Northern Spirits Stillwater LLC v. Water to Wine LLC

Background

Northern Spirits alleged that it bought the assets of Water to Wine LLC’s Cellars Wine & Spirits store in Stillwater, Minnesota, for $450,000. The agreement included a three-year, 10-mile covenant not to compete and transferred the “Cellars Wine & Spirits” tradename to Northern Spirits. Chad Moe signed the agreement for Water to Wine and personally guaranteed paragraphs 4 and 5. Northern Spirits alleged that Moe continued operating a competing Cellars Wine & Spirits store in Hudson, Wisconsin, about 7.64 miles from the Stillwater store.

Northern Spirits’ amended complaint asserted five claims: breach of contract; violations of the Lanham Act and Minnesota’s Uniform Deceptive Trade Practices Act; fraud, misrepresentation, and deceptive practices; false advertising under Minnesota law; and unjust enrichment. Defendants moved under Federal Rule of Civil Procedure 12(c), which permits judgment on the pleadings, challenging Claims 2, 3, and 4. Northern Spirits agreed to voluntarily dismiss Claims 3 and 4. Defendants’ remaining argument focused on Northern Spirits’ failure to join Mobu LLC, which defendants identified as the owner and operator of the Hudson store.

Court’s analysis

The court denied the motion as to Water to Wine’s alleged liability under Claim 2. Although defendants submitted evidence that Water to Wine had dissolved, the court explained that dissolution did not itself eliminate the company’s ability or responsibility to defend claims concerning conduct before dissolution. The record also left a factual question about whether Water to Wine infringed the trade name before it dissolved.

The court concluded that Mobu was a “required party” under Rule 19(a), the rule governing parties who must be included in a lawsuit. Without Mobu, the court could not provide complete relief because an injunction against Water to Wine or Moe would not directly bind Mobu, which allegedly operated the Hudson store. The court also found that Mobu could have an interest in the disputed trade names. The court did not decide whether Mobu would ultimately be liable for infringement or whether Moe would be liable; it determined only that Mobu needed to be joined before those issues could be fully resolved.

The court found that joining Mobu was feasible and therefore that dismissal under Rule 19 was improper. It denied defendants’ Motion for Partial Judgment on the Pleadings as to Claim 2. The court granted Northern Spirits leave to file a second amended complaint adding Mobu and allegations against it under Claim 2, and Claims 3 and 4 were dismissed with prejudice pursuant to Northern Spirits’ voluntary dismissal. Judge Susan Richard Nelson signed the order.