Saleh v. Sulka Trading ( 2020 )

19-2461
Saleh v. Sulka Trading
United States Court of Appeals
for the Second Circuit
AUGUST TERM, 2019
Argued: February 24, 2020
Decided, April 30, 2020
Docket No. 19-2461
ABDUL REHMAN KARIM SALEH,
Plaintiff-Appellant,
—v.—
SULKA TRADING LTD., A. SULKA AND COMPANY LIMITED,
Defendants-Appellees.
Appeal from the United States District Court
for the Southern District of New York (Preska, J.)
No. 1:18-cv-09299
Before: KATZMANN, Chief Judge, PARK, Circuit Judge, and CRAWFORD, Chief
District Judge. 1
Plaintiff-appellant Abdul Rehman Karim Saleh brought this action seeking
a declaratory judgment adjudicating the validity of defendants’ trademark
1Judge Geoffrey W. Crawford, of the United States District Court for the
District of Vermont, sitting by designation.
registrations relating to the “SULKA” mark. The District Court for the Southern
District of New York (Preska, J.) dismissed his complaint for lack of subject-
matter jurisdiction, finding that no genuine case or controversy existed. On
appeal, Saleh argues that the allegations in his pleadings adequately show that
he could quickly transition his online business—which presently operates only in
India and Thailand—to serve customers in the United States. We agree with the
district court, however, that Saleh’s allegations are too vague to support the
exercise of federal jurisdiction. We therefore AFFIRM the judgment of the
district court.
MILTON SPRINGUT (Tal S. Benschar, on the brief), Springut Law P.C.,
New York, NY, for Plaintiff-Appellant.
JOHN P. MARGIOTTA (David Donahue, Sean F. Harb, on the brief),
Fross Zelnick Lehrman & Zissu, P.C., New York, NY, for
Defendants-Appellees.
PER CURIAM:
In this case we are called upon to examine an action for declaratory relief
in the context of trademarks.
Plaintiff-appellant Abdul Rehman Karim Saleh is the co-owner of an
online business that sells apparel bearing the marks “SULKA” and “PHULKA”
to customers in India and Thailand. He would like to sell his wares in the United
States as well, but several U.S. trademark registrations relating to the “SULKA”
mark are currently owned by defendants-appellees, Sulka Trading Ltd. and
A. Sulka and Company Limited (collectively, “Sulka Trading”). After an
2
exchange of correspondence in which counsel for Sulka Trading insisted that the
mark was still in active use, Saleh brought this action seeking a declaratory
judgment that the trademark had been abandoned. The district court granted
defendants’ motion to dismiss for lack of subject-matter jurisdiction, finding that
Saleh’s allegations did not demonstrate that he was prepared to immediately
bring his goods to market in the United States.
On appeal, Saleh argues that the allegations in his pleadings—which
chiefly concern his business activities in India and Thailand—support an
inference that he could quickly transition his online business to service customers
in the United States. But under our precedent, to permit the exercise of
jurisdiction over this declaratory judgment action, Saleh was required to allege
that he “has engaged in a course of conduct evidencing a definite intent and
apparent ability to commence use of the marks on the product.” Starter Corp. v.
Converse, Inc., 84 F.3d 592, 595–96 (2d Cir. 1996), abrogated on other grounds by
MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118 (2007). 2 Saleh’s business activities
in India and Thailand evince neither intent nor ability to sell his apparel in the
2Unless otherwise indicated, case quotations omit all internal quotation
marks, alterations, and citations.
3
United States. Furthermore, Saleh’s purported plans to sell his goods in the U.S.
remain too vague and conclusory to invoke federal jurisdiction. We therefore
affirm the district court’s judgment of dismissal.
BACKGROUND
In early 2018, Saleh, a resident of Thailand and businessman with several
years’ experience working in Bangladesh, Singapore, and Malaysia, began to
explore starting an online clothing company. Together with Harsh V. Rungta, a
resident of India, Saleh “developed a business plan that would market
apparel . . . under the marks SULKA and PHULKA.” App’x 237.
In the United States, the name “Sulka” is associated with a now-defunct
luxury menswear brand. See, e.g., Terry Pristin, Sulka, Haberdasher to Royalty, Is to
Close Its Last Shop in U.S., N.Y. Times (Dec. 21, 2001), https://www.nytimes.com/
2001/12/21/nyregion/sulka-haberdasher-to-royalty-is-to-close-its-last-shop-in-
us.html. Sulka Trading owns registrations for several U.S. trademarks relating to
the SULKA mark. On August 28, 2018, Saleh wrote to Sulka Trading’s parent
company, representing that Saleh “intend[ed] to enter the United States market
with various clothing and accessory items and use the mark SULKA for th[o]se
goods.” App’x 34. The letter asserted that the SULKA mark “ha[d] not been used
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in U.S. commerce . . . for many years, and appears to have been abandoned.” Id.
