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finding that a preliminary injunction requires more than prima facie showing
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03 Civ. 3870.
June 17, 2003.
DECISION AND ORDER
The matter now before the Court arises from a motion for a preliminary injunction: (i) restraining Chris Rogovich ("Rogovich") from having any involvement in Breakfast Club 80, LLC ("Breakfast Club") or from engaging or being interested in any dance club or bar within a 30-mile radius of the boundaries of New York City or Philadelphia that maintains a 1970s or 1980s theme; (ii) restraining Rogovich, Breakfast Club and Michael Van Leeuwen ("Van Leeuwen"), the owner of Breakfast Club, (collectively, "Defendants"), from operating a 1980's theme bar, nightclub or dance club at the current location of Breakfast Club; and (iii) restraining Defendants from disseminating or disclosing trade dress or other proprietary intellectual property, as well as all other confidential and proprietary information belonging to Do the Hustle, LLC ("DTH"), Timothy Ouellette ("Ouellette"), and Robert Watman ("Watman") (collectively, "Plaintiffs"). In response to Plaintiffs' request for an Order to Show Cause, the Court held a hearing on June 11, 2003 (hereinafter, the "Hearing") to consider the appropriateness of the injunctive relief Plaintiffs' seek. For the reasons the Court stated at the Hearing, and as more fully detailed below, Plaintiffs' request for a preliminary injunction is DENIED.
I. BACKGROUND
DTH operates a franchise consisting of several 1980s theme bars and dance clubs called "Culture Club" situated in a number of locations throughout the United States, including a Culture Club located in Tribeca, Manhattan. Ouellette and Watman are principals of DTH. Commencing in 1997, Rogovich was a limited owner of a number of Culture Cub franchises, and as such he was privy to the inner workings of the Culture Club establishments. In or about November 2001, Rogovich, Watman and Ouellette executed an Interest Purchase and General Release Agreement ("Purchase Agreement"), under which Rogovich sold to Watman and Ouellette his interest in the Culture Club establishments for $610,000.00. (See Purchase Agreement, attached as Exh. A to the Verified Complaint for Injunctive Relief and Damages and Demand for Jury Trial ("Complaint"), dated May 28, 2003.) As part of the Purchase Agreement, Rogovich agreed to covenants of non-competition and confidentiality. Among other restrictions imposed on Rogovich, the non-competition clause prevents Rogovich from having any involvement for two years with any 1980s theme bars, dance clubs, or nightclubs located within 30 miles of the boundaries of New York City or Philadelphia. Pursuant to the confidentiality clause, Rogovich is prevented from using or divulging any of Plaintiffs' proprietary or confidential information.
Rogovich had an interest in a number of Culture Club entities, including Culture Club of Houston LLC. However, because of The non-disparagement clause contained in paragraph 5 of the Purchase Agreement, Rogovich has opted not to detail his relationship with Ouellette and Watman prior to entering into the Purchase Agreement. (See Affidavit of Rogovich in Opposition to Plaintiff's Application for Interim Relief ("Rogovich Aff."), dated June 3, 2003 ¶ 9.) Since he indicates that he has never visited the Culture Club located in New York City, it is presumed that he did not have an interest in the Culture Club in that location. Rogovich Aff. ¶ 21.).
Breakfast Club is a bar and dance club, also employing a 1980s theme, which commenced operations on or about March 20, 2003. It is located in Old Bridge, New Jersey, which is approximately 15 miles from New York City (Staten Island) and slightly more than 30 miles from mid-Manhattan. Plaintiffs allege that Rogovich was involved with Breakfast Club since its inception and now serves as its manager. According to Plaintiffs, Rogovich's involvement with Breakfast Club violates the non-competition and confidentiality clauses of the Purchase Agreement by enabling improper use of his knowledge of DTH's trade dress in helping Defendants to plan and establish Breakfast Club. Moreover, Plaintiffs argue that Breakfast Club infringes DTH's trade dress because it has a similar appearance, promotional elements and 1980s theme decor and, due to its proximity to New York City, targets the same market of customers as the Culture Club located in Manhattan.
Rogovich responds that he was approached by Van Leeuwen in March of 2002 to discuss the formation of Breakfast Club, but that, because of a separate provision in the Purchase Agreement preventing Rogovich from being involved with any 1970s or 1980s theme bar, nightclub or dance club for one year, he actually began to be materially involved in Breakfast Club on November 1, 2002. Rogovich admits to the following "limited" involvement in Breakfast Club: (1) "brainstorming with [Van Leeuwen] regarding potential ideas for the bar (2) an investment in the [Breakfast Club] made on or about February 4, 2003; (3) accepting a position as a manager of Breakfast Club; (4) registering Breakfast Club website for promotional use on or about February 19, 2003." (Rogovich Aff. ¶ 9.) Rogovich also admits that he has breached the plain words of the Purchase Agreement, although he contends that he did so by mistakenly understanding the 30-mile restriction pertaining to "New York City" to refer only to Manhattan, and argues that any injunction now entered against him would be moot because he severed all ties with Breakfast Club upon learning of his unintended breach. Moreover, Rogovich argues that no irreparable harm could ensue from any alleged breach of contract on his part, in particular because the breach has already occurred and will not continue since, as Rogovich attests, he is no longer affiliated with Breakfast Club in any capacity.
