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D&D Greek Rest., Inc. v. Great Greek Franchising, LLC

UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA
Aug 3, 2021
Case No. CV 20-9770-MWF (KSx) (C.D. Cal. Aug. 3, 2021)

Opinion

Case No. CV 20-9770-MWF (KSx)

08-03-2021

D and D Greek Restaurant, Inc. v. Great Greek Franchising, LLC et al.


CIVIL MINUTES—GENERAL

Present: Deputy Clerk:
Rita Sanchez Court Reporter:
Not Reported Attorneys Present for Plaintiff:
None Present Attorneys Present for Defendant:
None Present Proceedings (In Chambers): ORDER DENYING MOTION TO DISMISS COUNT VI [72]

Before the Court is Defendants Willy Chavez, Hany Ghattas, Doheg Velasco's (the "Franchisees") Motion to Dismiss Count VI (the "Motion"), filed on June 21, 2021. (Docket No. 72). Plaintiff D & D Greek Restaurant, Inc. ("D&D") filed an opposition on July 2, 2021. (Docket No. 74). Defendants filed a reply on July 12, 2021. (Docket No. 77).

The Court has read and considered the papers filed in connection with the Motion and held a telephonic hearing on July 26, 2021, pursuant to General Order 21-08 arising from the COVID-19 pandemic.

For the reasons discussed below, the Motion is DENIED. Plaintiff has sufficiently stated a claim for declaratory relief because the SAC alleges significant preparation by Franchisees beyond a mere intent to use the infringing marks. Plaintiff's declaratory relief claim does not violate Rule 8 because the SAC provides each Defendant with notice of the specific allegations and claims asserted by Plaintiff.

I. BACKGROUND

The factual background of this action is set forth in the Court's January 29, 2021 Order re Motion to Dismiss or Transfer Venue (the "January 29, 2021 Order"). (Docket No. 33). The Court incorporates by reference the factual background contained in the January 29, 2021 Order as if fully set forth herein. (See January 29, 2021 Order at 2-3). The Court discusses the relevant facts only as necessary for the Court's analysis below.

On May 19, 2021, the Court dismissed Plaintiff's injunctive relief claim (Count VI) because the First Amended Complaint ("FAC") was devoid of facts indicating that infringement of Plaintiff's marks is imminent and impending (the "Prior Order"). (Docket No. 68).

Plaintiff filed the Second Amended Complaint ("SAC") on June 7, 2021. (Docket No. 71). The SAC contains the following allegations in support of Count VI, which is now a claim for declaratory, rather than injunctive, relief:

The Franchisees purchased franchises from Great Greek Franchising, LLC ("GGF") on or before April 30, 2020, and committed themselves to open restaurants that are destined to infringe Plaintiff's trademark. (SAC ¶ 104). Defendants are in various stages of securing premises, developing, constructing, and preparing to open restaurants using the marks Great Greek and The Great Greek Mediterranean Grill located in Plaintiff's zones of market penetration, reputation, and expansion. (Id.).

Defendant Chavez agreed with GGF to open a restaurant to be known as "The Great Greek Mediterranean Grill" in Long Beach. (Id. ¶ 16). Defendant Ghattas agreed to open such a restaurant in a Redondo Beach shopping center on Pacific Coast Highway. (Id.). Defendant Velasco formed an entity called Domus and Cibum, LLC and used this entity to register a fictitious business name The Great Greek Mediterranean Grill in 2019, for the establishment of a restaurant by that name at a commercial space on Olympic Boulevard in Downtown Los Angeles. (Id.).

Defendants will infringe Plaintiff's trademark The Great Greek in violation of Section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a), the Model State Trademark Law and common law, if and when Defendants open and operate restaurants using either mark The Great Greek Mediterranean Grill or Great Greek. (Id. ¶ 110).

Based on these allegations, Plaintiff seeks a judicial declaration that the restaurants that Defendants and GGF agreed to develop are likely to confuse consumers to the detriment of Plaintiff and its trademark, in violation of Section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a), the Model State Trademark Law, and common law. (Id.).