The letter asked that Sulka Trading “voluntarily cancel” the SULKA trademark
registrations and “confirm that Sulka Trading has no objection to Mr. Saleh’s use
of the SULKA mark.” Id. Sulka Trading responded that it “ha[d] been using the
SULKA brand in connection with the sale of ties in the United States” and that it
“ha[d] imminent plans to launch a new and broader line of clothing under the
SULKA brand.” App’x 36. Sulka Trading characterized the mark as “one of great
value to the company” and refused to consent to Saleh’s use of it. Id. Sulka
Trading asked that Saleh “confirm that he will not use SULKA” and that he
“abandon[] his pending U.S. and Thai applications to register SULKA.”
App’x 37.
On September 6, 2018, Saleh requested additional proof that SULKA-
marked products had been sold in recent years, which Sulka Trading provided
on September 14. Sulka Trading also “reiterate[d] [its] request” that Saleh
“amicably resolve any potential conflict here by willingly withdrawing both his
Thailand and US applications for SULKA” and “confirm that he agrees to drop
any plans to use SULKA.” App’x 71. In response, Saleh adhered to his view that
Sulka Trading had abandoned the mark through non-use and notified Sulka
5
Trading of the filing of this lawsuit. He indicated that he was “actively preparing
for a launch in the United States” and that his plans were “potentially
jeopardized” by Sulka Trading’s “insistence that it has superior rights,” but that
he was “amenable . . . to discussing an amicable resolution of the matter.”
App’x 84.
PROCEDURAL HISTORY
Saleh filed this lawsuit on October 11, 2018, seeking a declaratory
judgment that Sulka Trading had lost any trademark rights in the SULKA mark.
The complaint alleged (without elaboration) that Saleh had “concrete plans” to
market articles of clothing with the SULKA mark, and that Saleh had applied to
register the trademark in the United States. App’x 8. Sulka Trading moved to
dismiss, arguing that Saleh’s unspecified “plans” were too vague to create an
actual controversy capable of supporting the exercise of subject-matter
jurisdiction. The parties then stipulated that Saleh would be permitted to file an
amended complaint in an attempt to address the purported jurisdictional
deficiency.
Saleh’s First Amended Complaint (“FAC”) offered more detail about his
plans, explaining that Saleh had partnered with Rungta and that the pair had:
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• applied to register the SULKA mark in Thailand and India, as well
as in the United States;
• created a website, sulka-phulka.com, that offered SULKA-branded
apparel for sale to India and Thailand;
• registered several other related domain names;
• sold an unspecified number of t-shirts to “a customer in India”;
• contracted with unnamed “manufacturers of apparel” to create
clothing bearing the SULKA mark;
• contracted with unnamed “shipping services” to ship the goods to
India and Thailand; and
• contracted with “on-line retail sales portals” to offer and sell the
goods to customers in India and Thailand.
App’x 84–85. The FAC further alleged that Saleh “could expand” to the United
States market by configuring the website to accept orders from the United States,
“[a]rranging for payments through U.S. payment processors such as PayPal,”
and utilizing Saleh’s current shipper to ship orders to the U.S. App’x 85. Sulka
7
Trading promptly renewed its motion to dismiss, arguing that the amendment
had not cured the lack of a real controversy. 3
The district court granted the motion to dismiss, concluding that Saleh’s
desire to use the mark in the United States was too hypothetical to create a
genuine controversy. The court rejected Saleh’s reliance on his business activities
in Thailand and India, stating that “foreign activity alone does not tend to create
jurisdiction in the United States.” Saleh v. Sulka Trading Ltd., No. 18-cv-9299
(LAP), 2019 WL 3711770, at *7 (S.D.N.Y. July 15, 2019). Finally, the district court
noted that “almost all of [Saleh’s] activity purportedly demonstrating his
imminent ability to use the SULKA mark in the United States occurred after he
filed the [initial] Complaint.” Id. at *8. These activities, the court held, were
irrelevant, for “post-complaint facts cannot create jurisdiction where none
existed at the time of [the original] filing.” Id. 4
3Subsequent to the filing of Sulka Trading’s renewed motion to dismiss,
Saleh filed a Second Amended Complaint solely for the purpose of adding
A. Sulka and Company as a defendant. The Second Amended Complaint is
otherwise identical to the First Amended Complaint, and the parties agreed that
Sulka Trading’s motion to dismiss would be deemed to have been filed on behalf
of both defendants.
