rule 50
defendant’s Rule 50 Motion,
dated
dated July 16,
16, 2008
2008 at
at p. 37.
37.
Furthermore, AG has
has never produced admissible evidence
produced either admissible evidence of
of actual confusion nor
evidence, muchless
evidence, much lessan
anexpert’s
expert’sopinion,
opinion,that
that S&L’s
S&L’s actions could lead
actions could lead to aa likelihood
likelihood ofof
confusion. No
Noconsumer
consumerhas
has ever
ever inquired
inquired whether,
whether, much
much less
less been misled even
even momentarily
momentarily on
the spurious grounds

the spurious groundsofof“initial
“initial interest”
interest” confusion that, S&L
confusion that, S&L is an
an “authorized”
“authorized” seller of the
the
Products or isis otherwise

Products or otherwiseaffiliated
affiliatedwith
with AG.
AG. This
This isis hardly
hardly surprising
surprising -–the
the S&L
S&Lwebsite
websitefeatures
features
products of almost
products of almost every
every manufacturer.
manufacturer. In
In the
theabsence
absence of evidence
evidence of actual
actual confusion,
confusion, the
the
burden is on
burden is on AG to
to produce
produce evidence of a likelihood
evidence of likelihood of
of confusion
confusion -–but,
but,asasAG
AGurged
urgedonon
summary judgment, “it

summary judgment, “it is certainly
certainly proper
proper for
for the
the trial
trial judge
judge to
to infer
inferfrom
fromthe
theabsence
absence of
of actual
actual
confusion that there

confusion that there was
wasalso
alsono
nolikelihood
likelihood of
of confusion.” Inc. Publishing Corp. v.
v. Manhattan
Manhattan
Magazine, Inc., 616

Magazine, Inc., 616 F.Supp.
F.Supp.370,
370,386
386(S.D.N.Y.1985),
(S.D.N.Y.1985),citing
citing McGregor-Doniger
McGregor-Doniger Inc.
Inc. v. Drizzle
Inc., 599 F.2d 1126, 1136 (2d Cir.1979).
AG
AG has
has no proof of
of aa likelihood
likelihoodofofconfusion
confusionhas
has no
no survey
survey or
or other
other expert
expert testimony on
point to present at trial.

present at trial. When
When asked
asked in
in discovery
discovery “to
“to[s]tate
[s]tate inindetail
detaileach
each fact
fact or
orcircumstance
circumstance
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which
which defendant
defendant contends shows that
contends or shows that aa likelihood
likelihood of
ofconfusion
confusionexists
existsbetween
between defendant
defendant and
and
plaintiffs
plaintiffsbecause plaintiffs’ use
because of plaintiffs’ use of
ofthe
the marks
marks at
at issue in this action …,”
…,” AG
AGwas
was unresponsive.
unresponsive.

See Australian Gold’s Responses
ResponsestotoS&L’s
S&L’s First Set of Interrogatories,
Interrogatories, No. 33 at
at 3-4,
3-4, attached
attached
hereto asExhibit
hereto as Exhibit B.
B. In
Infact,
fact, ininanswering
answering S&L
S&Linterrogatories,
interrogatories, AG
AG stated:
stated: “Australian
“Australian Gold
Gold has
has
not yet identified an

