Flea market case on secondary (and tertiary) liability for counterfeiting

Luxottica Gp., S.P.A. v. Greenbriar Marketplace II, LLC, —
F.Supp.3d —-, 2016 WL 5859023, No. 15-cv-01382 (N.D. Ga. Sept. 30, 2016)
Luxottica sought to hold Greenbriar and Albert Ashkouti
liable for contributory trademark infringement based on sales of counterfeit
goods by some vendors at the Greenbriar Discount Mall, including “knock-off”
Ray-Ban and Oakley sunglasses (Luxottica brands).  In December 2013, DHS and the Atlanta PD
raided the mall and adjacent Greenbriar Strip Plaza and seized thousands of
counterfeit products, including counterfeit Ray-Ban and Oakley merchandise.
Luxottica’s investigators observed sales of fake Ray-Bans and Oakleys and were
able to purchase several pairs of counterfeit sunglasses on multiple undercover
trips to the flea market from October, 2014 to April, 2015. Luxottica sent a C&D
letter about this addressed to the “Owner/Manager” of the “Greenbrier Strip
Plaza Warehouse” in January 2015.
Liability for contributory infringement depends upon whether
the alleged contributing defendant “intended to participate” in the
infringement or “actually knew about” the infringement. “The extent and nature
of the violations being committed may be relevant in making this determination.”
 The defendant also needs to have “actively
and materially furthered the unlawful conduct,” which can include “bad faith
refusal to exercise a clear contractual power to halt the infringing
activities.”  Corporate officers can be
held personally liable for contributory trademark infringement if they “actively
participated as a moving force in the decision to engage in the infringing
acts, or otherwise caused the infringement as a whole to occur.”
For purposes of this motion, defendants didn’t dispute knowledge
of the alleged widespread sale of counterfeit merchandise at the discount
mall/flea market and focused on their control over operations.
Greenbriar Marketplace is the owner of the real property on
which the Discount Mall is located. Greenbriar Marketplace leases the anchor
store space and the adjoining parking lot areas to defendant 2925 Properties,
LLC, for the operation of the Greenbriar Discount Mall (flea market).
Greenbriar Marketplace’s only income is rent from tenants of the shopping
center, including 2925 Properties. 
Greenbriar Marketplace has two owners: Tabas Two, LLLP and
Kimberly Swindall. 2925 Properties sublets spaces to vendor/tenants in the flea
market. Kimberly Swindall is also the sole member/owner of 2925 Properties:

organization chart

2925 Properties also owns and operates an adjacent property
and shopping center, as outlined on the map:
The utility of photos in opinions

Defendant Albert Ashkouti owns 67% of Tabas Holdings, which
in turn owns 1% (and is the general partner) of Tabas Two. Ashkouti is also a
limited partner of Tabas Two, and “a member of the general partner of
Greenbriar Marketplace’s majority member.” He’s listed with the Georgia
Secretary of State’s office as the “registered agent” and identified himself as
a “member/manager” for Greenbriar Marketplace, although he in fact is not
personally a “member” of the LLC:
Ashkouti chart

Kimberly Swindall was aware of the December 2013, law
enforcement raid on the Greenbriar Discount Mall and adjacent Greenbriar Strip
Plaza and acknowledged the seizure of counterfeit merchandise at both shopping
centers. That raid “was not the first run-in with counterfeiting by Greenbriar
and 2925 Properties, nor was it their last.” Swindall’s efforts to combat the
prevalent sale of counterfeit merchandise at the flea market were “unsuccessful
in ridding the flea market of all counterfeit sales.”  Greenbriar Marketplace, as landlord, has
certain rights if its tenant 2925 Properties doesn’t comply with the lease
terms, including the right to terminate the lease; the lease requires 2925
Properties to obey the law.  The lease
also barred the sale of alcohol, obscene, erotic or pornographic materials.
Greenbriar Marketplace argued that its tenant was solely
responsible for the use of the property and that it had no right of control
over tenants under the lease.  But
liability for contributory trademark infringement can attach to a landlord who
continues to lease space to a tenant whom it knows or has reason to know is
engaging in trademark infringement even without direct control over the
infringing conduct. Swindall’s dual status as half-owner of Greenbriar
Marketplace—the property owner and landlord—and as sole owner of 2925
Properties which operates the flea market was also highly relevant, as was her
general awareness of the widespread counterfeiting problem at the flea
market.  A reasonable jury could find
that Swindall could have acted on behalf of Greenbriar Marketplace but refused
to do so, or it could conclude that she took reasonable efforts to flush out
infringing sales of counterfeit merchandise at the flea market.
Ashkouti was not individually liable for contributory
infringement. “Mr. Ashkouti’s savvy business structuring of his family’s
investment companies was clearly done to avoid opening him up to personal
liability for his financial real estate dealings.”  The record showed that he maintained an active
management role in Greenbriar Marketplace, and was its agent.  He dealt with the money and never went inside
the shopping center, instead employing his own property management company to
manage it. “For all practical purposes, Mr. Ashkouti delegated all issues
involving the flea market and complaints regarding counterfeiting to Patrick
and Kimberly Swindall.” Whenever he received complaints, “he wrote a responsive
letter to the complainant, referred the matter to the Swindalls, and relied on
them to deal with it.” He met with representatives of Homeland Security once
and “complained that the department was harassing him, trying to put him out of
business, and that he didn’t have any rights over the flea market vendors that
the department had failed to arrest or take any other action against.”

The lease agreement didn’t give Ashkouti the personal right
to take action against 2925 Properties. Although he gave “evasive and conflicting
deposition testimony,” that wasn’t enough to show sufficent involvement.  He could potentially have exercised control
over 2925 Properties, which might be a contributory infringer.  “But control over a contributory infringer in
this way (not the actual infringer)—without evidence of more extensive
intermingling of Ashkouti and Greenbriar with 2925 Properties’
management/direction of the flea market …—does not provide an adequate basis
for Ashkouti’s individual liability.” A reasonable jury couldn’t find that he
oversaw, facilitated, or “actively participated as a moving force in
contributing to the flea market’s operation.”

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