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Uptown Grill, LLC v. Shwartz

United States District Court, E.D. Louisiana

May 26, 2017

UPTOWN GRILL, LLC
v.
MICHAEL LOUIS SHWARTZ, ET AL

         SECTION: “H” (4)

          ORDER AND REASONS

          JANE TRICHE MILAZZO UNITED STATES DISTRICT JUDGE

         Before the Court are the Shwartz parties' Motion for Partial Summary Judgment (Doc. 236) and the Khodr parties' Motion for Partial Summary Judgment on Trade Dress and Conversion (Doc. 262), Motion for Partial Summary Judgment on Damages (Doc. 264), and Rule 21 Motion to Drop Parties (Doc. 266). These Motions are disposed of as outlined herein.

         BACKGROUND

         Like the adventures of John Kennedy Toole's Ignatius Reilly, the procedural history of this case is long, meandering, and often borders on the absurd. At every turn, the parties have seemingly operated with the goal of extending, rather than ending, this ligation. Though the Court has on multiple occasions outlined the background facts of this matter, a recounting of the history of this matter is necessary to the disposition of the issues remaining before the Court.

         At present there are three consolidated cases before the Court. In the lead case (No. 13-6560), Uptown Grill, LLC (“Uptown Grill”)[1] seeks a judgment against Michael Shwartz, Camellia Grill Holdings, Inc. (“CGH”), and Camellia Grill, Inc.[2] (jointly referred to as the “Shwartz parties”) declaring that “(1) it owns the trademarks, etc. that are located within or upon the property 626 South Carrollton Avenue, and (2) that its continued use of the trademarks, etc. that it purchased is lawful in all respects.”[3]

         In the consolidated cases (Nos. 14-810 and 14-837), CGH seeks judgment against Defendants, Hicham Khodr; The Grill Holdings, LLC (“Grill Holdings”); Chartres Grill, LLC; RANO, LLC; Uptown Grill, LLC; Uptown Grill of Destin, LLC; K&L Investments, LLC; and Robert's Gumbo Shop, LLC (jointly referred to as the “Khodr parties”).[4] The Shwartz parties allege that the Khodr parties, acting as a single business enterprise, are unlawfully using the contested Camellia Grill trademarks. They seek damages for trademark infringement and request that the defendants be enjoined from further infringement.

         The Court will begin by outlining the facts that spawned this prolix litigation. It will then outline the circuitous procedural history by which the matter arrived at this juncture.

         I. Factual Background

         For many years prior to Hurricane Katrina, the Shwartz family owned and operated Camellia Grill. Under the Shwartz family ownership, the restaurant on Carrollton Avenue was the only location of operation. In 1999, Shwartz formed CGH for the sole purpose of holding federally registered trademarks associated with the restaurant.

         In August of 2005, the city of New Orleans was decimated by the landfall of Hurricane Katrina. Shwartz relocated to Grenada, Mississippi in the wake of the storm, and Camellia Grill remained closed. At some point during the year following Katrina, Shwartz and Khodr negotiated the sale of Camellia Grill. In August of 2006, the parties, through various entities, executed three contracts: (1) the Cash Sale, (2) the Bill of Sale, and (3) the License Agreement.

         The Cash Sale was executed on August 11, 2006. Pursuant to the Cash Sale, Michael Shwartz sold the immovable property located at 626 Carrollton Avenue (the home of Camellia Grill) to RANO, LLC for the sum of $490, 000.00.

         On August 11, 2006, Michael Shwartz, Camellia Grill, Inc., and CGH executed a Bill of Sale in favor of Uptown Grill, LLC, for the sum of $10, 000.00.

         On August 27, 2006, CGH and Grill Holdings executed the License Agreement, in which the parties acknowledged that CGH held the now-disputed federally registered trademarks and granted Grill Holdings exclusive license to use the trademarks for the sum of $1, 000, 000.00, plus royalties. On December 3, 2010, the Khodr Defendants opened a Camellia Grill restaurant on Chartres Street in the French Quarter.

