BBK Tobacco & Foods, LLP v. Galaxy VI Corp.

BBK TOBACCO & FOODS, LLP, Plaintiff, v. GALAXY VI CORP., Defendant.

17-CV-4079 (BCM)

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK

May 31, 2020

OPINION AND ORDER

BARBARA MOSES, United States Magistrate Judge.

Before me in this trademark infringement action is a motion by plaintiff BBK Tobacco & Foods, LLP d/b/a HBI International (HBI) for summary judgment as to the damages owed to it by defendant Galaxy VI Corp. d/b/a Galaxy Wholesale (Galaxy). This Court previously concluded, in ruling on HBI's motion for summary judgment as to liability, that Galaxy infringed HBI's trademarks, in violation of the Lanham Act, when it sold one pack of counterfeit RAW brand King Size Slim rolling papers (for $2.00) and one counterfeit RAW brand rolling tray (for $10.00) to an investigator hired by HBI. BBK Tobacco & Foods, LLP v. Galaxy VI Corp., 408 F. Supp. 3d 508, 518, 530 (S.D.N.Y. 2019) (hereafter HBI I). Based on the Court's finding of liability, HBI now seeks: (1) statutory damages of $600,000; (2) an order deeming this case "exceptional," so that HBI can apply for an award of attorneys' fees; and (3) an order permanently enjoining Galaxy and those acting in concert with it from future infringing conduct.

For the reasons that follow, plaintiff's motion will be GRANTED IN PART. The Court will award HBI statutory damages of $30,000 and enter a permanent injunction prohibiting Galaxy, and those acting in concert with it, from future infringing conduct. However, the Court does not find this case to be exceptional and consequently will not award attorneys' fees.

I. BACKGROUND

Plaintiff HBI designs, manufactures, imports, markets and sells RAW brand "smoking products and accessories," including rolling papers. Amend. Compl. (Dkt. No. 27) ¶¶ 6, 23. According to HBI, its rolling papers are used by consumers who prefer to "roll their own" cigarettes, often because such consumers view pre-made cigarettes as "artificial, over-processed, or environmentally unfriendly." Id. ¶ 25. RAW brand rolling papers use "minimally processed, unbleached ingredients, which give the rolling papers their characteristic translucent brown color." Id. ¶ 30. RAW is also "a lifestyle brand centered around smoking, smoking culture, and the particular culture that consumers of RAW-brand smoking products enjoy." Id. ¶ 33. Defendant Galaxy is a New York corporation, Am. Compl. ¶ 13, which since January 2017 has operated a smoke supply store at 746 Myrtle Avenue in Brooklyn, managed by Said Ghnaim. See Ghnaim Dep. Tr. (Dkt. No. 137-16) at 11:23-12:22, 39:2-10, 40:25-41:9.¹

A. Procedural History

HBI filed this action on May 31, 2017, alleging that eleven corporate and individual defendants sold counterfeit RAW rolling papers and related products at various newsstands, convenience stories, groceries, and other small businesses in New York City. Compl. (Dkt. No. 1) ¶¶ 5, 7-16. On June 22, 2017, HBI filed its Amended Complaint, stating claims for: (1) trademark infringement in violation of § 32 of the Lanham Act, 15 U.S.C. § 1114; (2) false designation oforigin in violation of § 43(a) of the Lanham Act, 15 U.S.C. § 1125(a); (3) deceptive acts and practices in violation of New York General Business Law (GBL) § 349; and (4) common-law trademark infringement, unfair competition, and unjust enrichment. On August 11, 2017, the parties consented to proceed before a United States Magistrate Judge for all purposes pursuant to 28 U.S.C. § 636(c). (Dkt. No. 70.) On October 11, 2017, the Court approved a stipulated preliminary injunction prohibiting Galaxy from purchasing or selling counterfeit RAW products. (Dkt. No. 88.) Thereafter, all of the other defendants settled or defaulted (Dkt. Nos. 96-99, 108, 119-122), leaving Galaxy as the sole defendant.

On September 14, 2018, after discovery, HBI filed its motion for summary judgment as to liability against Galaxy, supported by, inter alia, the Declaration of Victoria Danta, one of HBI's attorneys (Danta Decl.) (Dkt. No. 137). In opposition to plaintiff's motion, Galaxy submitted, inter alia, the Ghnaim Liability Affidavit. On September 30, 2019, the Court issued its Opinion and Order (Dkt. No. 142), granting summary judgment with respect to liability under the Lanham Act, but denying summary judgment as to willfulness and as to liability under New York law. HBI I, 408 F. Supp. 3d at 524-30.

On October 7, 2019, HBI moved to voluntarily dismiss its claims under GBL § 349 and New York common law (Dkt. No. 143), and on October 8, 2019, the Court granted the motion, dismissing HBI's state law claims. (Dkt. No. 144.) On October 31, 2019, HBI filed its second motion for summary judgment (Dkt. No. 145), supported by a Memorandum of Law (Pl. Mem.) (Dkt. No. 146) and a Local Civil Rule 56.1 Statement of Undisputed Facts (Pl. 56.1 Stmt.) (Dkt. No. 147), which in turn references various previously-filed affidavits, declarations, and otherportions of the record in this action.² HBI has elected to pursue statutory damages under the Lanham Act, 15 U.S.C. § 1117(c), rather than establish its actual damages. Pl. Mem. at 11-13.

