Coscarelli v. Esquared Hosp.
| Decision Date | 24 November 2021 |
| Docket Number | 18-CV-5943 (JMF) |
| Parties | CHLOE COSCARELLI et al., Plaintiffs, v. ESQUARED HOSPITALITY LLC et al., Defendants. |
| Court | U.S. District Court — Southern District of New York |
This case involves a long-running and bitter dispute between Plaintiff Chloe Coscarelli, a celebrity vegan chef, and her former business partners, Defendants ESquared Hospitality LLC (“ESquared”) and BC Hospitality Group LLC (“BCHG”), over a chain of fast casual vegan restaurants called “By Chloe” and related ventures. Now pending are a slew of motions, including, most significantly, portions of the parties' cross-motions to confirm and vacate certain arbitration awards on which the Court previously reserved judgment, see ECF Nos 173, 185; cross-motions for summary judgment, see ECF Nos. 140, 146; and Plaintiffs' motion for entry of a default judgment against BCHG, see ECF No. 291. For the reasons that follow, the Court GRANTS Plaintiffs' motion to confirm and DENIES Defendants' motion to vacate the arbitration awards; GRANTS in part and DENIES in part Defendants' motion for summary judgment; GRANTS in part and DENIES in part Plaintiffs' motion for summary judgment; and DENIES Plaintiffs' motion for default judgment.
The facts relevant to the present motions - drawn from the pleadings, admissible materials that the parties submitted in connection with these motions, and, to the extent relevant to the motions to confirm and vacate the arbitration awards the awards themselves - are either undisputed or described in the light most favorable to the relevant non-moving party. See, e.g., Simon v. City of New York, 893 F.3d 83, 91 (2d Cir. 2018). In addition, the Court has issued several prior decisions in this case, general familiarity with which is presumed. See, e.g., Coscarelli v ESquared Hosp. LLC (“Coscarelli I”), 364 F.Supp.3d 207 (S.D.N.Y. 2019) (ECF No 72); Coscarelli v. ESquared Hosp. LLC (“Coscarelli II”), No. 18-CV-5943 (JMF), 2021 WL 293163 (S.D.N.Y. Jan. 28, 2021) (ECF No. 256).
Coscarelli is a vegan chef who began receiving media attention in June 2010, when she became the first vegan chef to win Cupcake Wars, a televised cooking competition. ECF No. 76 (“FAC”), ¶ 2. Between 2012 and 2014, she published three vegan cookbooks, Chloe 's Kitchen, Chloe's Vegan Desserts, and Chloe 's Vegan Italian Kitchen. Id. ¶ 3. In 2014, she began discussing with restauranteur James Haber - Chief Executive Officer of ESquared - the possibility of establishing a chain of fast casual vegan restaurants. ECF No. 94 (“Counterclaims”), ¶ 12. On November 7, 2014, ESquared and Chef Chloe LLC - a limited liability company wholly owned by Coscarelli - entered into an operating agreement (the “Operating Agreement”) that established BCHG, [1] a limited liability company, for the purposes of operating a chain of such restaurants under the name By Chloe. FAC ¶ 7; see ECF No. 1-3 (“OA”). On the same day that the parties signed the Operating Agreement, Coscarelli and BCHG also entered into a separate agreement (the “Name, Face, and Likeness Agreement”), through which Coscarelli licensed certain rights to use her name and other rights of publicity in connection with the business. FAC ¶ 8; see ECF No. 1-2 (“NFL Agreement”).
At the outset, Chef Chloe LLC and ESquared each owned 50% of the company. FAC ¶ 7. Pursuant to the Operating Agreement, BCHG was to be co-managed by Coscarelli and Samantha Wasser, Haber's daughter. OA § 7.3; ECF No. 172-1 (“Hochberg Partial Final Award”), at 7. The company opened the first By Chloe restaurant, in New York City, in July 2015. Counterclaims ¶ 54. Despite the restaurant's early success, the relationship between Coscarelli and ESquared quickly soured. FAC ¶ ¶ 7, 9. Between 2016 and 2017, Coscarelli and ESquared were engaged in an arbitration proceeding before Arbitrator Erica Garay, culminating in an award (the “Garay Arbitration Award”) that was issued on March 21, 2017. FAC ¶ 9; see ECF No. 141-6 (“Garay Final Award”). To the extent relevant here, Arbitrator Garay terminated Chef Chloe LLC for cause as a Service Member of BCHG pursuant to Section 19.3(a) of the Operating Agreement. See Garay Final Award 3, 48. The New York Supreme Court confirmed the Garay Arbitration Award on November 16, 2017, in a decision that was affirmed by the New York Appellate Division on January 29, 2019. See Chef Chloe, LLC v. Wasser, 93 N.Y.S.3d 15 (1st Dep't 2019). The day after the Garay Arbitration Award was issued, ESquared purported to exercise its Repurchase Right pursuant to Section 19.5 of the Operating Agreement, which provides for the repurchase of Chef Chloe LLC's Membership Interest in the event of its termination for cause, in exchange for the value of Chef Chloe LCC's capital account, which was then $0. FAC ¶ 9; Counterclaims ¶ 50; see OA § 19.5.