II. LEGAL STANDARD

In ruling on the Motion under Rule 12(b)(6), the Court follows Bell Atlantic v. Twombly, 550 U.S. 544 (2007), Ashcroft v. Iqbal, 556 U.S. 662 (2009), and their Ninth Circuit progeny.

"Dismissal under Rule 12(b)(6) is proper when the complaint either (1) lacks a cognizable legal theory or (2) fails to allege sufficient facts to support a cognizable legal theory." Somers v. Apple, Inc., 729 F.3d 953, 959 (9th Cir. 2013). "To survive a motion to dismiss, a complaint must contain sufficient factual matter . . . to 'state a claim for relief that is plausible on its face.'" Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 570). The Court must disregard allegations that are legal conclusions, even when disguised as facts. See id. at 681 ("It is the conclusory nature of respondent's allegations, rather than their extravagantly fanciful nature, that disentitles them to the presumption of truth."); Eclectic Props. E., LLC v. Marcus & Millichap Co., 751 F.3d 990, 996 (9th Cir. 2014). "Although 'a well-pleaded complaint may proceed even if it strikes a savvy judge that actual proof is improbable,' plaintiffs must include sufficient 'factual enhancement' to cross 'the line between possibility and plausibility.'" Eclectic Props., 751 F.3d at 995 (quoting Twombly, 550 U.S. at 556-57) (internal citations omitted).

The Court must then determine whether, based on the allegations that remain and all reasonable inferences that may be drawn therefrom, the complaint alleges a plausible claim for relief. See Iqbal, 556 U.S. at 679; Cafasso, U.S. ex rel. v. Gen. Dynamics C4 Sys., Inc., 637 F.3d 1047, 1054 (9th Cir. 2011). "Determining whether a complaint states a plausible claim for relief is 'a context-specific task that requires the reviewing court to draw on its judicial experience and common sense.'" Ebner v. Fresh, Inc., 838 F.3d 958, 963 (9th Cir. 2016) (quoting Iqbal, 556 U.S. at 679).

III. DISCUSSION

As a preliminary matter, the Court notes that Defendants have devoted a significant portion of their briefing to arguing that Count VI is insufficiently pled because the substantive allegations underlying Count VI are nearly identical to the allegations this Court previously found insufficient to support Count VI in the FAC. (Motion at 3-5). This argument is unpersuasive. While the allegations underlying Count VI in the FAC and SAC are nearly identical, Count VI itself has changed from a claim for injunctive relief to one for declaratory relief. As discussed in detail below, the standard for declaratory relief is somewhat less demanding than the standard for injunctive relief, and does not require Plaintiff to allege that infringement is "imminent and impending." (See Prior Order at 1). Therefore, the Court is not persuaded by Defendant's reasoning on this issue.

Notwithstanding the argument mentioned above, Defendants argue that Plaintiff's claim for declaratory relief fails for two reasons: (1) the SAC improperly lumps eight individual defendants together as a single group, in violation of Federal Rule of Civil Procedure 8, and (2) the SAC fails to allege a "case of actual controversy" sufficient to grant declaratory relief. (Motion at 1).

A. Rule 8

As discussed in the Prior Order, the Court is not convinced that grouping several individual defendants together is a violation of Rule 8 under these circumstances. Rule 8 requires only "a short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2). "Generally, '[u]ndifferentiated pleading against multiple defendants is improper' because it fails to give each defendant notice of the specific allegations and claims that pertain to it." Steinley v. Health Net, Inc., No. CV 18-5458 PSG (SKx), 2018 WL 6985318, at *5 (C.D. Cal. Dec. 4, 2018) (quoting Corazon v. Aurora Loan Servs. LLC, No. 11-542 SC, 2011 WL 1740099, at *4 (N.D. Cal. May 5, 2011)).

Here, Plaintiff alleges that the Franchisees have purchased franchises from GGF and are preparing to open restaurants using the marks Great Greek and The Great Greek Mediterranean Grill in California. (SAC ¶ 104). The SAC differentiates the Franchisees by identifying the general location where they each seek to open a restaurant:

Plaintiff is informed and believes, and on that basis alleges, as follows: Mr. Chavez agreed with GGF to open a restaurant to be known as The Great Greek Mediterranean Grill in Long Beach. Mr. Ghattas agreed to open such a restaurant in a Redondo Beach shopping center on Pacific Coast Highway. Mr. Velasco formed an entity called Domus and Cibum, LLC and used this entity to register a fictitious business name "The Great Greek Mediterranean Grill" in 2019, for the establishment of a restaurant by that name at a commercial space on Olympic Boulevard in Downtown Los Angeles.
(SAC ¶ 16).