         II. Procedural History

         Sometime following the transactions in 2006, disagreements arose regarding the License Agreement and litigation ensued. The License Agreement was ultimately cancelled by a Louisiana state court based on the finding that Grill Holdings had breached its obligations under the contract.[5]That order has become final on direct appeal.

         While the state judgment cancelling the License Agreement was on appeal, CGH filed suit in this Court alleging that Grill Holdings's continued use of the Camellia Grill trademarks violated the Lanham Act and seeking a preliminary and permanent injunction prohibiting Grill Holdings from using the marks, including the facade of the Camellia Grill building.[6] After this Court denied CGH's Motion for Preliminary Injunction, CGH filed a Motion for Voluntary Dismissal, which this Court granted.

         While the Motion for Voluntary Dismissal was pending, Uptown Grill filed 13-6560, the lead case in this litigation. Uptown Grill alleges that it owns the trademarks that are located “within or upon the property” at 626 South Carrollton Avenue, that its continued use of the trademarks at that location is lawful, and that it is entitled to a declaratory judgment to that effect.

         After the Motion for Voluntary Dismissal was granted and while the Uptown Grill claim was pending, CGH initiated suit in state court asserting claims for trademark infringement and breach of the License Agreement by filing a supplemental pleading in the then-closed state court litigation. The Khodr parties removed the litigation to this Court, invoking this Court's federal question jurisdiction under the Lanham Act, and the litigation was consolidated with the declaratory action. After the Court denied a motion to remand, CGH amended its complaint to explicitly assert Lanham Act claims. CGH also amended its Complaint to assert trade dress claims.

         On July 9, 2015, this Court granted summary judgment to Uptown Grill in the lead action, finding that Uptown Grill owned all the Camellia Grill trademarks based on the plain language of the Bill of Sale. The Court found that the Shwartz parties' infringement claims asserted in the consolidated action were precluded by this ruling.

         On appeal, the Fifth Circuit affirmed those portions of this Court's ruling with regards to the finding that Uptown Grill owns the trademarks within or upon the Carrollton Avenue location but reversed with regard to this Court's ruling that Uptown Grill owned the Camellia Grill trademarks at all other locations. The Circuit found that the relief granted by the Court was beyond that requested by the Khodr parties in the lead action. Accordingly, the case was remanded for a determination of what further relief, if any, is warranted. It appears to this Court that the lead action is now resolved, as the Khodr parties have obtained the relief sought-namely, a ruling that they own the trademarks “within or upon the Carrollton Avenue location.” The Fifth Circuit's ruling did, however, serve to revive the Shwartz parties' claims for infringement as asserted in the consolidated action, as the Court has made no determination relative to the use of the marks at locations other than Carrollton Avenue.

         In the hopes of resolving these claims, the parties have filed a series of dispositive motions. CGH has filed a Partial Motion for Summary Judgment, asking the Court to declare (1) that CGH owns all the marks articulated in the License Agreement at all locations except 626 Carrollton Avenue, (2) that CGH owns a protected trade dress associated with Camellia Grill, (3) that the use of the Camellia Grill trade dress at both the Carrollton and Chartres locations violates the License Agreement, and (4) that operation of Camellia Grill at the Chartres location following termination of the License Agreement is a breach thereof. The Khodr Parties have responded in opposition and have filed their own motions for partial summary judgment asking the Court to dismiss CGH's trade dress, conversion, and damages claims. The Khodr Parties have also filed a Motion to Drop several Defendants pursuant to Federal Rule of Civil Procedure 21. The Shwartz parties oppose these Motions.

         LEGAL STANDARD

         Summary judgment is appropriate “if the pleadings, depositions, answers to interrogatories, and admissions on file, together with affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.”[7] A genuine issue of fact exists only “if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.”[8]

