Joli Grace, LLC v. Country Visions, Inc.

Filing 37

MEMORANDUM and ORDER signed by Senior Judge William B. Shubb on 11/30/2016 re 17 Motion to Dismiss and 18 Motion for Preliminary Injunction: IT IS ORDERED that Arthur Lancaster and Love Grace's motion to dismiss be, and the same hereby is , GRANTED on the ground of lack of personal jurisdiction. IT IS FURTHER ORDERED that the Trust and Thornhill's motion to dismiss be, and the same hereby is, GRANTED on the ground of lack of personal jurisdiction. IT IS FURTHER ORDERED that Sta cie Lancaster and Joli Grace's Rule 12(b)(6) motion to dismiss counter-claimant's first amended counterclaim be, and the same hereby is: 1) GRANTED with respect to claims seven, eight, and nine; and 2) DENIED in all other respects. IT IS F URTHER ORDERED that counter-claimant's motion for preliminary injunction be, and the same hereby is, DENIED. Counter-claimant has twenty days from the date of this Order to file an amended counterclaim, if it can do so consistent with this Order. (Kirksey Smith, K)

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UNITED STATES DISTRICT COURT

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EASTERN DISTRICT OF CALIFORNIA

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----oo0oo----

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JOLI GRACE, LLC, a Louisiana
Limited Liability Company,
Plaintiff,

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v.

CIV. NO.: 2:16-1138 WBS EFB
MEMORANDUM AND ORDER RE: MOTION
TO DISMISS FIRST AMENDED
COUNTERCLAIM AND MOTION FOR
PRELIMINARY INJUNCTION

COUNTRY VISIONS, INC., a
California Corporation,
Defendant.

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AND RELATED COUNTERCLAIMS.

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----oo0oo---Plaintiff Joli Grace, LLC (“Joli Grace”) brought this

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action against defendant Country Visions, Inc. (“Country

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Visions”) for breach of contract and declaratory relief arising

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from a series of franchise agreements for plaintiff’s use of

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defendant’s retail stores under the name “Apricot Lane.”

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Visions brought a counterclaim against Joli Grace, Stacie

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Lancaster Children’s Trust (“Trust”), Christine Thornhill, Arthur
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Country

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Lancaster, Love Grace Holdings, Inc. (“Love Grace”), and Stacie

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Lancaster (collectively “counter-defendants”) for breach of

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contract, declaratory relief, violations of the Lanham Act,

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violations of California Unfair Competition Law, violations of

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Louisiana Unfair Trade Practices and Consumer Protection Law

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(“LUTPA”), tortious interference with contracts, fraud, and

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accounting arising out of the same franchise agreements.

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the court are counter-defendants’ motion to dismiss pursuant to

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Federal Rule of Civil Procedure 12(b)(2) and 12(b)(6) and Country

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Visions’s motion for preliminary injunctive relief.

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I.

Before

Factual and Procedural History

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Country Visions is a California corporation that

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operates and grants franchises for Apricot Lane, a women’s

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specialty clothing boutique.

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(Docket No. 14).)

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Trust solely owns, Stacie Lancaster manages, and Stacie Lancaster

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and her husband Arthur Lancaster founded.

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24.)

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solely owns and the Lancasters allegedly founded after the

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founding of Joli Grace.

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(First Am. Countercl. ¶¶ 1, 10

Joli Grace is a Louisiana corporation that the

(Id. ¶¶ 1-2, 11, 13,

Love Grace is a Delaware corporation that Arthur Lancaster

(Id. ¶¶ 4, 16, 44.)

Beginning in 2009, Joli Grace allegedly received

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approval and began opening a series of Apricot Lane boutiques as

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a franchisee.

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Grace, executed Franchise Agreements for these Apricot Lane

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stores, which contained non-compete clauses and held Stacie

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Lancaster personally liable for breaches of the Franchise

(Id. ¶ 2.)

Stacie Lancaster, on behalf of Joli

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2

1

Agreements.1

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the day-to-day tasks of Joli Grace on behalf of the Trust and

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Arthur Lancaster is in charge of financial responsibilities for

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Joli Grace.

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(Id. ¶¶ 22-23.)

Stacie Lancaster allegedly manages

(Id. ¶ 25.)

By April 2015, Love Grace opened its first Blu Spero

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store.

(Id. ¶¶ 29, 41.)

Blu Spero boutiques allegedly sell the

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same brands and merchandise as Apricot Lane.

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Lancaster manages Blu Spero and is the sole owner, but a press

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release previously identified Stacie Lancaster as the founder of

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Blu Spero.

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Grace and Stacie Lancaster have breached several aspects of the

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Franchise Agreements since the opening of the Blu Spero stores.

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(Id. ¶¶ 32-33, 35, 54(d).)

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(Id. ¶¶ 39, 43.)

(Id. ¶ 3.) Arthur

Country Visions alleges that Joli

In August 2016, Country Visions specifically terminated

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the Franchise Agreement for Joli Grace’s Apricot Lane store in

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Hattiesburg, Mississippi for failure to timely cure a default.