These allegations appear to give each Defendant notice of the specific allegations and claims asserted against them: Plaintiff has identified the precise activity that threatens to infringe on Plaintiff's mark.

At the hearing, Defendants argued that the allegations here are insufficient under In re iPhone Application Litig., because Plaintiff has failed to "identify what action each Defendant took." No. 11-MD-02250-LHK, 2011 WL 4403963, at *8 (N.D. Cal. Sept. 20, 2011) (emphasis added). Specifically, Defendants argued that the SAC is insufficient because it identifies "locations" rather than "actions." The Court does not find this reasoning to be persuasive. Here, the identification of specific locations for the restaurants is the action carrying legal significance because the location of the restaurants is directly relevant to the consumer confusion element of the trademark infringement claim. Therefore, the Court disagrees with Defendants that Plaintiff has failed to identify a specific action taken by each Defendants.

Accordingly, the Court determines that the SAC complies with Rule 8. See Steinley, 2018 WL 6985318, at *5.

B. Declaratory Relief

Defendants also argue that Plaintiff's claim for declaratory relief fails because Plaintiff has not alleged facts plausibly giving rise to an "case of actual controversy." (Motion at 6).

The Declaratory Judgment Act provides that "[i]n a case of actual controversy within its jurisdiction . . . any court of the United States . . . may declare the rights and other legal relations of any interested party seeking such declaration, whether or not further relief is or could be sought." 28 U.S.C. § 2201(a).

The phrase "case of actual controversy" refers to "cases" and "controversies" that are justiciable under Article III. Medimmune, Inc. v. Genentech, Inc., 549 U.S. 118, 127 (2007). To demonstrate that a case or controversy exists, a declaratory judgment plaintiff must prove that the facts alleged, "under all the circumstances, show that there is a substantial controversy, between parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment." Id. The controversy must be "definite and concrete, touching the legal relations of parties having adverse legal interests," such that the dispute is "real and substantial" and "admi[ts] of specific relief through a decree of a conclusive character, as distinguished from an opinion advising what the law would be upon a hypothetical state of facts." Id.

The Supreme Court's MedImmune decision "lowered the threshold" for showing an actual case or controversy in declaratory judgment actions. See AARP v. 200 Kelsey Associates, LLC, No. 06 Civ. 81 (SCR), 2009 WL 47499, at *6 (S.D.N.Y. Jan. 8, 2009); Micron Tech., Inc. v. Mosaid Tech., Inc., 518 F.3d 897, 902 (Fed. Cir. 2008) ("Whether intended or not, the now more lenient legal standard facilitates or enhances the availability of declaratory judgment jurisdiction."). Because declaratory judgment actions "are particularly useful in resolving trademark disputes . . . the finding of an actual controversy should be determined with some liberality." Young v. Vannerson, 612 F. Supp. 2d 829, 839 (S.D. Tex. 2009) (citing Starter Corp. v. Converse, Inc., 84 F.3d 592, 596 (2d Cir. 1996)).

Defendants' arguments rely primarily on Geisha, LLC v. Tuccillo, 525 F. Supp. 2d 1002 (N.D. Ill. 2007). (Motion at 6).

In Geisha, the plaintiff was a restaurant owner who owned a trademark for the restaurant's name. 525 F. Supp. 2d at 1007-08. The plaintiff filed a claim for declaration of infringement regarding the defendant's plan to open a restaurant using a stylized version of the same name in another city. Id. The defendant had never used the trademark but took the step of filing a verified intent-to-use application with the Patent and Trademark Office for a stylized mark which was "virtually identical" to the plaintiff's mark. Id. at 1006. The intent-to-use application stated that the defendant had a "bona fide intention to use the mark" in connection with "restaurant and lounge services." Id. In addition, the defendant had taken certain preparatory steps, including deciding on the type of food to be served, and searching for a location. Id. at 1007.