         In determining whether the movant is entitled to summary judgment, the Court views facts in the light most favorable to the non-movant and draws all reasonable inferences in his favor.[9] “If the moving party meets the initial burden of showing that there is no genuine issue of material fact, the burden shifts to the non-moving party to produce evidence or designate specific facts showing the existence of a genuine issue for trial.”[10] Summary judgment is appropriate if the non-movant “fails to make a showing sufficient to establish the existence of an element essential to that party's case.”[11] “In response to a properly supported motion for summary judgment, the non-movant must identify specific evidence in the record and articulate the manner in which that evidence supports that party's claim, and such evidence must be sufficient to sustain a finding in favor of the non-movant on all issues as to which the non-movant would bear the burden of proof at trial.”[12] “We do not . . . in the absence of any proof, assume that the nonmoving party could or would prove the necessary facts.”[13] Additionally, “[t]he mere argued existence of a factual dispute will not defeat an otherwise properly supported motion.”[14]

         LAW AND ANALYSIS

         The instant Motions overlap in many respects and, in the Court's view, overcomplicate the questions remaining before the Court. First, the Shwartz parties have filed a Motion for Partial Summary Judgment, wherein they ask the Court to rule in their favor on several of their claims. The Khodr parties oppose this Motion and have responded with three Motions of their own. First, they ask the Court for summary judgment on the Shwartz parties' claims for trade dress infringement and conversion. Second, they ask the Court for summary judgment in their favor dismissing the Shwartz parties' claims for damages. Finally, they ask the Court to drop various Khodr entities as Defendants pursuant to Federal Rule of Civil Procedure 21. The Court will address each Motion in turn.

         I. Shwartz Parties' Motion for Partial Summary Judgment (Doc 236)

         In its Motion, Camellia Grill Holdings asks for the Court to declare (1) that it is the owner of the Camellia Grill trademarks at all locations other than Carrollton Avenue, (2) that it is the owner of the “trade dress” associated with Camellia Grill, including at the Carrollton unit, (3) that the use of the trade dress at the Carrollton and Chartres locations following the termination of the License Agreement is a breach of the obligations undertaken therein, and (4) that the operation of a Camellia Grill branded restaurant at the Chartres Street location following the termination of the License Agreement is a breach thereof. The Court will address these arguments in turn.

         A. Whether Shwartz Can Establish that Trademark Rights Exist at any Location Other Than as Associated with the Carrollton Location

         The Shwartz parties first ask the Court to declare that they are the owner of the Camellia Grill trademarks at all locations other than Carrollton Avenue. In response, the Khodr parties have agreed not to contest the Shwartz Parties' ownership of the registered trademarks outside of the Carrollton location. It appears that the Khodr parties entered into this stipulation in an attempt to put an end to this protracted litigation. This stipulation has, however, only served to complicate the Court's analysis. At oral argument, it became readily apparent that the parties did not agree as to the ramifications of this stipulation. While counsel for the Shwartz parties appeared to maintain that it would be within their rights to open a Camellia Grill restaurant in Orleans Parish, counsel for the Khodr parties indicated that, in their view, their ownership of the marks at Carrollton vests them with the exclusive rights to use of the marks within a reasonable geographic area.

         Regardless, the Court has not been presented with any evidence to establish that there exist any Camellia Grill trademarks beyond the Carrollton location.[15] To understand the scope of the parties' rights at present, it is necessary that the Court begin by outlining the effect of the Bill of Sale's transfer of the Carrollton Avenue marks.

         This Court previously held that that the Bill of Sale served to assign to Uptown Grill all marks and goodwill associated with the Carrollton location.[16]“[F]ollowing a proper assignment [of a trademark], the assignee steps into the shoes of the assignor.”[17] Put differently, “if the assignment is valid, and the assignee carries on use of the mark as it was in the past, a continuity of the mark and its good will is preserved.”[18] Accordingly, upon assignment of the goodwill and marks associated with the Carrollton Avenue location of Camellia Grill, Uptown Grill obtained all the rights and privileges associated with these marks.