an expert
expert witness who may
witness who may be
be called
called upon
upon to
to offer expert
expert testimony
testimony in this
area.”
area.” Id. InIndoing
doingso,
so,AG
AGacknowledged
acknowledged that
that ititwould
wouldneed
needtotopresent
present expert
expert testimony
testimony to
succeed on aatrademark
succeed on trademarkinfringement
infringement claim.
claim. But
But there
there is
is no expert,
expert, just as
as there
there isis no
no likelihood
likelihood
of confusion,
confusion, and
and hence there isis no
hence there nobona
bonafide
fideclaim
claim for
for trademark
trademark infringement.
infringement.
Instead, as this
Instead, as this case
caseapproaches
approachesthe
theeve
eveofoftrial,
trial,AG
AGintends
intendstotoonly
onlyoffer
offer the
the testimony
testimony of
its employees to so
employees to so that
that they
they may
may offer their own
own subjective
subjective views
views on
on “the
“the harm
harm caused
caused by the
the
sale of products
sale of products over
over the
the internet
internet .. .. . ” See Joint Pretrial Order,
See Joint Order, dated
dated March
March 24,
24, 2008
2008 (Dkt.
(Dkt. No.
129) at
at 8-9.
8-9. Indeed, even ifif it AG
Indeed, even AG sought introduce such
sought to introduce such“lay
“lay expert”
expert” opinion,
opinion, AG’s
AG’s failure to
amend their interrogatory

amend their interrogatory answers
answersto
to disclose
disclosethat
that intention
intention precludes
precludesitit from proffering such
such
testimony at trial under Fed.

Fed. R.
R. Civ. P. 26(a)(2) and
and Fed.
Fed.R.
R. Civ.
Civ. P.
P. 37(c)(1).
37(c)(1). But
But even
even ifif it were
were
admissible, such
such testimony
testimony would be legally
legally inadequate as competent
inadequate as competentevidence
evidenceof
ofaalikelihood
likelihood of
confusion.
The lack of an expert

expert opinion,
opinion, given the
the lack
lack of
of proof of actual confusion,
confusion, is legally fatal
to AG’s
AG’s trademark
trademark claim. The
The courts
courts in
in this
this Circuit
Circuithave,
have, logically,
logically, concluded
concluded that the
the “failure
to offer
offer aa survey
survey showing the existence of confusion
existence of confusion is evidence
evidence that
that the
thelikelihood
likelihood of confusion
cannot be shown.” Essence

cannot be Communications,Inc.
Essence Communications, Inc. v.
v. Singh
Singh Industries,
Industries, Inc. 703
703 F.Supp.
F.Supp. 261
261
(S.D.N.Y. 1988). See

See also
also E.S.
E.S. Originals Inc.
Inc. v.
v. Stride
Stride Rite
Rite Corp.,
Corp., 656
656 F.Supp
F.Supp 484 (S.D.N.Y.
1987), noting that the failure

failure to
to conduct
conduct aa survey was especially telling
telling because the plaintiff
because the plaintiff had
had
plenty of
of time
time to
to do
do so:
22
22
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Furthermore, it is significant
significantthat
thatStride
StrideRite
Ritedid
didnot
notundertake
undertake aa consumer
consumer survey,
a failure which strongly suggests
which strongly suggests that a likelihood of confusion cannot be
a likelihood of confusion cannot be shown.
shown.
This is
is especially
especially true
true since
since this
this case
case was
was not
not tried
tried on
onan
anemergency
emergency basis,
basis, and
and
there was therefore ample opportunity to undertake such
there was therefore ample opportunity to undertake such a survey. a survey.
Id. at 490 (citations omitted).

omitted). This,
This,ofofcourse,
course,isisperfectly
perfectlyanalogous
analogoustotothe
theevents
eventshere;
here; this
this case
case
has been
has been ongoing
ongoing for
for nearly
nearly four years, and AG has
years, and has been aware of
been aware of S&L’s
S&L’s business
business for at
at least
least
five years,
five years, because
because itit sent
sent its
its original
original cease and desist
cease and desistletter
letterclaiming
claiming trademark
trademark infringement
infringement in
January 2004.
January 2004. Accordingly, AG
AG had
had “ample
“ample opportunity”
opportunity”totoprepare
prepare aa survey,
survey, and
and failed to do
so.
so.
BecauseAG
Because AG has
has not
not produced
producedany
any evidence
evidenceofof actual
actual confusion
confusionoror aa likelihood
likelihood of
confusion, or any
any evidence
evidence of damages arising from trademark infringement under
damages arising under the
the Lanham
Lanham
Act, itit will

willnot
notbe
beable
able to
to sustain
sustain its claim for
for trademark infringement at trial.
C. AG Cannot Prove Any Trademark