The district court also denied Saleh’s request for jurisdictional discovery.
4
Saleh does not challenge that ruling on appeal.
8
Saleh timely appealed. 5
DISCUSSION
I. Standard of Review
“On appeal from a dismissal for lack of subject matter jurisdiction, we
review the district court’s legal conclusions de novo and its factual findings for
clear error.” Correspondent Servs. Corp. v. First Equities Corp. of Fla., 442 F.3d 767,
769 (2d Cir. 2006) (per curiam). 6 “A district court has discretion to hold a hearing
to resolve factual disputes that bear on the court’s jurisdiction, but where, as
here, the case is at the pleading stage and no evidentiary hearings have been
held, in reviewing the grant of a motion to dismiss under [Federal Rule of Civil
5 While this appeal was pending, Saleh filed a new action relating to this
dispute. See Complaint, Saleh v. Sulka Trading Ltd., No. 19-cv-8488-LAP (Sept. 12,
2019), ECF No. 1. We express no opinion as to the sufficiency of that complaint.
6 Sulka Trading argues that we review the district court’s determination
that it lacked jurisdiction for abuse of discretion. Not so. “[D]istrict courts
possess discretion in determining whether and when to entertain an action under
the Declaratory Judgment Act, even when the suit otherwise satisfies subject
matter jurisdictional prerequisites,” Wilton v. Seven Falls Co., 515 U.S. 277, 282
(1995), and we review that decision for abuse of discretion. Here, however, the
district court had no occasion to exercise its discretion because it concluded that
it lacked subject-matter jurisdiction. Saleh, 2019 WL 3711770, at *8. We review
that jurisdictional determination de novo. See Garanti Finansal Kiralama A.S. v.
Aqua Marine and Trading, Inc., 697 F.3d 59, 64 n.5 (2d Cir. 2012) (explaining this
distinction).
9
Procedure 12(b)(1)] we must accept as true all material facts alleged in the
complaint and draw all reasonable inferences in the plaintiff’s favor.” Sharkey v.
Quarantillo, 541 F.3d 75, 83 (2d Cir. 2008).
II. Subject-Matter Jurisdiction in Declaratory Judgment Cases
The Declaratory Judgment Act permits a district court, “[i]n a case of
actual controversy within its jurisdiction,” to “declare the rights and other legal
relations of any interested party seeking such declaration, whether or not further
relief is or could be sought.” 28 U.S.C. § 2201(a). “[T]he phrase ‘case of actual
controversy’ in the Act refers to the type of ‘Cases’ and ‘Controversies’ that are
justiciable under Article III” of the Constitution. MedImmune, Inc. v. Genentech,
Inc., 549 U.S. 118, 127 (2007). An action seeking declaratory relief satisfies the
case-or-controversy requirement, and thus permits the exercise of federal
jurisdiction, if the dispute is “definite and concrete, touching the legal relations
of parties having adverse legal interests” and is “real and substantial,” such that
it “admit[s] of specific relief through a decree of a conclusive character, as
distinguished from an opinion advising what the law would be upon a
hypothetical state of facts.” Id.
10
Prior to MedImmune, this Circuit applied a two-pronged test to determine
whether the case-or-controversy requirement was satisfied “[i]n a declaratory
judgment action involving trademarks.” Starter Corp., 84 F.3d at 595. We asked,
first, whether “the defendant’s conduct created a real and reasonable
apprehension of liability on the part of the plaintiff,” and, second, whether “the
plaintiff engaged in a course of conduct which has brought it into adversarial
conflict with the defendant.” Id. MedImmune “rejected Starter’s reasonable
apprehension requirement,” although “the threat of future litigation remains
relevant in determining whether an actual controversy exists.” Nike, Inc. v.
Already, LLC, 663 F.3d 89, 95–96 (2d Cir. 2011). Starter’s second prong, however,
remains valid. Id. at 96 n.1. This prong requires that the plaintiff adequately
allege that he or she “has engaged in a course of conduct evidencing a definite
intent and apparent ability to commence use of the marks on the product.”
Starter, 84 F.3d at 595–96.
III. The Adequacy of Saleh’s Allegations
Applying these standards, we conclude that the complaint before us does
not establish that a justiciable case or controversy exists.
