EDWARD J. CARROLL
`
`am:
`
`2733 ROUTE 209
`
`' KINGSTON, NEW YORK 12401
`
`TEL (845) 338-5977
`FAX (845) 338-5975
`
`‘in W/lo
`
`"A3
`
`PARALEGAL
`DEBRA LEACOCK
`
`October 31, 2007
`
`United States Patent and Trademark Office
`
`Trademark Trial and Appeal Board
`P.O. Box 1451
`
`Alexandria, VA 22313-1451
`
`Re: School Specialty, Inc. v. Seat Sack, Inc
`Serial No. 78/955,618
`Mark: SEAT SACK
`
`Filed: August 18, 2006
`Published: May 29,2007
`
`Dear Sirs:
`
`Please be advised that my office represents Seat Sack, Inc. in an action now pending in the
`United States District Court for the Southern District of New York, entitled Seat Sack, Inc. v.
`Childcraft Education Corp. ; U.S. Oflice Products Co.; US. Office Products North Atlantic
`District, Inc. and School Specialty, Inc., bearing case number O7-CIV-3344 (RJII) (DFE).
`This action was originally commenced on March 2, 2007 in the Supreme Court of the State of
`New York under index number 103040 / 07 and was thereafter transferred to the Federal
`
`Court, by application of the defendants, including School Specialty, Inc.
`
`As you can see, this Federal litigation, which is still pending, involves Seat Sack, Inc. and
`School Specialty, Inc., which is the same entity which is now opposing Seat Sack’s
`registration involving its mark, “Seat Sack”, before the Trademark Trial and Appeal Board. A
`review of Seat Sack, Inc.’s complaint in that Federal litigation also reveals that the same
`factual and legal issues, including that of plaintiffs trademark rights to “Seat Sack” to which
`School Specialty, Inc. now submits opposition, were previously submitted by all parties for
`judicial determination in the United States District Court.
`
`Enclosed herewith please find, for your review the following documents, which are self-
`explanatory. They include:
`Defendants’ Notice of Motion to Dismiss Pursuant to Federal Rules of Civil Procedure
`
`9(b) and l2(b)(6) and Memorandum of Law in support of Defendants’ Motion to
`Dismiss and Motion for a More Definite Statement, both dated June 27, 2007;
`Plaintiffs Notice of Cross-Motion for a Preliminary Injunction (which includes
`
`11-
`
`-
`
`07
`
`l_l"5_ P».-t-.-nl.
`
`:v Twffc/TM Hell Rcpi St.
`
`‘#39
`
`

`
`Plaintiff’s Summons and Verified Complaint), dated July 24, 2007; Childcraft
`Defendants’ Reply Memorandum of Law in Support of Motion to Dismiss, dated
`August 8, 2007; Reply Memorandum of Law in Opposition to Defendants’ Motion to
`Dismiss and in Support of Plaintiffs Cross Motion for a Preliminary Injunction, dated
`August 30, 2007; Childcraft Defendants’ Opposition to Plaintiffs Motion for
`Preliminary Injunction, dated August 23, 2007; Childcraft Defendants’ Amended
`Rule 26(a) Disclosures, dated August 27, 2007; Declaration of Virginia Murphy,
`dated August 23, 2007; Declaration of Cathy S. Klinger, dated August 23, 2007;
`Declaration of Mark E. Schmidt, dated August 23, 2007.
`
`Pursuant to the rules of this Board, Seat Sack, Inc. respectfully submits that all issues now
`before this Board be consolidated and transferred for judicial determination to the United
`States District Court for the Southern District of New York.
`
`Seat Sack, Inc. respectfully submits, to this Honorable Board, that such relief is appropriate in
`that all of the issues involve the mark, “Seat Sack” and that both this proceeding and the
`Federal litigation involve common issues of law and fact. Seat Sack, Inc. further requests that
`all proceedings be suspended until such a determination is made. By way of a copy of this
`correspondence, 1 am requesting that Edward M. Livingston, Seat Sack, Inc.’s counsel of
`record before the Board, make and file a Motion to Suspend these proceedings.
`
`In the alternative, if such a consolidation and transfer is not granted, Seat Sack, Inc.
`respectfully requests that Seat Sack Inc.’s counsel of record be granted an extension of time
`to file a response to School Specialty’s opposition with the Trademark Trial and Appeal
`Board.
`
`Naturally, if you have any questions, please do not hesitate to contact my office.
`
`By way of a copy of this correspondence, with enclosures, my office is notifying both
`Nicholas A. Kees, Esq., counsel for School Specialty, Inc., and Edward M. Livingston, Esq.,
`of this application.
`
`Very truly yours,
`
`Edward J. Carroll @
`
`EJC/sd
`
`'
`
`cc.: Godfrey & Kahn, S.C.
`Attn: Nicholas A. Kees, Esq.
`780 North Water Street
`
`Milwaukee, WI 53202-3590
`By fax (414) 273-5198 and Overnight Mail
`
`

