Morton v. Rank America, Inc., CV 92-0610 RG (Kx).

• Decision Date: 28 January 1993
• Docket Number: No. CV 92-0610 RG (Kx).,CV 92-0610 RG (Kx).
• Citation: 812 F. Supp. 1062
• Court: U.S. District Court — Central District of California
• Parties: Peter A. MORTON, an individual; Hard Rock Cafe Investors, Ltd., a California limited partnership; Hard Rock Cafe Investors IV, a California limited partnership; Hard Rock Cafe Investors V, a California limited partnership; Hard Rock Cafe Investors VI, a California limited partnership; Hard Rock Cafe Investors VII, a California limited partnership; Hard Rock Cafe Investors VIII, a California limited partnership; Hard Rock Cafe Investors IX, a Nevada limited partnership; Hard Rock Cafe Investors X, a California limited partnership; Hard Rock Cafe Investors XI, a California limited partnership, Plaintiffs, v. RANK AMERICA, INC., a Georgia corporation; Planet Hollywood, Inc., a Florida corporation; Planet Hollywood, Inc., a Delaware corporation; Hard Rock Cafe International, Inc., a Delaware Corporation; Robert Earl; and Keith Barish, Defendants.

812 F. Supp. 1062

Peter A. MORTON, an individual; Hard Rock Cafe Investors, Ltd., a California limited partnership; Hard Rock Cafe Investors IV, a California limited partnership; Hard Rock Cafe Investors V, a California limited partnership; Hard Rock Cafe Investors VI, a California limited partnership; Hard Rock Cafe Investors VII, a California limited partnership; Hard Rock Cafe Investors VIII, a California limited partnership; Hard Rock Cafe Investors IX, a Nevada limited partnership; Hard Rock Cafe Investors X, a California limited partnership; Hard Rock Cafe Investors XI, a California limited partnership, Plaintiffs, v. RANK AMERICA, INC., a Georgia corporation; Planet Hollywood, Inc., a Florida corporation; Planet Hollywood, Inc., a Delaware corporation; Hard Rock Cafe International, Inc., a Delaware Corporation; Robert Earl; and Keith Barish, Defendants.

No. CV 92-0610 RG (Kx).

United States District Court, C.D. California.

January 28, 1993.

COPYRIGHT MATERIAL OMITTED

Harry B. Swerdlow, Cooper, Epstein & Hurewitz, Beverly Hills, CA, James E. Hornstein, Greenberg, Glusker, Fields, Claman & Machtinger, Los Angeles, CA, for plaintiffs.

Maxwell M. Blecher, Blecher & Collins, John J. Quinn, Quinn, Kully and Murrow, Los Angeles, CA, Michael O. Warnecke, Keck, Mahin & Cate, Chicago, IL, Seth M. Hufstedler, Hufstedler, Kaus & Ettinger, Howard L. Weitzman, Katten, Muchin, Zavis & Weitzman, Los Angeles, CA, for defendants.

MEMORANDUM DECISION & ORDER

GADBOIS, District Judge.

The Defendants' Motion to Dismiss came on for hearing before this Court on Monday, October 19, 1992, at 10:00 a.m. Having considered the moving and opposition papers and arguments of counsel, the Court rules as follows:

I. Background

Plaintiff Peter Morton owns the rights to the Hard Rock Cafe trademark in the western half of the United States. Morton, along with a consortium of Hard Rock Cafe Investors, has named the following as Defendants in this suit: (1) Rank America, Inc. ("Rank") — an entity engaged in various business activities throughout the world, including the operation of various Hard Rock Cafes worldwide. Rank is the parent company of Defendant Hard Rock Cafe International, Inc. ("HRCI"), an entity that represents Rank as the owner of a fifty percent interest in the Licensing Corporation (the entity established to hold legal title to the Hard Rock trademark); (2) HRCI — a Rank subsidiary to which Isaac Tigrett, the co-founder of the Hard Rock Cafe, assigned his rights to use and exploit the Hard Rock Cafe mark in the eastern half of the United States; (3) Planet Hollywood, Inc. — a Florida and/or Delaware Corporation owned and operated by Defendants Robert Earl and Keith Barish; (4) Robert Earl — the President of HRCI and the President and CEO of Planet Hollywood, Inc.; and (5) Keith Barish — a director and executive of Planet Hollywood, Inc. This lawsuit derives from the Defendants' development and contemplated nationwide expansion of the Planet Hollywood restaurant, a competing restaurant in some respects similar to the Hard Rock Cafe.

The Plaintiffs state nine causes of action. Counts 1 and 4 allege violations of the federal and state antitrust laws. Count 2 alleges trade dress infringement in violation of the Lanham Act. Count 3 seeks redress pursuant to the California antidilution statute. Counts 5 and 6 allege breaches of fiduciary duty by Defendants Earl and Rank. Count 7 alleges a misappropriation of trade secrets. Count 8 states a claim for unfair competition. Finally, Count 9 pleads tortious interference with business relations.

The Plaintiffs assert that the overall motif of the Hard Rock Cafe restaurants — which is created through the combination of the service of American cuisine, the display of entertainment memorabilia, the loud broadcast of contemporary music, the availability of souvenir merchandise bearing the Hard Rock Cafe logo, and a multiple floor layout with vaulted and hand-painted ceilings — is distinctive and nonfunctional and therefore protectable trade dress. The Plaintiffs contend that the Defendants have utilized Hard Rock trade secrets to create the Planet Hollywood restaurants, and that these restaurants, which are allegedly knock-offs of the Hard Rock restaurants, constitute an infringement of the Plaintiffs' trade dress. The Plaintiffs further allege that the Defendants have stolen trade secrets and copied trade dress in an attempt to monopolize the market for entertainment/music themed restaurants in the United States.

