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Athletic Training Innovations, LLC v. L.A. Gear, Inc.

Court holds that the defendant may be sued in Louisiana where the defendant sent one cease-and-desist letter to the plaintiff in Louisiana and two cease and desist letters to the plaintiff’s customers in other states, which caused such customers to cancel orders with plaintiff.

Defendant, L.A. Gear, Inc. (“L.A. Gear”), a California Corporation, manufactured and sold the L.A. Gear Catapult in the 1980’s and 1990’s. The Catapult was a high-top basketball shoe, which has not been sold or actively marketed by defendant or its licensees since 2004. In 2009, L.A. Gear obtained a renewal of its trademark for the Catapult. Plaintiff Athletic Innovations, LLC (“ATI”) manufactures the Katapult, a specialist training shoe designed to target the calf muscle in order to improve various athletic skills. This design gives the Katapult an unorthodox appearance, which resembles reverse heels. On May 5, 2010, defendant issued a cease-and-desist letter to plaintiff and plaintiff’s largest customers, informing them that defendant owned the Catapult trademark and that the use of the name Katapult was likely to confuse customers. ATI’s customers subsequently canceled their orders in the Katapult. As a result, ATI filed suit against L.A. Gear, alleging that defendant had (1) engaged in unfair competition under the Lanham Act and Louisiana Unfair Trade Practices act, (2) abandoned its trademark for the Catapult, (3) procured the Catapult trademark through false statements and (4) intentionally interfered with plaintiff’s contractual relations with its customers. In response, defendant asserted that the court lacked personal jurisdiction because it directed no contacts with Louisiana other than a single cease-and-desist letter and a failure to state a claim.

In concluding that a Louisiana court may exercise personal jurisdiction over L.A. Gear, the court found that its exercise of specific jurisdiction comports the requirements of due process: (1) that L.A. Gear purposefully availed itself of the benefits and protections of Louisiana by establishing “minimum contacts” with the state; and (2) that the exercise of personal jurisdiction over L.A. Gear does not offend “traditional notions of fair play and substantial justice.”

In support of its motion to dismiss, defendant argued that the cease-and-desist letters it sent were not directed at Louisiana but to Colorado and Pennsylvania, but even if they were, a single cease-and-desist letter is insufficient to form the basis of personal jurisdiction, as defendant was entitled to protect its trademark by informing plaintiff of its possible infringement. However, the court agreed with plaintiff’s contention that L.A. Gear’s cease-and-desist letters had foreseeable effects in Louisiana even though L.A. Gear sent the letters to clients outside of Louisiana. Since the defendant specifically sent a cease-and-desist letter to plaintiff in Louisiana, stated the court, it is clear that defendant knew plaintiff was a Louisiana company. A nonresident, instructed the court, can establish contact with the forum by taking purposeful and affirmative action, the effect of which is to cause business activity in the forum state. The court emphasized that the cease-and-desist letters were intended to convince plaintiff’s customers to cease buying the Katapult shoe from the plaintiff, which defendant knew was a Louisiana company.

In addition, the court found that the exercise of personal jurisdiction over L.A. Gear would not “violate traditional notions of fair play or substantive justice.” Here, defendant argued that it would be burdened by the exercise of jurisdiction because it has no ties with Louisiana and because exercising jurisdiction would interfere with its ability to protect its trademark. In rejecting L.A. Gear’s argument, the court noted four factors: (1) defendant could have protected its trademark by only serving notice upon plaintiff; (2) the burden of requiring defendant to litigate in Louisiana was no more than the burden of requiring plaintiff to litigate in California; (3) Louisiana has an interest in protecting local businesses from unfair trade practices and tortious interference with contracts; and (4) there is no outstanding litigation regarding the case in another forum.

In the alternative, L.A. Gear argued that plaintiff had failed to state a claim upon which relief can be granted. First, defendant argued that plaintiff’s unfair competition claim was deficient because a trademark holder has the right to defend against infringement by warning customers of an alleged infringer. Plaintiff responded by pointing out that it asserted that defendant’s cease-and-desist letters were “baseless,” which, stated the court, is synonymous with “false.” Specifically, plaintiff alleged that defendant abandoned its Catapult trademark and therefore sending cease-and-desist orders regarding that non-existent trademark was both false and in bad faith. Further, argued plaintiff, its Katapult shoe could not be confused with the Catapult as they are aimed at very different markets so as not to be in competition with each other. While not taking a position on the merits of plaintiff’s claim, the court held that it were clearly plausible and plaintiff’s pleading provided more than enough notice to defendant of the grounds that constitute plaintiff’s claim.