National Marketers, LLC v. SMC Promotions [1]

On August 13, 2009, Plaintiff National Marketers, LLC filed a complaint [2] in Arizona state court against Defendants SMC Promotions, Inc.; Specialty Merchandise Corp.; John Does I-X; and Blue Corporations I-X, asserting claims for injurious falsehood, libel, tortious interference with business expectancy, and unfair competition.   

Plaintiff provides marketing services to internet home-based businesses, while Defendants SMC Promotions and Specailty Merchandise Corp. are distributors of gift items, novelties, and household goods that are sold to directly to "member affiliates" (including home-based businesses) for resale (Complaint ¶¶ 3-17).

According to the Complaint, Defendants maintain a page on their website entitled "Fraud Alert," as well as a separate website at www.smc-fraud-alert.com [3].  On these websites, Defendants identify a number of companies, including Plaintiff, that Defendants claim have engaged in fradulent activity directed towards Specialty Merchandise Corp.'s members.  Among the allegations contained on the websites are statements that:

• Defendants "strongly caution [the reader] against providing credit card, bank accountor other personal information" to the Plaintiff (Complaint ¶ 37); and
• "The companies . . . listed [including Plaintiff] . . . may infringe trademarks or copyrights, provide sub-standard products or services, or be involved with customer complaints, lawsuits, credit problems, or bankruptcy. Doing business with them may subject you to liability or termination of your membership [with Defendant]" (Complaint ¶ 38).

In addition to the generalized statements above, the Complaint alleges that the websites contain information about and links to lawsuits against a few, but not all, of the companies listed on the websites (Complaint ¶¶ 43-47).  Plaintiff claims that the websites contain no direct evidence of any wrongdoing on Plaintiff's part, but that the association of Plaintiff with the other companies and allegations on Defendants' websites falsely suggests that Plaintiff has engaged in fraud, thus harming Plaintiff's reputation and interfering with Plaintiff's business expectancy.

On September 15, 2009, Defendants SMC Promotions, Inc. and Specialty Merchandise Corp. filed a Notice of Removal seeking to remove the case from Arizona state court to the U.S. District Court for the Central District of California.