FRHUEB, Inc v. Sabino De Freitas Abdala

Background

FRHUEB, Inc. sued Thiago Sabino De Freitas Abdala, Priscila Patto, Fadua Miguel Hueb, Rogerio Hueb Abdala, and FR Hueb LTDA (Brazil). The complaint alleged trademark infringement, unfair competition, breaches of fiduciary duties, trademark dilution, misappropriation, and related violations of the Lanham Act and New York law based on the defendants’ use of the “HUEB” trademarks.

Abdala and Patto filed an amended answer and counterclaims adding FR Hueb International, Ltd., Rihen Mehta, Soigne Kothari, and Priti Mehta as third-party defendants. Their counterclaims included fraudulent misrepresentation, fraudulent inducement, breach of contract, unjust enrichment, breaches of fiduciary duties, aiding and abetting a breach of fiduciary duty, and related claims under the Lanham Act and New York law. They also contended that FRHUEB, Inc.’s acquisition of the trademark was fraudulent and invalid.

The dispute arose from ownership and control of the Hueb jewelry business and related trademarks. FR Hueb LTDA transferred worldwide rights, first excluding Brazil and later including Brazil, to FR Hueb International. Abdala alleged that he was fraudulently induced to transfer part of his ownership interest in FR Hueb International. Mehta later assigned rights relating to the brand to FRHUEB, Inc.

In March 2022, Mehta, personally and as a representative of FR Hueb International, filed Case No. 133/2022/20 against Abdala in the Dubai Courts of First Instance. That foreign proceeding concerned ownership and shares in FR Hueb International, repayment of business losses, and compelling Abdala to transfer his remaining 12% interest to Mehta. The agreements between the parties contained a mandatory and exclusive forum-selection clause for disputes in Dubai. At the time of this opinion, a three-person panel had been selected and had reserved the foreign proceeding for judgment.

Motion to Stay and Legal Standard

Abdala and Patto moved to stay, or pause, this action until the Dubai proceeding concluded. A federal court may stay an action in deference to a parallel foreign action under principles of international comity, meaning respect for proceedings in another country. Proceedings are parallel when substantially the same parties are litigating substantially the same issues at the same time in different forums. The parties and issues need not be identical.

When proceedings are parallel, the court considers whether exceptional circumstances justify deferring to the foreign proceeding. The relevant considerations include which action was filed first, whether the foreign forum is adequate, potential prejudice, convenience, the connections between the dispute and the United States, and the connections between the dispute and the foreign jurisdiction.

Court’s Analysis

The court found the proceedings parallel because the parties and issues were substantially similar. FRHUEB, Inc. was the successor to FR Hueb International, which was involved in the Dubai proceeding and the counterclaims here. Abdala was a defendant in both proceedings. Although Patto was not named in the Dubai proceeding, the court found that her interests were aligned with Abdala’s for purposes of the stay motion.

The court identified ownership of FR Hueb International as a threshold issue in both proceedings. The defendants argued that the transfer of the trademarks to FRHUEB, Inc. was fraudulent because Abdala, allegedly a 50/50 owner of FR Hueb International, received misleading information and did not consent. If that argument succeeded, it could affect whether FRHUEB, Inc. owned the disputed trademarks and whether the defendants’ conduct amounted to infringement.

The court concluded that the factors favored a stay even though this case was filed first. The Dubai proceeding had progressed further and was awaiting judgment, while this case was still in its early stages. The parties did not dispute the adequacy or convenience of the UAE forum, and the contracts selected Dubai as the exclusive forum for the relevant disputes. The court also found that proceeding simultaneously could create inconsistent outcomes and impose duplicative litigation costs.

Ruling

The court granted defendants’ motion to stay. It stated that the stay would promote judicial efficiency and avoid duplicative litigation because the Dubai proceeding could clarify ownership interests, affect the validity of the trademark transfer, narrow the issues here, or potentially dispose of this action. The stay did not limit the parties’ rights to seek the court’s intervention concerning the interim injunction at ECF No. 135. The parties were ordered to submit a joint status letter about the Dubai proceeding within 90 days of the opinion and order.