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(Id. ¶¶ 57-59.)

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Country Visions allegedly informed Joli Grace that it intended to

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exercise its right to take possession of the premises of the

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Hattiesburg store.

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the Hattiesburg Lease to Country Visions.

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Pursuant to the Hattiesburg Franchise Agreement,

(Id. ¶ 59.)

Joli Grace has not turned over
(Id. ¶ 60.)

Joli Grace initiated this action against Country
Visions, alleging breach of contract and seeking declaratory

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The non-compete clauses prohibit Joli Grace and Stacie
Lancaster from owning, engaging in, or having any interest in any
business “that sells through any channel of distribution of [sic]
any of the types of merchandise that are the same as or similar
to the types of merchandise being sold through the Specialty
Stores, unless granted prior approval in writing” by Country
Visions. (Id. ¶ 28, Ex. K.)
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relief regarding the enforceability of the non-compete clauses.

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(See Docket No. 1.)

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against Joli Grace and the other counter-defendants, alleging the

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following causes of action: (1) breach of the Franchise

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Agreements; (2) breach of the personal guarantees; (3) breach of

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contract for failure to turn over the Hattiesburg Lease; (4)

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breach of contract for failure to pay past due royalties; (5)

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declaratory relief that the transfer of sole membership in Joli

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Grace from Stacie Lancaster to the Trust is void; (6) violation

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of the Lanham Act for the operation of Hattiesburg Apricot Lane

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store; (7) violation of the Lanham Act for the operation of the

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Blu Spero stores; (8) violation of California’s Unfair

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Competition Law; (9) violation of LUTPA; (10) tortious

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interference with contracts; (11) fraud; and (12) accounting.

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Country Visions then filed a counterclaim

Counter-defendants move to dismiss all causes of action

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against Love Grace, Arthur Lancaster, the Trust, and Thornhill

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for lack of personal jurisdiction, and some causes of actions on

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other grounds.

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relief requiring Joli Grace and Stacie Lancaster to turn over the

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Hattiesburg Lease, requiring counter-defendants to cease

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operating the Blu Spero boutique at the Hattiesburg store

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location, and preventing counter-defendants from using the

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Apricot Lane mark at the Hattiesburg store.

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II.

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Country Visions moves for preliminary injunctive

Discussion
A.

Rule 12(b)(2) Motion
A plaintiff has the burden of establishing that the

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court has personal jurisdiction over a defendant.

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Corp., 248 F.3d 915, 922 (9th Cir. 2001).
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Doe v. Unocal

Where the court does

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not hold an evidentiary hearing and the motion is based on

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written materials, the plaintiff need only establish a prima

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facie showing of personal jurisdiction.

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Martin Motor Co., 374 F.3d 797, 800 (9th Cir. 2004).

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case, “[u]ncontroverted allegations in the complaint must be

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taken as true” and “[c]onflicts between parties over statements

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contained in affidavits must be resolved in the plaintiff’s

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favor.”

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Schwarzenegger v. Fred
In such a

Id.
If there is no applicable federal statute governing

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personal jurisdiction, the court applies the law of the state in

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which it sits.

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601, 608-09 (9th Cir. 2010).

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statute is coextensive with federal due process requirements.”

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Id.; see also Cal. Code Civ. Proc. § 410.10.

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requires that for a nonresident defendant to be subject to the

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court’s jurisdiction, the defendant must “have certain minimum

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contacts with [the forum state] such that the maintenance of the

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suit does not offend traditional notions of fair play and

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substantial justice.”

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310, 316 (1945) (citation omitted).

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required depends on which of the two categories of personal

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jurisdiction a litigant invokes: specific jurisdiction or general

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jurisdiction.

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2015) (citing Daimler AG v. Bauman, 134 S. Ct. 746, 754 (2014)).

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Specific jurisdiction exists when a case “aris[es] out

Love v. Associated Newspapers, Ltd., 611 F.3d
“California’s long-arm jurisdiction

Due process

Int’l Shoe Co. v. Washington, 326 U.S.
The strength of contacts

Ranza v. Nike, Inc., 793 F.3d 1059, 1068 (9th Cir.

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of or relate[s] to the defendant’s contacts with the forum.”

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Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408,

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414 n.8 (1984).

The focus is on the “relationship among the
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defendant, the forum, and the litigation.”

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433 U.S. 186, 204 (1977).

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contacts that the defendant himself creates with the forum

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state.”

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court must thus “look[] to the defendant’s contacts with the

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forum State itself, not the defendant’s contacts with persons who

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reside there.”

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Shaffer v. Heitner,

“[T]he relationship must arise out of

Walden v. Fiore, 134 S. Ct. 1115, 1122 (2014).

The

Id.

Counter-defendants do not contest that the court has
personal jurisdiction over Joli Grace and Stacie Lancaster.

(See

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Mot. 7:10-14:26 (Docket No. 17-1).)

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whether the court has personal jurisdiction over the remaining

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counter-defendants.

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1.