TrademarkDamages Due to
Damages Due to S&L’s
S&L’s Actions
To be
be awarded profits under
awarded profits under the
the Lanham
LanhamAct,
Act, aa plaintiff
plaintiff must
must show
show that an infringer
acted with
acted with willful
willful deception,
deception,ininaddition
additiontotoshowing
showing(1)
(1)the
thedefendant's
defendant's unjust
unjust enrichment;
enrichment; (2) the
plaintiff's damages from the

damages from the infringement; or (3)
(3) that
that an
an accounting
accounting for
for profits
profits isisnecessary
necessary to
deter future
deter future willful
willful infringement.
infringement.George
GeorgeBasch
Basch Co.
Co. v.
v. Blue
Blue Coral,
Coral, Inc.,
Inc.,968
968 F.2d
F.2d 1532,
1532, 1537 (2d
Cir.1992); see
Cir.1992); see also
also Gidatex,
Gidatex, S.r.L.
S.r.L. v.v.Campaniello
CampanielloImps.,
Imps.,Ltd., F.Supp.2d 136,
Ltd., 82 F.Supp.2d 136, 141
141
(S.D.N.Y.2000). Along
(S.D.N.Y.2000). Along with
withshowing
showing defendant's willful deception,
defendant's willful deception, the
the plaintiff
plaintiff must
must prove
prove
defendant's sales
defendant's salesin
in order
order to recover defendant's profits. See
defendant's profits. 15 U.S.C.
See 15 U.S.C. § 1117(a);
1117(a); Basch,
Basch, 968
F.2d at 1539;
F.2d 1539; Ahava
Ahava (USA),
(USA), Inc.
Inc. v.
v. J.W.G.,
J.W.G., Ltd.,
Ltd., 286
286F.Supp.2d
F.Supp.2d 321,
321, 324
324 (S.D.N.Y.2003);
(S.D.N.Y.2003);
Gidatex, 82 F.Supp.2d at 141-42.

F.Supp.2d at 141-42. But
But to recover their own damages, including those
damages, including those lost
lost profits,
see Basch,
see Basch,968
968 F.2d
F.2d at
at 1540
1540 (observing
(observing that
that plaintiff's
plaintiff's lost
lost profits “have
“have been
been traditionally
traditionally
compensableas
compensable asan
anelement
elementofofplaintiff's
plaintiff's damages”),
damages”),plaintiffs
plaintiffs are
are required
required to
to prove
prove –- with
with some
some
specificity -–what
specificity whattheir
theiractual
actualdamages
damages are.
are. See, e.g., PPX
See, e.g., PPX Enters.
Enters. v.
v. Audiofidelity Enters.,
Enters., 818
23
23
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F.2d
F.2d 266,
266, 271 (2d
(2d Cir.1987)
Cir.1987) (noting
(noting that
that “the
“thequantum
quantum ofofdamages,
damages, as
as distinguished
distinguished from
entitlement, must be demonstrated with specificity”).

demonstrated with specificity”).Some
Somereasonable
reasonable basis
basis of computation
computation has
has
to be used, even though

used, even though the
the proof
proof may
may be
be only
only approximate.
approximate. See
SeeGTFM,
GTFM, Inc.
Inc. v.
v. Solid
Solid Clothing,
Inc., 215 F.Supp.2d 273, 305

F.Supp.2d 273, 305 (S.D.N.Y.2002).
(S.D.N.Y.2002). AG
AG has
has provided,
provided, in
in discovery
discovery or
or otherwise,
otherwise, no
reasonable basison
reasonable basis onwhich
which aa jury
jury could
could make
make such
such aa calculation.
calculation.
Similarly, aa plaintiff
plaintiffmust
mustdemonstrate
demonstrate that
that defendants'
defendants' infringing
infringing conduct
conduct had
had some
some
effect on its
its own
own sales
sales or otherwise
otherwise caused plaintiffs economic
caused plaintiffs economic harm.
harm. See, e.g., Burndy
See, e.g., Burndy Corp. v.
Teledyne Indus., Inc.,

