Oneida Grp. Inc. v. Steelite Int'l

THE ONEIDA GROUP INC., Plaintiff, v. STEELITE INTERNATIONAL U.S.A. INC., TABLEWERKS INC.,RICHARD ERWIN, STEVEN LEFKOWITZ and ANTHONY DELOSREYES, Defendants.

17-cv-0957 (ADS)(AKT)

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF NEW YORK

May 10, 2017

MEMORANDUM OF DECISION AND ORDER

APPEARANCES:

Milbank Tweed Hadley & McCloy, LLP

Attorneys for the Plaintiff

28 Liberty Street

New York, NY 10005

By: Christopher J. Gaspar, Esq.,

Mark C. Scarsi, Esq.,

Ashlee Lin, Esq.,

Kristin L. Yohannan, Esq.,

Ryan N. Hagglund, Esq.,

Nathaniel T. Browand, Esq., of Counsel

Gordon & Rees LLP

Attorneys for the Defendants Steelite International U.S.A., Inc., Steven Lefkowitz, and Anthony DeLosReyes

1300 I Street, NW

Washington, DC 20005

By: Howard Shipley, Esq.

John G. Ebken, Esq.,

Thomas L. Allen, Esq.,

Paul Eastgate, Esq.,

Peter G. Siachos, Esq., of Counsel

Moses & Singer

Attorneys for the Defendants Tablewerks, Inc., and Richard Erwin

405 Lexington Avenue

New York, NY 10174

By: David M. Rabinowitz, Esq.,

Shari Ann Alexander, Esq., Of Counsel

SPATT, District Judge:

This action centers on whether certain dishes obtained trade dress protections under the Lanham Act or New York State law, and whether two parties ever entered into an exclusive distribution contract for those dishes.

The Plaintiff Oneida Group, Inc. (the "Plaintiff" or "Oneida") brought this action against the Defendants Steelite International U.S.A. Inc. ("Steelite"), Tablewerks Inc. ("Tablewerks"), Richard Erwin ("Erwin"), Steven Lefkowitz ("Lefkowitz"), and Anthony DeLosReyes ("DeLosReyes") (collectively, the "Defendants"). Oneida sought damages and injunctive relief, alleging trade dress infringement under the Lanham Act, 15 U.S.C. § 1125(a) and New York common law; unfair competition under New York common law; trade secret misappropriation in violation of the Defend Trade Secrets Act ("DTSA"), 18 U.S.C. § 1836; New York state common law pertaining to misappropriation of trade secrets; Ohio state laws pertaining to misappropriation of trade secrets, Ohio Rev. Code § 1333.61 et seq.; breach of contract, and tortious interference with business relations.

Oneida initially moved for a temporary restraining order, a preliminary injunction, and expedited discovery. The Court referred Oneida's motion to Magistrate Judge A. Kathleen Tomlinson for a report and recommendation (an "R&R"). Judge Tomlinson did an outstanding job under these very expeditious circumstances. On February 28, 2017, Judge Tomlinson issuedan R&R recommending that the Court issue a temporary restraining order pending resolution of Oneida's motion for a preliminary injunction. Judge Tomlinson followed up her initial R&R with a full written opinion on March 14, 2017. Following that ruling, the Court held a five day hearing from April 10, 2017 through April 14, 2017 to resolve Oneida's motion for a preliminary injunction.

This decision is rendered following a five day preliminary injunction hearing, and the benefit of multiple memoranda from each party. For the following reasons, Oneida's motion for a preliminary injunction is denied; the temporary restraining order is vacated; and Oneida's motion for expedited discovery is granted.

I. THE HEARING

The Court will not engage in a detailed recitation of all of the evidence presented over the course of the five day hearing. Knowledge of the underlying facts is presumed. The Court notes that the hearing transcript ("Tr.") spans over nine hundred pages, and dozens of exhibits were entered into evidence. However, for the purposes of the instant motion, the Court will review the relevant portions of the testimony presented during the hearing.

A. The Plaintiff's Case

1. Corrie Byron

Corrie Byron ("Byron") is the President of Food Service and International at Oneida. Byron testified that Oneida has been in business for over a century. It sells tabletop products, including dinnerware, drinkware, flatware and banquetware. As to dinnerware, one of its most promoted lines is the Sant' Andrea line including the Botticelli design and the Nexus design. Byron leads a team of approximately twenty-six sales persons.

The Court notes that later testimony revealed that these plates are manufactured by Royal Porcelain in Thailand. Royal Porcelain makes the plates and sells them to Tablewerks. Oneida would place orders for the Sant' Andrea dishes with Tablewerks, and Tablewerks sold the dishes to Oneida.

