Grit Bxng At Home Inc V Sweatworks Llc

Key Facts

Transaction Type

Issues

• The court examined whether GRIT BXNG properly alleged a claim for unfair competition based on alleged misappropriation of its trademark. The court found that GRIT BXNG failed to state a cause of action because it did not allege that SweatWorks LLC was a competitor or that SweatWorks took and used GRIT BXNG's alleged trademark to compete against GRIT BXNG, and dismissed the third cause of action.
• The court assessed whether the complaint adequately alleged business disparagement under Restatement Torts § 629. The court found no allegations indicating how information published on the website disparaged GRIT BXNG's business to cause financial loss or impact reputation, and dismissed the fifth cause of action.
• The court evaluated whether GRIT BXNG's complaint contained sufficient non-conclusory facts indicating how SweatWorks LLC was enriched at GRIT BXNG's expense. The court found the complaint merely asserted that SweatWorks LLC 'obtained clients and generated revenue' by using GRIT BXNG's name, which was insufficient to state a cause of action for unjust enrichment, and dismissed the fourth cause of action.
• The court addressed SweatWorks' request to domesticate a foreign judgment obtained in the Virginia action. The court dismissed this sixth cause of action on the grounds that the relief requested is sought in a separate special proceeding, as noted in Index No. 159471/2025, Supreme Court, NY County.
• The court determined whether SweatWorks' fraudulent inducement claim against the Zankers was time-barred under Virginia's two-year statute of limitations. The court held that third-party defendants failed to establish that SweatWorks should have discovered the alleged fraud by April 2022, as the mere filing of a Form 1-K/A Report was not sufficient to constitute constructive notice, and declined to dismiss the first cause of action in the third-party complaint.
• The court addressed whether GRIT BXNG's complaint sufficiently alleged that it suffered injury as a result of SweatWorks LLC's allegedly deceptive website content. The court determined that the complaint lacked factual specificity regarding why GRIT BXNG's reputation or revenue would be impacted by the allegedly misleading information, and dismissed the first and second causes of action for violations of General Business Law §§ 349 and 350.
• The court analyzed whether a forum selection clause in GRIT HOME's Certificate of Incorporation requiring claims to be brought in Delaware Chancery Court should be enforced. The court found the clause clearly provided that Delaware Chancery Court 'shall' be the forum for breach of fiduciary duty claims, and since SweatWorks did not demonstrate that litigating in Delaware would be so gravely difficult as to deprive it of its day in court, the court dismissed the third, fourth, and fifth causes of action in the third-party complaint.
• The court addressed whether the fraudulent concealment claim against William and Ediva Zanker was time-barred under Virginia's statute of limitations. The court found that the Form 1-K/A Report did not disclose that the loans were made by entities the Zankers controlled, and absent knowledge requiring investigation, the filing was not sufficient to constitute constructive notice. The court declined to dismiss the second cause of action.

Holdings

• First-party defendant's motion to dismiss the complaint in Action No. 02, Index No. 655268/2024, is granted and the complaint is dismissed. All causes of action in the complaint are dismissed including violations of General Business Law §§ 349 and 350, unfair competition, unjust enrichment, and business disparagement.
• Third-party defendants' motion to dismiss the third-party complaint is granted only to the extent that the third, fourth, fifth, and sixth causes of action are dismissed, and the motion is otherwise denied. The first cause of action for fraudulent inducement and second cause of action for fraudulent concealment against the Zankers are not dismissed. The third, fourth, and fifth causes of action for breach of fiduciary duty, waste, and unjust enrichment are dismissed on grounds that they must be brought in a Delaware Chancery Court pursuant to forum selection clause. The sixth cause of action for domestication of foreign judgment is dismissed as relief sought in separate special proceeding.

Remedies

• The court granted the third-party defendants' motion to dismiss the third-party complaint only to the extent that the third, fourth, fifth, and sixth causes of action in the third-party complaint are dismissed, and denied the motion in all other respects.
• The court granted the first-party defendant's motion to dismiss the complaint in Action No. 02, Index No. 655268/2024.

Legal Principles

• The court examined the burden of proof requirements for statute of limitations defenses under CPLR 3211 (a) (5). Third-party defendants bore the prima facie burden of establishing that the time within which to sue had expired. Once this showing was made, the burden shifted to plaintiffs to offer evidentiary facts establishing that the action was timely commenced. The court found third-party defendants failed to establish that SweatWorks should have discovered the alleged fraud earlier than November 2024.
• The court analyzed whether a forum selection clause in GRIT HOME's Certificate of Incorporation requiring claims to be brought in Delaware Chancery Court should be enforced. The clause states that the Delaware Court of Chancery shall be the sole and exclusive forum for breach of fiduciary duty claims and claims brought on behalf of the corporation. The court found the clause valid and enforceable, dismissing claims for breach of fiduciary duty, waste, and unjust enrichment because they must be brought in Delaware Chancery Court, as the plaintiff failed to demonstrate that litigating in Delaware would be gravely difficult and inconvenient.
• The court addressed claims for breach of fiduciary duty, waste, and unjust enrichment against William and Ediva Zanker, WHPH, and GRIT HOME. These claims were dismissed based on a forum selection clause in GRIT HOME's Certificate of Incorporation requiring such claims to be brought in Delaware Chancery Court. The court found the clause clearly provides that Delaware Chancery Court shall be the forum for breach of fiduciary duty claims and claims brought on behalf of the corporation.
• The sixth cause of action sought to domesticate a foreign judgment obtained in the Virginia action. The court dismissed this cause of action on the grounds that the relief requested is sought in a separate special proceeding. The court noted that the parties' remaining contentions were either unavailing or academic in light of its determination regarding forum selection.

Precedent Name

• Plavin v Group Health Inc.
• Audthan LLC v Nick & Duke, LLC
• Behler v Kai-Shing Tao
• Landmark Ventures, Inc. v Birger
• Global Fin. Corp. v Triarc Corp.
• Mandarin Trading Ltd. v Wildenstein
• ITC Ltd. v Punchgini, Inc.

Key Disputed Contract Clauses

Cited Statute

• Restatement of Torts
• Civil Practice Law and Rules 202
• Virginia Code
• Civil Practice Law and Rules 3016
• New York General Business Law
• Civil Practice Law and Rules 3211

Judge Name

Passage Text

• It is assumed, of course, that [GRIT BXNG's] factual allegations are true, both in the complaint and in opposition to the motion. However, conclusory allegations will not serve to defeat a motion to dismiss (DRMAK Realty LLC v Progressive Credit Union, 133 AD3d 401, 404 [1st Dept 2015]). Thus, based on the circumstances and arguments presented on this motion, the first and second causes of action in the complaint are dismissed.
• Accordingly, it is hereby ORDERED third-party defendants' motion to dismiss the third-party complaint is granted only to the extent that the third, fourth, fifth, and sixth causes of action in the third-party complaint are dismissed, and the motion is otherwise denied (Mot Seq No 002); and it is further ORDERED that first-party defendant's motion to dismiss the complaint in Action No. 02, Index No. 655268/2024, is granted and the complaint is dismissed (Mot Seq No 003).
• A forum selection clause is documentary evidence that may provide a proper basis for dismissal pursuant to CPLR 3211 (a) (1) (Landmark Ventures, Inc. v Birger, 147 AD3d 497, 497 [1st Dept 2017]) and the enforcement of such clauses is governed by New York law. The clause clearly provides that the Delaware Chancery Court shall be the forum for any breach of fiduciary duty claim and any claim brought on behalf of the corporation, GRIT HOME.