Breakfast Club and Van Leeuwen argue that the Courts does not have personal jurisdiction over them, a New Jersey corporation and individual resident, respectively, because they do not have any contact with New York sufficient to subject them to New Jurisdiction either under New York law or the Due Process Clause of the United States Constitution. All three Defendants argue that DTH has no protectable trade dress and that any trade dress it might have has not been infringed by their actions under either the Lanham Act or New York unfair competition laws.
II. DISCUSSION
A. JURISDICTION
Breakfast Club and Van Leeuwen assert that the Court does not have personal jurisdiction over them because they do not have sufficiently substantial contacts with New York and because the Purchase Agreement between Rogovich and Plaintiffs can not confer jurisdiction upon the Court over a third-party not involved in the underlying contractual relationship.
Before a court can enter a preliminary injunction against a litigant, personal jurisdiction over that party must be "clearly established." Weitzman v. Stein, 897 F.2d 653, 658-659 (2d Cir. 1990). Ordinarily, a plaintiff need only make a prima facie case of jurisdiction before proceeding to trial, at which time personal jurisdiction must be definitively proven on the merits. However, upon a plaintiff's request for a preliminary injunction, "[a] prima facie showing of jurisdiction will not suffice. A court must have in personam jurisdiction over a party before it can validly enter even an interlocutory injunction against him." Visual Science Inc. v. Integrated Communications, Inc. 660 F.2d 56, 59 (2d Cir. 1981); accord 601 West 26 Corp. v. Solitron Devices, Inc., 291 F. Supp. 882, 895 (S.D.N.Y. 1968), aff'd, 420 F.2d 293 (2d Cir. 1969)). Moreover, "`the plaintiff must adequately establish that there is at least a reasonable probability of ultimate success upon the question of jurisdiction when the action is tried on the merits.'" Id. (quoting Industrial Electronics Corp. v. Cline, 330 F.2d 480, 482 (3d Cir. 1964)); see also Yurman Designs, Inc. v. A.R. Morris Jewelers, L.L.C., 41 Supp.2d 453 (S.D.N.Y. 1999). Plaintiffs in this case have not met the higher standard for establishing personal jurisdiction over Breakfast Club or Van Leeuwen necessary for the Court to order a preliminary injunction against them.
Plaintiffs argue that Breakfast Club's and Van Leeuwen's contacts with New York fit within the requirements of New York's Long-Arm Statute, Civil Practice Law and Rules ("C.P.L.R.") §§ 302(a)(1), (2), and (3), which provide:
(a) As to a cause of action arising from any of the acts enumerated in this section, a court may exercise personal jurisdiction over any non-domiciliary . . . who in person or through an agent: (1) transacts any business within the state or contracts anywhere to supply goods or services in the state (2) commits a tortious act within the state; or (3) commits a tortious act outside of the state causing injury to person or property within the state if he (i) regularly does or solicits of conduct, or derives substantial revenue from goods used or consumed or services rendered in the state or (ii) expects or should reasonably expect the act to have consequences in the state and derives substantial revenue from interstate or international commerce.
Plaintiffs assert that personal jurisdiction over Breakfast Club and Van Leeuwen exists under C.P.L.R. § 302(a)(2) because a tortious act (breach of the non-compete agreement) was committed by Rogovich within New York, while he was acting as an agent of Breakfast Club; and that therefore, Rogovich subjected Breakfast Club to personal jurisdiction in New York.
However, although the Court, pursuant to a provision of the Purchase Agreement itself, presumably would have jurisdiction over Rogovich for breach of the Purchase Agreement, that jurisdiction does not extend to Breakfast Club and Van Leeuwen because the contract does not purport to bind them to in personam jurisdiction in New York. Furthermore, the tortious conduct committed by Rogovich, even assuming he acted as an agent of Breakfast Club, was allegedly committed in New Jersey, through his involvement with Breakfast Club located in New Jersey. At a minimum, for the Court to obtain jurisdiction under C.P.L.R. § 302(a)(2), Defendants' tortious conduct must have been committed in New York. See Kramer v. Vogl, 215 N.E.2d 159, 160 (N.Y. 1966). Accordingly, Rogovich's tortious action, which on the record before the Court apparently occurred in New Jersey, would not create jurisdiction over Breakfast Club or Van Leeuwen in this forum.
Moreover, merely because Rogovich may be subject to personal jurisdiction in New York by reason of his breach of the Purchase Agreement, does not mean that he acted as an agent for Breakfast Club or Van Leeuwen while breaching his non-compete obligation. In fact, Breakfast Club and Van Leeuwen attest, and Plaintiffs do not dispute, that they were neither aware of, nor had any part in, the alleged breach. Under general agency principles, in order for liability for an agent's actions to be attributed to a principal, an agent must be acting within the scope of his employment, typically meaning that the principals were aware of and ratified or accepted the benefit of the unlawful conduct. See Restatement (Second) of Agency § 219 (1958). The Court is therefore not convinced that Rogovich's breach, if in fact completely unknown to Van Leeuwen or Breakfast Club, could create jurisdiction over those parties in New York.
