A.V.E.L.A., Inc. v. Estate of Marilyn Monroe, LLC

• Decision Date: 13 March 2017
• Docket Number: 12 Civ. 4828 (KPF)
• Citation: 241 F.Supp.3d 461
• Parties: A.V.E.L.A., INC., Plaintiff, v. The ESTATE OF MARILYN MONROE, LLC, et al., Defendants. The Estate of Marilyn Monroe, LLC, Counterclaimant, v. A.V.E.L.A., Inc., Counter–Defendant, Leo Valencia, IPL, Inc., X One X Movie Archives Inc., V. International Fine Arts Publishing, Inc., Third–Party Defendants. X One X Movie Archives Inc., V. International Fine Arts Publishing, Inc., Counterclaimants, v. The Estate of Marilyn Monroe, LLC, Authentic Brands Group, LLC, James Salter, Leonard Green & Partners, L.P., Counter–Defendants.
• Court: U.S. District Court — Southern District of New York

241 F.Supp.3d 461

A.V.E.L.A., INC., Plaintiff,

v.The ESTATE OF MARILYN MONROE, LLC, et al., Defendants.

The Estate of Marilyn Monroe, LLC, Counterclaimant,

v.A.V.E.L.A., Inc., Counter–Defendant,Leo Valencia, IPL, Inc., X One X Movie Archives Inc., V. International Fine Arts Publishing, Inc., Third–Party Defendants.

X One X Movie Archives Inc., V. International Fine Arts Publishing, Inc., Counterclaimants,

v.The Estate of Marilyn Monroe, LLC, Authentic Brands Group, LLC, James Salter, Leonard Green & Partners, L.P., Counter–Defendants.

12 Civ. 4828 (KPF)

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

Signed March 13, 2017

Michael Ray Adele, Technology Litigation Center, Anaheim, CA, Michael Bergman, Mbergman Law, Century City, CA, Gregory Goodheart, Goodheart Law, West Hills, CA, for Plaintiff/Counter–Defendant /Counterclaimants.

Paul Wendell Garrity, Sheppard, Mullin, Richter & Hampton, LLP, Matthew Nicholas Ganas, Paolo Morante, Tamar Y. Duvdevani, DLA Piper US LLP, New York, NY, Gina I. Durham, DLA Piper US LLP, Chicago, IL, Christopher D. Dusseault, Michael Lee, Gibson, Dunn & Crutcher LLP, Los Angeles, CA, for Defendants/Counterclaimant/Counter–Defendants.

OPINION AND ORDER

KATHERINE POLK FAILLA, District Judge:

This Opinion is the latest installment of a multi-party, multi-claim, and multi-year intellectual-property dispute. What began in 2012 as a declaratory-judgment action has transmogrified into a sprawling conflict raising issues of trademark, antitrust, and state business law. And at the center of this controversy is one of the most iconic entertainers of the twentieth century: Marilyn Monroe.

In A.V.E.L.A., Inc. v. Estate of Marilyn Monroe, LLC , 131 F.Supp.3d 196 (S.D.N.Y. 2015) (" AVELA I " ), this Court granted in part the motions of X One X Movie Archives Inc. ("X One X") and V. International Fine Arts Publishing, Inc. ("V. International") to dismiss the First Amended Counterclaim (the "FAC") of the Estate of Marilyn Monroe, LLC (the "Monroe Estate"). In the wake of AVELA I , X One X and V. International filed separate answers to the FAC, and brought counterclaims of their own against the Monroe Estate, Authentic Brands Group LLC ("ABG"), James Salter ("Salter") (together, the "Estate Movants"), and Leonard Green & Partners, L.P. ("LGP").¹

Now, the shoe is on the other foot. Pending before the Court are two motions to dismiss X One X's and V. International's counterclaims: one filed by the Estate Movants, and another filed by LGP. Both motions urge this Court to dismiss X One X's and V. International's counterclaims in their entirety.

This, the Court will not do. To be clear, X One X and V. International assert many legal conclusions, but few factual allegations. And for that reason, the Court will dismiss several of their counterclaims. But some of X One X's and V. International's counterclaims raise fact-intensive issues that the Court cannot resolve at this stage. Others are supported by just enough factual allegations to survive a motion to dismiss under Fed. R. Civ. P. 12(b)(6). Accordingly, and for the reasons set forth below, LGP's motion to dismiss is granted, and the Estate Movants' motion to dismiss is granted in part and denied in part. The Court grants the requests of X One X and V. International for leave to replead; however, the Court expects each to consider this Opinion carefully in deciding whether and what to replead.

BACKGROUND²

The facts and history of this case are set forth in AVELA I. See 131 F.Supp.3d at 200–03. V. International and X One X, however, offer their own narrative of this case's operative events.³ The Court will summarize that narrative here, then recount how this case's procedural history has developed since AVELA I.

A. Factual Background

1. The Parties

V. International is a California corporation that "operates as a licensing agent for A.V.E.L.A." (V. Int'l Countercl. ¶ 1). X One X is a Nevada corporation that performs a similar function: It "creat[es] new artistic works," "obtains copyrights" for those works, then "licenses these artistic works to third parties." (X One X Am. Countercl. ¶ 1).