Teledyne Indus., Inc., 748
748 F.2d
F.2d 767,
767, 771-73
771-73 (2d Cir.1984). “A
“A plaintiff
plaintiffwho
whoestablishes
establishes false
false
advertising in violation of
advertising in of §§ 43(a)
43(a) of
of the
the Lanham
Lanham Act
Act will
willbebeentitled
entitledonly
onlytotosuch
suchdamages
damages as
as
were caused by
were caused by the
the violation.” Burndy
Burndy Corp.
Corp. v.v.Teledyne
Teledyne Industries,
Industries, Inc., 748
748 F.2d
F.2d 767,
767, 771
771
(2d Cir
Cir 1984),
1984), citing,
citing, Quabaug
Quabaug Rubber
Rubber Co.
Co. v.
v. Fabiano
Fabiano Shoe
Shoe Co., Inc., 567
567 F.2d
F.2d 154,
154, 161
161 (1st
(1st
Cir.1977); Invicta
Invicta Plastics
Plastics (USA),
(USA), Ltd.
Ltd. v.
v. Mego
Mego Corp., 523 F.Supp. 619 (S.D.N.Y.1981).
F.Supp. 619 (S.D.N.Y.1981). A court
may not engage

engage in any
any degree
degree of speculation
speculation in
in computing
computing the
theamount
amount ofofdamages
damages unless
unless and
and
until causation
causation of damages is first established.
damages is established. Story
Story Parchment
Parchment Co.
Co. v.v. Paterson
Paterson Parchment
Parchment
Paper
Paper Co.,
Co., 282 U.S. 555,
282 U.S. 562 (1931).
555, 562 (1931).
In an
an “evidentiary
“evidentiary vacuum”
vacuum” such
such as
as the one here, “there is
here, “there is no basis to award
basis to award plaintiffs
plaintiffs
any
any damages underthe
damages under theLanham
LanhamAct.”
Act.” Merchant
Merchant Media,
Media, LLC
LLC v.
v. H.S.M.
H.S.M. Intern.,
Intern., 2006
2006 WL
WL
3479022 (S.D.N.Y. 2006), citing

citing Gidatex,
Gidatex, S.r.L.
S.r.L. v.
v. Campaniello
Campaniello Imports,
Imports, Ltd.,
Ltd.,82
82 F.Supp.2d
F.Supp.2d 136,
141-142
141-142 (S.D.N.Y. 2000 (evidentiary record did not support an award
support an awardof
of profits
profits where
where plaintiffs
plaintiffs
failed
failed to
to demonstrate
demonstrate lost
lost sales
sales and merely showed defendant's intent
showed defendant's intent to divert
divert sales)
sales)
On
On this
this record,
record, AG
AG cannot
cannot proffer
proffercompetent
competentevidence
evidence of
ofthe
thecausation
causation of
ofdamages,
damages, much
much
less
less aa guideline
guideline as
as to
to their
their amount
amount even
even ifif they theoretically existed, with
with respect
respect to its Lanham
Lanham
Act claims.
claims. While
While AG
AGoriginally
originally“reserved
“reservedits
itsright”
right”toto“designate
“designatean
anexpert
expert witness
witness to
to testify
testify as
as
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to the monetary damages

damagesof
of Australian
Australian Gold’s
Gold’s goodwill
goodwill and
and reputation,”
reputation,” ititnever
neversupplemented
supplemented
its response by naming

response by naming such
such an
an expert.
expert. See
SeeAustralian
Australian Gold’s
Gold’s Responses
ResponsestotoS&L’s
S&L’s First Set
Set of
Interrogatories, No.4,and 6 at
at 4-
4- 5, attached
attachedhereto
heretoasasExhibit
ExhibitB.
B. Rather,
Rather, once
once again, AG
AG instead
instead
insists that by merely insisting “we’ve