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Thus, the question is

Personal Jurisdiction over Arthur Lancaster
and Love Grace

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Country Visions argues the court has personal

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jurisdiction over Arthur Lancaster and Love Grace because they

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are alter egos of Stacie Lancaster and Joli Grace or,

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alternatively, in connection with their tortious actions directed

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at Country Visions.2

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The court can exercise personal jurisdiction over an

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entity that would not ordinarily be subject to personal

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jurisdiction when it is an alter ego of an entity that the court

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has personal jurisdiction over.

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in the context of corporate liability, the veil separating

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affiliated corporations may also be pierced to exercise personal

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2

Ranza, 793 F.3d at 1070-71 (“As

Country Vision, as the party bearing the burden of
proving jurisdiction, does not distinguish between Arthur
Lancaster and Love Grace when discussing whether the court has
personal jurisdiction over them.
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jurisdiction over a foreign defendant in certain limited

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circumstances.”).

3

Transamerica Corp. v. Compana, LLC, Civ. No. 05-00549 MJJ, 2005

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WL 2035594, at *4 (N.D. Cal. Aug. 22, 2005) (quoting Patin v.

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Thoroughbred Power Boats Inc., 294 F.3d 640, 653 (5th Cir.

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2002)).

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defendant under an alter ego theory, two conditions must exist:

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“(1) there is such unity of interest and ownership that the

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separate personalities [of the entities] no longer exist and (2)

This applies to individuals and corporations.

For a court to exercise personal jurisdiction over a

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that failure to disregard [their separate identities] would

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result in fraud or injustice.”

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(alteration in original) (quoting Unocal, 248 F.3d at 926).

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Ranza, 793 F.3d at 1073

The first prong looks for “pervasive control,” id., and

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whether “the parent controls the subsidiary ‘to such a degree as

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to render the latter the mere instrumentality of the former,’”

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Unocal, 248 F.3d at 926 (quoting Calvert v. Huckins, 875 F. Supp.

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674, 678 (E.D. Cal. 1995) (Whelan, J.)).

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considered include (1) commingling of funds and assets; (2)

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observation of corporate formalities; (3) use of the same offices

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and employees; (4) identity of directors and officers; (5) sole

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ownership of all stock by one individual or members of a family;

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(6) inadequate capitalization; (7) failure to maintain arm’s

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length relationship; (8) use of the corporation as a shell for a

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single venture or the business of an individual or another

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corporation; and (9) manipulation of assets and liabilities

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between entities.

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JLS POR, 2011 WL 5036027, at *3 (S.D. Cal. Oct. 24, 2011);

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Associated Vendors, Inc. v. Oakland Meat Co., 210 Cal. App. 2d

Factors to be

Hall-Magner Grp. v. Firsten, Civ. No. 11-312

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825, 838-40 (1st Dist. 1962).

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courts have found “no alter ego relationship [is] created [even

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when a] parent company guaranteed loans for the subsidiary,

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reviewed and approved major decisions, placed several of its

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directors on the subsidiary’s board, and was closely involved in

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the subsidiary’s pricing decisions.”

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(quoting Unocal, 248 F.3d at 928).

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This is a high standard, and

Ranza, 793 F.3d at 1074-75

Applying the nine factors and taking conflicts between

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affidavits in favor of Country Visions, there are insufficient

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allegations that Love Grace and Arthur Lancaster are alter egos

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of Joli Grace and Stacie Lancaster.

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no under-capitalization in this case.

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Corp. v. Hempel Fin. Corp., 859 F.2d 92, 94 (9th Cir. 1988) (“We

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have held that under California law the ‘kind of inequitable

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result that makes alter ego liability appropriate is an abuse of

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the corporate form, such as under-capitalization . . . .’”

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(quoting Orloff v. Allman, 819 F.2d 904, 909 (9th Cir. 1987))).

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If an entity is a shell without assets, the plaintiff is

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effectively prevented from recovery.

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assets in excess of $2 million with a net worth in excess of

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$650,000.

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(Docket No. 17-2).)

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that Arthur Lancaster or Love Grace treat Joli Grace’s assets as

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their own assets.

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strongly in favor of finding Joli Grace is not an alter ego of

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Arthur Lancaster or Love Grace.

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Most importantly, there is
See Firstmark Capital

See id.

Joli Grace has

(Stacie Lancaster Decl. (“Stacie Decl.”) ¶ 8, Ex. 1
Further, Country Visions has not alleged

Joli Grace’s adequate capitalization weighs

There is some evidence of commingling of assets,
however.

Country Visions alleges at least three Apricot Lane
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stores operated by Joli Grace sell Blu Spero merchandise.

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Am. Countercl. ¶ 42; Liming Decl. ¶¶ 2, 6 (Docket No. 26); Liming

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Decl. Exs. 2-4 (Docket Nos. 26-2 to -4).)

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alleges at least two former Apricot Lane stores are now Blu Spero

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stores operated by Arthur Lancaster and Love Grace, even though

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the Blu Spero stores still sell Apricot Lane clothing inside.

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(First Am. Countercl. ¶ 41; Petersen Decl. ¶ 21; Petersen Decl.