`
`Livingston Firm
`Edward M. Livingston, Esq.
`963 Trail Terrace Drive
`
`Naples, FL 34103-2329
`(without enclosures)
`By fax (239) 261-3773
`
`

`
`11
`
`IN THE UNITED STATES PATENT AND TRADEMARK OFFICE
`
`BEFORE THE TRADMARK TRIAL AND APPEAL BOARD
`
`. _ _ . _ _ _ _ . _ _ _ . . _ _ _ . . . . . . . . . . . _ . . . . . . . . . _ . . . . . . . . - -x
`
`School Specialty, Inc. v. Seat Sack, Inc
`Serial No. 78/955,618
`Mark: SEAT SACK
`
`AFFIDAVIT OF
`SERVICE
`
`Filed: August 18, 2006
`Published: May 29, 2007
`. _ _ _ . _ _ _ _ _ _ — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — —X
`
`STATE OF NEW YORK )
`COUNTY OF ULSTER ) ss.:
`
`I, SUZANNE DOWNIE, being duly sworn, deposes and says:
`
`1. That I am not a party to the above entitled action and am over the age of 18
`years and reside in Olivebridge, New York.
`
`2. That on the 1st day of November, 2007, I served a true copy of the enclosed
`documents: Defendants’ Notice of Motion to Dismiss Pursuant to Federal Rules of Civil
`
`Procedure 9(b) and l2(b)(6) and Memorandum of Law in support of Defendants’
`Motion toDismiss and Motion for a More Definite Statement, both dated June 27,
`2007; Plaintiffs Notice of Cross—Motion for a Preliminary Injunction (which
`includesPlaintiff’s Summons and Verified Complaint), dated July 24, 2007;
`Childcraft Defendants’ Reply Memorandum of Law in Support of Motion to Dismiss,
`dated August 8, 2007; Reply Memorandum of Law in Opposition to Defendants’
`Motion to Dismiss and in Support of Plaintiffs Cross Motion for a Preliminary
`Injunction, dated August 30, 2007; Childcraft Defendants’ Opposition to Plaintiffs
`Motion for Preliminary Injunction, dated August 23, 2007; Childcraft
`Defendants’ Amended Rule 26(a) Disclosures, dated August 27, 2007; Declaration
`of Virginia Murphy,
`dated August 23, 2007; Declaration of Cathy S. Klinger,
`dated August 23, 2007; Declaration of Mark E. Schmidt, dated August 23, 2007,
`
`by mailing the same in a sealed envelope with postage prepaid thereon, in a
`post-office or official depository of the U.S. Postal Service within the State of
`New York, by overnight mail, addressed to the last known address of the
`addressee(s) as indicated below:
`
`

`
`Godfrey & Kahn, s.c.
`Attn: Nicholas A. Kees, Esq.
`780 North Water Street
`
`Milwaukee, WI 53202-3590
`
`Sworn to before me this
`
`
`
`oumn m ULSTER cou
`COMMISSION sxmnes JUNE 30, W50 /1
`
`
`
`

`
`May 23, 2007
`
`Honorable Richard J. Holwell
`United States District Judge
`Southern District of New York
`United States Courthouse
`
`500 Pearl Street
`New York, New York 10007
`
`Re: Seat Sack, Inc.,
`Vs: Childcraft Education Corp.; US Office Products Company; US Office Products North
`Atlantic District, lnc.; and School Specialty, Inc.,
`07—CV-3344(RJH)(DFE)
`
`Dear Judge Holwellz
`Please be advised that my office represents plaintiff, Seat Sack, Inc. in regard to the
`
`i
`
`above entitled action.
`
`This correspondence is in response to defense counsel’s letter, dated May 3, 2007, a copy
`of which is enclosed for your convenience.
`
`BACKGROUND
`
`Defense counsel does not dispute that the defendants are in the business are marketing
`and distributing educational aides, products and supplies to educational institutions.
`Defense counsel also does not dispute that in late 1999, at least one of defendants,
`Childcraft Education Corp., entered into an agreement whereby it agreed that it would
`serve as a distributor of Seat Sack, a product developed by plaintiff, Seat Sack, Inc. for
`which the plaintiff holds a patent. Seat Sack is an organizational device which is secured
`to the back of a student’s chair containing compartments to organize the student’s
`supplies. It is by virtue of this fiduciary relationship, breached by the defendant, and its
`further acts of defrauding the public by substituting its own “knock off product”, for the
`plaintiffs product, that the plaintiff now brings suit against these defendants.
`
`After plaintiff filed a complaint in the Supreme Court of the State of New York, County
`of New York, and Childcraft and School Specialty were served, defense counsel moved
`
`

