American Girl, LLC, a Delaware corporation with a flagship store in New York, sued Zembrka, a Chinese entity operating interactive websites, for trademark counterfeiting and infringement. Zembrka sold counterfeit American Girl dolls and accessories to customers in the United States. When American Girl filed suit in the Southern District of New York, Zembrka moved to dismiss for lack of personal jurisdiction, arguing they did not transact business in New York because they never shipped the counterfeit goods to the state and eventually refunded the payments after being served. The district court granted the motion, reasoning that without physical shipment, no business transaction occurred under New York law. American Girl appealed, presenting evidence that New York customers successfully placed orders, received confirmations, and paid for the goods before the orders were cancelled.
The Second Circuit analyzed the case under New York's long-arm statute, specifically N.Y. C.P.L.R. § 302(a)(1), which allows jurisdiction over a non-domiciliary who transacts business in the state. The court emphasized that this is a 'single act statute' where proof of one transaction is sufficient if the defendant purposefully availed themselves of the privilege of conducting activities within New York. The court rejected the district court's conclusion that physical shipment was required. Instead, the appellate court found that Zembrka's operation of interactive websites, which allowed New York customers to input billing information, place orders, and receive confirmations stating 'Order confirmed' and 'We're getting your order ready to be dispatched,' constituted transacting business. The court noted that the fact that Zembrka later cancelled the orders and refunded the money did not negate the transaction that had already occurred. The court clarified that while the district court relied on the case of *Chloe v. Queen Bee of Beverly Hills*, that case did not establish shipment as a mandatory requirement, but rather focused on the quality of contacts. Furthermore, the court found that exercising jurisdiction comported with due process, as Zembrka purposefully directed its activities toward New York, New York has a strong interest in protecting consumers from counterfeit goods, and the defendants failed to show that litigating in China would be an appropriate alternative forum.
The decision allows trademark owners to sue foreign counterfeiters in New York courts based on online sales interactions, even if the goods are never physically delivered to the state. It establishes that accepting payment and order confirmations for goods destined for New York satisfies the 'transacting business' prong of the long-arm statute. The case is remanded to the district court to proceed on the merits of the trademark infringement claims, as the jurisdictional hurdle has been cleared.
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