On June 29, 2018, Coscarelli, Chef Chloe LLC, and two other entities also wholly owned by Coscarelli - CC Hospitality Holdings LLC and CKC Sales, LLC - brought this action against ESquared and BCHG. See FAC ¶ 13-15. In their original complaint, Plaintiffs alleged, among other things, claims for breach of the NFL Agreement and Operating Agreement; tortious interference with a business relationship; various statutory and common law claims under California state law; federal unfair competition, trademark infringement, and cyberpiracy; common law unfair competition, unjust enrichment, and trademark infringement; federal copyright infringement; and cancellation of the By Chloe registered trademark. See ECF No. 1. On July 11, 2018, Plaintiffs moved for a preliminary injunction barring Defendants from selling retail packaged foods under the By Chloe name and reinstating Chef Chloe LLC's 50% Membership Interest in BCHG. See ECF No. 22. On July 13, 2018, Defendants moved to dismiss all of Plaintiffs' claims on the ground that they were subject to a mandatory arbitration provision or, in the alternative, to dismiss Plaintiffs' claims under California state law in light of the Operating Agreement and NFL Agreement's New York choice-of-law provisions. See ECF No. 28; see also OA § 20.18; NFL Agreement § 18.
On January 31, 2019, the Court granted Defendants' motion to dismiss as to Plaintiffs' claims under California law, denied Plaintiffs' motion for preliminary injunctive relief, and stayed the claims brought by Chef Chloe LLC pending arbitration. See Coscarelli I, 364 F.Supp.3d 207. Thereafter, Plaintiffs filed an amended complaint (the “Complaint”), see FAC, and Defendants brought counterclaims seeking a declaratory judgment with respect to the parties' trademark rights; federal trademark infringement and unfair competition; common law trademark infringement and unfair competition; breach of the NFL Agreement and Operating Agreement; a declaratory judgment with respect to Coscarelli's purported termination of the NFL Agreement; and breach of certain loan agreements, see Counterclaims. The claims that were not stayed pending arbitration proceeded to discovery. See ECF Nos. 77, 83.
Meanwhile, on March 14, 2019, Coscarelli and celebrity chef Tom Colicchio filed a separate action against BCHG seeking a declaration that their then-new pop-up restaurant “Supernatural” does not violate BCHG's rights in the By Chloe trademark and that Coscarelli did not breach the NFL Agreement through her involvement in Supernatural. See Colicchio v. BC Hospitality Group LLC, 19-CV-2325 (JMF), ECF No. 1. In that action (the “Colicchio Action”), Defendants brought counterclaims against Plaintiffs for federal trademark infringement and unfair competition, common law trademark infringement and unfair competition, breach of the NFL Agreement, and a declaratory judgment with respect to Coscarelli's purported termination of the NFL Agreement. See Colicchio v. BC Hospitality Group LLC, ECF No. 31. On May 3, 2019, the Court consolidated this action and the Colicchio Action for pretrial purposes. See ECF No. 98. On January 10, 2020, Defendants moved for summary judgment on Counts One, Three, Four, Seven, Eight, and Eleven through Eighteen of the Complaint and on the declaratory judgment claims alleged in the Colicchio Action. See ECF No. 140.[2] On February 7, 2020, Plaintiffs cross-moved for summary judgment on Defendants' Counterclaims Five through Eight and Defendants' Affirmative Defenses Five and Thirteen through Seventeen. See ECF No. 146.
As the parties engaged in discovery here, they proceeded to arbitration with respect to Counts Two, Five, and Six of the Complaint before the Honorable Faith S. Hochberg, former United States District Judge for the District of New Jersey. See Coscarelli I, 364 F.Supp.3d at 212; Coscarelli II, 2021 WL 293163, at *1. On May 13 2020, Judge Hochberg issued an award (the “Hochberg Partial Final Award”) in which she ruled that BCHG's purported repurchase of Chef Chloe LLC's Membership Interest following Coscarelli's termination was invalid in light of a series of intra-family transactions that had occurred with respect to ESquared on October 15, 2015. See Coscarelli II, 2021 WL 293163, at *2. Judge Hochberg reasoned that these transactions had extinguished the Repurchase Right that ESquared purported to exercise following Coscarelli's termination. See id. As a remedy, Judge Hochberg reinstated Chef Chloe LLC's 50% Membership Interest in BCHG and awarded fees and costs to Plaintiffs, as the prevailing party, pursuant to Section 20.7 of the Operating Agreement. Id. She also ruled that, pursuant to the Operating Agreement, Coscarelli's consent was required to use the By Chloe trademark in connection with any products or services other than fast casual vegan restaurants. See Hochberg Partial Final Award 22-31. Thereafter, the parties file...
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