`
`to remove the case to the United States District Court for the Southern District of New
`York. To my knowledge, no order has been yet made or entered officially transferring
`this action to this Court. However, plaintiff does not oppose this application, provided
`that this Court determines that it will not only exercise jurisdiction concerning the federal
`causes of action, but also its jurisdiction to determine the supplemental state law claims
`which are found in plaintiffs underlying causes of action.
`
`It is respectfully submitted that the allegations in plaintiffs complaint are not vague.
`
`Specifically, plaintiff alleges that while the defendant was acting in a fiduciary capacity,
`as plaintiffs distributor, with the promise to use due diligence and good faith in selling
`plaintiffs product, and after plaintiff had allowed defendant the inclusion of its product
`in defendant’s catalog, with a notice to purchasers that additional orders could be made
`through the defendant’s company, Childcraft Education Corp. secretly established a web
`site to defraud the plaintiff. The defendant utilized plaintiffs trade name and product to
`attract customers for the sale of its own “knock off product”, which it sold in direct
`competition with the plaintiff. When a user searched for the word “seat sack”, instead of
`using due diligence to promote plaintiff s product, the defendant utilized this web site to
`automatically transfer the customer to its own “knock off product” known as a “seat
`pocket”. The customer was then presented with an artificially rigged purchase price,
`whereby plaintiffs product was sold by defendant for more than the defendant’s own
`“knock off product”, thereby inducing the purchaser to purchase defendant’s product over
`the plaintiffs product, or, as occurred on many occasions, while customers still believed
`that they were purchasing plaintiffs product. After the purchase, the defendant’s “knock
`off product” was then supplied and the profits were retained by the defendant. These
`actions, carried out without the knowledge and consent of the plaintiff, resulted in a
`breach of a fiduciary duty owed to plaintiff in that defendant, while acting as plaintiffs
`distributing agent, did commit acts of “self-dealing” by utilizing the plaintiffs good will,
`trade name and patented product to sell its own “knock off product” and to induce
`breaches of contract with plaintiffs customers whereby the defendant realized vast
`profits at the plaintiffs expense.
`
`Defense counsel claims that attomey’s fees may not be recovered by the plaintiff in this
`action. This claim is meritless. For more than 70 years, New York Courts have held that
`a fiduciary may be surcharged with another interested party’s counsel fees where the
`fiduciary is guilty of misconduct that necessitated the expense. See In re Estate of
`Garvin, 256 NY 518, 520 (1931); Parker v. Rogerson, 49 A.D.2d 689, 709, 370 N.Y.S.2d
`753 (4th Dept., 1973); In re Estate ofEstate ofLz'ss, 102 Misc.2d 617, 618, 424 N.Y.S.2d
`92, 93 (Sup. Ct. Orange County, 1980). Matter ofCampbe[l, 138 A.D.2d 827, 829
`(1988). See In the Matter ofRose BB, 16 A.D.3rd at 803. Under such circumstances, the
`wrongdoer becomes an insurer against losses and bears the risk of the uncertainty that his
`actions created. Parker v. Rogerson, supra, 49 A.D.2d at 708, 370 N.Y.S.2d at 754. The
`
`