“we’vebeen
been damaged,”
damaged,” itit hopes such aaplea,
hopes that such plea,will,
will, by itself be
enough to assert
enough to assertliability
liability against
against S&L.
S&L.
Consistent with its

Consistent with its now long
long held
held approach
approach to the issue
issue of proof
proof of
ofdamages,
damages, AG’s
recently filed
filed Trial
TrialMemorandum
Memorandumonce
once again
again states
states in conclusory
conclusory fashion
fashion the
the astonishing
astonishing claim
that its actual damages “average almost

damages “average almost $700,000
$700,000per
peryear,”
year,” but
but even
even at
at this
this late
late date
dateAG
AG fails
fails to
explain how such

explain how an amount
such an amount was
wasarrived
arrivedat.
at. ItIt merely
merely states
states that this reflects
reflects the
the “costs
“costs of
fighting product
product diversion
diversion on
on the
the internet
internet and
and the
the training
training and
and management of the distributor
management of
relationships were previously

relationships were previously submitted
submittedtoto the
the Court
Court in
in Australian
Australian Gold’s response to S&L’s
response to S&L’s
motion for summary

summary judgment.” See
See Australian
Australian Gold’s
Gold’sTrial
TrialMemorandum,
Memorandum,dated
dated January
January 2,
2009
2009 (Dkt. No. 144) at 25. In
Inreviewing
reviewingthe
theevidence
evidence AG
AG points
points to
to from
from its
itssummary
summary judgment
judgment
motion,
motion, such “evidence” is
such “evidence” is nothing
nothingmore
morethan
thanself-serving
self-servingaffidavits
affidavitssubmitted
submittedby by
AGAG
employees, which do not even

employees, which even specifically
specifically address
address the
the issue
issue of
of actual
actual damages
damages for trademark
trademark
infringement, but were instead

instead offered
offered in
in support
support of
of AG’s
AG’s damages arisingfrom
damages arising from S&L’s
S&L’s tortious
interference with contract,

interference with i.e., an
contract, i.e., an entirely different claim.
claim. See
Gold’s Memorandum
Memorandum
of Law
Law In
In Opposition
Opposition to S&L’s
S&L’sVitamins
VitaminsMotion
Motionfor
forSummary
SummaryJudgment
Judgment (Dkt.
(Dkt. No.
No. 106),
106), at
at 23.
As to AG’s
AG’s New
New York
Yorklaw
lawclaims,
claims,the
the standard
standard of proof mirrors
mirrors that
that of aa Lanham
Lanham Act
claim, except that aa claim of unfair

except that unfair competition
competition under
under New York
York law
lawalso
alsorequires
requires evidence
evidence of
defendant's badfaith.
defendant's bad faith. Louis
Louis Vuitton
Vuitton Malletier v.v. Dooney
Dooney &&Bourke,
Bourke,Inc.
Inc. (Vuitton I), 340
(Vuitton I), 340
F.Supp.2d 415,436
F.Supp.2d 415, 436(S.D.N.Y.2004),
(S.D.N.Y.2004),vacated
vacatedininpart,
part,Vuitton
VuittonIIII 454
454 F.3d
F.3d108;
108;Cartier
Cartier Int'l
Int'l B.V.
BenMenachem,No.
v. BenMenachem, No. 06
06 Civ.
Civ. 3917,
3917, 2008
2008 WL
WL 64005, at *13 (S.D.N.Y.
(S.D.N.Y.Jan.
Jan. 3, 2008) (“The
(“The same
same
25
25
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acts that constitute

