Asset Co IM Rest, LLC v. Katzoff

Background

Plaintiffs Asset Co IM Rest, LLC, Il Mulino Joint Ventures, LLC, and Receivables IM Rest, LLC sued Gerald “Jerry” Katzoff, IMNY GS, LLC, West 3rd Holdings, LLC, West 3rd Products, LLC, IM LLC-I, and GFB Restaurant Corp. The complaint alleges that the defendants unlawfully used Il Mulino intellectual property, including trademarks, trade dress, recipes, trade secrets, processes, formulas, and operational know-how.

The dispute involves two restaurants. Il Mulino Tribeca operated at 361 Greenwich Street under a sublicense of Il Mulino intellectual property. After that restaurant closed, a new restaurant called Il Giglio Tribeca opened in the same space. The complaint alleges that Katzoff directed the transfer of property from Il Mulino Tribeca to West 3rd Holdings and West 3rd Products and that Il Giglio Tribeca used Il Mulino intellectual property. The complaint also alleges that GFB continued using Il Mulino intellectual property at Il Mulino West 3rd Street after a license expired in September 2022.

The complaint asserts fourteen claims, including federal trademark infringement and unfair competition, infringement and breach of the intellectual-property license, common-law unfair competition, conversion, unjust enrichment, a voidable transaction, breach of fiduciary duty, a faithless-servant claim, and breach of a promissory note. The court had previously granted the plaintiffs’ request for a preliminary injunction in part concerning alleged trade-dress violations at Il Giglio Tribeca.

Motions and rulings

The defendants moved under Federal Rules of Civil Procedure 12(b)(1), 12(b)(6), and 12(e). Rule 12(b)(1) concerns subject-matter jurisdiction, Rule 12(b)(6) concerns whether a complaint states a legally sufficient claim, and Rule 12(e) allows a party to seek a more definite statement when a pleading is too vague or ambiguous to answer.

The court held that the earlier bankruptcy proceeding did not bar the plaintiffs’ claims concerning Il Mulino West 3rd Street under claim preclusion, also called res judicata. The court reasoned that the present claims were based on alleged use after the GFB License expired in September 2022, while the earlier bankruptcy decision was issued in 2021. The present claims therefore could not have been brought in the earlier proceeding. The court did not decide whether issue preclusion, a separate doctrine, might apply because the defendants did not ask for dismissal on that basis.

The court also rejected Katzoff’s and GFB’s argument that the plaintiffs lacked statutory standing to bring trademark-infringement claims under 15 U.S.C. § 1114(1). The court explained that an exclusive licensee must show that its license effectively transferred an ownership interest in the trademarks. At the pleading stage, the allegations about IM Asset Co’s exclusive, perpetual, royalty-free rights; its ability to transfer, sublicense, or assign those rights; the restrictions on IM LLC-I’s rights; and its ability to pursue infringement were sufficient to allow the claims to proceed. The court noted that this conclusion could change after additional evidence at summary judgment or trial.

The court granted GFB’s motion to dismiss Count 5 to the extent that Count 5 concerns alleged infringement at Il Giglio Tribeca because the complaint did not allege GFB’s involvement in operating or infringing at that location. The court granted W3H’s motion to dismiss Counts 5, 7, and 8 to the extent those counts concern alleged infringement at Il Mulino West 3rd Street because the complaint did not allege W3H’s involvement at that restaurant.

The court denied W3P’s ripeness challenge to Counts 1, 2, 5, 9, 10, and 11. It held that the complaint plausibly alleged W3P’s involvement in the transfer of property and in the operation of Il Giglio Tribeca. The court stated that the factual basis for those allegations could be tested through summary judgment or trial rather than dismissal at the pleading stage.

The court also rejected W3P’s challenge to allegations made “upon information and belief.” Under the ordinary pleading standard applicable here, such allegations may proceed when the relevant facts are mainly within the defendant’s control or when the surrounding facts make the alleged misconduct plausible. The court found both conditions satisfied.

The court denied the defendants’ arguments that it lacked supplemental jurisdiction over the state-law claims. Supplemental jurisdiction allows a federal court to hear related state-law claims arising from the same core facts as federal claims. The court found substantial factual overlap between the federal trademark and trade-dress claims and the state-law claims concerning the intellectual-property license, the transfer of restaurant property, the parties’ business relationship, and the opening of Il Giglio Tribeca. It also held that this reasoning supported jurisdiction over the breach-of-promissory-note claim against IMNY GS.

Finally, the court denied all defendants’ Rule 12(e) motions. Although the complaint sometimes referred to “Defendants” collectively, its claim headings identified the defendants named in each count. The court concluded that the complaint was not so vague or ambiguous that the defendants could not reasonably answer it.

Disposition

The court grants GFB’s motion to dismiss Count 5 to the extent it pertains to alleged infringement occurring at Il Giglio Tribeca. The court grants W3H’s motion to dismiss Counts 5, 7, and 8 to the extent they pertain to alleged infringement occurring at Il Mulino West 3rd Street. Defendants’ motions are otherwise denied. The defendants must answer the complaint within two weeks of the Opinion and Order.