Surrey Propco LLC v. Denihan Ownership Company, LLC

Background

The Surrey hotel had been operated by Denihan Ownership Company, LLC, directly or through affiliates, in premises leased from the property’s prior owner. After the hotel closed during the COVID pandemic, the prior owner sold the real estate at 20 East 76th Street to Surrey Propco LLC under a December 2020 Sale-Purchase Agreement.

Propco alleged that the purchase included both the physical property and the intellectual property associated with the hotel, including THE SURREY trademark. Propco claimed that Denihan continued making unauthorized and infringing uses of the mark, including through the hotel website, email domain, and Instagram account. Propco also alleged that Denihan had obtained federal registration of the mark through fraud.

Propco asserted claims for federal trademark infringement, a declaration that it owned THE SURREY mark, and cancellation of Denihan’s federal registration. Denihan asserted a counterclaim seeking a declaration that it owned the mark. Denihan moved for judgment on the pleadings, a procedure evaluated under the same pleading standard as a motion to dismiss for failure to state a claim.

The Sale Agreement and Trademark Ownership

The court examined the Sale-Purchase Agreement and held that its text unambiguously conveyed the land, buildings, specified appurtenances, and certain personal property, but did not convey intellectual property. The agreement expressly disclaimed representations about the existence or ownership of intellectual property, including trade names and trademarks used in connection with the property.

The court also relied on a provision requiring the prior owner, after closing, to request that Denihan assign its service-mark registration. In the court’s view, that provision indicated that a separate assignment from Denihan would be needed to acquire the associated intellectual property. The agreement therefore did not support Propco’s claim that the trademark transferred automatically with the real estate.

The court rejected Propco’s argument that a hotel’s name necessarily belongs to whoever acquires the hotel building. It explained that trademark ownership generally depends on priority of use in commerce and control over the quality of the related goods or services. Propco had not plausibly alleged that it or the prior owner had operated, marketed, or otherwise conducted commerce using THE SURREY name. The court therefore concluded that Propco had not plausibly alleged any ownership interest in the mark.

Standing and Disposition of Propco’s Claims

The court concluded that Propco’s lack of a plausible ownership interest meant it lacked constitutional standing to pursue the action. It held that Propco’s first and second causes of action failed to state claims upon which relief could be granted. It held that Propco lacked standing to pursue the third cause of action, which sought cancellation of Denihan’s federal registration, and dismissed that claim for lack of subject-matter jurisdiction under Rule 12(b)(1).

Counterclaim

The court dismissed Denihan’s counterclaim on its own motion. Because the court had already concluded that the Sale-Purchase Agreement conveyed no intellectual property to Propco, it found that no continuing controversy remained between the parties that could be resolved by declaring Denihan the owner of THE SURREY mark. The court stated that it lacked subject-matter jurisdiction over the counterclaim and that, even if jurisdiction existed, allowing the counterclaim to continue would not serve a useful purpose.

Conclusion

Judge Lewis A. Kaplan granted Denihan’s motion to dismiss the complaint in all respects: the first two causes of action were dismissed for failure to state a claim, and the third was dismissed for lack of subject-matter jurisdiction under Rule 12(b)(1). The court also dismissed Denihan’s counterclaim on its own motion, directed the Clerk to enter judgment, and closed the case.