Finally, even if Rogovich were acting as an agent for Breakfast Club when he breached the Purchase Agreement, Breakfast Club would be subject to personal jurisdiction in New York only for purposes of litigating the particular tortious act allegedly committed within the state — in this case, the breach of contract claim and not the trade dress infringement claim. Of course, Plaintiffs do not assert a breach of contract claim against Breakfast Club and Van Leeuwen who were not parties to the Purchase Agreement or subject in any way to its obligations.
To the extent that Plaintiffs allege that Defendants' trade dress infringement was committed in New York through a conspiracy with Rogovich (see Memorandum of Law in Support of Plaintiffs' Reply to Defendants' Opposition to Plaintiffs' Application for Preliminary Injunctive Relief ("Reply Mem."), at 14 n. 7), this theory has not been adequately pled or developed at this stage in the proceedings, as conceded by Plaintiffs. Moreover, the Court notes that Plaintiffs' attempted comparison with Best Cellars, Inc. v. Grape Finds at Dupont, Inc., 90 F. Supp.2d 431, 445 (S.D.N.Y. 2000) on the matter of personal jurisdiction is flawed because, in that case, the principal Defendants repeatedly visited the plaintiffs' "Best Cellars" wine store for the purposes of copying its setup, trade dress, and brochure information for their own wine store, "Grape Finds." Id. In the instant case, Rogovich asserts that he has never been to the Culture Club in New York City and that Van Leeuwen has never visited any Culture Club. (Rogovich Aff. ¶ 21; Affidavit of Michael Van Leeuwen, dated June 4, 2003, ¶ 14.).
Plaintiffs alternately assert that personal jurisdiction over Breakfast Club and Van Leeuwen exists under C.P.L.R. § 302(a) (3) (ii). In this regard, they allege that Defendants' conduct caused injury in New York by luring customers away from the Culture Club, by deceiving customers as to the origins of Defendants' services, and by trade dress infringement, thus meeting the first requirement of § 302(a) (ii) — a reasonable expectation that the act will have consequences in New York.See Cleopatra Kohlique, Inc. v. New High Glass, Inc., 652 F. Supp. 1254, 1254 (E.D.N.Y. 1987) (stating that the place where the plaintiff loses business is the situs of the injury). Moreover, Plaintiffs contend that the Defendants' own affidavits attest to the fact that they derive substantial revenue from interstate commerce, particularly from New York, although they cite no source or provide any evidence in support of this claim. (Reply Mem. at 15.)
In fact, according to the documentation supplied by Defendants, the opposite appears to be true. The Affidavit of Andrew P. Swary ("Swary Aff."), dated June 3, 2003, indicates that on Friday, May 31, 2003, only 3 of 209 patrons who frequented Breakfast Club were from New York, and 8 were from other states or foreign countries. (Swary Aff. ¶ 5). Breakfast Club contends that 95 percent of its customers come from within New Jersey, and that Van Leeuwen derives all of his income within New Jersey. (Id.) Plaintiffs point to no other specific source of interstate revenue derived by Defendants.
In Best Cellars, the only evidence of substantial revenue from interstate commerce was the defendant's admission that some of his liquor customers came from Virginia and Maryland. The court held that "in spite of the likelihood of such sales . . . the [defendant's] Grape Finds operation is essentially of a `local character,' and does not provide a basis for asserting jurisdiction." 90 F. Supp.2d at 448. This finding applies equally well to the facts in this case.
The one colorable basis for this Court's exercise of personal jurisdiction over Breakfast Club and Van Leeuwen, therefore, at least upon the current record, is pursuant to C.P.L.R. § 302(a)(1). Plaintiffs contend that Defendants' transaction of business in New York by using Rogovich and his New York Corporation, Tribeca Blues or "16 Warren Street Restaurant Corp.", to set up, administer and operate their website, www.breakfastclub80.com (the "Website"), for the purpose of advertising Breakfast Club provides a sufficient basis for the Court's personal jurisdiction.
Two elements must be satisfied before the Court may exercise personal jurisdiction under C.P.L.R. § 302(a)(1): the party must have purposely transacted business in New York, and the cause of action must arise out of such transaction. Regarding the first element, "proof of one transaction in New York is sufficient to invoke jurisdiction [under § 302(a)(1)], even though the defendant never enter[ed] New York, so long as the defendant's activities here were purposeful. . . ." PDK Labs, Inc. v. Friedlander, 103 F.3d 1105, 1109 (2d Cir. 1997) As for the second element, there must be "a substantial relationship between the transaction and the claim asserted." Kreutter v. McFadden Oil Corp., 522 N.E.2d 40, 43 (1988) (emphasis added). The Second Circuit has also elaborated on this element, noting that "[a] cause of action arises out of a defendant's New York transactions when it is `sufficiently related to the business transacted that it would not be unfair to deem it to arise out of the transacted business.'" PDK Labs, 103 F.3d at 1109 (quoting Hoffritz for Cutlery, Inc. v. Amajac, Ltd., 763 F.2d 55, 59 (2d Cir. 1985)) (emphasis added).