         Throughout this litigation, the parties have consistently maintained that (1) prior to the transactions in question, CGH was the senior user of the marks in question, (2) that, prior to these transactions, the marks in question were used soley at the Carrollton Avenue location, and (3) that the Shwartz parties have made no efforts to operate another “Camellia Grill” branded restaurant before or since the execution of the Bill of Sale. This Court's prior ruling specifically held that the Bill of Sale unambiguously indicated that Camellia Grill, as operated on Carrollton Avenue, “was sold lock, stock, and barrel” to Uptown Grill, including all trademarks and goodwill associated with that location. The Fifth Circuit affirmed this ruling. There was no reservation of rights regarding the marks in the Bill of Sale. Accordingly, all rights in the Carrollton Avenue Camellia Grill trademarks passed to Uptown Grill. It is axiomatic that “[o]ne who first uses a distinct mark in commerce . . . acquires rights to that mark.”[19] “A federal registration does not create the trademark; the trademark is acquired by use.”[20] CGH's pre-Bill of Sale rights were acquired through its use of the marks at Carrollton Avenue, and those rights were, without reservation, transferred to Uptown Grill. The parties have not shown that there was any use of Camellia Grill trademark rights by any Shwartz entity at any other location; accordingly, they cannot have acquired trademark rights associated with any other location. The Court finds no basis to rule that the Shwartz parties have any remaining protectable interest under trademark law, and therefore denies their request to find that they are the owner of the Camellia Grill trademarks beyond Carrollton Avenue. Nevertheless, as discussed below, CGH may preclude the use of the registered trademarks by Khodr at other locations based on the contractual relationship between the parties.

         B. Whether the License Agreement Can Be Employed to Preclude Use of Any Trade Dress by the Khodr Parties

         The Shwartz parties next ask the Court to find that they are the owner of a Camellia Grill trade dress at all locations based on the language of the License Agreement.[21] The Court notes that the Shwartz parties have brought two claims with regard to Camellia Grill trade dress-a breach of contract claim averring that the Khodr parties cannot use any Camellia Grill trade dress under the terms of the License Agreement and a Lanham Act claim for trade dress infringement. In the context of this Motion, the Court will only address the breach of contract claims. The Lanham Act claims are separately addressed in the Court's discussion of the Khodr parties' Motion to Dismiss those claims.

         As a preliminary matter, the Court finds that any dispute relative to the operation of the Carrollton location as a Camellia Grill is settled by this Court's previous ruling and the ruling of the Fifth Circuit. In its Motion, CGH repackages its trademark claims as trade dress claims in an apparent attempt to re-litigate the now-settled issue of whether Uptown Grill may operate the Carrollton location as “Camellia Grill.” It also argues that the use of this trade dress was a violation of the License Agreement. Both arguments are meritless. The Bill of Sale transferred all “furniture, fixtures and equipment, cooking equipment, kitchen equipment, counters, stools, tables, benches, appliances, recipes, trademarks, names, logos, likenesses, etc., and all other personal and/or movable property owned by Seller located within or upon the property.” The Court previously concluded that this language indicated that Camellia Grill, as operated on Carrollton Avenue, “was sold lock, stock, and barrel” to Uptown Grill, including all trademarks associated with that location. The Fifth Circuit affirmed this ruling. Left undisturbed on appeal was this Court's finding that the sale included all goodwill associated with the marks. “The purpose of trade dress protection, like trademark protection, is to secure the owner of the [trade dress] the goodwill of his business and to protect the ability of consumers to distinguish among competing products.”[22] The Bill of Sale necessarily included trade dress associated with this location, to the extent that any exists.[23] To hold otherwise would lead to an absurd result, as it would prevent Uptown Grill from making use of the property purchased in the Bill of Sale, including the marks and good will associated with this location. Accordingly, the Court finds any protectable trade dress relative to the Carrollton location was transferred as part of the Bill of Sale. The Shwartz parties' claims associated with the Carrollton location therefore fail.

         The Shwartz parties also claim that they are the owners of a trade dress associated with all locations other than Carrollton Avenue. They assert that this “trade dress” exists by virtue of the fact that an undefined trade dress was mentioned in the License Agreement.[24] This argument is undercut by the fact that a court cannot enforce a trade dress until the elements of the same are reduced to a list.[25] Shwartz has not done so in the context of this Motion, preferring instead to rely on the License Agreement's undefined use of the term.[26] The proponent of the existence of a trade dress must articulate the elements constituting the putative trade dress.[27] The License Agreement fails to define even a single element of the alleged trade dress. Unlike the registered marks, which are defined with specificity in the License Agreement and are outlined in the registration documents, the elements of the putative trade dress are nowhere defined. Because of this failure, the License Agreement cannot be used to stop the use of any elements of a Camellia Grill trade dress. Accordingly, the Shwartz parties' Motion is denied with respect to all trade dress claims.