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Exs. N-O (Docket No. 25-14 to -15); Martin Decl. ¶¶ 3, 5, Exs. A-

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B (Docket No. 27).)

(First

Country Visions also

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It is uncontroverted that Joli Grace maintains

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corporate formalities and Joli Grace and Love Grace have separate

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directors and officers.

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stated that Joli Grace maintains separate books and records.

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(Stacie Decl. ¶ 4.)

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Arthur Lancaster loaned Joli Grace money, suggesting Joli Grace

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is maintaining its corporate formalities.

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cf. Kramer Motors, Inc. v. Britis Leyland, Ltd., 628 F.2d 1175,

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1177 (9th Cir. 1980) (holding no alter ego relationship was

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created when parent company guaranteed loans for subsidiary,

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among other factors).

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affirm that there is no overlap between directors and officers in

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Love Grace and Joli Grace.

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Decl. (“Arthur Decl.”) ¶ 4 (Docket No. 17-3).)

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factors favor a finding of no alter ego.

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Stacie Lancaster, in her declaration,

Joli Grace’s balance sheet also shows that

(See id. ¶ 6, Ex. 1);

Both Stacie Lancaster and Arthur Lancaster

(Stacie Decl. ¶ 4; Arthur Lancaster
Both of these

Counter-defendants do not contest that some employees

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work for both Love Grace and Joli Grace.

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This includes Arthur Lancaster, who has been Joli Grace’s primary

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contact person with Country Visions for new stores, construction,
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(Arthur Decl. ¶ 7.)

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royalties, and financial matters.

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Love Grace, Stacie Lancaster has her own phone extension where

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there is a voicemail that states, “You have reached Stacie

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Lancaster with Love Grace.”

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defendants also concede that Love Grace and Joli Grace have the

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same corporate address.

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however, are insufficient to justify viewing Joli Grace as Love

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Grace and Arthur Lancaster’s alter ego.

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1074 (finding employees moving between entities is not enough to

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undermine the entities’ formal separation); Martinez v. Manheim

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Cent. Cal., Civ. No. 1:10-1511 SKO, 2011 WL 1466684, at *6 (E.D.

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Cal. Apr. 18, 2011) (“The fact that [a parent corporation] is

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headquartered in the same place as its subsidiary and shares one

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common director with [the subsidiary] does not indicate that the

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two corporations have indistinct personalities.”).

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(Petersen Decl. ¶¶ 5-6.)

(Petersen Decl. ¶ 13.)

(Arthur Decl. ¶ 7.)

At

Counter-

Such allegations,

See Ranza, 793 F.3d at

The ownership of Love Grace and Joli Grace also favors

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a finding of no alter ego.

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Stacie Lancaster manages Joli Grace as the trustor of the Trust.

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(Stacie Decl. ¶ 3.)

Arthur Lancaster solely owns Love Grace.

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(Arthur Decl. ¶ 3.)

While Stacie Lancaster, on at least one

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occasion, represented to the public that she is the founder of

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Blu Spero, (Petersen Decl. Ex. F (Docket No. 25-6)), her

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management of Love Grace and Joli Grace would not be enough to

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establish an alter ego relationship, Patterson v. Home Depot,

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USA, Inc., 684 F. Supp. 2d 1170, 1178-79 (D. Ariz. 2010) (holding

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that a parent and subsidiary having the same president was

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insufficient to justify disregarding the corporate form).

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The Trust solely owns Joli Grace, and

The factor most indicative of an alter ego relationship
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is the lack of an arm’s length relationship.

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Apricot Lane store issues receipts stating “Follow us on Social

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Media @ BluSpero.”

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16).)

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store, an employee informed all customers that the store

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underwent a name change, “but everything else is the same.”

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(Martin Decl. ¶ 4.)

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Grace’s behalf, Arthur Lancaster repeatedly represented that “we

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are not opening and [sic] new stores.”

At least one

(Petersen Decl. ¶ 22, Ex. P (Docket No. 25-

In one Blu Spero store that used to be an Apricot Lane

When emailing Country Visions on Joli

(Id. ¶ 7 (emphasis

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added); Petersen Decl. Ex. C (Docket No. 25-3).)

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Country Visions’s favor, Arthur Lancaster’s use of “we”

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demonstrates control and involvement in Joli Grace’s operations.

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Even after Arthur Lancaster informed Country Visions that he

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would no longer be involved with the day-to-day operations of

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Joli Grace, he continued to act as the primary point of contact

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on financial and royalties matters.

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27, Ex. M; Petersen Decl. ¶ 7, Ex. D (Docket No. 25-4).)

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Viewed in

(See First Am. Countercl. ¶

Country Visions has presented a wealth of evidence in

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support of a relationship between Love Grace and Joli Grace, but

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this evidence does not show that there was such a unity of

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interest that their separate corporate personalities no longer

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existed.

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1177 (holding no alter ego relationship existed when parent

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guaranteed loans for the subsidiary, reviewed and approved major

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decisions, placed several of its directors on the subsidiary’s

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board, and was closely involved in the subsidiary’s pricing

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decisions).

