E. W., LLC v. Rahman

• Decision Date: 05 June 2012
• Docket Number: No. 1:11cv1380 (JCC/TCB).,1:11cv1380 (JCC/TCB).
• Citation: 873 F.Supp.2d 721
• Parties: EAST WEST, LLC d/b/a, Caribbean Crescent, Plaintiff, v. Shah RAHMAN, et al., Defendants.
• Court: U.S. District Court — Eastern District of Virginia

873 F.Supp.2d 721

EAST WEST, LLC d/b/a, Caribbean Crescent, Plaintiff,

v.Shah RAHMAN, et al., Defendants.

No. 1:11cv1380 (JCC/TCB).

United States District Court,

E.D. Virginia,

Alexandria Division.

June 5, 2012.

Steven War, McNeely & Hare LLP, Washington, DC, for Plaintiff.

Mark Hunter Churchill, Katie Bukrinsky, Mary Declan Hallerman, McDermott Will & Emery, Washington, DC, for Defendant.

MEMORANDUM OPINION

JAMES C. CACHERIS, District Judge.

This matter is before the Court on Defendants Shah Rahman (“Rahman”) and Caribbean Crescent, Inc.'s (“CCI”) (collectively, “Defendants”) Motion to Dismiss [Dkt. 60] (the “Motion”). For the following reasons, the Court will grant in part and deny in part Defendants' Motion.

I. Background

This case arises out of a business dispute involving alleged acts of trademark and trade name infringement and breach of contract.

A. Factual Background

Plaintiff East West, LLC (“East West”) sells food products including Jamaican and south Asian spices and halal meat and fish in the Washington, D.C. metropolitan area and surrounding communities. (Second Amended Complaint (“SAC”) [Dkt. 59] ¶ 2.) On June 11, 2003, East West and Third Party Defendants Naeem Zai and Mohammad Sadiq, who are East West's President and Vice President, respectively, (collectively, the “Buyers”) entered into an “Agreement for Sale of Inventory/Assets” (the “Sale Agreement”) with Defendants in which they agreed to purchase the business assets known as Caribbean Crescent. (SAC ¶ 13; Ex. A (“Sale Agreement”) at 1.) Defendants agreed to deliver to the Buyers all rights, title, and interest in the business assets known as Caribbean Crescent including the common law trademark CARIBBEAN CRESCENT (“the CARIBBEAN CRESCENT Mark” or “the Mark”) and the trade name Caribbean Crescent. (SAC ¶¶ 17–18, 21; Sale Agreement § 1.) ¹

The Sale Agreement contained a non-compete provision (the “Non–Compete Agreement”), in which Defendants agreed not to compete with the business being sold to the Buyers for a period of five years and within a five mile radius of the Washington Metropolitan Area.² (Sale Agreement § 21.) Defendants were entitled to “use [the] Carribean Crescent [as opposed to Caribbean Crescent] trade name,” and to “continue [to] trade and market products and services as Carribean Crescent [as opposed to Caribbean Crescent] outside the Washington Metropolitan Area.” (Id.)

On June 17, 2003, the parties closed on the Sale Agreement. (SAC ¶ 34.) The Buyers purchased the business assets known as Caribbean Crescent as well as Defendants' remaining inventory of goods. (SAC ¶¶ 31, 36.) The Buyers paid $225,918 and executed a promissory note in the amount of $215,918 in furtherance of the Sale Agreement. (SAC ¶ 40; Settlement Agreement.) The Buyers satisfied the amount due under the promissory note over a period of approximately two and a half years. (SAC ¶ 47.)

The parties executed an Articles of Sale and Transfer, also on June 17, 2003, in which CCI transferred all of the assets of Caribbean Crescent, including the trade name Caribbean Crescent and the CARIBBEAN CRESCENT Mark to East West. (SAC ¶ 44; Ex. D.) That same day, the parties entered into a Financing Statement in which CCI was the Secured Party and Buyers were the Debtor, and which covered all “Goodwill, the tradename ‘CARRIBEAN CRESCENT’ [sic] and all derivatives thereof; customer lists; and telephone numbers.” (SAC ¶ 45; Ex. E.) The Buyers thereupon began using the trade name Caribbean Crescent and the CARIBBEAN CRESCENT Mark, and East West began doing business as Caribbean Crescent. (SAC ¶¶ 48–50.)

On February 23, 2004, East West and CCI entered into a Commission Agreement, which provided that East West would handle all sales of Defendants' Jamaican patties product in the Washington Metro Area. (SAC ¶¶ 55–56; Ex. I.) East West was entitled to a twenty percent commission for such sales. (Id.) The Commission Agreement also established a five percent commission to be paid by East West to CCI for all sales of East West's products made by Rahman. (SAC ¶ 57.) East West alleges that Defendants have never paid any commissions on any of the sales made pursuant to the Commission Agreement. (SAC ¶ 59.)

