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Uptown Grill, LLC v. Shwartz

United States District Court, E.D. Louisiana

February 8, 2018

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 is a Motion for Summary Judgment filed by Camellia Grill Holdings, Inc. (Doc. 305) and a Motion to Dismiss filed by Grill Holdings, L.L.C.; K&L Investments, LLC; Hicham Khodr; Rano, L.L.C.; Robert's Gumbo Shop, LLC; Uptown Grill of Destin, LLC; and Uptown Grill, LLC (Doc. 306). For the following reasons, the Motion to Dismiss is DENIED, and the Motion for Summary Judgment is GRANTED IN PART.

         BACKGROUND

         The long and complicated factual and procedural background to this case has been outlined in this Court's previous decisions and need not be recounted here.[1] The following facts are pertinent to the motions now before the Court.

         On July 9, 2015, this Court granted summary judgment to Uptown Grill in the lead action, finding that Uptown Grill owned all of the Camellia Grill trademarks based on the plain language of the Bill of Sale. This Court also found that CGH's 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 this 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. 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 CGH's claims for infringement as asserted in the consolidated action.

         The parties filed a variety of cross-motions following the remand, which this Court addressed in its May 26, 2017 Order and Reasons.[2] This Court held that the Shwartz parties could not sustain their trade dress claims. The Shwartz parties do not own any trade dress rights relative to the Carrollton location because those protections were transferred by the Bill of Sale, cannot assert any trade dress claims based on the License Agreement beyond the Carrollton location because the License Agreement fails to articulate the elements constituting the putative trade dress, and cannot sustain a trade dress action under the Lanham Act because there is no possibility of consumer confusion.[3] With respect to trademarks, this Court held that while the Shwartz parties do not own any Camellia Grill trademarks anywhere, and therefore cannot assert a trademark claim under the Lanham Act, the License Agreement prohibits Grill Holdings and its affiliates, subsidiaries, and sublicensees, including Chartres Grill, from the use of such trademarks outside of the Carrollton location.[4]

         This Court dismissed the Shwartz parties' claims for trade dress and trademark infringement under the Lanham Act, but in an abundance of caution held that even if such claims persisted, the Shwartz parties were not eligible for an award for damages on a Lanham Act claim.[5] Similarly, this Court held that although the Shwartz parties' claims for damages based on state trademark law were precluded, a damages award was unwarranted even if they were not.[6] Furthermore, this Court held that the Shwartz parties were not entitled to treble damages under the Louisiana Unfair Trade Practices Act.[7] This Court also dismissed the Shwartz parties' claim for conversion.[8]

         The Khodr parties now move to dismiss CGH's claim for damages for breach of the License Agreement on the grounds that CGH failed to assert such a claim in any of its complaints. The Khodr parties also move to dismiss CGH's claim for attorney's fees, arguing that CGH failed to demand them pursuant to the License Agreement and that no statute provides for their recovery. CGH opposes the motion to dismiss, arguing that it provided sufficient notice of the contract claim.

         Independently, CGH moves for summary judgment that the Khodr parties violated the post-termination provisions of the License Agreement by operating Chartres Grill during three discrete time periods and that the measure of damages for such a breach is the disgorgement of profits and recovery of attorney's fees.

         LEGAL STANDARD

         To survive a Rule 12(b)(6) motion to dismiss, a plaintiff must plead enough facts “to state a claim to relief that is plausible on its face.”[9] A claim is “plausible on its face” when the pleaded facts allow the court to “draw the reasonable inference that the defendant is liable for the misconduct alleged.”[10]A court must accept the complaint's factual allegations as true and must “draw all reasonable inferences in the plaintiff's favor.”[11] The Court need not, however, accept as true legal conclusions couched as factual allegations.[12]

         To be legally sufficient, a complaint must establish more than a “sheer possibility” that the plaintiff's claims are true.[13] “A pleading that offers ‘labels and conclusions' or ‘a formulaic recitation of the elements of a cause of action''' will not suffice.[14] Rather, the complaint must contain enough factual allegations to raise a reasonable expectation that discovery will reveal evidence of each element of the plaintiff's claim.[15]