In sum, in order to fulfill the requirements of C.P.L.R. § 302(a)(1), Plaintiffs need to show that: (1) Breakfast Club, or Rogovich acting as the agent of Breakfast Club, transacted business in New York in connection with the creation, publication or administration of the Website; and (2) there exists a "substantial relationship" between this transaction and the claims asserted by Plaintiffs. Although at the Hearing Defendants indicated that Rogovich and his New York corporation are no longer involved with the Website, jurisdiction may still be proper based on Defendants' past actions.
Moreover, at the Hearing, Defendants argued that the Website did not confer jurisdiction on the Court because its content is passive as opposed to active. See, e.g., Zippo Manufacturing Co. v. Zippo Dot Cor, Inc., 952 F. Supp. 1119, 1124 (W.D.Pa. 1997); Bensusan Restaurant Corp. v. King, 937 F. Supp. 295 299 (S.D.N.Y. 1996). However, as the Court understands Plaintiffs' argument, jurisdiction is not alleged because the content of the Website reaches New York citizens, as it does all locations where the internet is accessible, but because a business transaction was conducted by the Breakfast Club and Van Leeuwen in New York by setting up and maintaining the Website there.
However, the extent to which operation of the Website by Rogovich's New York corporation creates jurisdiction over Defendants is still unclear because personal jurisdiction inquiries under C.P.L.R. § 302(a)(1) are "necessarily fact sensitive." Id. at 1108. The court must "look at the aggregation of defendant's activities. . . . Moreover, it is the `nature and quality, and not the amount of New York contacts [which] must be considered by the court.'" Hearst Corp. v. Goldberger No. 96 Civ. 3620, 1997 WL 97097, at *9 (S.D.N.Y. Feb. 26, 1997).
Furthmore, the Court lacks certain material factual information essential to assist it in making an informed decision on this point. The only information currently in the record concerning this matter is that the Website providing information about Breakfast Club, including, among other things, directions to the Club, the Club's food and drink offerings, and opportunities to host special parties and events at the Club, is registered to Tribeca Blues, listed on the Website registry at 10 Prospect St., Demarest, N.J. 07627. Rogovich is also listed as the administrative and technical contact for the Website. Moreover, as conveyed by Plaintiffs at the Hearing and evident from their submissions, a considerable part of the allegedly infringing trade dress is displayed on the Website.
Plaintiffs contend that Tribeca Blues is a restaurant wholly-owned by Rogovich and located in New York. (See Reply Mem. at 13.).
The case law suggests that the following factual issues, which are not clearly articulated in the record before the Court, would be relevant to the inquiry at hand: (1) whether or not the Website was created or "published" in New York, see Hearst Corp., 1997 WL 97097, at *10, or whether the Website is hosted on a web server that is physically located in New York; (2) whether or not Breakfast Club or its agent sent files (presumably via email) to a web server located in New York, for the purpose of posting content to the Website, see Christian Science Bd. of Directors of the First Church of Christ, Scientist v. Nolan, 259 F.3d 209, 216 (4th Cir. 2001);Compuserve, Inc. v. Patterson, 89 F.3d 1257, 1263-64 (6th Cir. 1996); and (3) whether or not Breakfast Club or its agent, when creating and publishing the Website, entered into any contracts with a web server or other website service provider in New York,see Christian Science Bd., 259 F.3d at 216.
The degree of substantiality of the relationship between the Website transactions and the claims asserted by DTH depend on the exact nature of those transactions, which have yet to be clarified. Therefore, if the Website content, which contains alleged trade dress infringements, was physically created and published in New York, and hosted on New York servers, and especially if the contractual transaction under which Rogovich or his corporation undertook to service the Website was entered into in New York, then a sufficient relationship likely exists for this Court to exercise personal jurisdiction over Defendants for those alleged infringements. However, even if the trade dress claims related to the Website are substantially related to Defendants' alleged business transaction in New York — setting up the Website — the Court's further jurisdiction under C.P.L.R. § 302(a)(1) to issue an injunction concerning alleged trade dress infringements occurring at Breakfast Club, separate and apart from the Website, is another jurisdictional leap that the Court cannot make without proper basis. In other words, the substantial nexus requirement must be further satisfied with regard to alleged trade dress infringements not occurring on the Website if personal jurisdiction is to be properly established to support granting an injunction relating to the operation of Breakfast Club, as well as the Website.
Thus, because Plaintiffs have not satisfied their burden to establish a basis for in personam jurisdiction over Breakfast Club and Van Leeuwen with the requisite clarity, documentation and persuasiveness, the Court finds that issuing an injunction against Breakfast Club and Van Leeuwen at this stage in the proceedings would be improvident.