The court determined that the "actual preparations for opening a restaurant [did] not appear to have advanced significantly beyond [the defendant's] statement of intent." Id. at 1015. The court held that the defendant's stated intent to open the restaurant, combined with the preparatory steps, showed only "a mere and distant possibility of potentially infringing activity, rather than a real, immediate, or imminent threat." Id. at 1016.

Plaintiff contends that Geisha should not guide this Court's analysis here because Geisha was decided on the plaintiff's motion for summary judgment rather than a motion to dismiss, and therefore, applied a different legal standard. (Opposition at 8). The Court agrees. In concluding that the defendant's preparations for opening a restaurant did not advance significantly beyond mere intent, the Geisha court scrutinized the available evidence rather than accepting Plaintiff's allegations as true, as a court would on a motion to dismiss:

Tuccillo's preparations for opening his own "Japonais" restaurant . . . have consisted entirely of "play[ing] around with" a menu and searching for a suitable location. The former is of little consequence; and the latter activity would carry more significance but for the fact that Tuccillo's search for a property does not appear either serious or advanced. As of the time of his
deposition in January 2006, he had not found a location: he testified that he "do[es]n't have specific properties right now," and when asked directly if he had found a property, he answered that he merely "ha[s] some properties in mind." He was not using a real estate agent, and when asked to explain what he meant by "aggressively pursuing" a location, he answered, "I am out myself driving around and doing my due diligence."
Id. at 1015 (internal citations omitted).

Because the Geisha court was analyzing the declaratory relief claim through a significantly higher legal standard, Geisha has limited persuasive value with respect to the Court's decision here. The issue before the Court is not whether Plaintiff has produced evidence sufficient for the Court to determine as a matter of law that Plaintiff prevails on her declaratory relief claim. Instead, the question here is whether the allegations in the SAC support a declaratory relief claim that is plausible on its face. See Iqbal, 556 U.S. at 678.

Plaintiff argues that the Court should be guided by district courts analyzing this issue on a motion to dismiss. (Opposition at 5). Specifically, Plaintiff points to AARP v. 200 Kelsey Associates, LLC, 2009 WL 47499 (S.D.N.Y. Jan. 8, 2009). (Id.).

In AARP, the plaintiff was the publisher of a magazine who owned a trademark for the title of the magazine. 2009 WL 47499, at *1. The plaintiff filed a claim for declaration of infringement over the defendant's plan to launch a new magazine with the same name, targeted at the same audience. Id. In preparation for this launch, the defendants filed an intent-to-use trademark application with the United States Patent and Trademark Office, contacted potential publishers, generated written business plans concerning the design and sale of the magazine, and engaged in extensive market analysis. Id. The court determined that, even under the more demanding pre-MedImmune case law, the plaintiff had demonstrated an actual controversy because defendants had taken steps beyond merely stating an intent to use the trademark:

Far from relying solely on defendants' mere intent to infringe, which courts have found insufficient to demonstrate an actual controversy, plaintiff has
alleged that defendants have taken significant steps toward realizing that intent, including "actively seeking licensees to publish a magazine called 'Modern Maturity'" and "conduct[ing an] extensive analysis of the publishing industry."
Id. at *9. The court distinguished the allegations in complaint from the facts in Geisha, noting that, unlike in Geisha, the defendants' preparation had advanced significantly beyond the statement of intent. Id. (citing Geisha, 525 F. Supp. 2d at 1015).

Here, the SAC alleges that Franchisees have (1) purchased franchises from GGF; (2) committed themselves to open restaurants within 300 days of April 30, 2020; (3) identified locations for the restaurants in the same region as Plaintiff's restaurants; (4) committed themselves to using the name The Great Greek Mediterranean Grill. (SAC ¶¶ 15, 16, 104, 107).

With respect to the "case of actual controversy" requirement, the factual allegations in the SAC fall somewhere in between the relevant factual allegations in Geisha and AARP. On the one hand, the allegations here go beyond the allegations in Geisha because here the Franchisees have purchased franchises and identified locations, demonstrating that the "actual preparations for opening a restaurant" have advanced significantly beyond a mere statement of intent. Id. at 1015. On the other hand, the SAC's allegations fall short of showing that Defendants have engaged in the same level of preparation seen in AARP, where the defendants "generated written business plans concerning the design and sale of the magazine, and engaged in extensive market analysis." 2009 WL 47499, at *1.

