Great Mill Rock LLC v. Stellex Capital Management LP

Background

Great Mill Rock LLC, Christopher Whalen, and Adi Pekmezovic sued Stellex Capital Management LP, Stellex Capital Management LLC, and J. Anthony Braddock. The plaintiffs alleged claims involving trademark and copyright ownership, unfair competition, false advertising, deceptive business practices, conversion, fraudulent inducement, and interference with prospective business opportunities.

The plaintiffs alleged that they created the “Mill Rock” trademarks and website text and that Stellex received only a limited, revocable license to use the marks in connection with proposed investment funds. They also alleged that Stellex later claimed ownership of the marks, filed trademark applications in its own name, withheld mail and electronic files, and interfered with the plaintiffs’ business dealings.

The parties had signed memoranda of understanding concerning the proposed funds. The documents addressed the plaintiffs’ roles, compensation, responsibilities, and branding work for those funds, but did not state who owned intellectual property or mention “Mill Rock.” The plaintiffs alleged that the parties also reached an unsigned oral agreement covering the proposed funds and separate investment transactions.

Motion and standard

Defendants moved under Federal Rule of Civil Procedure 12(b)(6), which permits dismissal for failure to state a legally sufficient claim. The court had to accept the complaint’s well-pleaded factual allegations as true and draw reasonable inferences in the plaintiffs’ favor. The court considered the memoranda of understanding because the complaint described and relied on them, but it did not consider W-2 forms submitted by defendants because the complaint did not mention or rely on those forms.

Court’s reasoning

Defendants argued that Stellex owned the trademarks and website text because the plaintiffs first used them while working for Stellex. The court rejected dismissal at this stage. It concluded that the memoranda of understanding focused on the proposed funds and did not, on their face, prevent an oral agreement concerning separate investment activities. The documents also did not expressly assign Stellex ownership of the disputed trademarks or website text.

The court explained that the plaintiffs might ultimately be unable to prove the alleged oral agreement or ownership claims, but the complaint plausibly alleged its existence. Because the parties disputed what agreement governed their relationship and who owned the intellectual property, the court concluded that discovery was necessary. The court stated that all of the challenged claims survived the motion to dismiss for the same basic reason: their outcome depended on whether the memoranda were binding and what matters they covered.

Ruling

Chief Judge Colleen McMahon denied defendants’ motion to dismiss. She declined to convert it into a motion for summary judgment and gave the parties 120 days to complete discovery, after which defendants could renew their arguments in a summary-judgment motion.

The court also addressed a dispute over emails and attachments retained by Whalen. It found that the materials were discoverable and directed plaintiffs’ counsel to take custody of them, preserve them, and hold them for the benefit of the clients and the court. Magistrate Judge Ona Wang was assigned to supervise discovery, including disputes concerning the emails.