B. STANDARD OF REVIEW
In order to prevail on a motion for a preliminary injunction, the moving party must establish irreparable harm and either (1) a likelihood of success on the merits of the underlying claim or (2) sufficiently serious questions going to the merits of the claim and a balance of hardships tipping decidedly in the movant's favor. See Kamerling v. Massanari, 295 F.3d 206, 214 (2d Cir. 2002)
C. IRREPARABLE HARM
1. Request to Restrain Rogovich from Breaching Purchase Agreement
The Second Circuit has noted that the irreparable harm requirement is "the single most important prerequisite for the issuance of a preliminary injunction." Rodriguez v. DeBuono, 175 F.3d 227, 234 (2d Cir. 1999) (per curiam) (citations omitted). As a result, unless the party moving for a preliminary injunction can show that the alleged injury "`is neither remote nor speculative, but actual and imminent and . . . cannot be remedied by an award of monetary damages,' a motion for a preliminary injunction should be denied." Levinson v. Cello Music Film Sys., Inc., 199 F.3d 1322 (2d Cir. 1999) (unpublished disposition) (quoting Rodriguez, 175 F.3d at 234); see also Electrolux Corp. v. Val-Worth, Inc., 161 N.E.2d 197 (N.Y. 1959) (the extraordinary relief afforded by an injunction is protection for the future and is not proper unless there is imminent danger of an injury).
With regard to Plaintiffs' claims against Rogovich for breach of the Purchase Agreement, the Court finds unconvincing Plaintiffs' argument that an injunction is necessary to restrain Rogovich's actions on account of the alleged irreparable harm being done to their interests. First, at the Hearing and in his submissions, Rogovich concedes his breach of the Purchase Agreement and attests that it occurred by error on his part and that he has voluntarily desisted from any further connection with Breakfast Club. Plaintiffs argue that despite Rogovich's statement that he will no longer be involved in Breakfast Club, he must be restrained because his demonstrated willingness to violate the Purchase Agreement makes his assurances insufficient to placate their concerns. Further, they contend that any further breaches of the Purchase Agreement would cause irreparable harm to them.
Such speculative fears ascribing dishonesty to Rogovich, however, are not immediate enough to justify the extraordinary remedy of a preliminary injunction. Moreover, as a consequence of any additional breach of the Purchase Agreement by Rogovich, at most Plaintiffs would incur lost profits through unlawful competition. However, "the possibility of monetary loss does not present a risk of irreparable harm." Manhattan Cable Television, Inc. v. Cable Doctor, Inc., 824 F. Supp. 34 (S.D.N.Y. 1993); accord Borey v. Nat'l Union Fire Ins. Co. of Pitt. Penn., 934 F.2d 30, 34-35 (2d Cir. 1991) ("Monetary loss alone will generally not amount to irreparable harm."); Tucker Anthony Realty Corp. v. Schlesiger, 888 F.2d 969, 975 (2d Cir. 1989) ("A monetary loss will not suffice unless the movant provides evidence of damage that cannot be rectified by financial compensation.") Though the Purchase Agreement mentions the possibility of irreparable harm caused by any breach, that circumstance alone is not sufficient to demonstrate irreparable harm in this case. Nor is the Court persuaded that any damages Plaintiffs may establish would be so difficult to quantify as to warrant injunctive relief.
2. Trade Dress Infringement
As regards Plaintiffs' trade dress allegations, in a case involving trade dress infringement charges under the Lanham Act, 15 U.S.C. § 1125, irreparable harm is presumed if the plaintiff can demonstrate a likelihood of success on the merits of the infringement claim. See Fun-Damental Too, Ltd. v. Gemmy Indus. Corp., 111 F.3d 993, 999 (2d Cir. 1997). Accordingly, a finding of likelihood of confusion between the trade dresses in question generally provides sufficient grounds to justify issuance of a preliminary injunction, without further evidence of actual injury. See id.; Best Cellars, 90 F. Supp.2d at 449. Therefore, such a finding is essential as a basis for injunctive relief with regard to Plaintiffs' trade dress claims. However, as discussed below, the strength of Plaintiffs' claim of confusion is inadequate to justify an injunction at this stage in the proceedings.
D. SUCCESS ON THE MERITS
A preliminary injunction will not be granted unless the rights of the parties are "indisputably clear." Brown v. Gilmore, 533 U.S. 1301, 1303 (2001); Turner Broad. Sys. Inc. v. Fed. Communications Comm'n, 507 U.S. 1301, 1303 (U.S. 1993);Rosemont Enterp. v. Random House Inc., 366 F.2d 303, 311 (2d Cir. 1966) ("A preliminary injunction is always a drastic remedy and the one seeking to invoke such stringent relief is obliged to establish a clear and compelling legal right thereto based upon undisputed facts.") (internal quotation omitted). Moreover, "[t]he burden upon the moving party is heightened when the movant seeks to disturb the status quo by ordering affirmative relief, as opposed to preserving the status quo by prohibiting the non-movant from altering the status quo." West v. Keane, No. 93 Civ. 6680, 1995 WL 434306 (S.D.N.Y. June 24, 1995);accord Johnson v. Kay, 860 F.2d 529, 540 (2d Cir. 1988); see also Tom Doherty Assocs., Inc. v. Saban Entertainment, Inc., 60 F.3d 27, 34 (an injunction that alters the status quo can only issue "upon a clear showing that the moving party is entitled to the relief requested, or where extreme or very serious damages will result from the denial of preliminary relief.") Essentially, to alter the status quo, and thus effectively obtain all the relief to which the moving party would be entitled were he to prevail on the merits, the movant must make an even greater demonstration of likelihood of success than he would in connection with an injunction that maintains the status quo. See Saban Entertainment, 60 F.3d at 24.