         “The standard for dismissal under Rule 12(c) is the same as that for dismissal for failure to state a claim under Rule 12(b)(6).”[16]

         Summary judgment is appropriate if “the record, including depositions, documents, electronically stored information, affidavits or declarations, stipulations. . ., admissions, interrogatory answers, or other materials” “shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.”[17] A genuine issue of fact exists only “if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.”[18]

         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.[19] “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.”[20] 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.”[21] “In response to a properly supported motion for summary judgment, the nonmovant 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 nonmovant on all issues as to which the nonmovant would bear the burden of proof at trial.”[22] The Court does “not . . . in the absence of any proof, assume that the nonmoving party could or would prove the necessary facts.”[23] Additionally, “[t]he mere argued existence of a factual dispute will not defeat an otherwise properly supported motion.”[24]

         LAW AND ANALYSIS

         I. The Khodr Parties' Motion to Dismiss

         A. Claim for Breach of Contract

         Rule 8 of the Federal Rules of Civil Procedure requires that a pleading make “a short and plain statement of the claim showing that the pleader is entitled to relief; and . . . a demand for the relief sought.”[25] The purpose is to “give the defendant fair notice of what the . . . claim is and the grounds upon which it rests.”[26] “Federal pleading rules . . . do not countenance dismissal of a complaint for imperfect statement of the legal theory supporting the claim asserted.”[27] Furthermore, Rule 54 authorizes and advises a court to “grant the relief to which each party is entitled, even if the party has not demanded that relief in its pleadings.”[28]

         CGH' Second Petition, Third Amended Complaint, and Fourth Amended Complaint (collectively, “Complaints”) state enough facts to support a claim for contract damages and therefore such a claim will not be dismissed at this stage. The Second Petition states that the License Agreement was declared to be terminated as of June 1, 2011 and that Grill Holdings continued to operate restaurants using the “marks” licensed in the License Agreement despite that judicial termination.[29] It further states that,

The operation of the two restaurants by the defendant . . . using the once-licensed marks and service mark, following the effective date of termination of the License Agreement . . . constitutes conversion, and unfair trade practices and trade name/service mark infringement, entitling petitioner . . . to damages resulting from the unauthorized use of its previously licensed marks, service mark and trade dress.[30]

         Additionally, paragraph fifteen of the Second Petition demands an injunction prohibiting the “continued unauthorized use of plaintiff's retained intellectual property in any of the ongoing restaurant operations, in violation and direct contempt of the prior Judgment rendered herein terminating the License Agreement under which the defendant's [sic] had been granted the use of said licensed marks.”[31]

         These allegations are sufficient to put the Khodr parties on notice that a breach of the License Agreement was at issue. The Complaint clearly alleges the existence of a contract. It also alleges a breach when it refers to the “continued unauthorized use of plaintiff's retained intellectual property.”[32]

         Finally, it alleges the existence of damages by stating that the Khodr parties have benefitted from the unauthorized use of the licensed property. The failure to specifically plead for contract damages is irrelevant in light of Rule 54's broad provisions for relief.[33] With a trial still unscheduled, the Khodr party defendants will not be prejudiced by allowing the breach of contract claim to survive.

         Furthermore, the proposed pretrial orders in this case indicate that the Khodr parties had actual notice that CGH was pursuing a claim for breach of the License Agreement. The joint pretrial order of January 5, 2017, signed by both CGH and the Khodr parties, includes the following as contested issues of fact:

Whether the continued use of the marks, as listed on Exhibit 1.1 of the License Agreement, and the trade dress developed by the Shwartz family for The Camellia Grill Restaurant, and the use of the Louisiana service mark “Camellia Grill” initially following the effective termination date of June 1, 2011 through December 1, 2013, and between July 10, 2015 and at least as of December 19, 2016, was an action or condition which may have suggested to the public that the Licensee had any rights to the marks or trade dress, or was associated with Licensor, as prohibited in ¶12.1 of the License Agreement.
. . .
Whether the continued use of the Marks and trade dress set forth in Exhibit 1.1 of the License Agreement, following the effective date of termination, by the licensee, its related or affiliated parties, or its sublicensee, was a breach of the provisions of § 12.1 and § 12.2 of the License Agreement.[34]