`
`
`
`surcharge is imposed based upon a breach of trust arising out of self-dealing. See In re
`Estate ofBausch, 280 A.D. 482, 490, 115 N.Y.S.2d 278, 284 (4th Dept., 1952) (citations
`omitted). And, the surcharge includes all legal expenses and disbursements reasonably
`expended by objectants in their successfial efforts to obtain redress. See In re Estate of
`Bausch, supra, 280 A.D. at 494, 115 N.Y.S.2d at 288. Here, this action seeks such
`redress. See April v. April, 245 A.D. 841, 281 N.Y.S. 538 (2nd Dept., 1935) affd as
`modified, 272 N.Y. 331, 6 N.E.2d 43 (1936); In re Estate ofFez'nberg, 82 N.Y.S.2d 879
`(Sur. Ct., N.Y. Co., 1948) affd 275 A.D. 925, 90 N.Y.S.2d 690 (1st Dept., 1949); In re
`Estate 0fDa[simer, 160 Misc. 906, 296 N.Y.S. 209 (1stDept., 1937).
`
`This is not simply a claim for a failure to provide contractual promises. Instead, the
`defendant(s), has(have) carried out a scheme of “self—dealing” to defraud the plaintiff,
`among many other contributing suppliers, to gain the public’s interest in the good will
`and Value of their products, while counterfeiting them, and then utilizing misleading and
`deceptive advertising to sell those counterfeits. Their acts have converted sales and the
`proceeds of which should have gone to the plaintiff, instead of the defendant’s coffers.
`Public confusion is clearly set forth in the facts of this case which support plaintiffs
`causes for unfair competition, fraud, conversion, and unjust enrichment. Control of the
`plaintiffs product and advertising was provided to the defendant in good faith. This
`good faith and the plaintiff’ s rights were violated as a result of the illegal acts of the
`defendant(s).
`~
`
`As such, the defendant’s claims that the causes of action set forth in plaintiffs complaint,
`including and/or a request for an award of “attorney’s fees”, under federal statutory law
`and/or state law are unwarranted and without merit.
`
`Clearly, many other causes of action are set forth in the plaintiffs complaint which
`sufficiently state federal causes of action. As such, no comment is made concerning
`these issues.
`
`Discovery has not yet been provided by the defendant(s), nor have deposition(s) been
`held to clarify the particulars of the case. Therefore, defendant’s application is
`premat\ure.
`
`Due to the foregoing, it is respectfully submitted that defense counsel requests for
`permission to move to dismiss the First, Second, Third, Fourth, Sixth and Thirteenth
`Causes of action should be denied.
`
`CONFERENCES
`
`Please be advised that I am presently confined to a wheelchair in my residence due to
`recent reconstructive surgery, with external fixation of my right foot, ankle and leg, due
`
`

`
`
`
`I therefore request the Court’s, and counsels indulgence in avoiding personal appearances
`
`until that time.
`
`Should you have any questions, please do not hesitate to contact my office.
`
`Very truly yours,
`
`Edward J. Carroll
`
`EJC/md
`
`Enclosure
`
`cc w/enc.: ORRICK, HERRINGTON & SUTCLIFFE, LLP
`Attorneys for Defendants — Childcraft Education Corp., and School
`Specialty, Inc.
`Att: Richard W. Mark, Esq., (RM6884)
`666 Fifth Avenue
`
`,
`
`New York, New York 10103
`
`YOUNG, CONAWAY, STARGATT & TAYLOR, LLP
`Attorneys for Defendants - US Office Products Company and US Office
`Products North Atlantic District, Inc.
`Att: Sean M. Beach, Esq.
`P.O. Box 391
`
`Wilmington, Delaware 19899-0391
`
`

`
`Iwiezwm
`
`J’.
`
`
`
`1'7;
`
`
`
`CASE NO. 07-CIV-3344 (RJH)(DFE)
`
`NOTICE OF MOTION TO DISMISS
`PURSUANT TO FEDERAL RULES OF
`CIVIL PROCEDURE 9 b AND 12 b 6
`
`Richard w. Mark
`David M. Fine
`
`ORRICK, HERRTNGTON & SUTCLIFFE LLP
`666 Fifth Avenue
`
`New York, NY 10103
`Telephone: (212) 506-5000
`Facsimile: (212)506-5151
`
`UNITED STATES DISTRICT COURT
`SOUTHERN DISTRICT or NEW YORK
`
`_ _ _ . _ _ _ . _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ __ X
`
`SEAT SACK, INC.,
`
`Plaintiff,
`
`'aga'“St'
`"CHI/LDCRAFT EDUCATION CORP.;
`Us OFFICE PRODUCTS COMPANY;'
`Us OFFICE PRODUCTS NORTH
`ATLANTIC DISTRICT, INC; and
`SCHOOL SPECIALTY, INC.,
`
`Defendants.
`
`'
`
`_
`
`_ _ _ . _ _ _ _ _ _ _ _ . _ _ _ _ _ _ _ _ . _ _ _ _ _ _ _ _ _ _ . _ . . __ X
`
`PLEASE TAKE NOTICE that, upon the annexed Declaration of Anthony S. Baish,
`
`executed on June 27, 2007 and the exhibits thereto, the accompanying Memorandum of Law,
`
`and upon all pleadings filed herein, defendants Childcraft Education Corp and School Specialty,
`
`Inc. (“Childcraft”) will move this Court, before the Honorable Richard J. Holwell, United States
`
`District Judge, in the United States Courthouse for the Southern District of New York, 500 Pearl
`
`Street, Courtroom 17B, New York, New York, 10007-1312, for an order dismissing the Verified
`
`Complaint in the above-referenced action (dated February 6, 2007) pursuant to Rules 9(b) and
`
`12(b)(6) of the Federal Rules of Civil Procedure on August 8, 2007, or any date thereafter
`
`convenient to the Court and parties.
`
`

