Russell Rd. Food & Beverage, LLC v. Galam

• Citation: 180 F.Supp.3d 724
• Decision Date: 13 April 2016
• Docket Number: Case No. 2:13-cv-00776-RFB-NJK
• Parties: Russell Road Food and Beverage, LLC, Plaintiff, v. Mike Galam, et al., Defendants. Mike Galam, et al., Counterclaimants, v. Russell Road Food and Beverage, LLC, Counterdefendant.
• Court: U.S. District Court — District of Nevada

180 F.Supp.3d 724

Russell Road Food and Beverage, LLC, Plaintiff,

v.Mike Galam, et al., Defendants.

Mike Galam, et al., Counterclaimants,

v.Russell Road Food and Beverage, LLC, Counterdefendant.

Case No. 2:13-cv-00776-RFB-NJK

United States District Court, D. Nevada.

Signed April 13, 2016

Bruno Tarabichi, David R. Owens, Owens Tarabichi LLP, San Jose, CA, Puoy K. Premsrirut, Brown Brown & Premsrirut, Sigal Chattah, Chattah Dimopoulos, Las Vegas, NV, for Plaintiff.

Bryan C. Altman, Michael Thomas Smith, The Altman Law Group, Los Angeles, CA, Jason Hicks, Lewis Brisbois Bisgaard & Smith, Kathleen Bliss, The Federal Defenders Law Group, LLC, Michael R. Mushkin, Michael R. Mushkin & Associates, William H. Brown, Lambrose Brown, Allison R. Schmidt, Ariel E. Stern, Akerman LLP, Las Vegas, NV, David Nazar, Tarzana, CA, for Defendants.

ORDER

RICHARD F. BOULWARE, II

, United States District Judge

I. INTRODUCTION

This case involves a dispute between two owners of real property in Las Vegas:

Plaintiff, who allegedly owns the Crazy Horse III trademark, and Defendants/Counterclaimants, who allege that they own the Crazy Horse Too mark. The parties have asserted competing trademark infringement claims, each claiming prior use over the other, and each has also moved for summary judgment. For the reasons discussed below, the Court determines that Defendants never acquired the Crazy Horse Too trademark. Therefore, summary judgment must be granted in Plaintiffs' favor on all of its claims and all of Defendants' counterclaims.

II. BACKGROUND

A. Procedural History

Plaintiff Russell Road Food and Beverage, LLC (“Russell Road”) filed suit in this Court on May 2, 2013 against Defendants Canico Capital Group, LLC, Rhino Bare Projects, LLC, Industrial Road 2440–2497, LLC, Crazy Horse Too Gentlemen's Club, LLC, and various related entities and individuals it alleges are members of those entities. In its Complaint, Russell Road claims trademark infringement and trademark dilution and seeks to cancel Defendants' trademark registration. Defendants are a group of individuals and entities who claim to be the rightful owners of the trademark “Crazy Horse Too” and have asserted identical counterclaims against Russell Road.

In its Complaint, Russell Road alleges that it opened the Crazy Horse III Gentlemen's Club on September 4, 2009 in Las Vegas, Nevada, and that at that time there were no other strip clubs in Las Vegas that used the name Crazy Horse. Russell Road alleges that in April 2013, Defendants began advertising the opening of the Crazy Horse Too Gentlemen's Club following their 2011 purchase of certain real property located on Industrial Road in Las Vegas. This real property was the site of the former Crazy Horse Too strip club, which was owned by The Power Company, Inc. Russell Road alleges that this club opened in 1984 and was closed in 2006, when The Power Company forfeited it to the United States Government following a guilty plea in United States of America v. The Power Company, Inc., No. 2:06–cr–00186–PMP–PAL (D.Nev.).

Russell Road alleges that Defendants' use of the Crazy Horse Too mark infringes on its Crazy Horse III mark, as Russell Road was the first to use its mark. Russell Road also argues that Defendants cannot rely on the earlier use of the Crazy Horse Too mark from 1984–2006 because the club was subsequently closed, the mark was forfeited to the United States government, and Defendants did not acquire the mark when they purchased the Industrial Road property in 2011. Alternatively, Russell Road argues that the mark was abandoned during the nearly six years of non-use when the property was in the possession of the government. In response, Russell Road argues that it can demonstrate an unbroken chain of title from The Power Company, the original owner of the Crazy Horse Too, to itself and that the mark was not abandoned.

On May 22, 2013, the Court issued a preliminary injunction against Defendants (1) enjoining them from using the Crazy Horse Too mark and any variations thereof, and (2) ordering them to remove all signage, disable all websites, and remove all promotional materials featuring the Crazy Horse Too mark. Order, ECF No. 46. On February 10, 2014, the Court vacated its earlier preliminary injunction, finding that certain additional documents presented by Defendants demonstrated that they had likely acquired the Crazy Horse Too mark in 2011 and that the mark was likely not abandoned. Order, ECF No. 127. On December 1, 2014, the U.S. Court of Appeals for the Ninth Circuit reversed this Court's order vacating the preliminary injunction and remanded “for further proceedings to determine whether [Defendants] have some other basis for claiming ownership of the trademark and, if so, whether the trademark was abandoned by the United States before it was acquired by appellees.” Mem. at 3, ECF No. 210.¹

After remand, this Court permitted Defendants to request the production of documents from the U.S. Attorney's Office and permitted the parties to supplement their summary judgment and preliminary injunction motions with material received from that request. Minutes of Proceedings, ECF Nos. 222, 235, 249, 259. The Court permitted this limited additional discovery in order to provide Defendants with an opportunity to identify any additional basis for claiming ownership of the mark, as ordered by the Ninth Circuit. The U.S. Attorney's Office provided the parties with additional documents, and the parties filed supplemental briefs and responses.