Byron testified that customers recognize these two plates by the patterns on the plates. The plates are premier dinnerware and considered to be luxury brands. The customers of the Oneida Sant' Andrea line are hotels, cruise lines and fine dining establishments, including Royal Caribbean Cruise Line, Hilton hotels, Hyatt Hotels, and Garden Bringer. The plates are primarily not sold directly to the customers by Oneida. The plates are typically sold by Oneida through dealers and distributors, but in some situations, Oneida will sell directly to an end user.

Byron testified that she has been in personal contact with most of these ultimate customers, and that there is a lot of confusion in the market due to the current situation. There are twenty-six members in Oneida's sales team and fifteen people are in the Sant' Andrea products group.

Botticelli is the number one product in Oneida's sales. The Botticelli pattern was launched in the market fifteen or sixteen years ago. It is its largest product and it consummates eight million dollars in Oneida's total sales of sixteen million dollars. The Oneida sales for fiscal year 2014 was $16,175,000 and $16.6 million for the year 2015. In 2016, the Sant' Andrea dinnerware represented close to 15% of the total Oneida food service sales.

Also introduced in evidence was the Oneida Food Service Cost Structure (Pl.'s Ex. 61). The investment in the Sant' Andrea line was approximately $48 million dollars over a period of nineteen years. The average annual investment was in excess of $2.5 million dollars.

In 2016, Oneida paid $2,109,715 in commissions. This money is paid to sales agents as commissions to promote Oneida's products. The Sant' Andrea products represent 16% of the Oneida total food service sales. In addition to dinnerware, Oneida also supplies knives, forks, spoons, glassware and banquetware. However, the sale of dinnerware drives the sales of other food service products. Oneida had investments of approximately $1,380,000 with Royal Porcelain, the manufacturer of the Sant' Andrea products, for tooling costs.

Also, Oneida furnishes dinnerware catalogs to explain its line and promote sales of its products. Oneida printed these catalogs every year for the last nineteen years. The catalogs include the Botticelli dinnerware. Oneida also issues printed sales promotional material for a television line. The Sant' Andrea Botticelli dinnerware won an award in February 2014. In addition, another award was given to the Sant' Andrea Botticelli design from the Club and Resort Company.

On December 13, 2016, Byron received a letter from Steelite related to its acquisition of Tablewerks. (Pl.'s Ex. 2). The letter stated that:

Steelite [had] acquired substantially all assets, intellectual property, and other rights of Tablewerks . . . . Please be advised that . . . Steelite intends to self-distribute all product produced by Royal Porcelain under the Royal Porcelain back-stamp. While we are advised that there is no contractual relationship between [Oneida] and/or its affiliates [], on the one hand, and Tablewerks and/or Royal Porcelain on the other, in an effort to facilitate a seamless transition, Steelite is prepared to accommodate [Oneida] . . . .

(Id.) Steelite's CEO went on to say that Steelite would fulfill all existing purchase orders, and honor the current pricing terms, not object to Oneida's sale of its current Royal Porcelain inventory; respect Oneida's intellectual property such as the "Sant' Andrea" name and back-stamp; and asked that Oneida similarly honor Steelite's intellectual property. (Id.). The letter ended by stating that Steelite was "open to any dialogue concerning the [matter] . . . ." (Id.).

This was a "shock" to Byron. Within twenty-four hours of the receipt of this letter, Oneida started receiving customer questions and experienced customer confusion. In response, Byron sent an e-mail to Oneida's dealers, distributors and end users. (Defs.' Ex. G). In this communication to its customers, Oneida advised them that Tablewerks had been purchased by "another smaller supplier," but that "[e]ven prior to this event, Oneida had been working on a transition of both design and manufacturing capability due to what we saw as the diminished innovation and protected design portfolio being offered." (Id.). Byron described a "very minor adjustment to our supply chain . . . with zero disruption to product or services . . . ." (Id.).

After the Steelite December 13, 2016 letter, in February and March 2017, Oneida's sales decreased over one million dollars. After the issuance of the Temporary Restraining Order, some sales have come back, but overall, Oneida sales are still down.

Oneida attended a NAFEM trade show (the "trade show") from February 9, 2017 to February 11, 2017, in Miami, Florida,. At the trade show, Steelite had a booth and presented the full line of Sant' Andrea products, with a place card that stated "supply will be available in Spring."

Byron was questioned as to the effect on Oneida's business if Steelite is able to sell these Sant' Andrea products made by Royal Porcelain as Steelite's own products. Byron responded:

A. I believe this truly would have a devastating effect on the business. This dinnerware is the leading category, in importance, to our customers. The Sant' Andrea one is the most prominent brand and luxury line. If that were compromised, the rest of the categories and brands that we sell will be at risk.

Q. Would you describe this as a major impact? Or some other type of impact; minor impact?

A. Oh, truly a devastating impact. It's a

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