11
As a preliminary matter, the parties dispute which allegations we may
properly consider. Several of the allegations in the FAC relate to activities that
appear to have taken place after the filing of the original complaint. The district
court concluded that these allegations were not relevant to the question of
jurisdiction because “post-complaint facts cannot create jurisdiction where none
existed at the time of [the original] filing.” Saleh, 2019 WL 3711770, at *8. Sulka
Trading similarly argues on appeal that these allegations cannot be relied upon
to establish jurisdiction because “the jurisdiction of the court depends upon the
state of things at the time of the action brought.” Appellees’ Br. 19 (quoting
Grupo Dataflux v. Atlas Global Grp., L.P., 541 U.S. 567, 570 (2004)). Saleh, in turn,
points out that “when a plaintiff files a complaint in federal court and then
voluntarily amends the complaint, courts look to the amended complaint to
determine jurisdiction.” Appellant’s Reply Br. 11 (quoting Rockwell Int’l Corp. v.
United States, 549 U.S. 457, 473–74 (2007)).
Although we have discussed the question in dicta, see Travelers Ins. Co. v.
633 Third Assocs., 973 F.2d 82, 87–88 (2d Cir. 1992), we have never squarely
addressed whether events occurring after the filing of a complaint may cure a
jurisdictional defect that existed at the time of initial filing. That question has
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divided our sister circuits. 7 We need not answer it here, however, because even
the expanded allegations in the FAC are insufficient to confer jurisdiction. We
therefore assume, solely for the purpose of deciding this appeal, that these
allegations are relevant to the existence of subject-matter jurisdiction.
As previously noted, to permit the exercise of federal jurisdiction over this
declaratory judgment action, Saleh was required to plead that he “has engaged in
a course of conduct evidencing a definite intent and apparent ability to
commence use of the marks on the product.” Starter, 84 F.3d at 595–96. The
parties agree that, to satisfy this test, Saleh must allege that he is prepared to sell
products bearing the SULKA mark in the United States. Virtually all of the
conduct alleged in the FAC, however, relates to Saleh’s business activities in
7 Compare Scahill v. District of Columbia, 909 F.3d 1177, 1184 (D.C. Cir. 2018);
United States ex rel. Gadbois v. PharMerica Corp., 809 F.3d 1, 6 n.2 (1st Cir. 2015);
Northstar Fin. Advisors Inc. v. Schwab Invs., 779 F.3d 1036, 1044 (9th Cir. 2015);
Feldman v. Law Enf’t Assocs. Corp., 752 F.3d 339, 347 (4th Cir. 2014); Prasco, LLC v.
Medicis Pharm. Corp., 537 F.3d 1329, 1337 (Fed. Cir. 2008); and Wilson v.
Westinghouse Elec. Corp., 838 F.2d 286, 290 (8th Cir. 1988) (holding that post-
complaint facts alleged in a supplemental pleading may cure jurisdictional
defects), with Spear Mktg., Inc. v. BancorpSouth Bank, 791 F.3d 586, 593 (5th Cir.
2015); S. Utah Wilderness All. v. Palma, 707 F.3d 1143, 1153 (10th Cir. 2013); and
Innovative Therapies, Inc. v. Kinetic Concepts, Inc., 599 F.3d 1377, 1383–84 (Fed. Cir.
2010); Park v. Forest Serv. of U.S., 205 F.3d 1034, 1037 (8th Cir. 2000) (holding that
jurisdiction cannot be based on events subsequent to the filing of the original
complaint).
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India and Thailand. App’x 200–01. Saleh alleges that he “could” expand his
business to cover the United States, App’x 201, but does not allege that he has
taken any steps whatsoever to do so. It is not enough for Saleh to aver that he has
the intent and ability to enter the U.S. market; he must point to specific conduct
on his part that evidences such intent and ability. He has not done so.
To be sure, a party’s business activities abroad might be relevant to a
determination that the party is ready and able to expand into the United States.
The district court’s assertion that “foreign activity alone does not tend to create
jurisdiction in the United States,” Saleh, 2019 WL 3711770, at *8, should not be
understood to mean that allegations of foreign activity are never enough to
confer jurisdiction. Our cases impose no such bright-line test for jurisdiction
under the Declaratory Judgment Act.
We eschew prescribing acts that must be alleged to satisfy the case or
controversy requirement and prefer to examine each case on its merits. Here,
Saleh’s proposed plans are too nebulous and ephemeral to support the
conclusion that he has “engaged in a course of conduct evidencing a definite
intent and apparent ability,” Starter, 84 F.3d at 596 (emphasis added), to sell his
products in the United States. Saleh alleges that he might use his existing
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shipper, or he might contract with a different shipper; he might process
payments through PayPal, or perhaps a different processor; he might contract
with unnamed and unspecified “additional on-line portals” to sell his wares.