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relationship between the parties “is typified by [Arthur

Unocal, 248 F.3d at 928; see Kramer Motors, 628 F.2d at

Country Visions has failed to show how the

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Lancaster and Love Grace’s] control of [Joli Grace]’s internal

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affairs or daily operations.”

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Because Country Visions has not met the unity of interest prong,

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the court need not address the second prong--whether failure to

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disregard the separate identities would result in fraud or

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injustice.

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exercise personal jurisdiction over Arthur Lancaster and Love

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Grace on the basis of an alter ego relationship.

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See Unocal, 248 F.3d at 926.

See Ranza, 793 F.3d at 1073.

The court will not

The court likewise does not have specific jurisdiction

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over Arthur Lancaster and Love Grace for claims seven, eight,

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nine, and ten.

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to dismiss, Country Visions argues Love Grace and Arthur

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Lancaster’s actions were intended to harm a California entity--

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Country Visions--and thus they are subject to this court’s

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jurisdiction.

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24).)

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connection to the forum.”

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“[T]he plaintiff cannot be the only link between the defendant

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and the forum.”

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evidence that Love Grace and Arthur Lancaster directed their

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actions to the forum state, and thus Country Visions has not met

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its burden establishing that the court has specific jurisdiction

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over Love Grace and Arthur Lancaster.

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In its opposition to counter-defendants’ motion

(Counter-claimant’s Opp’n 29:26-30:3 (Docket No.

However, “injury to [Country Visions] is not a sufficient
See Walden, 134 S. Ct. at 1125.

Id. at 1122.

Country Visions has presented no

Accordingly, the court must grant counter-defendants’

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12(b)(2) motion to dismiss Country Visions’s claims against

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Arthur Lancaster and Love Grace.3

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3

Because the court lacks personal jurisdiction over
Arthur Lancaster and Love Grace, the court need not consider
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1

2.

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3

Personal Jurisdiction over Thornhill and the
Trust

Counter-defendants also argue that the court does not

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have personal jurisdiction over the Trust or Thornhill.

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Visions contends it has personal jurisdiction over the Trust and

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Thornhill because of the forum selection clauses in the Franchise

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Agreements.

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9

Country

It is well established that personal jurisdiction is a
waivable right.

See, e.g., Burger King v. Rudzewicz, 471 U.S.

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462, 472 n.14 (1985).

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personal jurisdiction through the execution of a valid forum

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selection clause.

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advance to submit their controversies for resolution within a

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particular jurisdiction.”); Nat’l Equip. Rental, Ltd. v.

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Szukhent, 375 U.S. 311, 315-16 (1964) (“[P]arties to a contract

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may agree in advance to submit to the jurisdiction of a given

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court . . . .”).

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Relevant here, a defendant may consent to

See id. (“[P]arties frequently stipulate in

Here, the language of the pertinent forum selection

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clause is clear.

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and consent to the exclusive jurisdiction of the state and

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federal courts with proper subject matter jurisdiction located in

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the county or the judicial district in which Franchisor maintains

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its principal offices at the time of such litigation.”

24

Decl. Ex. A (“Franchise Agreement”) § 23.C (Docket No. 25-1).)

25

Arthur Lancaster and Love Grace’s motion to dismiss the First
Amended Counterclaim under Rule 12(b)(6). See Fasugbe v. Willms,
Civ. No. 2:10-2320 WBS KJN, 2011 WL 2119128, at *4, *7 (E.D. Cal.
May 26, 2011) (holding defendant’s Rule 12(b)(6) motion was moot
once the court determined it did not have personal jurisdiction
over defendant pursuant to Rule 12(b)(2)).
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The “Franchisee and Franchisor hereby submit

(Petersen

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It is undisputed that Joli Grace is the Franchisee, not the Trust

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or Thornhill.

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signatories to any agreement, let alone an agreement with a forum

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selection clause binding more than only Joli Grace as the

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Franchisee.

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the Trust and Thornhill did not waive personal jurisdiction.

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(Id. at 1.)

Neither the Trust nor Thornhill are

Under the clear terms of the forum selection clause,

Country Visions does not argue there is any other basis

8

for the court to exercise personal jurisdiction over the Trust

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and Thornhill.

The Trust is a Louisiana entity and Thornhill is

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a Louisiana resident, and there are no allegations that either

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counter-defendant has sufficient minimum contacts with California

12

to justify the court exercising personal jurisdiction over the

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Trust or Thornhill.

14

(See Stacie Decl. ¶ 3.)

Accordingly, the court will grant counter-defendants’

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Rule 12(b)(2) motion to dismiss Country Visions’s claims against

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the Trust and Thornhill.

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B.

Rule 12(b)(6) Motion
On a motion to dismiss under Rule 12(b)(6), the court

19

must accept the allegations in the complaint as true and draw all

20

reasonable inferences in favor of the plaintiff.

21

Rhodes, 416 U.S. 232, 236 (1974), overruled on other grounds by

22

Davis v. Scherer, 468 U.S. 183 (1984); Cruz v. Beto, 405 U.S.

23

319, 322 (1972).

