My Online Store Was Suspended Because of a Schedule A Lawsuit. What Do I Do?
What to Do If Your Amazon, Etsy, eBay, or Walmart Store Is Suspended Because of a Schedule A Lawsuit
Yesterday your business was operating normally. Today, your Amazon, Etsy, eBay, Walmart, or other online marketplace store has been suspended or restricted; your marketplace funds may have been frozen, and you've received an email referring to a lawsuit you've never heard of.
If this has happened to you, there is a good chance you have been named as a defendant in a Schedule A lawsuit.
Although the situation is serious, it does not necessarily mean your business is over. Schedule A litigation moves quickly, and understanding what has happened is the first step towards protecting your rights and determining the best course of action.
Why Has This Happened?
Schedule A lawsuits are a form of intellectual property litigation commonly used by brand owners to enforce their trademark, copyright, and patent rights against online sellers.
Rather than filing separate lawsuits against individual defendants, the plaintiff commences a single federal court action against numerous sellers who are alleged to be offering products that infringe the plaintiff's intellectual property rights. It is not uncommon for a single Schedule A lawsuit to name dozens, or even hundreds, of defendants.
The name comes from the way the defendants are identified. Instead of naming each seller in the body of the complaint, the plaintiff lists them, usually by store name, seller ID, or marketplace URL, in an attached exhibit called "Schedule A." That schedule is often filed under seal at first, which is one reason you may not find your store name when you search the court docket.
If you have been named in one of these lawsuits, it does not automatically mean that the allegations are correct. However, it does mean that a federal court proceeding has been commenced against you, and that prompt attention is required.
Why Was My Store Suspended or My Funds Frozen?
At the outset of many Schedule A cases, the plaintiff asks the court to grant a Temporary Restraining Order (TRO).
A TRO is an emergency court order designed to preserve the status quo while the court considers the plaintiff's claims. If granted, the order may require online marketplaces and payment processors to suspend seller accounts, remove listings, freeze marketplace funds, or take other steps intended to preserve assets during the litigation.
The purpose of these orders is not to determine whether you are ultimately liable, but rather to preserve the court's ability to deal with the case while it is being litigated.
Under the Federal Rules of Civil Procedure, a TRO issued without notice generally expires within 14 days unless extended by the court. Before the TRO expires, the plaintiff may seek a preliminary injunction, which can extend restrictions on your marketplace account and funds while the litigation continues.
Importantly, defendants may have opportunities to challenge, modify, or dissolve these restrictions before or during preliminary injunction proceedings. Because these proceedings can move quickly, obtaining legal advice as early as possible is important.
Can I Get My Frozen Funds Back?
Possibly. Marketplaces often freeze an entire account balance, even where only a small fraction of your sales relates to the products identified in the lawsuit. Courts have, in some cases, released frozen funds that exceed a reasonable estimate of what the plaintiff could recover or released funds from sales that have nothing to do with the accused products. The scope of the freeze is one of the first things an attorney should review.
Why Was I Not Told About the Lawsuit?
Many defendants are understandably surprised to discover that their online store has been suspended, or their funds have been frozen before they were even aware that legal proceedings had been commenced.
This is because Schedule A lawsuits frequently begin with an ex parte application. The term "ex parte is Latin for "from one side only." It refers to a court application made by the plaintiff without first notifying the defendants.
Plaintiffs typically argue that providing advance notice would allow defendants to withdraw marketplace funds, transfer assets, close seller accounts, remove listings, or otherwise frustrate the court's ability to grant effective relief.
If the court is satisfied that urgent relief is justified, it may grant a Temporary Restraining Order before the defendants are notified. Once the order has been granted, the defendants are served with the relevant court documents and given an opportunity to respond as the litigation proceeds.
Should I Respond to a Schedule A Lawsuit?
Although you are not necessarily required to respond to a Schedule A lawsuit, failing to do so can have serious consequences.
