Antitrust Law Daily Wrap Up, ADVERTISING—W.D. Tex.: Repeated sales through an Amazon storefront satisfy personal jurisdiction requirements, (Aug 2, 2024)

By Rebecca Mayo, J.D.

Repeated sales through an Amazon storefront were found to be more than random, fortuitous, and attenuated and could not be considered isolated occurrences.

Arguments that a Texas court did not have personal jurisdiction over a military equipment and survival gear company in another state failed, after the federal district court in Austin, Texas found that repeated sales to Texas customers through an Amazon storefront was enough to show the company purposefully availed itself of the privilege of doing business in Texas with Texas residents. The court held that whether or not the items were shipped by Amazon, the repeated sales were enough to establish specific jurisdiction. The court ultimately dismissed the false advertising and unfair competition claims against the company for being too conclusory, however the court granted leave to amend (Best Glide Aviation Survival Equipment, Inc. v. Tag-Z, LLC, No. 1:23-cv-01080-DAE (W.D. Tex. July 19, 2024)).

Tag-Z, LLC filed for, but later withdrew, a trademark application for U.S. Shelby openers, which are military style P-38 and P-51 can openers stamped with “U.S. Shelby Co.” These openers were manufactured, distributed, and sold by various entities after the original manufacturer dissolved in 1983. Based on this trademark application, Tag-Z was able to achieve brand owner status through Amazon, making it so that other can opener sellers could no longer sell the U.S. Shelby openers through Amazon.

One of these sellers, Best Glide Aviation Survival Equipment, Inc., filed suit, alleging that the trademark application was fraudulent, as was the resulting brand owner status designation and brought claims for federal false designation of origin/association/endorsement, federal unfair competition/advertising, Texas common law unfair competition (passing off), Texas common law unfair competition (false advertising), Texas common law misappropriation, and Texas common law unjust enrichment. Tag-Z moved to dismiss for lack of personal jurisdiction and failure to state a claim.

Personal jurisdiction. Tag-Z is a Delaware Limited Liability Company with its principal place of business in Omaha, Nebraska, which the court agreed meant the company was not “at home” in Texas for purposes of general jurisdiction. Therefore, the court looked to determine whether Tag-Z had purposeful minimum contacts with Texas such that they established personal jurisdiction.

Tag-Z had a website available to customers everywhere, including Texas, however the only contact the company had with Texas arose out of 28 sales to Texas customers through the Amazon website. The court noted that even if Amazon had shipped the products for Tag-Z, the sales were not isolated occurrences and Tag-Z had repeatedly entered into the transactions with Texas consumers, purposefully availing itself of the privilege of doing business in Texas with Texas residents.

The court then turned to whether the lawsuit arose out of or related to those purposeful forum contacts. Tag-Z argued that the complaint accused Tag-Z of making false statements in its trademark application, rather than directly to Texas consumers. However, the court found that the brand owner status misrepresentations could cause the customers to be confused about the true origin of the goods and this deception was related to the false advertising, false designation, and unfair competition claims, which was enough to show sufficient connection between the forum contacts and the claims. Further, Best Glide is a Texas corporation with its corporate headquarters in Austin, Texas and the Tag-Z sales to Texas customers caused a diversion of sales from Best Glide to Tag-Z. Therefore, the court found that the claims arose out of and related to Tag-Z’s contacts in the forum.

Failure to state a claim. Tag-Z moved to dismiss all of the claims for failure to state a claim. The court looked at each claim independently and determined that each one was too conclusory to survive. For example, Best Glide alleged that Tag-Z falsely claimed ownership to the “US Shelby” mark in its trademark application, which allowed it to crowd out other sellers on Amazon and falsely inherit the number of years it had been selling and the product reviews. However, Best Glide failed to specifically allege how the statement either deceived or had the capacity to deceive a substantial segment of potential customers, nor did it sufficiently allege how the deception was material or how it was likely to influence customers’ purchasing decision.

The federal unfair competition and false advertising claims failed to identify the commercial advertisement, if any, that included a false or misleading statement. The court found that the Texas common law unfair competition and federal false advertising claims failed for the same reason. Further, Best Glide did not describe or identify facts to support each element of a Texas common law misappropriation claim. Finally, the unjust enrichment claim failed to allege what benefit Tag-Z received that would be unconscionable to retain. Therefore, the court granted the motion to dismiss for failure to state a claim.

The Case is No. 1:23-cv-01080-DAE.

Judge: Ezra, D.

Attorneys: H. Dale Langley, Jr. (Law Firm of H. Dale Langley, Jr., PC) for Best Glide Aviation Survival Equipment, Inc. Jon B. Hyland (Hilgers Graben PLLC) for Tag-Z LLC.

Companies: Best Glide Aviation Survival Equipment Inc.; Tag-Z LLC

Cases: Advertising TexasNews