only "laconic" resellers allowed: court refuses to dismiss complaint against reseller of Chanel goods

Chanel, Inc. v. WGACA, LLC, 2018 WL 4440507, No. 18 Civ. 2253 (LLS) (S.D.N.Y. Sept. 14, 2018)

Depressing but unsurprising: Chanel’s claims against used goods-seller What Goes Around Comes Around proceed because WGACA may have been too forward in telling the world that it could provide legitimate Chanel products.  Chanel is appalled that WGACA “uses the Chanel trademark and brand in its advertising and promotions, although WGACA is not an authorized Chanel retailer or affiliated with Chanel.”  Its retail stores “prominently feature the Chanel brand. Its store in East Hampton is decorated with a facsimile of a giant Chanel No. 5 perfume bottle as a promotional advertisement, and the sign in front of its SoHo store lists several brands, but lists ‘Vintage Chanel’ at the top of the sign in larger print than the other brands, and its window display items are all Chanel-branded.” WGACA’s website “offers more Chanel-branded products for sale than those of any other brand,” features a Chanel sale, and lists Chanel first under the non-alphabetical heading “Shop by Brand.” WGACA’s social media includes quotations of Coco Chanel, photographs of Chanel-branded products, and photographs of models and public-opinion influencers wearing or carrying Chanel handbags, including photographs from previous Chanel ads. They tag photos of Chanel-branded products with “#WGACACHANEL” and refer to Chanel-branded products as “our #WGACACHANEL.”

WGACA’s website contains a section titled “Authenticity Guaranteed,” which states, “Any piece purchased at What Goes Around Comes Around or one of our retail partners has been carefully selected, inspected and is guaranteed authentic.” WGACA also provides letters of authenticity to its customers, e.g., “This letter confirms that item Q6HCHK00KB000 Chanel Black Long Tissue Box is an authentic Chanel decoration.” But the guarantee comes from WGACA; Chanel has not inspected or authenticated WGACA’s inventory.

Chanel plausibly stated a claim.  For example, #WGACACHANEL might create the impression that WGACA is affiliated with Chanel or is an authorized Chanel retailer. Also, WGACA’s extensive unauthorized use of the Chanel brand and trademarks might constitute false advertising or endorsement, given the extensive use of Chanel images and marks. Nominative fair use is no help because this is the Second Circuit. “WGACA’s Chanel-branded items would be readily identifiable as Chanel without the #WGACACHANEL hashtag and the multiple uses of Chanel’s name and trademark in the hashtags,” and the special prominence it gave to Chanel made it plausible that WGACA caused confusion by using the mark too prominently or too often. And #WCAGACHANEL and WGACA’s guarantees of authentication “of themselves” might suggest sponsorship or endorsement by Chanel.

First sale also didn’t help because WGACA “did much more than laconically resell Chanel-branded products: its presentations were consistent with selling on Chanel’s behalf.”  I didn’t realize that one had to be John Wayne to take advantage of first sale (and there is probably a useful gender analysis to be done here; fashion is excessive, but WGACA is apparently not allowed to be).

State common law unfair competition claims are nearly identical but require bad faith; the court found that the complaint didn’t plausibly allege bad faith intent to confuse.  “If anything, the amended complaint shows that WGACA’s intent was to display the Chanel brand conspicuously, and emphasize that their source was Chanel.” Section 349 and 350 claims were, however, plausibly pled; they don’t require bad faith, only deceptive/misleading conduct.