`
`PLEASE TAKE FURTHER NOTICE that, in accordance with this Court’s May 31 2007
`
`order, plaintiff shall file its opposition to the motion on or before July 25, 2007, and Childcraft
`
`shall file its reply on or before August 8, 2007.
`
`Dated: June 27, 2007
`
`Respectfully submitted,
`
`ORRICK, HERRINGTON & SUTCLIFFE LLP
`
`By:
`
`s/ Richard W. Mark
`Richard W. Mark
`David M. Fine
`
`666 Fifth Avenue
`
`New York, NY 10103
`
`Attorneys for Defendants,
`Childcraft Education Corp. and
`School Specialty, Inc.
`
`OF COUNSEL:
`
`Nicholas A. Kees
`Anthony S. Baish
`Mark E. Schmidt
`
`GODFREY & KAHN, S.C.
`780 North Water Street
`Milwaukee, WI 53202-3590
`
`To:
`
`Edward J. Carroll, Esq.
`Attorney for Plaintiff
`2733 Route 209
`Kingston, NY 12401
`
`Sean M. Beach, Esq.
`Young Conaway Stargatt & Taylor, LLP
`Attorneys for USOP Liquidating LLC
`(f/k/a US Office Products Company and
`US Office Products North Atlantic District, Inc.)
`P.O. Box 391
`
`Wilmington, DE 19899-0391
`
`
`
`

`
`UNITED STATES DISTRICT COURT
`SOUTHERN DISTRICT OF NEW YORK
`
`.................................... - _ x
`SEAT SACK, INC.,
`'
`
`Plaintiff,
`
`-against-
`CHILDCRAFT EDUCATION CORP.;
`US OFFICE PRODUCTS COMPANY;
`US OFFICE PRODUCTS NORTH
`ATLANTIC DISTRICT, INC.; and
`SCHOOL SPECIALTY, INC.,
`
`Defendants.
`
`_
`
`--------- --4—-------------------------- X
`
`CAsE NO. O7-CV-3344 (RJH)(DFE)
`
`DECLARATION OF ANTHONY S.
`BAISH
`
`1, Anthony S. Baish, under penalty ofperjury, hereby declare as follows:
`1.
`I make this Declaration on personal knowledge of the facts and circumstances set
`forth herein .
`
`2.
`Specialty Inc.
`
`I am one ofthe attorneys for Defendants Childcrafi Education Corp. and School
`
`Attached hereto as Exhibit 1 is a true and correct copy ofthe Complaint filed by
`3.
`Plaintiff Seat Sack, Inc. in the above-referenced action.
`
`mwl337794_l
`
`Anthony S. Biish
`
`
`
`

`
`SUPREME COURT OF THE STATE OF NEW YORK
`'. COUNTY OF NEW YORK
`
`_______________________________________ - _x
`
`SEAT SACK, INC ,
`
`Plaintiff,
`
`~against—
`
`CHILDCRA.FT EDUCATION CORP.; US OFFICE
`PRODUCTS COMPANY; US OFFICE PRODUCTS
`NORTH ATLANTIC DISTRICT, INC.; and SCHOOL
`_ SPECIALITY, INC.,
`
`Defendants.
`
`..-_. _ . . . _ _ _ _ _ . _ _ _ _ _ . _ . . . . _ . . _ _ . . . ....'....._..____X
`
`VERIFIED
`COMPLAINT
`
`Index # /0 309 07
`Date Filed:
`3;5/.900’!
`
`Plaintiff, complaining ofthe defendants, by its attorney, EDWARD J.
`
`.CARROLL, BSQ., as and for its verified complaint respectfully sets forth and
`‘ {alleges as follows:
`
`1. Plaintiff, SEAT SACK, lNC., was and still is at all times hereinafter
`
`; mentioned:
`
`A. A foreign corporation organized under and by virtue ofthe
`‘laws ofthe State ofFlorida having a principal place ofbusiness situated at
`
`5910 Taylor Road, in the City ofNaples, State ofFlorida 34109, and a mailing
`
`address ofP.O. Box 9732, Naples, Florida 34101; and
`
`B. Established for the pulpose of engaging in the business of
`
`manufacturing and selling, by wholesale and retail marketing, a certain
`
`