App’x 201. These hypothetical possibilities, without tangible steps to effectuate
those plans, are not enough to create a “definite and concrete” dispute between
the parties. MedImmune, 549 U.S. at 127. Nor do the more detailed allegations in
Saleh’s declaration, submitted in opposition to the motion to dismiss, fix this
fundamental problem. Although Saleh claims to have “conduct[ed] market
research,” “travel[ed] to meet potential suppliers,” and “identif[ied] leather
goods manufacturers,” App’x 237–38, he does not specify whether those
exploratory activities were directed at the United States or merely at India and
Thailand.
The only allegation that does relate to the U.S. market is Saleh’s
“[a]pplication to register the SULKA mark in the United States.” App’x 200.
While this allegation is certainly relevant to the matter of Saleh’s intent, it has
little bearing on his ability to transition his business to the United States. And
there were significant reasons for the district court to be skeptical that Saleh was,
in fact, prepared to enter the U.S. market. For example, as of the date that the
15
First Amended Complaint was filed, Saleh was not in possession of any actual
shirts bearing the SULKA mark. His website, which purported to offer such
shirts for sale, simply digitally added the mark to images of the shirts. Only after
Saleh filed his opposition to the motion to dismiss did he represent that he had
finally received “samples” of the actual shirts from his supplier. App’x 239. That
Saleh lacked any inventory for months after this lawsuit was filed undermines
his assertion that he would be able to quickly transition his business to the
United States. And the revelation that Saleh had not even received samples of the
final product calls into question the allegation in the First Amended Complaint
that he had already sold an unspecified number of “t-shirts bearing the SULKA
label to a customer in India.” App’x 84.
We are mindful, of course, that a declaratory judgment plaintiff need not
“bet the farm, so to speak,” by actually infringing the mark in question prior to
filing suit. MedImmune, 549 U.S. at 129. But Saleh’s conduct here falls short of the
kind of preliminary activity that we and other courts have found sufficient to
uphold declaratory judgment jurisdiction. For example, in Starter, we found an
actual case or controversy existed where the plaintiff had not only “designed
styles and prepared prototype shoes”—as Saleh appears to have done with his
16
shirts—but also “conducted a consumer survey; made strategic decisions
regarding who should manufacture the shoes; hired an external licensing agent;
and attempted to find a manufacturing partner.” 84 F.3d at 596. Saleh, in
contrast, does not allege, for example, that he has conducted any market research
relating to the United States, nor has he made any concrete plans about how his
products will find their way to customers here. Similarly, in Gelmart Industries,
Inc. v. Eveready Battery Co., 120 F. Supp. 3d 327 (S.D.N.Y. 2014), the district court
found declaratory judgment jurisdiction appropriate where the plaintiff “ha[d]
long-standing relationships with suppliers and manufacturers located in China,
Indonesia, India, Bangladesh and the Philippines, with the ability to manufacture
and supply product to the U.S. market-place within weeks” and “ha[d] pitched
the product concept to major retailers and held multiple discussions, design and
branding meetings based on retailer interest.” Id. at 332. Saleh does not allege
that his brand-new company has undertaken similar levels of marketing or sales
outreach.
We emphasize that we do not mean to imply that any particular action or
combination of actions is always necessary to find that a case or controversy
exists. For example, because he intends to start an online store, Saleh may not
17
need to cultivate relationships with retail partners. Nor do we hold that Starter or
any other case sets out the bare minimum that a plaintiff must do before a
declaratory judgment action can be maintained, for each case must be judged on
its own merits. See MedImmune, 549 U.S. at 127 (“Basically, the question in each
case is whether the facts alleged, under all the circumstances, show that there is a
substantial controversy, between parties having adverse legal interests, of
sufficient immediacy and reality to warrant the issuance of a declaratory
judgment.”). We discuss these cases only to highlight the comparative paucity of
Saleh’s allegations. Before a court may entertain an action for declaratory relief in
the context of trademarks, the plaintiff must allege that he has taken some action
showing that he has both the “definite intent and apparent ability to commence
use of the marks on the product.” Starter, 84 F.3d at 596. The allegations in the
FAC do not meet that burden. 8
CONCLUSION
For the foregoing reasons, we AFFIRM the judgment of the district court.
8 Because we resolve this appeal based on the second prong of the Starter
test, we deny as moot Saleh’s motion for judicial notice, ECF No. 56, which is
relevant only to the separate requirement that the parties have adverse legal
interests. We also deny as moot Sulka Trading’s motion to strike, ECF No. 74.
18