N. Spirits Stillwater LLC v. Water to Wine LLC
| Decision Date | 08 March 2023 |
| Docket Number | 22-cv-00514 (SRN/DJF) |
| Parties | Northern Spirits Stillwater LLC, Plaintiff, v. Water to Wine LLC and Chad Moe, Defendants. |
| Court | U.S. District Court — District of Minnesota |
Aaron D. Hall, Hall PC, and Lucas J. Thompson, Thompson Horst PLLC, for Plaintiff.
Jon R Steckler, Madigan, Dahl & Harlan, P.A., for Defendants.
ORDER ON DEFENDANTS' MOTION FOR PARTIAL JUDGMENT ON THE PLEADINGS
This matter is before the Court on Defendants Water to Wine LLC (“W2W”) and Chad Moe's Motion for Partial Judgment on the Pleadings [Doc. No. 24]. For the reasons set forth below, the Court denies Defendants' Motion.
In February 2021, Defendant Chad Moe informed Plaintiff Northern Spirits Stillwater LLC (“Northern Spirits”) that he intended to sell “all of his Cellars Wine & Spirits locations.” (Am. Compl. [Doc. No. 21] ¶ 8.) As part of this decision, he offered to sell the assets of the Cellars Wine & Spirits located at 1920 Market Drive, Stillwater, Minnesota (“Stillwater CWS”). (Id. ¶ 9.) According to Northern Spirits, Mr. Moe represented that he “would not own or operate any competing business” within a 10-mile radius of the Stillwater store. (Id. ¶ 10.)
Sometime later that month, the parties entered into a Business Sale Agreement (“Agreement”).[1] (Am. Compl., Ex. A (Agreement) at 1.) The Agreement provides for the sale of W2W's “Business Assets”:
Seller hereby sells to Buyer all the equipment, inventory, customer files, vendor files, tradename, web site content and rights, domain name, URL's, Internet domain names, furniture, fixtures, machinery and tools, goodwill, supplies, leasehold improvements, including, but not limited to, the property listed on the attached Exhibit A (the “Assets”) used in Cellars Wine & Spirits (the “Business”), presently located at 1920 Market Drive, Stillwater, MN 55082 (the “Premises”). Seller hereby delivers to Buyer all title and rights to same subject only to those liens and encumbrances disclosed in the Bill of Sale of even date herewith. Seller agrees that the sale price is $450,000.00, which includes $250,000.00 of inventory, at cost.
(Id. ¶ 1.) Northern Spirits paid the sale price in full. (Am. Compl. ¶ 15.)
Two key provisions are the subject of this dispute. One is the Agreement's “Covenant Not to Compete”:
Water to Wine, LLC and Chad Moe agree that they will not directly or indirectly, alone or in concert with others, compete in the same or similar type Business for a period of three (3) years and within a radius often (10) miles of said business. In the event such covenant is found by a court of competent jurisdiction to be unreasonable, such covenant shall be in force for the period and within the area such court deems to be reasonable. Water to Wine, LLC and Chad Moe acknowledge that a breach by them of this covenant would cause Buyer irreparable harm which could not be adequately compensated by damages at law, and therefore expressly agrees that Buyer shall be entitled to injunctive or other equitable relief to prevent a breach of this covenant, in addition to such other remedies which may be legally available to Buyer. The duration of this covenant shall be extended by the length of any violation of this covenant.
The second key provision in dispute is Paragraph 6 that provides: (Id. ¶ 6.)
Mr. Moe signed the contract twice: first, in his capacity as President of W2W; and second, he “personally guarantee[d] paragraphs 4 and 5.”[2] (Id. at 5.)
Northern Spirits alleges that after signing the Agreement, Mr. Moe “continued to operate a competing business, Cellars Wine & Spirits - Hudson, at 131 Carmichael Road, #102, Hudson, Wisconsin 54016.” (Am. Compl. ¶ 26.) Northern Spirits alleges that Cellars Wine & Spirits - Hudson (“Hudson CWS”) is approximately 7.64 miles from the Stillwater CWS. (Id. ¶ 28.) The continued operation of the Hudson CWS instigated this suit.
Northern Spirits filed suit in Washington County District Court on February 3, 2022, alleging: breach of contract (Claim 1); violations of the Lanham Act, “11 U.S.C. § 1125(a)(1)”,[3] and the Minnesota Uniform Deceptive Trade Practices Act (“MUDTPA”) (Claim 2); fraud, misrepresentation, and deceptive practices in violation of Minn. Stat. § 325F.69 (Claim 3); false statements in advertising in violation of Minn. Stat. § 325F.67 (Claim 4); and unjust enrichment (Claim 5). (First Steckler Decl. [Doc. No. 3], Ex. 1 (Compl.) ¶ 36-72.) Invoking diversity jurisdiction, Defendants removed the case to this Court on March 1, 2022. (Notice of Removal [Doc. No. 1] at 2.)