24

must plead “only enough facts to state a claim to relief that is

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plausible on its face.”

26

544, 570 (2007).

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‘probability requirement,’ but it asks for more than a sheer

28

possibility that a defendant has acted unlawfully.”

Scheuer v.

To survive a motion to dismiss, a plaintiff

Bell Atl. Corp. v. Twombly, 550 U.S.

“The plausibility standard is not akin to a

14

Ashcroft v.

1

Iqbal, 556 U.S. 662, 678 (2009).

2

plausibility when the plaintiff pleads factual content that

3

allows the court to draw the reasonable inference that the

4

defendant is liable for the misconduct alleged.”

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standard, “a well-pleaded complaint may proceed even if it

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strikes a savvy judge that actual proof of those facts is

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improbable.”

8
9

“A claim has facial

Id.

Under this

Twombly, 550 U.S. at 556.

“Threadbare recitals of the elements of a cause of
action, supported by mere conclusory statements, do not suffice.”

10

Iqbal, 556 U.S. at 678; see also id. at 679 (“While legal

11

conclusions can provide the framework of a complaint, they must

12

be supported by factual allegations.”).

13

1.

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In its seventh cause of action, Country Visions alleges

15

counter-defendants violated the Lanham Act by using the federally

16

registered “Apricot Lane” trademark, creating customer confusion

17

through its use, and falsely representing the relationship

18

between Apricot Lane and Blu Spero.

19

claim seven is two separate Lanham Act claims--false designation

20

of origin and false advertising--which are subject to Rule 9(b)’s

21

heightened pleading standard.

22

argues claim seven is a trademark infringement claim that is not

23

subject to Rule 9(b)’s heightened pleading standard.

24

Ciba-Geigy Corp. USA, 317 F.3d 1097, 1104-05 (9th Cir. 2003).

25

Violation of Lanham Act

Counter-defendants argue

In its opposition, Country Visions

See Vess v.

First, it is unclear what cause of action Country

26

Visions is alleging in claim seven.

27

“[v]iolation of the Lanham Act.”

28

The claim contains allegations relating to false advertising and
15

The claim is labeled

(First Am. Countercl. 21:18.)

1

misrepresentations--such as allegations that Blu Spero falsely

2

claimed it is a “sister store” of Apricot Lane and allegations

3

that Love Grace misrepresented the nature, characteristics, or

4

qualities of its goods, services, or commercial activities.

5

¶ 108.)

6

trademark infringement, such as the allegation that Apricot Lane

7

is a federally registered trademark.

8
9

(Id.

The claim also contains allegations relating to

(Id. ¶ 107.)

Second, even if the court construes this claim as a
trademark infringement claim as argued by Country Visions,

10

Country Visions fails to allege sufficient facts to meet the

11

standard pleading requirements.

12

infringement claim, the plaintiff must allege (1) that it has a

13

valid, protectable trademark and (2) that the defendant’s use of

14

the mark is likely to cause confusion.

15

v. eBay, Inc., 511 F.3d 966, 969 (9th Cir. 2007).

16

Visions sufficiently alleges it owns a federally registered

17

trademark in “Apricot Lane.”

18

To allege a trademark

Applied Info. Scis. Corp.
Country

(First Am. Countercl. ¶ 107.)

Country Visions does not sufficiently allege likelihood

19

of consumer confusion.

Likelihood of confusion looks at “whether

20

use of the plaintiff’s trademark by the defendants is ‘likely to

21

cause confusion or to cause mistake, or to deceive as to the

22

affiliation, connection, or association’ of the two products.”

23

Mattel, Inc. v. Walking Mountain Prods., 353 F.3d 792, 807 (9th

24

Cir. 2003) (quoting Cairns v. Franklin Mint Co., 292 F.3d 1139,

25

1149 (9th Cir. 2002)).

26

confusion when a terminated franchisee continues to use the

27

former franchisor’s trademark.

28

Madina Corp., Civ. No. A 04-1399 (JAG), 2006 WL 842403, at *4

There can be a high risk of consumer

See Dunkin Donuts, Inc. v. All

16

1

(D.N.J. Mar. 28, 2006); 4 McCarthy, supra, § 25:31.

2

only allegation regarding Joli Grace’s use of the Apricot Lane

3

mark is that Joli Grace has “sold Blu Spero labeled merchandise

4

in at least three Apricot Lane stores, thereby causing confusion

5

amongst customers regarding the relationship between Apricot Lane

6

and Blu Spero.”4

7

Joli Grace used the Apricot Lane mark after the termination of

8

any Franchise Agreement.

9

Grace sold Blu Spero products in Apricot Lane stores without its

(Id. ¶ 108.)

Here, the

There are no allegations that

Likewise, Country Visions alleges Joli

10

permission, but Country Visions does not allege that such

11

permission was required under the Franchise Agreement.

12

allegation that Joli Grace and Stacie Lancaster used the mark in

13

an unpermitted manner, Country Visions does not adequately allege

14

Joli Grace and Stacie Lancaster committed trademark infringement.