         C. Whether the License Agreement May be Used as a Predicate to Preclude the Khodr Parties' Use of the Camellia Grill Trademarks at Locations Other than Carrollton

         The Shwartz Parties also ask the Court to enter judgment in their favor finding that the operation of the Chartres location after the termination of the License Agreement was a violation of that agreement and should subject the Khodr parties to contractual damages to be determined at trial. As noted above, the License Agreement was a contract between CGH and Grill Holdings whereby Grill Holdings contracted for use of certain intellectual property purportedly owned by CGH.[28] The agreement was ultimately terminated effective June 1, 2011. The Shwartz parties argue that the License Agreement contains provisions governing the parties' conduct in the event of termination, and that any use of the Camellia Grill trademarks by any Khodr entity following the cancellation of the license agreement is a breach thereof. The Khodr Parties respond, arguing that the termination of the License Agreement by the Louisiana state court means that it cannot be used as the predicate for a cause of action at this time. Alternatively, they argue that only Grill Holdings was a party to the License Agreement and that therefore Chartres Grill, LLC, the operator of the Chartres Location, cannot be bound by its terms. The Court will first address whether the License Agreement contains enforceable provisions governing its termination and, if so, to which entities those provisions apply.

         1. Whether the Provisions of the License Agreement Governing Termination Remain Enforceable

         The Khodr parties argue that the termination of the License Agreement by the Louisiana state court means that the provisions thereof governing the parties' obligations in the event of termination may not be relied on as the predicate for a breach of contract claim. This argument ignores the plain language of the contract. The License Agreement contains terms governing the conduct of the parties thereto in the event of its termination-namely, that the licensee and its affiliates would cease use of the marks upon termination of the agreement. These conditions were triggered when the License Agreement was terminated by the Louisiana state court. Unlike the undefined “trade dress” discussed above, the subject registered marks were specifically identified. The Court is cognizant of the fact that the Khodr Parties have, throughout this litigation, represented that they intended to purchase only the Carrollton location as a fully functioning unit and that the License Agreement was intended to govern the use of the marks at any future locations. The Court is also, of course, aware of the fact that, in remanding this matter, the Fifth Circuit advised that “the court must take all facts and circumstances of the parties' contractual relations, litigation tactics, and applicable trademark law into consideration before reinstating relief plainly beyond the plaintiffs' pleadings.”[29] Accordingly, though Uptown Grill may operate the Carrollton Location by virtue of the rights acquired in the Bill of Sale, the parties bound by the License Agreement's terms are contractually precluded from using the Camellia Grill marks at other locations.

         2. Whether Chartres Grill, LLC is Bound by the License Agreement

         The Shwartz parties contend that Chartres Grill, LLC is bound by the License Agreement as both an affiliate of Grill Holdings and a sub-licensee under the terms of the License Agreement. In support of this contention, the Shwartz parties have introduced both the affidavit of Hicham Khodr, wherein he states that Chartres Grill, L.L.C. was a sublicensee, [30] and the sublicensing agreement between Chartres Grill and Grill Holdings, LLC.[31] They also argue that the Fifth Circuit's finding that Uptown Grill, LLC was an affiliate of Grill Holdings should apply to Chartres Grill by analogy.

         In pertinent part, the License Agreement provides that “the term ‘Licensee' shall mean all affiliates, subsidiaries or related companies of Grill Holdings, LLC” and that the “Licensee shall cause any . . . sublicensee of any or all of the Marks to abide by all of the provisions of this Agreement . . . .”[32]At this juncture, based on both the evidence cited by the Shwartz parties and the ruling of the Fifth Circuit, it appears to this Court to be beyond genuine dispute that Chartres Grill is at the very least a sublicensee of Grill Holdings, LLC. Accordingly, it is bound by the terms of the License Agreement governing ...


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