Dual Groupe, LLC v. Gans-Mex LLC

• Decision Date: 25 March 2013
• Docket Number: No. 12 CV 1031.,12 CV 1031.
• Citation: 932 F.Supp.2d 569
• Parties: DUAL GROUPE, LLC, Plaintiff, v. GANS–MEX LLC et al., Defendants.
• Court: U.S. District Court — Southern District of New York

932 F.Supp.2d 569

DUAL GROUPE, LLC, Plaintiff,

v.GANS–MEX LLC et al., Defendants.

No. 12 CV 1031.

United States District Court, S.D. New York.

March 25, 2013.

Richard Paul Savitt, Savitt Law Firm PLLC, Bryan Ha, Attorney at Law, New York, NY, for Plaintiff.

Alexander Karasik, Karasik Law Firm PLLC, Brooklyn, NY, for Defendants.

OPINION

THOMAS P. GRIESA, District Judge.

Plaintiff Dual Groupe, LLC (“Dual Groupe”) brings this suit alleging that defendants continue to make unauthorized use of Dual Groupe's trademark in connection with defendants' restaurant, MPD. Dual Groupe claims that it licensed its trademark to defendants on a royalty free basis for as long as Dual Groupe was employed to manage the restaurant MPD, According to the complaint, in January 2012 defendants ousted Dual Groupe as managers of MPD but continued to use Dual Groupe's trademark. Dual Groupe asserts that this constitutes trademark infringement and dilution in violation of the Lanham Act and New York state law. Dual Groupe seeks damages resulting from defendants' past unauthorized use of the Dual Groupe trademark.¹

Defendants have moved to dismiss Dual Groupe's complaint for failure to state a claim and for lack of subject matter jurisdiction. Defendants argue that Dual Groupe's complaint does not properly allege that the unregistered trademark is entitled to protection because Dual Groupe does not assert prior use. Defendants state that Dual Groupe's alleged licensing of the trademark to defendants is insufficient to establish prior use by Dual Groupe because Dual Groupe does not allege it exercised quality control. Defendants also state that Dual Groupe lacks standing to sue because it has failed to comply with New York state publication requirements for limited liability companies. Finally, defendants argue that because the court should dismiss the federal claims for failure to state a claim, the court should decline exercising supplemental jurisdiction over the state law claims.

The court denies defendants' motion to dismiss because the complaint properly pleads that Dual Groupe owns the rights to MPD and has established that ownership through licensing. As the complaint alleges that the licensing agreement has been breached and defendants have made unauthorized use of Dual Groupe's mark, the complaint states a claim for trademark infringement and dilution. Defendants' contentions that the Management Agreement is fraudulent and that Dual Groupe has abandoned its right to the MPD through ‘naked licensing’ present factual contentions that cannot be resolved at the motion to dismiss stage.

Dual Groupe has not yet satisfied the publication procedures required to be a company authorized to do business in New York. As such, Dual Groupe would not be entitled to commence an action in New York state court, but it is not prevented from litigating in federal court. Even if the publication requirements barred Dual Groupe from maintaining a federal action, this is not a basis for dismissing Dual Groupe's complaint, as the proper course of action is to stay the case until the failure is cured.

Because the court is not dismissing Dual Groupe's federal cause of action, it is appropriate for the court to continue exercising supplemental jurisdiction over Dual Groupe's related state law claims.

Legal Standard

To survive a motion to dismiss under Fed.R.Civ.P. 12(b)(6), a complaint must plead sufficient facts to state a claim to relief that is plausible on its face. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007); Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). In deciding such a motion, a court must accept as true the facts alleged in the complaint, but it should not assume the truth of its legal conclusions. Iqbal, 556 U.S. at 678–79, 129 S.Ct. 1937. A court must also draw all reasonable inferences in the plaintiff's favor, and it may consider documents attached to the complaint, incorporated by reference into the complaint, or known to and relied on by the plaintiff in bringing the suit. ATSI Commc'ns, Inc. v. Shaar Fund, Ltd., 493 F.3d 87, 98 (2d Cir.2007). A court may also consider documents of which a plaintiff would have had actual notice as he drafted his complaint and which are integral to the claims set forth within it. Cortec Indus., Inc. v. Sum Holding L.P., 949 F.2d 42, 48 (2d Cir.1991).

The Complaint

I. The Parties

Plaintiff Dual Groupe is a limited liability corporation organized under the laws of the State of New York and is involved in the business of promoting and managing restaurants. Defendant Gans–Mex is a limited liability corporation organized under the laws of the State of New York and is an owner of several restaurants. Defendant Ginza is a limited liability corporation organized under the laws of the State of New York and was at all relevant times one of the owners of Gans–Mex. Defendant Brunetti was at all relevant times a member or managing member of Gans–Mex and Ginza.