Defendants allegedly violated the Non–Compete Agreement and the sale and assignment of the trade name Caribbean Crescent by competing against East West and using the trade name Caribbean Crescent within a five-mile radius of the Washington Metro Area “sometime between June 17, 2003 and June 16, 2008.” (SAC ¶¶ 60, 62.) Defendants also allegedly began using the CARIBBEAN CRESCENT Mark “sometime shortly after” the sale and assignment of the Mark to East West. (SAC ¶ 64.) East West alleges, on information and belief, that a number of the products sold by Defendants under the trade name Caribbean Crescent and bearing the CARIBBEAN CRESCENT Mark were first introduced into the market in June or July of 2011. (SAC ¶¶ 61, 63.)

On or about February 20, 2008, Defendants allegedly filed a trademark application with the United States Patent and Trademark Office for the CARIBBEAN CRESCENT Mark, despite having sold and assigned the Mark to East West over four years earlier. (SAC ¶¶ 65–66.) Defendants allegedly made various fraudulent statements regarding their purported ownership and use of the CARIBBEAN CRESCENT Mark in filing and prosecuting the trademark application. (SAC ¶¶ 66–70.) The PTO ultimately accepted the trademark application and registered the CARIBBEAN CRESCENT Mark. (SAC ¶ 79.)

On or about October 30, 2008, Rahman sent a facsimile to East West claiming ownership of the CARIBBEAN CRESCENT Mark. (SAC ¶ 71.) Rahman sent two subsequent facsimiles to East West in which he expressed a desire to clear up their misunderstandings. (SAC ¶¶ 72–73; Exs. N, O.) On December 15, 2008, East West sent a letter by counsel to Rahman asserting that it had purchased all of CCI's assets, including the trade name Caribbean Crescent. (SAC ¶ 74; Ex. P.)

In January 2009, Rahman advised Zai that Rahman's father, who was terminally ill with cancer, wished to meet with him to help resolve the problems between the parties. (SAC ¶ 75.) In February 2009, Sadiq and Zai visited Rahman's father. (SAC ¶ 77.) Rahman was also present. (Id.) At that time, Rahman's father allegedly stated that Rahman had not honored the agreements between the parties but that he would from that point on. (Id.) Rahman himself allegedly agreed to honor the parties' agreements as well. (Id.)

In February or March of 2011, Defendants hired a former employee of East West named Ishmael Amin. (SAC ¶ 82.) According to East West, Amin had knowledge of its customers, its business methods, and “other ‘company sensitive’ information.” (Id.) Much of this information was valuable, not known outside of its business, was protected, and would be difficult, if not impossible, for Defendants to acquire or duplicate. (SAC ¶ 83.) Defendants have allegedly obtained proprietary information and knowledge of East West's business relationships through Amin. (SAC ¶¶ 85, 88.) East West alleges that Defendants have begun to interfere with East West's business relationships and to use its proprietary information. (SAC ¶¶ 86–87.)

In June or July of 2011, Rahman approached Zai and Sadiq with new products displaying the trade name Caribbean Crescent and the CARIBBEAN CRESCENT Mark and asked if East West would sell those products in the Washington Metropolitan Area. (SAC ¶ 80.) When Zai and Sadiq refused, Rahman informed them that he would proceed to sell the products using a different distributor. (Id.) East West asserts that this was the point in time at which it “lost all hope” that Defendants would honor the parties' agreements despite the assurances previously made by Rahman. (Id.)

B. Procedural History

On May 9, 2012, Plaintiff filed its Second Amended Complaint (the “Complaint”).³ [Dkt. 59.] The Complaint contains thirteen causes of action: (1) federal trademark infringement, false designation of origin, and false representations in commerce under Section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a); (2) common law trademark infringement; (3) federal unfair competition, passing off, false advertising, trade name infringement and/or false designation of origin under 15 U.S.C. § 1125(a); (4) common law unfair competition and trade name infringement; (5) violation of the Virginia Consumer Protection Act (“VCPA”), Va.Code § 59.1–196, et seq.; (6) violation of the Virginia Criminal Code, Va.Code § 18.2–216, et seq.; (7) breach of contract; (8) unjust enrichment; (9) conversion; (10) cancellation of registration; (11) for permanent injunctive relief; (12) tortious interference with business relationship/intentional interference with economic advantage; and (13) misappropriation of trade secrets in violation of the Virginia Uniform Trade Secrets Act (“VUTSA”), Va.Code § 59.1–336, et seq.

On May 10, 2012, Defendants filed a Motion to Dismiss certain claims in the Complaint. [Dkt. 60.] Plaintiff filed its opposition on May 24, 2012 [Dkt. 65], to which Defendants replied on May 30, 2012 [Dkt. 66].

Defendants' Motion is before the Court.

II. Standard of Review

Rule 12(b)(6) allows a court to dismiss those allegations which fail “to state a claim upon which relief can be granted.” Fed.R.Civ.P. 12(b)(6). A 12(b)(6) motion tests the legal sufficiency of the complaint. Giarratano v. Johnson, 521 F.3d 298, 302 (4th Cir.2008). A court reviewing a complaint on a 12(b)(6) motion must accept well-pleaded allegations as true and must construe factual allegations in favor of the plaintiff. See Randall v. United States, 30 F.3d 518, 522 (4th Cir.1994).

A court must also be mindful of the liberal pleading standards under Rule 8, which require only “a short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8. While Rule 8 does not require “detailed factual allegations,” a plaintiff must still provide “more than labels and...