To show a likelihood of success in a claim asserting trade dress infringement, the plaintiff must establish that: (i) the trade dress is primarily non-functional, where, as here, the dress has not been registered; (ii) the trade dress is either inherently distinctive or has become distinctive because it has acquired secondary meaning; and (iii) there is a likelihood of confusion between the trade dresses at issue. See Taco Cabana Int'l v. Two Pesos, Inc., 932 F.2d 1113, 1119 (5th Cir. 1991),aff'd, 505 U.S. 763 (1992); L J.G Stickley v. Canal Dover Furniture Co., Inc., 79 F.3d 258, 262 (2d Cir. 1996);Fun-damental, 11 F.3d at 999. In this case, Defendants do not dispute that, taken as a whole, Plaintiffs' alleged trade dress is non-functional. Rather, they challenge Plaintiffs' satisfaction of the second two elements of the test. The Court, therefore, turns to these elements.
1. Distinctiveness of the Trade Dress
The inherent distinctiveness of a trademark or trade dress is evaluated under the test set forth by the Second Circuit inAbercrombie Fitch Co. v. Hunting World, Inc., 537 F.2d 4, 9 (2d Cir. 1976), based on various classifications of trade dress:
Trade dress is classified on a spectrum of increasing distinctiveness as generic, descriptive, suggestive, or arbitrary/fanciful. Suggestive and arbitrary or fanciful trade dress are deemed inherently distinctive and thus always satisfy the first prong of the test for protection. A descriptive trade dress may be found inherently distinctive if the plaintiff establishes that its mark has acquired secondary meaning giving it distinctiveness to the consumer. A generic trade dress receives no Lanham protection.Fun-Damental, 111 F.3d at 1000 (citing Two Pesos, 505 U.S. at 768-769). In a trade dress action such as the instant case, where the trade dress alleged is a combination of many factors and encompasses the overall look and feel of a theme restaurant, the test does not concern classification of specific elements of the alleged trade dress. Rather, if the trade dress as a whole is determined to be arbitrary or suggestive, the trade dress of the establishment is inherently distinctive, despite incorporation of generic or functional elements. See Jeffrey Milstein, Inc. v. Greger, Lawler, Roth, Inc., 58 F.3d 27, 31-32 (2d Cir. 1995).
Moreover, the Second Circuit has held that "[b]ecause there is a `virtually unlimited' number of ways to combine elements to make up the total visual image that constitutes a trade dress, `a product's trade dress typically will be arbitrary or fanciful and meet the inherently distinctive requirement for § 43(a) protection.'" Fun-damental, 111 F.3d at 1000; accord Best Cellars, 90 F. Supp. at 451. In other words, although a genre or theme can not be protected — in this case, for example, a 1980s theme bar — Culture Club's concrete expression of that theme may be entitled to protection. See Jeffrey Milstein, 58 F.3d at 32-33. Similarly, in determining whether an inherently distinct trade dress exists, a central inquiry is whether there are many alternative applications of the general theme, and the application at issue is just one option, or whether Plaintiffs are attempting to dominate and monopolize all 1980s theme bars. See Abercrombie, 280 F.3d at 643 ("The lack of comparable alternatives to pleasing design features means that granting an injunction would deny consumers the benefits of a competitive market.")
Here, Plaintiffs' assert that their trade dress consists of: (i) murals on the interior walls with photographs and posters of 1980s popular culture, (ii) checkerboard patterns on the signs, walls and dance floors, (iii) De Lorean cars, (iii) oversized Rubik's Cubes, (iv) security personnel known as "Peace Patrol," (v) television monitors playing 1980s shows and movies, (vi) drinks featuring 1980s themes, (vii) "Pac-Man" logos, (viii) promotions for being the "Bachelorette Party Headquarters," (ix) the double entendre use of the name "Culture Club".
Plaintiffs allege that Breakfast Club's trade dress was copied directly from Culture Club. In fact, the elements of DTH's trade dress described above are all used in some fashion at Breakfast Club. However, a significant portion of this trade dress can fairly be described as descriptive, in that the particular features are merely descriptive tools that identify a 1980s theme bar. See Two Pesos, 932 F.2d at 1120 ("`A descriptive term identifies a characteristic or quality of an article or service . . . such as its color, odor, function, dimensions, or ingredients.'") (quoting Zatarains Inc. v. Oak Grove Smokehouse, Inc., 698 F.2d 786, 790 (5th Cir. 1983)). Such descriptive elements are the 1980s theme drinks, television monitors playing 1980s movies and shows, and murals with photographs of 1980s icons. On the other hand, some of the elements of DTH's trade dress are more arbitrary or fanciful, or at least suggestive: "Bachelorette Party Headquarters," the De Lorean cars, security officers called "Peace Patrol" and promotion as "Bachelorette Party Headquarters." Other features fall in the middle. The question is whether, overall, the trade dress is distinctive. See id. (". . . the existence of descriptive elements does not eliminate the possibility of inherent distinctiveness in the trade dress as a whole. The whole, in trademark law, is often greater than the sum of its parts.") (internal quotations omitted).