The Defendants have now moved to dismiss the entire complaint, pursuant to F.R.C.P. 12(b)(6).

II. Jurisdiction

The Plaintiffs' Second Amended Complaint ("the Complaint") alleges causes of action arising under the following laws of the United States: Section 43(a) of the Lanham Act (15 U.S.C. § 1125(a)); Section 2 of the Sherman Act (15 U.S.C. § 2); and Sections 4 and 16 of the Clayton Act (15 U.S.C. §§ 15, 26). The Complaint also alleges various causes of action arising under state law.

This court has jurisdiction over this matter, pursuant to: (a) 28 U.S.C. § 1331 (federal question jurisdiction); (b) 28 U.S.C. § 1332 (diversity jurisdiction); and (c) 28 U.S.C. § 1367 (supplemental jurisdiction).

III. Analysis

A. Standard for Dismissal Pursuant to F.R.C.P. 12(b)(6)

Dismissal of an action pursuant to F.R.C.P. 12(b)(6) ("failure to state a claim upon which relief can be granted") is strongly disfavored. The accepted rule is that the court should not dismiss a complaint "unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 102, 2 L.Ed.2d 80 (1957) (footnote omitted). The Court must take all allegations of the plaintiff as true, and the complaint must be construed in the light most favorable to the plaintiff. United States v. City of Redwood City, 640 F.2d 963, 966 (9th Cir.1981). This court analyzes below whether the Defendants have met the burden of proof required under F.R.C.P. 12(b)(6) for dismissing the Plaintiffs' Complaint.

B. Counts 1 and 4 — Violation of Antitrust Laws

Count 1 of the Complaint states a cause of action under Section 2 of the Sherman Act¹ alleging conspiracy and attempt to monopolize the market for Entertainment/Music Themed restaurants in the United States. Count 4 alleges a parallel state claim under the Cartwright Act.² As private parties, the Plaintiffs have standing to bring suit for monetary and injunctive relief under Sections 4 and 16 of the Clayton Act.³

1. Attempt to Monopolize

"The phrase `attempt to monopolize' means the employment of methods, means and practices which would, if successful, accomplish monopolization, and which, though falling short, nevertheless approach so close as to create a dangerous probability of it...." American Tobacco Co. v. United States, 328 U.S. 781, 785, 66 S.Ct. 1125, 1127, 90 L.Ed. 1575 (1946). The Ninth Circuit has held that, to establish an attempt to monopolize claim under Section 2 of the Sherman Act, a plaintiff must prove the following:

(1) specific intent to control prices or destroy competition;

(2) predatory or anticompetitive conduct to accomplish the monopolization;

(3) dangerous probability of success; and

(4) causal antitrust injury.

Pacific Express, Inc. v. United Airlines, Inc., 959 F.2d 814 (9th Cir.1992), citing Movie 1 & 2 v. United Artists Communications, Inc., 909 F.2d 1245, 1254 (9th Cir. 1990), cert. denied, ___ U.S. ___, 111 S.Ct. 2852, 115 L.Ed.2d 1020 (1991).

The Plaintiffs claim that the Defendants intend "to control prices or destroy competition" by coercing the Plaintiffs to sell their interests in the Hard Rock enterprise at far below fair market value. Second Amended Complaint at ¶¶ 29, 30. The Defendants have allegedly attempted to achieve this goal by committing the following "anticompetitive acts": (1) misappropriating Hard Rock trade secrets and Hard Rock format to develop "a low quality restaurant format entitled `Planet Hollywood'"; and (2) threatening to open Planet Hollywood restaurants in the proximity of each of the Plaintiffs' existing Hard Rock Cafe restaurants, thereby "adversely affecting and destroying" these businesses. Id. at ¶ 33 (A) and (B).

The Defendants maintain that the Plaintiffs cannot state a claim for attempted monopolization, because they have not, nor can they, allege an "antitrust injury" arising from "predatory or anticompetitive conduct." The Defendants argue that the Plaintiffs are trying to characterize the introduction or threatened introduction of competition into a market previously dominated exclusively by Hard Rock as an "anticompetitive act." The Defendants emphasize that the opening of Planet Hollywood restaurants offers more consumer choice, increases output, and stimulates price competition. Defendants' Motion to Dismiss at 11.

2. Anticompetitive Acts and Antitrust Injury

To establish a claim for attempted monopolization under Section 2 of the Sherman Act, a plaintiff must demonstrate that the defendant has committed anticompetitive acts resulting in an antitrust injury. Pacific Express, 959 F.2d at 817. Additionally, a private party does not have standing to bring an antitrust suit unless he or she can prove the existence or threat of an antitrust injury — "an injury of the type the antitrust laws were intended to prevent and that flows from that which makes defendants' acts unlawful." Atlantic Richfield Co. v. U.S.A. Petroleum, 495 U.S. 328, 334, 110 S.Ct. 1884, 1889, 109 L.Ed.2d 333, 343 (1990) ("ARCO") (interpreting Section 4 of the Clayton Act — damages); Cargill, Inc. v. Monfort of Colorado, Inc., 479 U.S. 104, 113, 107 S.Ct. 484, 491, 93 L.Ed.2d 427, 438 (1986) (interpreting Section 16 of the Clayton Act — injunctive relief),⁴ citing Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 489, 97 S.Ct. 690, 697, 50 L.Ed.2d 701 (1977). An anticompetitive act is one that...