`
`I f
`
`product known as a “Seat Sack” which is used by pupils to organize their
`
`school supplies by hanging p1aintifl’s device over the back oftheir chair(s) and
`
`utilizing individual pouches contained therein for storage of school supplies,
`
`including but not limited to books, pencils, pens, etc.
`
`2. At all times herein mentioned, plaintifi’s aforementioned device was
`
`. known to the defendants to be protected under and by virtue of State and
`
`Federal Law, including but not limited to the United States Patent Number:
`
`‘Des. 358, 731 ‘issued to plaintiff on or about May 30, 1995.
`
`3. Upon information and beliefand at all times hereinafter mentioned,
`defendants,‘ CHILDCRAFT EDUCATION CORP., was and still _is a domestic
`
`- corporation organized under and by virtue of the laws of the State ofNew York
`
`‘on or about October 24, 1952 in the County of New York, State ofNew York
`‘which maintains a principal place ofbusiness situated at 2918 Old Tree Drive,
`
`‘Lancaster, PA 17603.
`
`4. Upon information and belief and at all times hereinafter mentioned,
`
`defendant, CI-IILDCRAFT EDUCATION CORP., did and still does authorize
`
`C T Corporation System, 111 8th Avenue, New York, New York 10011 to act
`
`as its designated agent for the service of legal process.
`
`5. Upon information and belief and at all times hereinafter mentioned,
`
`defendants, US OFFICE PRODUCTS COMPANY and US OFFICE ‘
`
`-2-
`
`C!
`
`

`
`
`
`I
`
`I I
`
`I
`
`..
`
`I I
`
`I
`
`I PRODUCTS NORTHATLANTICDISTRICT, INC., are both‘foreign
`corporations whichwere incorporated inthe State ofDelaware and authorized
`to do business in the State ofNew York with a designated agent for service of
`
`process at 440 New York Avenue Northwest, Suite 310, Washington, DC
`
`20005. SCHOOL SPECIALITY, lNC., is a foreign corporation originally
`‘ incorporated in the State ofNew York and thereafter discontinued and then
`
`6. That at all times hereinafler mentioned herein, all ofthe above named
`
`defendantshaveactedinconcertwithCHJLDCRAFTEDUCATIONCORPin
`
`5 committing those acts against plaintiffas are alleged hereinafter herein.
`7. Upon information andbeliefand at all times hereinafter mentioned,
`each ofthe defendants have/has held itselflthemselves out to the general public,
`including plaintiff, as a distrib1Itor(s) for the wholesale and retail sale of
`
`various school products and services, including plaintiffs aforesaid “Seat
`
`Sack” organizer, to municipal and private schools, their districts, and/or their
`
`authorized agents and/or employees throughout the world, including the United
`
`.States ofAmerica and specifically within the State ofNew York, for use in
`
`,theirdailyeducationalcurriculum.
`
`I
`
`
`
`

`
`
`8. Upon information and beliefand at all times herein mentioned, the
`
`I I !
`
`4
`
`' defendants did transact business within the State ofNew York and/or did
`
`commit a tortious act
`
`that state, and/or did commit a tortious act without
`
`that State, all causing injury and damages to the plaintiff and/or did enter into a
`
`agreement with plaintiffwhich is the subject ofthis litigation within that State
`
`and regularly does or solicits business, or does engage in any other persistent
`
`course of conduct, and/or derives substantial revenue from goods used or
`
`consumed orservices rendered in the State ofNew York, and/or expects or
`
`, should reasonably expect that its acts will have consequences in the State of
`3New York and/or-derives substantial revenue from interstate or international
`
`Icommerce and/or owns, uses or possesses real property situated within the
`
`9. Upon information and belief, at all times hereinafter mentioned,
`
`10. This action arises_under the Federal Trademark Act, 15 U.S.C.
`
`Section 1051, et seq., and other laws adopted by the State ofNew York,
`
`including but not limited to the Uniform Fiduciaties Act; unfair trade practices
`"and unlawful packaging trade; and unfair competition; and Section 360-1 ofthe
`
`