The Monroe Estate "is a Delaware limited liability company [ ('LLC') ] with its principal place of business" in New York. (V. Int'l Countercl. ¶ 2; X One X Am. Countercl. ¶ 2). V. International and X One X allege that the Monroe Estate is in fact an alter ego of ABG, another Delaware LLC "with its principal place of business" in New York. (V. Int'l Countercl. ¶¶ 2–3; X One X Am. Countercl. ¶¶ 2–3). To this end, V. International and X One X allege that ABG and the Monroe Estate operate out of the same address, "share the same" management, and that "[w]ritten communications sent on behalf of [the Monroe Estate] are printed on ABG letterhead," with the ultimate effect that the Monroe Estate "functions as a mere facade or instrumentality for ABG." (V. Int'l Countercl. ¶ 10; X One X Am. Countercl. ¶ 11). Salter is ABG's and the Monroe Estate's Chief Executive Officer. (V. Int'l Countercl. ¶ 4; X One X Am. Countercl. ¶ 4). Finally, LGP is a Delaware private-equity firm with its principal place of business in California; it owns several chain retail stores. (X One X Am. Countercl. ¶ 5).

2. The Estate Movants' and LGP's Alleged Misconduct

At root, this is a dispute over 12 registered word- and design-trademarks involving Monroe (the "Contested Marks"). (V. Int'l Countercl. ¶ 25; X One X Am. Countercl. ¶ 28).⁴ Although neither V. International nor X One X indicates as much in their counterclaims, the Court adds that at least eight of the Contested Marks use the words "Marilyn" or "Marilyn Monroe." AVELA I , 131 F.Supp.3d at 201.

The Monroe Estate and MM–ABG LLC, "a subordinate entity" of the Monroe Estate, own the Contested Marks. (V. Int'l Countercl. ¶¶ 19, 25; X One X Am. Countercl. ¶¶ 22, 28). All of the Contested Marks were registered after Marilyn Monroe's death in 1962. (V. Int'l Countercl. ¶¶ 15, 17, 20, 23–25; X One X Am. Countercl. ¶¶ 18, 20, 23, 26–28).

It is the shared contention of X One X and V. International that, despite owning the Contested Marks, the Estate Movants do not hold "exclusive rights to intellectual property related to Marilyn Monroe." (V. Int'l Countercl. ¶ 26; X One X Am. Countercl. ¶ 29). During her lifetime, Monroe was photographed frequently, and today many individuals and entities claim "to own copyrights in images of" her. (V. Int'l Countercl. ¶ 27; X One X Am. Countercl. ¶ 30). And trademarks involving Monroe abound: There are trademarks and copyrights in films in which Monroe starred, characters Monroe portrayed, and Monroe's name. (V. Int'l Countercl. ¶ 28; X One X Am. Countercl. ¶ 31).

X One X and V. International further contend that the Estate Movants act, improperly, as if they alone may lay claim to intellectual property in Monroe. Indeed, even the Monroe Estate's full name—"Estate of Marilyn Monroe, LLC"—is alleged to be a misleading contrivance, given that this entity is not in fact Monroe's estate. (V. Int'l Countercl. ¶¶ 21, 29; X One X Am. Countercl. ¶¶ 24, 33). And central to the Estate Movants' efforts at deception are the Contested Marks, which are merely "strategic litigation tools" that ABG (through the Monroe Estate) uses to assert dominion over "Monroe's image, likeness, and name in commerce." (V. Int'l Countercl. ¶ 29; X One X Am. Countercl. ¶ 33). The Contested Marks, too, erroneously and unlawfully suggest an actual connection between the Monroe Estate and Monroe herself. (V. Int'l Countercl. ¶ 32; X One X Am. Countercl. ¶ 36).

The Estate Movants' ultimate goal, V. International and X One X allege, is "to gain a monopoly over every use of Marilyn Monroe's image, likeness and/or name in commerce." (V. Int'l Countercl. ¶ 30; X One X Am. Countercl. ¶ 34). In furtherance of this goal, the Estate Movants, misusing the Contested Marks, threaten to file and file lawsuits against entities such as X One X and V. International's licensees. (V. Int'l Countercl. ¶ 30; X One X Am. Countercl. ¶ 34). And in conjunction with LGP, ABG has endeavored "to create a vertical scheme" by "assur[ing] [its] licensees that their ABG-licensed Marilyn Monroe-related products will sell exclusively in retailers owned by [LGP]." (X One X Am. Countercl. ¶ 70).

The Estate Movants also stifle competition in ways that do not involve legal process. X One X alleges that Salter denounced its owner, Leo Valencia, as a "bootlegger" at a trade show, then proclaimed that he "own[ed] Marilyn Monroe." (X One X Am. Countercl. ¶ 32). Salter has also discouraged retailers from working with X One X, and "has publicly and privately threatened to shut down X One X and Valencia's licensing of artwork featuring Marilyn Monroe's image." (Id. ).

Again, the crux of V. International's and X One X's counterclaims is the Contested Marks. They allege that the Contested Marks' "[c]ontinued registration" will facilitate the Estate Movants' and LGP's monopolistic efforts and, in the process, damage V. International's and X One X's business. (V. International Countercl. ¶ 31; X One X Am. Countercl. ¶ 35).

B. Procedural Background

1. Motion Practice After AVELA I

On September 18, 2015, the Court issued AVELA I , which recounts this case's procedural history through that date. AVELA I , 131 F.Supp.3d at 203. AVELA I denied the bulk of V. International's and X One X's motions to dismiss the FAC. Id. at 219.

On October 30, 2015, X One X and V. International filed separate answers to the FAC and brought counterclaims of their own. (Dkt. #219, 223). V. International brought counterclaims against all three of the Estate Movants. (Dkt. #219, ¶¶ 2–4). X One X named the Estate Movants and LGP as counter-defendants. (Dkt. #223, ¶¶ 2–5).

Here is where the procedural history underlying the instant Opinion becomes complicated. On November 20, 2015, the Monroe Estate filed a letter announcing its intention to move to dismiss all of X One X's and V. International's counterclaims. (Dkt. #231). And on February 11, 2016, the...