Given the use of these arbitrary 1980s features within their theme clubs, coupled with other more descriptive or generic elements, Plaintiffs conceivably could make a valid claim that, taken as a whole, their particular style of 1980s theme club is inherently distinct. In other words, a competing 1980s theme club need not use these particular manifestations of a 1980s theme in order to compete for 1980s theme club patrons. Rather, what the Culture Club is seeking to protect is a particular application of the 1980s theme, not the entire 1980s theme.
However, as a general matter, this inquiry is very fact intensive and somewhat difficult to determine on the basis of the record now before the Court. A determination also depends on the extent to which the 1980s features used by DTH are arbitrary as opposed to simply descriptive, a finding subject to varying perceptions of how basic the particular features are to a 1980s club. It is clear that the features at issue here are less arbitrary, as a whole, than those found in Best Cellars, where evidence was presented as to the uniqueness of the plaintiff's store as compared to other wine stores. By contrast, in this case Plaintiffs do not provide similar information concerning other 1980s theme clubs.
On the other hand, the facts in this case may be analogous to those in Two Pesos, which held that a distinct trade dress existed in a Mexican theme restaurant based on vibrant colors, a fiesta atmosphere with jubilant paintings and murals, the use of open and enclosed terraces, as well as the waiters' costumes. InTwo Pesos, the existence of the trade dress was determined as a factual matter by the jury. The inherent distinctiveness of Culture Club's trade dress is therefore an issue that warrants evidentiary elaboration and factual findings.
Although it is possible, and even likely, that DTH can establish an inherently distinctive, protectable trade dress at Culture Club, such a finding is not sufficiently clear, based on the evidentiary record Plaintiffs have presented, to meet the heightened standard for success on the merits applicable in this case to justify the extraordinary remedy they seek. Moreover, even if DTH is likely to demonstrate a protectable trade dress, as discussed below, DTH does not present sufficiently convincing proof of the likelihood of confusion between the Culture Club and Breakfast Club to warrant a preliminary injunction.
2. Existence of Secondary Meaning
Another avenue available to Plaintiffs to demonstrate a likelihood of success is a finding of secondary meaning. To establish secondary meaning, a party must show that "in the minds of the public, the primary significance of a product feature . . . is to identify the source of the product rather than the product itself." Inwood Labs., Inc. v. Ives Labs., Inc., 456 U.S. 844, 851 n. 11 (1982). However, in this case, sufficient evidence has not been produced by Plaintiffs to satisfy this rigorous standard. Laureyssens v. Idea Group, Inc., 964 F.2d 131, 136 (2d Cir. 1992) ("[P]roof of secondary meaning entails vigorous evidentiary requirements.") To prove secondary meaning in the Second Circuit, the plaintiff must present evidence including: "(1) advertising expenditures; (2) consumer studies linking the dress to the source; (3) unsolicited media coverage of the product; (4) sales success; (5) attempts to plagiarize the dress; and (6) length and exclusivity of the use." Stickley, 79 F.3d at 263; Centaur Comm. Ltd. v. A/S/M/ Comm., Inc., 830 F.2d 1217, 1222 (2d Cir. 1987).
Although in their Reply to Defendants' Opposition, Plaintiffs include affidavits attesting to their ability to satisfy this standard, further debate and evidence would be necessary on this point to support injunctive relief.
3. Likelihood of Confusion
However, even assuming that Plaintiffs sufficiently met their burden of demonstrating a distinctive trade dress, in order for a preliminary injunction to ensue, they must also show a likelihood of confusion. On this point, Plaintiffs' case for injunctive relief is more tenuous. Courts in the Second Circuit apply an eight-factor test to determine whether there is a likelihood of confusion between the trade dress of two competitors:
(1) the strength of the plaintiff's trade dress, (2) the similarity between the two trade dresses, (3) the proximity of the products in the market place, (4) the likelihood that the prior owner will bridge the gap between the products, (5) evidence of actual confusion, (6) the defendant's bad faith, (7) the quality of defendant's product, and (8) the sophistication of the relevant consumer group.Fun-Damental, 111 F.3d at 1002-03 (citing Polaroid Corp. v. Polarad Elecs. Corp., 287 F.2d 492 (2d Cir. 1961); accord Best Cellars, 90 F. Supp.2d at 453.
The strength of the trade dress is an amorphous factor, but, as explained above, conceivably DTH can make out a valid claim for a reasonably distinct trade dress for Culture Club's look and feel in its entirety. However, even if distinct, the extent of the distinction, on the evidentiary record here does not strike this Court as particularly strong. Furthermore, at this point in the proceedings, the physical proximity of the two establishments does not clearly weigh in favor of either party. On the one hand, given the distance between the two clubs, approximately 30 miles, it is possible that they may compete for some of the same New Jersey clientele. On the other hand, Defendants have proffered evidence that the vast majority of Breakfast Club patrons are local New Jersey residents. (See Swary Aff.) The location of Breakfast Club in Old Bridge New Jersey, presumably a suburban community that reflects a far different geographical and demographic market than the cosmopolitan site of the Culture Club, weighs against a finding of significant proximity.