If you do not respond within the applicable deadline, the plaintiff may seek a default judgment against you. A default judgment may result in permanent injunctions, financial liability, continued marketplace restrictions, and the potential forfeiture or transfer of frozen marketplace funds to satisfy a judgment.
However, responding to a Schedule A lawsuit does not necessarily mean that you must engage in prolonged or expensive litigation. In many cases, defendants may be able to resolve the matter through settlement negotiations without filing a formal response to the complaint.
Every case is different, and the most appropriate strategy will depend on the allegations, the strength of the plaintiff's claims, the products involved, and your business objectives. Before deciding whether to defend the lawsuit, negotiate a settlement, or take another course of action, it is important to understand your legal position and the potential consequences of each option.
What Should I Do Now?
The first priority is to document everything.
Before making any changes to your online store or removing product listings, preserve as much information as possible. This information may become important when assessing the allegations and determining the most appropriate response to the lawsuit.
You should consider retaining:
Screenshots of your storefront and affected product listings.
Screenshots of your seller account and any marketplace notifications.
Your inventory records.
Sales records relating to the products identified in the lawsuit.
Supplier invoices and supplier contact information.
Product sourcing documentation.
Copies of all emails received from the marketplace.
Copies of the court documents, if they have been served on you.
Just as important, avoid these common mistakes:
Do not keep selling the products identified in the lawsuit or relist them through another store. Doing so may violate the court's order.
Do not try to move money out of a frozen account or open new accounts to get around the restraint.
Do not contact the plaintiff or its attorneys to explain, apologize, or negotiate before getting legal advice. What you say can be used against you.
Do not ignore emails from the plaintiff's counsel or the marketplace, even if they look spam.
Once you have preserved this information, you should contact an attorney without delay.
An attorney can review the complaint and court orders, explain the allegations against you, identify any upcoming deadlines, assess the strength of the plaintiff's claims, and advise whether the matter should be defended, negotiated, or otherwise resolved.
Why Choose Rotek Law?
Many Schedule A lawsuits are filed in the Northern District of Illinois and the Southern District of New York, regardless of where the defendant is located. It is common for online sellers across the United States—and around the world—to find themselves defending litigation in one of these federal courts.
Rotek Law is based in Florida, our attorneys have extensive experience assisting defendants in Schedule A litigation from the moment they discover that their online store has been suspended or their marketplace funds have been frozen.
Where appropriate, our first objective is to resolve the matter through strategic settlement negotiations. Many Schedule A lawsuits are successfully settled before a responsive pleading needs to be filed, allowing defendants to avoid the expense and uncertainty of prolonged federal court litigation.
If litigation becomes necessary, we work closely with experienced attorneys admitted to practice before the Northern District of Illinois and the Southern District of New York. This enables us to coordinate your defense, manage settlement discussions, develop litigation strategy, and ensure that local counsel is available to appear before the court where required.
From your initial consultation, our focus is on helping you understand the claims against you, preserving your legal options, protecting your business, and pursuing the most practical and cost-effective resolution available.
Schedule a Consultation with Rotek Law
If your online store has been suspended, your marketplace funds have been frozen, or you have been named as a defendant in a Schedule A lawsuit; time is critical.
Contact Rotek Law today to discuss your case. We can explain the court documents, assess the allegations, outline your options, and help you determine the most effective strategy for protecting your business.
Email: info@rotek.com | Contact Us: +1 (305) 731-2593
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About the Author
Cristian A. Rodriguez, Esq. is a registered U.S. patent attorney and the founder of Rotek Law, an intellectual property law firm representing inventors, entrepreneurs, and businesses in patent, trademark, and other intellectual property matters.
Disclaimer
This article is provided for general informational and educational purposes only and does not constitute legal advice. The facts and legal issues in Schedule A cases vary, and readers should consult a qualified attorney regarding their specific circumstances. Reading this article or contacting Rotek Law does not create an attorney-client relationship.
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