`
`
` and 1125, 28 U.S.C. Section 1331 and 28 U.S.C. Section 1338 andjurisdiction
`
`pendent thereto.
`
`AS AND FOR A FIRST CAUSE OF ACTION IN
`_________..______________________
`BASED IN FRAUD IN THE INDUCEMIENT IN
`FAVOR OF THE PLAINTIFF AND
`AGAINST THE DEFENANTS
`
`11. Plaintiff, SEAT SACK, INC., repeats, reiterates and realleges each ~
`' and every allegation contained inparagraphs “1” through “10” ofplaintifif’s
`' complaint
`ifthose allegations were fully set forth at length herein.
`12. On, about or during the month ofNovember, 1999, plaintiff‘, as a
`{result of fraudulent misrepresentations made by defendants and/or its
`employees while acting
`the scope oftheir authority and in furtherance of
`the business interests ofsaid defendants, did enter into an agreement with the ,
`idefendants, whereby plaintiffagreed to allowthe defendants to act as its
`distributor for present and future sales ofplaintiff’s aforesaid “Seat Sack”, and
`defendants agreed to so act, in a fiduciary capacity and on behalfofplaintiff, as
`plaintiffs distributor for this product to municipal andprivate schools, their
`districts, andlor their authorized agents and/or employees throughoutthe world,
`iincluding the United States ofAmerica and specifically within the State of
`
`.5-
`
` :_
`
`.._—.__._j._j..._.
`
`

`
`‘ New York, for use by their pupils in their daily educational curriculum...
`
`13. Upon information and belief, on, about or immediately proceeding
`
`the making ofthe aforesaid-agreement, defendants, through itsftheir agents
`
`and/or employees, fraudulently represented to the plaintiff, for the sole purpose
`
`of inducing the plaintiffto enter into the aforesaid agreement, and with the
`
`intent to deceive, cheat and defraud plaintiff, and with full knowledge that the
`
`statements so made by them were not true, that:
`
`A. The defendants would at all times act as plaintiffs fiduciary and
`
`distributor and would protect and promote the best interests ofplaintiffand its
`
`aforesaid product; that defendants would faithfully adhere to and perform all of
`its/their obligations under the aforesaid agreement;and would distribute
`
`f
`I
`
`plaintiffs product in a good faith and diligent manner, and would promote
`
`plaintiffs product in all markets via promotional and catalog sales; and
`
`B. All payments obtained as a result‘ofany sale ofplaintiffs
`
`aforesaid product would be timely made and accounted for; that defendants
`
`would carry out the distribution ofplaintiff’s product(s) using good business
`
`distribution practices; and would protect plaintiffs product as a protected
`
`patented device; would protect and promote plaintifi"s property right in said
`
`device; that all ofthe plaintiffs existing and future customers would be
`
`serviced in the same manner and at the same rates and prices; that new sales
`
`-5-
`
`

`
`and markets forplaintiffs aforesaidproduct would be pursued by defendants
`on behalfofthe plaintiffwithin and without the country; that defendants would
`
`57a‘D U’ 5'532.. 3591 OO.5. Ng33" 326}‘ U?s9
`
`2-Q 3 0F3E?On 53
`
`. defendants would at all times protect the integrity and solvency ofthe
`
`1
`
`I 1 I
`
`ll
`J
`
`promoted and protected inzthe general market for the benefit ofthe plaintiff.
`14. On or about November, 1999, plaintiffherein wholly believing and
`,-relying upon the aforesaid statements and representations so made by the‘
`
`agreement with defendants whereby plaintiffdid hold out the defendants to be
`"its lawfiil distributor and non-
`
`exclusive licensee; and did allow the defendants
`-to include plaintiffs product in their catalog and advertisements and did
`
`-7.-
`
`

`
`thereafter provide “Seat Sacks” to defendants for subsequent sale to the general
`
`' public, including the aforesaid private and municipal school districts and their
`
`agents and/or employees‘, up to and including August, 2004, and has
`sporadically continued to do so up to and including the present.
`
`15. Upon information and belief, at the time ofthe making ofthe
`
`aforesaid agreement, defendants had notice of each and every term and
`
`condition and representation so made by its representatives and knew that the
`:p1aintifi'was relying thereon.
`
`16. Upon information and belief, each and every statement,
`
`representation, covenant and promise so made by defendants herein was false
`
`and untrue and known by the defendants to be so at the time said statement was
`
`‘made and all of said statements were intentionally and fraudulently madewith
`
`the intent to cheat and defraud the plaintiff herein.
`
`.
`
`17. That from the inception of defendants’ knowledge and possession of
`
`the plaintiff’s aforesaid product and contact with plaintiffs customers and
`
`market, defendants have failed to perform its/their obligations under its
`
`aforesaid distributorship agreement and has/have acted in breach ofits/their
`
`fiduciary responsibility to plaintiff.
`
`18. That defendants’ unlawful acts committed since 1999 were done
`
`with gross malice and without the knowledge and consent ofplaintiffand
`
`-.._.....—.—_.
`
`-3-
`
`