The bad faith element may weigh in favor of Plaintiffs, since Rogovich was admittedly involved from near the inception of Breakfast Club and was likely responsible for many of the similarities between the two establishments, in violation of the Purchase Agreement. Despite Rogovich's assertion in his submissions and at the Hearing that he mistakenly understood the Purchase Agreement to mean 30 miles from Manhattan as opposed to the plain language, "New York City," such a lack of understanding of the plain words in the contract does not excuse his breach.
However, it is upon consideration of the similarities of the trade dresses where, as a factual inquiry, the inappropriateness of an injunction here is clear. Pictures submitted by Rogovich demonstrating the overall look and feel of the two theme clubs, attached as Exhibits D and E to the Rogovich Affidavit, particularly weaken Plaintiffs' claim to injunctive remedy. Essentially, Breakfast Club appears to be a significantly smaller, less elaborate bar; it employs a modest dance floor, and mostly caters to local clientele. The marked difference in scale between the two clubs is evident not only by the vast contrast in appearance, but also in the Breakfast Club's more limited use of photos, signs and video equipment as compared to the Culture Club. The Culture Club's walls are decorated with painted murals, whereas the Breakfast club employs a handful of posters for this purpose. While the Culture Club has multiple television screens playing movies and shows from the 1980's, the Breakfast Club has one screen, that usually features sporting events.
Plaintiffs point out that a number of the same features or elements of their trade dress are used by Breakfast Club: security guards dressed as "Peace Keepers," the double entendre of "Club" in the two names and the promotion of identical logos "Bachelorette Party Headquarters." However, as a whole, the use of such features, as well as more generic elements such as a checkerboard dance floor and 1980s theme mixed drinks, coupled with the vastly different overall appearance and scale of the two establishments, makes the likelihood of confusion remote. The trade dress of the two establishments at issue here appears to be significantly less similar than those involved in Two Pesos or Best Cellars. Fundamentally, despite some similarities, the Culture Club appears to have the look and feel of a New York City dance club featuring a 1980s theme, while Breakfast Club looks more like a suburban bar with a small dance floor and some 1980s decorations.
While all the factors laid out in Polaroid are relevant, the fact that these two establishments are fundamentally dissimilar, even if they use certain similar features, makes the high standard applicable to establishing a likelihood of success on the merits difficult for Plaintiffs to meet. Absent a stronger demonstration than presented here of actual similarity likely to confuse patrons, a preliminary injunction is inappropriate.
Similarly, Plaintiffs have not made any showing of actual confusion, and given the vast differences in appearance of the two clubs, such a failure is significant. Although "it is black letter law that actual confusion need not be shown to prevail under Lanham Act, since actual confusion is very difficult to prove and the Act requires only a likelihood of confusion as to source", Lois Sportswear, U.S.A. v. Levi Strauss Co., 799 F.2d 867, 875 (2d Cir. 1986), in this case, given the lack of overall similarity of these two establishments, such a showing is important. It should be noted, however, that since Breakfast Club has only been open for a few months, evidence of actual confusion would be difficult for Plaintiffs to present at this stage in the proceedings.
E. UNFAIR COMPETITION
"Under New York law, common law unfair competition claims closely resemble Lanham Act claims except insofar as the state law claim may require the additional element of bad faith or intent." Girl Scouts of the United States of America v. Bantam Doubleday Dell Publ'g Group, Inc., 808 F. Supp. 1112, 1131 (S.D.N.Y. 1992). The central inquiry to obtain a preliminary injunction under the Lanham Act — demonstrating the likelihood of confusion — is equally applicable under New York State law.See Educational Testing Service v. Touchstone Applied Science Assoc., Inc., 739 F. Supp. 847, 849 (S.D.N.Y. 1990)). Accordingly, the extent to which the unfair competition claim warrants a preliminary injunction tracks Plaintiffs' trade dress infringement claim. See Best Cellars, 90 F. Supp.2d at 458. As such, the failure of Plaintiffs to satisfy their burden of persuasion as to their trade dress allegations is fatal for their unfair competition claim as well.
F. SCOPE OF PRELIMINARY INJUNCTION
Even if an injunction would be appropriate in this case, the injunction requested by Plaintiffs is draconian in scale, asking that Breakfast Club be shut down in its entirety, and that no other 1980s nightclub be permitted to operate in that location. In Best Cellars, the district court tailored the injunction to those elements of the trade dress that were distinct and caused confusion because of compelling evidence that they were copied by the defendants. 90 F. Supp.2d at 458. Here too, if Plaintiffs could succeed in making a case for trade dress infringement, it appears that a curtailing of some, but not all, of the trade dress elements of the Culture Club allegedly copied by Defendants would sufficiently provide all the relief to which the Culture Club would be entitled.
III. ORDER
Accordingly, it is hereby
ORDERED that Plaintiffs' request for a preliminary injunction restraining Rogovich from breaching the Purchase Agreement and restraining all the Defendants from operating a 1980s theme bar at the current location of Breakfast Club or from disclosing trade dress or other proprietary information is DENIED; and it is further
ORDERED that the parties confer and submit to the Court, within ten days fo the date of this Order, an agreed-upon Case Management Plan in the form provided by the Court, setting forth proposed dates for completion of pretrial proceedings.