Galaxy failed to file any responding memorandum of law, in violation of Local Civil Rule 7.1, and likewise failed to file any response to plaintiff's Local Civil Rule 56.1 Statement. Instead, on November 23, 2019, Galaxy filed the Ghnaim Damages Affidavit, as well as a document entitled Declaration and Opposition of Elio Forcina, signed by its attorney.³ On November 26, 2019, the Court struck the Forcina declaration pursuant to Fed. R. Civ. P. 12(f), and ordered defendant to refile the Ghnaim Damages Affidavit if Galaxy wished it to be considered in opposition to the pending motion.⁴ On November 26, 2019, defendant re-filed the Ghnaim Damages Affidavit, which now constitutes the only document in the record designed to counter the pending motion.

On November 27, 2019, HBI filed a reply memorandum (Pl. Reply Mem.) (Dkt. No. 153) in further support of its motion for summary judgment as to damages.

B. Facts

The relevant facts are taken from plaintiff's Local Civil Rule 56.1 Statement, the underlying evidentiary materials to which it cites, and the prior pleadings and proceedings in this matter. They are undisputed unless otherwise noted. Where the evidence is susceptible of more than one interpretation, the Court has, as required, "resolv[ed] all ambiguities and draw[n] all factual inferences in favor of the party against whom summary judgment is sought." Cronin v. Aetna Life Ins. Co., 46 F.3d 196, 202 (2d Cir. 1995) (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986)).⁵

1. Plaintiff

HBI "designs, manufactures, imports, markets, and sells the 'RAW' brand of smoking products, including rolling papers and accessories like rolling trays." Pl. 56.1 Stmt. ¶ 1. HBI's "RAW" rolling papers come in several varieties, including RAW King Size Slim (KSS), which aresold wholesale in 50-pack boxes with 32 paper "leaves" per pack, and cost approximately $38.70 to $40.50 per box. Id. ¶¶ 2-3. RAW KSS rolling papers "are subject to strict quality control standards" before they are distributed to wholesale stores and retailers. Id. ¶ 4. HBI also sells accessories, including rolling trays, which "share design elements with RAW rolling paper packaging" and have a "distinctive look and feel" that "makes the connection to RAW and [HBI] clear to consumers." Id. ¶ 6. RAW-brand products enjoy "strong consumer brand recognition," in part due to "strong sales and a strong social media presence." Id. ¶ 7.

HBI owns the "exclusive rights to a family of registered and common-law RAW® trademarks and trade dresses, which cover a variety of goods and services, including RAW® rolling papers and rolling trays," and have been used continuously and exclusively for this purpose since their first use dates. Pl. 56.1 Stmt. ¶¶ 18, 21; Declaration of Ian Kobe (Kobe Decl.) (Dkt. No. 12), Ex. A.⁶

2. Defendant

Galaxy sells a variety of RAW products from its Brooklyn storefront. Pl. 56.1 Stmt. ¶¶ 25, 27, 28, 29, 32, 33. Although it also sells other brands of rolling papers, RAW rolling papers are the most popular. Id. ¶ 28; Ghnaim Dep. Tr. at 49:6-12. Galaxy sells a variety of RAW rolling papers, including RAW KSS. Pl. 56.1 Stmt. ¶ 29; Ghnaim Dep. Tr. at 51:8-15. It also sells RAW rolling machines, RAW filter tips, RAW cases, and RAW rolling trays. Pl. 56.1 Stmt. ¶ 32; Ghnaim Dep. Tr. at 51:20-25.

Prior to opening Galaxy's storefront in January 2017, Said Ghnaim worked as a "jobber," or middleman, selling, among other things, RAW products. Pl. 56.1 Stmt. ¶ 48; Ghnaim Dep. Tr.at 131:11-25. In September 2016, in anticipation of opening the store, Ghnaim made a "preparatory purchase" from nonparty My Import Warehouse (My Import), which included two cases (60 boxes) of what purported to be RAW KSS rolling papers, at a price of $28.50 per box. Pl. 56.1 Stmt. ¶¶ 38, 39, 40; Ghnaim Dep. Tr. at 141:19-143:18 & Ex. 4. In February 2017, shortly after Galaxy's store opened, Ghnaim contacted an HBI sales representative and began purchasing RAW products directly from HBI. Pl. 56.1 Stmt. ¶¶ 35, 36, 37; Ghnaim Dep. Tr. at 56:19-57:15; Danta Decl. Ex. D, at ECF page 19. From May through December 2017, he also purchased RAW products, including RAW KSS rolling papers, from nonparty Metro General Enterprise (Metro General), Pl. 56.1 Stmt. ¶ 41; Ghnaim Dep. Tr. at 115:23-116:4, at prices as low as $22 per box. Pl. 56.1 Stmt. ¶ 47; Ghnaim Dep. Tr. at 279:15-21; Danta Decl. Ex. D (Dkt. No. 137-4), at ECF page 25.

Ghnaim never inquired whether his non-HBI sources purchased their RAW products directly from HBI. Pl. 56.1 Stmt. ¶ 44. However, he did check to "mak[e] sure that the product [he] receiv[ed] [came] in a marked case box from RAW," and he used "a bar code scanner app on [his] phone" to ensure that the box was a "legitimate product." Ghnaim Dep. Tr. at 120:15-121:5. Ghnaim stated that he generally looked for the lowest prices available. Pl. 56.1 Stmt. ¶ 43...