Defendants filed a joint Answer as well as a Counterclaim alleging “Fraud / Bad Faith.” (Joint Answer & Countercl. [Doc. No. 6] at 8-9.) Thereafter, Northern Spirits filed an Amended Complaint alleging the same causes of action as its original Complaint. (Am. Compl.) Defendants in turn filed an Amended Answer, incorporating their Counterclaim. (Am. Answer [Doc. No. 22].)
On September 8, 2022, Defendants moved for Partial Judgment on the Pleadings pursuant to Federal Rule of Civil Procedure 12(c), arguing that Claims 2, 3, and 4 fail to state a claim upon which relief can be granted. (Defs.' Mot. [Doc. No. 24]; Defs.' Mem. [Doc. No. 26] at 2.) In its opposition, Northern Spirits agreed to voluntarily dismiss Claims 3 and 4.[4] (Pl.'s Opp'n [Doc. No. 34] at 1.) Thus, only Claim 2 remains in dispute on Defendants' Motion.
The Court held oral argument on October 20, 2022. (Hr'g Minutes [Doc. No. 40].) While Defendants style their Motion as asserting the failure to state a claim, Defendants' initial briefing and their contentions at oral argument focused on Northern Spirits' failure to join Mobu LLC (“Mobu”) as a party. The Court ordered supplemental briefing from the parties for further clarification as to whether Mobu is a “necessary party” within the meaning of Federal Rule of Civil Procedure 19.[5] (Id.)
From the supplemental briefing, all parties appear to agree that Mobu is a necessary party. (Defs.' Supp. Mem. at 7; Pl.'s Supp. Mem. at 3-4.) For its part, Northern Spirits requests permission to amend its Amended Complaint to join Mobu or in the alternative, requests that the Court effect Mobu's joinder. (Pl.'s Supp. Mem. at 4.)
In light of these developments, the Court construes Defendants' Motion as seeking judgment on the pleadings based on Northern Spirits' failure to join a required party. See Fed. R. Civ. P. 12(h)(2)(B) ().
Judgment on the pleadings is appropriate if, “accepting all facts pled by the nonmoving party as true and drawing all reasonable inferences from the facts in favor of the nonmoving party, the movant has clearly established that no material issue of fact remains and that the movant is entitled to judgment as a matter of law.” Schnuck Mkts., Inc. v. First Data Merch. Servs. Corp., 852 F.3d 732, 737 (8th Cir. 2017). The Court ordinarily does not consider matters outside the pleadings on a motion under Rule 12(c). See Fed.R.Civ.P. 12(d). The Court may, however, “consider the pleadings themselves, materials embraced by the pleadings, exhibits attached to the pleadings, and matters of public record.” Mills v. City of Grand Forks, 614 F.3d 495, 498 (8th Cir. 2010) (citing Porous Media Corp. v. Pall Corp., 186 F.3d 1077, 1079 (8th Cir. 1999)).
In addition, “because granting a Rule 12(c) motion ‘summarily extinguish[es] litigation at the threshold and foreclose[s] the opportunity for discovery and factual presentation,' courts must treat such motions with the ‘greatest of care.'” Acosta v. Reliance Tr. Co., No. 17-cv-4540 (SRN/ECW), 2019 WL 3766379, at *7 (D. Minn. Aug. 9, 2019) (quoting Comcast Cable Commc'ns, LLC v. Hourani, 190 F.Supp.3d 29, 32 (D.D.C. 2016)).
Northern Spirits' Claim 2 alleges violations of the Lanham Act, 15 U.S.C. § 1125(a), and the MUDTPA for unregistered trademark infringement. (Am. Compl. ¶ 3852; Pl.'s Opp'n at 4.) Northern Spirits asserts that by continuing to operate the Hudson CWS, despite transferring the “Cellars Wine & Spirits” trade name through the Agreement, Defendants engaged in false advertising and otherwise deceived the public. (Am. Compl. ¶ 39-50.)
The Court need not address the elements of unregistered trademark infringement under the Lanham Act,[6] as Defendants do not challenge the claim on the merits. Rather, Defendants argue that Claim 2 fails because “[s]imply put, Plaintiff has sued the wrong parties[.]” (Defs.' Mem. at 2.)
Specifically, Defendants assert that W2W is dissolved and non-operational and thus cannot be liable for purported ongoing infringement. (Id. at 5.) As for Mr. Moe, Defendants contend that he is not bound by the Agreement's trade name provision, and that even if he was, he is not responsible for the alleged infringement at the Hudson CWS. (Id. at 4-5.) Rather, Defendants assert that the Hudson CWS is owned and operated by a separate corporate entity: Mobu LLC. (Id. at 8-10; Defs.' Reply at 3 .)[7] Without any allegations against Mobu or Mr. Moe in his representative capacity, Defendants urge, Northern Spirits does not state a claim for trademark infringement concerning the Hudson CWS. (Defs.' Reply at 3.)
Northern Spirits counters that Mr. Moe owns and operates Mobu, which Defendants admit, meaning he is “plainly the principal of the Hudson store.” (Pl.'s Opp'n at 3 (quoting Defs.' Mem. at 9).) As such, Northern...
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