acts that constitute trademark
trademark counterfeiting
counterfeiting and
and unfair
unfair competition under federal laws give rise
to [p]laintiffs'
[p]laintiffs'claims
claimsofofcommon
commonlaw
lawtrademark
trademark infringement
infringement and
and unfair
unfair competition,
competition, as
as well
well as
as
unfair competition underNew

competition under NewYork
York law.”).
law.”). AG
AGwill
willnot
notbebeable
abletotomeet
meetthis
thisstandard
standard at trial
either –- itit has

has no proof of bad faith on the
the part
part of
of S&L.
S&L.
CONCLUSION
CONCLUSION
For the foregoing reasons, S&L intends to demonstrate

reasons, S&L at trial,
demonstrate at trial, upon the submission
submission of
of all
of AG’s
AG’s proofs,
proofs, AG
AGwill
willnot
nothave
havesustained
sustainedits
itsburden
burdenon
onprosecution
prosecution of
ofits
itscounterclaims
counterclaims as
as aa
matter
matter of law, and that it will
willbe
beable,
able, ininthe
theevent
event the
the Court
Court determines otherwise, that
determines otherwise, that S&L’s
S&L’s
proofs will
willrebut
rebut any
any such
such proofs
proofs also
also to
to the
the extent
extent that
that S&L
S&Lshould
shouldbe
begranted
granted judgment
judgment as
as a
matter of law.
Dated:
Dated: New York, New York
January 5, 2009
January 5, 2009
Respectfully submitted,
GOETZ
GOETZ FITZPATRICK
FITZPATRICKLLP
LLP
By:
By: ______/s/________________
______/s/________________
Ronald D. Coleman (RC 3875)

One
One Penn
Penn Plaza
Plaza
GOETZ
GOETZ FITZPATRICK
FITZPATRICKLLP LLP
New York, NYNY 10110
10110
Telephone:
Telephone: (212) 695-8100
695-8100
Facsimile: (212) 629-4013
Attorney for
for S&L Vitamins, Inc.
and Larry Sagarin
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S &amp; L Vitamins v. Australian Gold - S &amp; L Vitamins Trial Brief

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Case 2:05-cv-01217-JS-MLO Document 150

Document Filed 01/05/2009

Ronald D. Coleman (RC 3875)

Plaintiff, 05-CV-1217 (JS)

Third Party Plaintiff,

Larry Sagarin, (jointly “S&L”)

protection, various varieties of trademark

Act based upon S&L’s

133 claim under New York

interference with contract,

Business Law Section

letters, through two versions

and off, and

probability right through

of the pretrial order essentially

establish S&L’s liability.

Yet precisely because AG’s factual

key legal principles

basic outline is this:

demonstrate S&L induced any

any third person actually did

cannot prove that

various distributors which prohibit

persons reselling Products

See Australian Gold’s

v. Serling 492 F.Supp.2d

274 (2d Cir.2001);

of the contract without justification,

underlying contract between AG and any identified third

retailers it purchased from entered

defendant knew about

Douglas, 742 F.Supp.

of understanding concerning the

knowledge naturally lies with the

such knowledge without

employee, competitor, and

entity separate from distributor. “To

F.3d 194, 204-205 (2d Cir. 1998).

any party, because AG made

who those distributors are.

See Article II,

even circumstantial evidence

Indeed, the evidence

through the course

stop buying from any

know the identity of the

discovery in this case,

Suggestions have also

show that S&L

shipping invoice, that

Because S&L does

introduce into New York

contracts and contract

detecting until found liable in

contract, AG must also

this claim under

628, 406 N.E.2d

134 N.E.2d 97 (1956).

interference with contract

Energy Ltd. v. Chase

137, 603 N.Y.S.2d 849, 851 (1st Dep't 1993).

Here, notwithstanding the

to breach its agreement

once again become

S & L Vitamins v. Australian Gold - S & L Vitamins Trial Brief

S & L Vitamins v. Australian Gold - S & L Vitamins Trial Brief