`
`represent a continuing course ofconduct against plaintiffand other entities
`
`' similarly situated- These acts included but were not limited to the following:
`
`A. That defendants did create a “l<11ock offproduct” in direct
`
`competition to plaintiff's “Seat Sack” which-was known as a “Seat Pocket”
`which was identical tos “Seat Sack” and did advertise and solicit, for
`
`the manufacture and/or distribution and sale of same to, from and within the
`countries ofChina and Taiwan and the United States; and
`
`_ _._m...:_.
`
`B. That defendants did also establish and create an intemet website
`
`for the manufacture, sale and distribution ofthe aforesaid “knock ofl'product”
`
`‘which automatically transferred a customer searching for plaintiffs “Seat
`
`Sack” to defendants’ site which provided all information necessary to purchase
`
`Idefendants’ “Seat Pocket”. The foregoing acts were done for the purpose of
`
`inducing breaches of contract between plaintifl and its prior, existing and/or
`
`_future customers and/or for the confusion and deception ofthe general public
`
`-which believed that they were purchasing plaintiffs product; and
`
`C. Defendants filrther did, withoutjust cause, artificially increase
`
`the purchase price ofplaintiff’s product that it was distributing as plaintiffs
`
`fiduciary in -an amount greater than the purchase price of its own “Seat Pocket”
`
`A
`
`to induce its customers to purchase its product and to deprive the plaintiffof
`
`_any opportunity to compete
`
`the open market; and
`
`-9-
`
`

`
`
`
`D. That defendants consistently misled and manipulated the
`. plainfiffs customers into believing that they were purchasing plaintiffs
`
`product when they were actually purchasing defendants’ product; and
`
`E. Defendants withheld knowledge of its foregoing unfair business
`
`practices from the plaintifi‘to preclude plaintifffrom competing with sales of
`
`defendants’ “knock offproduct”, although defendants were still acting as
`: plaintiff’s fiduciary and disiributor; and
`
`F. That defendants have refused to act in the best interests of
`
`plaintiff as its fiduciary and instead, acted in a competitive, unlawful manner
`
`' for the purpose ofstealing plaintiffs protected product, sales and market
`
`19. That at all times hereinafier mentioned, said defendants were and .
`
`still are in default of its/their contractual obligations to the plaintiffherein.
`
`20. That the plaintifi‘has allowed defendants numerous opportunities to
`
`-cure the aforesaid defaults and/or unlawful conduct and defendants have failed
`
`and/or refused to remedy same and/or refrain from such unlawful conduct in —
`
`the fixture.
`
`21. As a result of defendants’ failure and/or refiisal to cease its/their
`unlawful conduct and remedy its/their default and deceptive practices, plaintiff
`
`has sustained lost profits in sales, together with ancillary damages and
`
`continues to suffer from same, a diminishing market, together with damage to
`
`' -10-
`
`

`
`3 its good name, reputation product, and other unwarranted costs and damages.
`
`22. Plaintiff has fi1lly performed all of its duties and obligations under
`
`' the distributorship agreement, including but not limited to manufacturing a
`
`I defendants were acting as its distributor and including for the purpose of
`' reordering merchandise defendants’ name, address and contact telephone
`
`‘numbers on its product.
`
`23." As a result ofthe foregoing, the plaintiffhas fiilly performed its
`i obligations under the aforesaid agreement but the obligations to be performed
`:by the defendants have not been met.
`
`24. Defendants have refused and/or failed to meet its/their obligations
`and as a result, said defendants have defaulted.
`
`25. Plaintiffhas demanded in a timely and reasonable manner that said
`
`defendants fully perform its/their obligations pursuant to its agreement and that
`
`defendants provide plaintiff_with an accountingof all sales ofits “Seat Sack”
`
`and defendants’ ”Seat Pocket” from the inception ofthe distributorship of
`plaintiffs product, together with all monies obtained from the sale thereof; and
`that defendants -refiain from the unlawful conduct set forth herein, but
`
`-11-
`
`

`
`
`
`defendants have wrongfiilly failed, refused or neglected to do so as ofthis date.
`
`26. That due to defendants’ unlawful conduct of unfair business practice
`
`and deception, plaintiffhas sustained the loss of its past, present and/or future
`
`'
`
`customers and market a