Antitrust Law Daily Wrap Up, ADVERTISING—DNH: Hat Box Seller States Claims for False Advertising Against Competitor , (Apr 15, 2013)

By Jody Coultas, J.D.

New Hampshire-based company Sarah’s Hat Boxes, LLC stated Lanham Act and New Hampshire Consumer Protection Act (CPA) claims against a company and its agents that Sarah’s sold hats to that allegedly falsely claimed that it had designed and manufactured those hats, according to the federal district court in Concord, New Hampshire (Sarah’s Hat Boxes, LLC v. Patch Me Up, LLC, April 12, 2013, Barbadoro, P.). The court also held that it had personal jurisdiction over the defendants and that venue was proper.

Patch Me Up, which sold spa products, purchased hat boxes wholesale from Sarah’s to use as packaging for their products. Some of the boxes were labeled with "Patch Me Up" labels printed by Sarah’s, as requested by Patch Me Up.

A division of Patch Me Up, L’Artisane Box, offered hat boxes for sale online. After the two companies began a relationship, Patch Me Up created a link to a website and a reference to hat boxes offered through L’Artisane Box. L’Artisane Box’s website containing numerous photographs of hat boxes purchased from Sarah’s.

Sally’s alleged that the Patch Me Up and L’Artisane Box were advertising its hat boxes as designed and manufactured by L’Artisane Box, and alleged that the companies offered hat boxes at prices below those charged by Sally’s to consumers in New Hampshire. Sally’s filed Lanham Act and CPA claims alleging that the companies and the president and founder of the companies stole business from Sally’s by making false claims on their website about the source, quality, and patent status of the hat boxes listed for sale. The defendants moved to dismiss the claims, arguing that the court lacks personal jurisdiction over them, that venue was improper, and for failure to state a claim.

The companies and their agents had sufficient contacts with New Hampshire to find personal jurisdiction, according to the court. Sally’s argued that specific personal jurisdiction applied in this case as the causes of action arose from or related to the companies’ contacts New Hampshire. To establish that the companies has sufficient minimum contacts with New Hampshire to support the exercise of personal jurisdiction, the court may look to the actions of the agents of the companies as their actions were legally attributable to the companies. Sally’s alleged that the companies and their agents directed more than one hundred e-mail and telephone communications to Sally’s in New Hampshire involving negotiations about the sale of hat boxes from New Hampshire, purchased the hat boxes in New Hampshire, and a website soliciting business from New Hampshire residents using images of the hat boxes purchased from New Hampshire. Because the website reached into New Hampshire and caused harm to Sally’s in New Hampshire, there was a sufficient relationship between the alleged contacts and the alleged injury. The agents also had sufficient contact based on the emails and telephone conversations. Also, the defendants could have foreseen that, should a claim arise, they would likely be haled into court in New Hampshire.

Because the court found personal jurisdiction over the Lanham Act claim, it exercised pendent personal jurisdiction over the CPA claims since they arose out of the same common nucleus of operative fact as the Lanham Act claim.

Venue for an action under the Lanham Act is proper in a judicial district in which any defendant resides. A defendant corporation resides in any judicial district in which it is subject to the court’s personal jurisdiction. Since the court found personal jurisdiction, it also found the venue to be proper.

Sarah’s stated Lanham Act false advertising claims against the companies, according to the court. A false advertising claim may be based on an advertisement that is false or that is literally true or ambiguous, but likely to mislead and confuse consumers. The defendants challenged the factual allegations, but not the legal claims. Factual issues do not bear on the sufficiency of the pleadings. Because the court assumed for the purposes of the motion to dismiss that all the allegations were true, and the defendants failed to argue that the pleadings are insufficient to state a claim under the Lanham Act, the motion was denied. The court applied this same reasoning in its denial of the motion to dismiss the CPA claims.

The case is No. 12-cv-399-PB.

Attorneys: Daniel A. Laufer for Sarah’s Hat Boxes, LLC. Paul David Marotta (Corporate Law Group) for Patch Me Up, LLC.

Companies: Sarah’s Hat Boxes, LLC; Patch Me Up, LLC; L’Artisane Box

Cases: Advertising StateUnfairTradePractices NewHampshireNews