II. The December 21, 2009 Agreement

On December 21, 2009, Dual Groupe and Gans–Mex entered into a Management Agreement, signed by Brunitti on behalf of Gans–Mex. The Agreement contemplated the creation of a restaurant called “MPD.” It provided that Dual Groupe would “develop,operate and manage a new restaurant” in a space defendants owned at 73 Gansevoort Street, New York, New York. (par. 9). The Agreement further stated that Dual Groupe “shall have full control and discretion over the operations of the premises,” and “shall have the right to control all aspects of the Restaurant including but not limited to promotions, entertainment, hiring and firing personnel, determining hours over such personnel and setting staff count.” (par. 10; Management Agreement, ¶¶ 3.1, 3.11). The parties agreed on a formula for paying Dual Groupe management fees that was based on a varying percentage of the restaurant's gross receipts. (par. 11).

Of particular importance to the present action, the Agreement stated that so long as Dual Groupe was managing the restaurant, Dual Groupe would “license to [Gans–Mex] the use of the brand MPD on a royalty free basis at the Restaurant.” (par. 11). The parties do not dispute that the trademark MPD is not registered with the United States Patent and Trademark Office.²

Dual Groupe “conceived and developed” a French–American restaurant under the MPD brand which opened in October 2010. (pars. 14, 15). MPD was very successful and as a result, in 2011, Dual Groupe earned management fees totaling $364,989.10. (par. 19). Around January 30, 2012, defendants unilaterally terminated the Management Agreement and removed Dual Groupe from its management position in order to avoid paying Dual Groupe management fees. (pars. 20, 24). Since the Management Agreement was terminated and Dual Groupe no longer managed the restaurant, the defendants' licensing rights to MPD were also terminated. (par. 25). However, defendants continued to use the trademark in connection with their restaurant and have “continued to market, promote and operate the restaurant under the name ‘MPD Restaurant.’ ” (par. 26). On February 1, 2012, Brunetti registered the Internet domain name “ MPDRESTAURANT.COM ”. (par. 26).

Defendants' Factual Allegations

Defendants dispute many of the complaint's factual allegations, which the court cannot adjudicate at the motion to dismiss stage. Specifically, defendants claim that the Management Agreement is fraudulent—Brunetti does not recall signing the agreement and defendants claim that the MPD concept had not been created at the time the agreement was allegedly signed. Defendants claim that they own the MPD trademark because they financed and created the elements of MPD and designed the logo, and chose the furniture, concept, and menu. According to defendants they terminated Dual Groupe because they caused MPD to lose its liquor license and Dual Groupe employees sexually harassed MPD employees. Finally, defendants claim that this lawsuit is part of Dual Groupe's campaign to sabotage defendants' business, which has included presenting MPD's vendors with slanderous information about defendants and threatening to sue the vendors if they continue business relations with MPD.

The Legal Claims

Based on the previously mentioned allegations in the complaint, Dual Groupe asserts federal and state law causes of action:Trademark Infringement and False Designation of Origin pursuant to 15 U.S.C. § 1125(a); Trademark Dilution pursuant to 15 U.S.C. § 1125(c); Trademark Infringement and Unfair Competition pursuant to New York State law; and Trademark Dilution pursuant to New York State law.

Discussion

Causes of Action under the Lanham Act

Parties' Arguments

Defendants claim that Dual Groupe has no protected rights under the Lanham Act because the complaint only made a conclusory assertion that Dual Groupe owned MPD and never alleged prior use. According to the defendants, Dual Groupe made no prior use because it only used the MPD trademark after allegedly licensing MPD to defendants. Defendants argue that Dual Groupe also never made an independent use of MPD; instead, Dual Groupe only provided defendants' a service in defendants' use of MPD, Therefore, the Management Agreement could not have licensed use of MPD because at the time of the Agreement, Dual Groupe had no protected rights to license.

Defendants also claim that the alleged licensing agreement was a naked licensing because Dual Groupe, as licensor, does not allege that it controlled the quality of the MPD's food, menu, and decor. Defendants argue that the complaint's allegations that the Management Agreement gave Dual Groupe control over managing MPD is insufficient as the complaint needs to allege that Dual Groupe actually utilized its power to manage.

Legal Analysis

Plaintiff's claims of trademark infringement and dilution under the Lanham Act both require that plaintiff demonstrate it owns the mark in question. In order to...