On September 30, 2015, the Court decided the pending motions for summary judgment. Minute Order in Chambers, ECF No. 273. The Court granted Russell Road's Motion for Summary Judgment Based on Defendants' Failure to Acquire the Crazy Horse Too Trademark (ECF No. 181), denied Russell Road's remaining Motions for Summary Judgment as moot, and denied Defendants' Motion for Summary Judgment (ECF No. 177). This Order sets forth the Court's reasoning for its rulings.

B. Undisputed Facts

For purposes of summary judgment, the Court finds the following facts to be undisputed. The Crazy Horse Too club opened in 1984 at 2476 Industrial Road in Las Vegas, Nevada. Defs.' Resp. to Requests for Admissions Nos. 1–2, ECF No. 98–1. Beginning in 1984, the Power Company, Inc. operated the Crazy Horse Too club and owned the Crazy Horse Too business and trademark. Defs.' Resp. to Requests for Admissions Nos. 1–3; Decl. of Bruno Tarabichi ¶¶ 1–2 & Ex. A, ECF No. 43–1. RicRiz, LLC (“RicRiz”) was formed in 2002 and, sometime on or before October 26, 2005, became the owner of the real property located at 2440–2497 Industrial Road, which includes the property on which the Crazy Horse Too club was located. Decl. of Bruno Tarabichi ¶¶ 3–5, ECF No. 43–1; Deed of Trust, ECF No. 91–6.

On October 26, 2005, RicRiz obtained a $5 million loan from Security Pacific Bank that was secured by a Deed of Trust granted by RicRiz for the real property at 2440–2494 Industrial Road. Promissory Note, ECF No. 91–5; Deed of Trust, ECF No. 91–6. RicRiz was the sole trustor for the Deed of Trust; The Power Company was not a party to the Deed of Trust. Id. Security Pacific Bank also obtained a guaranty from The Power Company that required The Power Company to guarantee “the full and prompt payment and performance” to Security Pacific Bank of all of RicRiz's indebtedness under the Promissory Note and Deed of Trust. Continuing Guaranty of Payment and Performance ¶ 1, ECF No. 91–2. Through the Continuing Guaranty, The Power Company granted a security interest to Security Pacific Bank in all of The Power Company's property “now or hereafter in the physical possession of or on deposit with” Security Pacific Bank. Id.¶ 5. However, the Crazy Horse Too trademark was never in the physical possession of, nor on deposit with, Security Pacific Bank. Dep. of Michael R. Mushkin 75:1–77:8, ECF No. 98–1 (“Mushkin Dep.”); Def. Canico's Resp. to Interrogatory No. 4, ECF No. 98–1, Ex. E.

On December 5, 2005, Security Pacific Bank filed a UCC Financing Statement, with RicRiz named as the Debtor, that listed as collateral the personal and real property of RicRiz, including the real property at 2440–2494 Industrial Road. ECF No. 91–8. Neither Security Pacific Bank nor any other party filed a UCC Financing Statement or any other instrument to perfect any security interest in the property of The Power Company. Mushkin Dep. 41:4–42:15.

Through a series of assignments, the loan from Security Pacific Bank to RicRiz—which was secured by the Deed of Trust granted by RicRiz for the real property on Industrial Road—was acquired by Defendant Canico Capital Group, LLC (“Canico”) on July 23, 2009. Decl. of Bruno Tarabichi ¶ 23, ECF No. 16; Decl. of Abraham Assil, ECF No. 16–10; Id. Ex. B.

The Crazy Horse Too club closed in September of 2006 or 2007.² On August 16, 2007, the real property at 2440–2497 Industrial Road and the Crazy Horse Too business, including the Crazy Horse Too trademark, were forfeited to the United States government. Defs.' Resp. to Requests for Admissions No. 68; Order, ECF No. 91–12. These assets were ordered to be sold and applied to The Power Company's and Frederick Rizzolo's forfeiture and restitution obligations in connection with the judgments entered in the Power Company criminal case. Order at 2, ECF No. 91–12.

However, the government still had not sold the property after three and a half years, and on February 28, 2011, the court in the Power Company case permitted Canico to conduct a nonjudicial foreclosure sale of the property that was subject to the Deed of Trust granted by RicRiz. Order of Sale, ECF No. 91–19; see also Order, Dec. 22, 2010, ECF No. 91–18 (discussing Canico's property interests). The court also found that “the foreclosure sale by Canico Capital Group, LLC, is a sale for all purposes, including the plea agreements, the Second Amended Order of Forfeiture, and the Order [filed December 22, 2010] amending the Second Amended Order of Forfeiture...