Brokers Beware! Nike Goes for Slam Dunk

Last week a federal court judge in Savannah, Georgia denied the request by a Houston-based customhouse brokerage to transfer a case from Savannah to Atlanta, where the broker maintains an office that prepared entry documentation for an import that arrived at the Port of Savannah. While the denial of that motion to transfer seems irrelevant enough, the plaintiff in the case is Nike, Inc. And the case does not involve an error or omission that the broker made when entering a shipment for Nike. Instead, the lawsuit against the broker is for trademark infringement and counterfeiting.

Nike filed its lawsuit earlier this year, seeking a preliminary and permanent injunction, damages, costs, and attorney fees due to the broker’s alleged infringing conduct. According to the complaint, the broker received a call from a person identifying himself as a vice president of an importing company that did not do any prior business with the broker. The broker received a signed POA from that person, who actually was not a representative of the supposed importer. The POA lacked a notary or corporate seal. Based on the POA, the broker filed an entry for what was described as “ladies cotton woven pants.” The shipment, as it turned out, actually consisted of more than 4,000 pairs of counterfeit Nike shoes valued by CBP at over $180,000. The shipment also included more than 5,000 counterfeit Chanel, Coach, and Louis Vuitton handbags.

Nike alleges that the broker filed fraudulent entry documents and that in order to file any entry documents, the broker had to show that it had a “sufficient interest” in the goods and that it had exercised due diligence in obtaining the POA. The lawsuit alleges that the broker did not confirm with the supposed importer that it was aware of the entry or that it had a vice president by the name of “Michael Mai.” The broker also did not confirm that the supposed importer used a generic yahoo.com email account that it received from “Michael Mai” before attempting to enter the shipment in the Port of Savannah. In other words, the broker failed to use “reasonable care” in its handling of the shipment.

In the lawsuit, Nike requests injunctive relief, as well as monetary damages under the Lanham Act that could include between $1,000 and $200,000 per trademark per type of goods sold, and up to $2,000,000 if the court finds the broker’s “use” of the counterfeit mark was willful.

Whether Nike gets a slam dunk judgment in the case remains to be seen. But Nike is certainly sending a strong message to customs brokers – pay attention and exercise the same reasonable care that legitimate importers are required to exercise or Nike will sue the cotton woven pants off of you.