         Setting aside the issue of whether a pretrial order signed by all parties but not adopted by the Court is binding, it provides clear evidence that the parties were aware that the breach of the License Agreement was a live issue.[35]

         The cases that the Defendant Khodr parties cite do not address whether a plaintiff may recover under a new legal theory for a set of facts already pled, but rather concern whether plaintiffs pled enough facts to put the defendants on notice of the basis of their claims. In Anderson v. U.S. Department of Housing & Urban Development, the court held that plaintiffs failed to plead a claim related to a voucher program when they only alleged facts related to “a totally different course of conduct.”[36] Here, the course of conduct that CGH alleged constituted conversion and infringement is the same as constitutes breach of contract. In the non-binding Jang v. Boston Science Scimed, Inc., the Third Circuit affirmed a trial court's refusal to consider a claim for breach of contract because the complaint contained only a “bare recital of the elements of a breach-of-contract claim.”[37] Here, CGH identified the specific contract at issue, the License Agreement, the conduct that constituted a breach, the Khodr parties' ongoing operation of restaurants using the previously licensed marks, and the damage that CGH suffered, the profits from that operation. In Herster v. Board of Supervisors of Louisiana State University, the court held that the plaintiffs' complaints did not contain factual allegations that would have put the defendants on notice of a failure to pay claim.[38] And in Snider v. New Hampshire Insurance Co., the court denied plaintiffs the ability to present evidence of negligent hiring, training, and supervision when the plaintiffs' complaint contained only allegations of vicarious liability.[39] An employer's negligent hiring or supervision necessarily involves acts by the employer that are separate from the negligent acts of the employee, unlike here, where the acts of the Khodr parties that constitute conversion and infringement are essentially the same as those constituting breach of the License Agreement.[40]

At its core, the Khodr parties' argument seeks an application of the now rejected theory of the pleadings doctrine.[41] Accordingly, their Motion to Dismiss CGH's breach of contract claim is denied.

         B. Claim for Attorney's Fees

         The Khodr parties also move to dismiss CGH's claim for attorney's fees pursuant to Section 17.2 of the License Agreement. That section provides that, “In the event any Party hereto institutes an action or proceeding to enforce any rights under this Agreement, the party prevailing in such an action or proceeding shall be paid all reasonable attorneys' fees and costs.”[42] The Khodr parties argue that the section does not survive the termination of the License Agreement. This Court already held that the plain language of the License Agreement makes the post-termination prohibitions on the use of the covered marks in the License Agreement remain effective after its termination. An action to enforce that prohibition is an action to enforce a right under the License Agreement, and Section 17.2 therefore applies to CGH's breach of contract claim. CGH has stated a valid claim under the Rule 12(b)(6) standard, and the Khodr parties' Motion to Dismiss the claim for attorney's fees is accordingly denied.

         II. CGH's Motion for Summary Judgment

         CGH moves for summary judgment on the issue of whether the Khodr parties breached the post-termination provisions of the License Agreement and on the issue of the proper measure of damages for such a breach. This Court already held that the License Agreement contains post-termination provisions prohibiting the Khodr parties bound by the agreement from using certain categories of intellectual property outside of the Carrollton location.[43] Those provisions refer to “Marks, ” which the License Agreement defines to mean a) all Camellia Grill marks registered with the United States Patent and Trademark Office, b) all trade dress associated with the Camellia Grill restaurant, c) rights to the blueprints and specifications developed for additional Camellia Grill restaurants, and d) all menus and recipes developed by or used in the Camellia Grill restaurant.[44] This Court specifically held that the use of the registered marks was a breach of the License Agreement, but that the License Agreement was too indefinite to prohibit the use of an undefined “trade dress.”[45]

         A. Whether the Khodr Parties Breached the License Agreement

         CGH seeks a judgment recognizing that the Khodr parties breached sections 12.1 and 12.2 of the License Agreement by operating the restaurant at Chartres Street using covered marks during three time periods. The Court already held that Chartres Grill, LLC is bound by ...


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