On balance, the Court determines that this action is more analogous to AARP because, like the defendants in AARP, Defendants here have demonstrated more than a mere "intent" to use the allegedly infringing marks: Defendants purchased franchises, committed to opening the restaurants by a certain date, and identified the locations of the restaurants. (SAC ¶¶ 15, 16, 104). Therefore, even if Geisha's persuasive value were not already limited by the fact that it was decided under a different legal standard, the Court would not assign it great weight here because the facts are distinguishable.

At the hearing, Defendants reiterated their argument that Siegler v. Sorrento Therapeutics, Inc., No. 318CV01681GPCNLS, 2019 WL 3532294, at *20 (S.D. Cal. Aug. 2, 2019) is instructive. In Siegler, the plaintiff was a "an early stage micro-entity" in the pharmaceutical sales industry and sought an order declaring that the defendant's patent is invalid. 2019 WL 3532294 at *1. The district court explained that declaratory relief in this context requires "both (1) an affirmative act by the patentee related to the enforcement of his patent rights and (2) meaningful preparation to conduct potentially infringing activity." Id. at *19. The plaintiff alleged that the defendant took an affirmative act by filing for an "Assignee Showing Ownership per 37 CFR 3.73" form (the "Form") relating to the plaintiff's patent. Id. And the plaintiff alleged that she had undertaken meaningful preparation by (1) achieving the "pre-pre investigation new drug" milestone with the FDA, and (2) being in the process of "reach[ing] milestones that are needed to eventually gain entry to the US market as well as other markets following marketing approval by the applicable regulatory bodies." Id. (emphasis added).

The district court rejected both arguments, determining that filing the Form did not constitute an affirmative act of patent enforcement, and that the plaintiff had failed to persuade the court that being in the very early stages of development constituted "meaningful preparation" in this context. Id. The court explained that "[i]n general, the greater the length of time before potentially infringing activity is expected to occur, 'the more likely the case lacks the requisite immediacy.'" Id. (quoting Cat Tech. LLC v. TubeMaster, Inc., 528 F.3d 871, 881 (Fed. Cir. 2008)).

This Court does not find Siegler to be particularly instructive here, given that Siegler involved patent infringement, and part of the test applied by Siegler required the plaintiff herself to show that she had engaged in meaningful preparation relating to the use of the patent. The test here, in the context of trademark infringement, requires Plaintiff to show that Defendants have engaged in meaningful preparation to conduct potentially infringing activity. See AARP, 2009 WL 47499, at *9.

Even if Siegler were instructive here, the Court determines that Siegler is distinguishable: Defendants here have demonstrated more meaningful preparation to conduct potentially infringing activity than the plaintiff in Siegler. Defendants here signed agreements, agreed to open restaurants by a specific date, and identified specific locations for the restaurants. Because Defendants here appear to be much closer in time to conducting infringing activity than either party in Siegler, the Court determines that the persuasive value of Siegler is very limited.

On balance, the Court is satisfied that Plaintiff has sufficiently stated a claim for declaratory relief because the allegations in the SAC, taken as true, demonstrate that Franchisees have engaged in meaningful preparation to conduct activity that would infringe on Plaintiff's marks.

Accordingly, the Motion is DENIED.

Defendants shall file an Answer to the SAC on or before August 16, 2021.

IT IS SO ORDERED.


Summaries of

D&D Greek Rest., Inc. v. Great Greek Franchising, LLC

UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA
Aug 3, 2021
Case No. CV 20-9770-MWF (KSx) (C.D. Cal. Aug. 3, 2021)
Case details for

D&D Greek Rest., Inc. v. Great Greek Franchising, LLC

Case Details

Full title:D and D Greek Restaurant, Inc. v. Great Greek Franchising, LLC et al.

Court:UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA

Date published: Aug 3, 2021

Citations

Case No. CV 20-9770-MWF (KSx) (C.D. Cal. Aug. 3, 2021)

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