15

Absent an

It is unclear whether claim seven is a cause of action

16

for trademark infringement, false advertisement, or false

17

designation of origin.

18

for trademark infringement, Country Visions fails to allege

19

sufficient facts.

20

defendants’ motion to dismiss the Lanham Act claim.5

Even if claim seven is a cause of action

Accordingly, the court must grant counter-

21

2.

22

In its eighth cause of action, Country Visions alleges

23
24
25
26
27
28

California Unfair Competition Law

4

Country Visions also alleges misuse of the Apricot Lane
mark by Love Grace and Arthur Lancaster at Blu Spero stores.
However, as discussed above, the court does not have personal
jurisdiction over Love Grace or Arthur Lancaster.
5

Because the court will dismiss claim seven in its
entirety, the court need not address counter-defendants’ motion
to dismiss claim seven as to Stacie Lancaster for failure to
properly allege Stacie Lancaster is an alter ego of Joli Grace.
17

1

counter-defendants violated California’s Unfair Competition Law

2

by engaging in “fraudulent and/or unfair competition” acts.

3

(First Am. Countercl. ¶ 116.)

4

Professions Code § 17200 et seq. prohibits unfair competition,

5

which is defined to include “any unlawful, unfair, or fraudulent

6

business act or practice.”

7

“Each prong of the UCL is a separate and distinct theory of

8

liability . . . .”

9

(9th Cir. 2009) (citing S. Bay Chevrolet v. Gen Motors Acceptance

10

California Business and

Cal. Bus. & Prof. Code § 17200.

Kearns v. Ford Motor Co., 567 F.3d 1120, 1127

Corp., 72 Cal. App. 4th 861, 886 (4th Dist. 1999)).

11

Country Visions does not state which prong of the UCL

12

it is relying upon.

13

engaged in “acts of fraudulent and/or unfair competition,” (First

14

Am. Countercl. ¶ 116), while also alleging that counter-

15

defendants “misle[d] the general public” through such “fraudulent

16

business act or practice,” (id. ¶ 117).

17

factual allegation identified in Country Visions’s UCL claim is

18

that the counter-defendants actions will likely lead to public

19

into believing Blu Spero and Apricot Lane are sister stores.

20

(Id.)

21

or constituted unfair competition.

22

is vague and conclusory, regardless of which prong or pleading

23

standard applies.

24

02304 WBS DAD, 2012 WL 5349403, at *2 (E.D. Cal. Oct. 26, 2012)

25

(dismissing plaintiffs’ UCL claims where it was unclear which

26

prong of the UCL the plaintiffs rely upon).

27
28

It alleges that counter-defendants were

The only specific

Country Visions does not allege which acts were fraudulent
Thus, Country Visions’s claim

See Randhawa v. Skylux Inc., Civ. No. 2:09-

Accordingly, the court will grant counter-defendants’
motion to dismiss the UCL claim.
18

1

3.

2
3

Louisiana Unfair Trade Practices and Consumer
Protection Law

In its ninth cause of action, Country Visions alleges

4

counter-defendants violated LUTPA by engaging in “unfair methods

5

of competition or unfair or deceptive acts or practices in the

6

conduct of any trade or commerce.”

7

LUTPA declares unlawful “[u]nfair methods of competition and

8

unfair or deceptive acts or practices in the conduct of any trade

9

or commerce.”

(First Am. Countercl. ¶ 126.)

La. Stat. Ann. § 51:1405.

The elements of a cause

10

of action under LUTPA are: “(1) an unfair or deceptive trade

11

practice declared unlawful; (2) that impacts a consumer, business

12

competitor, or other person to whom the statute grants a private

13

right of action; (3) which has caused ascertainable loss.”

14

FloQuip, Inc. v. Chem Rock Techs., Civ. No. 6:16-0035, 2016 WL

15

4574436, at *16 (W.D. La. June 20, 2016).

16

“when the practice is unethical, oppressive, unscrupulous, or

17

substantially injurious.”

18

Inc., 594 F. Supp. 2d 710, 720-21 (E.D. La. 2009) (citing

19

Jefferson v. Chevron U.S.A. Inc., 713 So. 2d 785, 792 (La. App. 4

20

Cir. 1998)).

21

“fraud, deceit or misrepresentation.”

22

are not limited solely to allegations of fraud, but may be

23

independently premised on a range of non-fraudulent conduct.”

24

Mabile v. BP, p.l.c., Civ. No. 11-1783, 2016 WL 5231839, at *24

25

(E.D. La. Sept. 22, 2016).

26

A practice is unfair

Pinero v. Jackson Hewitt Tax Serv.

A trade practice is deceptive when it amounts to
Id.

Thus, “LUTPA claims

Similar to the UCL claim, Country Visions does not

27

clearly state which prong of the LUTPA it is relying upon.

28

its nine line, five paragraph LUTPA claim, Country Visions
19

In

1

alleges that counter-defendants “engaged in unfair methods of

2

competition or unfair or deceptive acts or practices in the

3

conduct of any trade or commerce.”

4

These allegations refer to conduct that is fraudulent and non-

5

fraudulent as a basis for Country Visions’s LUTPA claim.

6

Visions has not provided notice of which basis it seeks to

7

recover against counter-defendants under LUTPA.

8

2012 WL 5349403, at *2 (dismissing UCL claims for failure to

9

identify which prong of the UCL the plaintiffs rely upon).

(First Am. Countercl. ¶ 126.)

Country

Cf. Randhawa,

This

10

claim only contains allegations that are mere recitations of the

11

elements of LUTPA and are vague and conclusory.

12
13

Accordingly, the court will grant counter-defendants’
motion to dismiss the LUTPA claim.

14

4.

Fraud

15

In its eleventh cause of action, Country Visions

16

alleges Joli Grace and Stacie Lancaster fraudulently induced

17

Country Visions to enter into Franchise Agreements.

18

defendants seek to dismiss this cause of action because the

19

economic loss rule precludes recovery.

20

Counter-

The economic loss “rule ‘prevent[s] the law of contract

21

and the law of tort from dissolving one into the other.’”

22

Robinson Helicopter Co., Inc. v. Dana Corp., 34 Cal. 4th 979, 988

23

(2004) (quoting Rich Prods. Corp. v. Kemutec, Inc., 66 F. Supp.

24

2d 937, 969 (E.D. Wis. 1999)).

25

economic loss due to disappointed expectations, unless [the

26

plaintiff] can demonstrate harm above and beyond a broken

27

contractual promise.”

28

It precludes recovery for “purely

Id.

Conduct “amounting to a breach of contract becomes
20

1

tortious only when it also violates a duty independent of the

2

contract arising from principles of tort law.”

3

(quoting Erlich v. Menezes, 21 Cal. 4th 543, 551 (1999)).

4

California Supreme Court permits tort damages in contract cases

5

in several limited scenarios, including when a party procured the

6

contract through fraudulent inducement.

7

551-52.

8

liability is either completely independent of the contract or

9

arises from conduct which is both intentional and intended to

Id. at 989
The

Erlich, 21 Cal. 4th at

In such a case, “the duty that gives rise to tort

10

harm.”

11

at 552).

12

pled fraudulent inducement claim.

13

v. Countrywide Fin. Corp., 660 F. Supp. 2d 1163, 1188 (C.D. Cal.

14

2009) (“[I]t has long been the rule that where a contract is

15

secured by fraudulent representations, the injured party may

16

elect to affirm the contract and sue for fraud.” (quoting Lazar

17

v. Superior Court, 12 Cal. 4th 631, 645 (1996))).

18

Robinson, 34 Cal. 4th at 990 (quoting Erlich, 21 Cal. 4th
Thus, the economic loss rule does not bar a properly
United Guar. Mortg. Indem. Co.

Here, claim eleven alleges Joli Grace and Stacie

19

Lancaster breached the Franchise Agreements by fraudulently

20

inducing Country Visions to enter into the Franchise Agreements.

21

(First Am. Countercl. ¶¶ 142-45.)

22

the violation of “a duty independent of the contract arising from

23

the principles of tort law,” the economic loss rule does not

24

apply.

25

loss rule does not bar Robinson’s fraud and intentional

26

misrepresentation claims because they were independent of Dana’s

Since fraudulent inducement is

Robinson, 34 Cal. 4th at 989, 991 (“We hold the economic

27
28
21

1

breach of contract.”).6

2
3

Accordingly, the court must deny counter-defendants’
motion to dismiss the fraud claim.

4

5.

Accounting

5

In its twelfth cause of action, Country Visions alleges

6

counter-defendants failed to properly account to Country Visions

7

using Country Visions’s point of sale system as required by the

8

Franchise Agreements and must therefore account for all missing

9

sales in Joli Grace’s Apricot Lane stores.

(First Am. Countercl.

10

¶ 157.)

11

stand-alone claim.

12

4th 65, 82 (1st Dist. 2007) (noting accounting “is not an

13

independent cause of action but merely a type of remedy, an

14

equitable remedy at that”).

15

accounting claim is related to [one of its] breach of contract

16

claim[s], which [counter-defendants] do[] not address in [their]

17

motion to dismiss, the court will interpret this claim as a

18

prayer for relief attached to [its] breach of contract claim and

19

will not dismiss it at this time.”

20

N.A., Civ. No. 2:12-225 WBS CMK, 2012 WL 892282, at *5 (E.D. Cal.

21

Mar. 14, 2012).

22
23
24
25
26
27
28

Under California law, a claim for accounting is not a
Batt v. City & County of S.F., 155 Cal. App.

“Because [Country Visions’s]

Rose v. J.P. Morgan Chase,

Accordingly, the court must deny counter-defendants’
6

Counter-defendants rely on Multifamily Captive Group,
LLC v. Assurance Risk Managers, Inc., 629 F. Supp. 2d 1135, 114546 (E.D. Cal. 2009) (Damrell, J.), to argue that the economic
loss rule will always preclude recovery of fraud claims when the
misrepresentations arose from the underlying contract and caused
the injured party to enter into a contract. However, such a view
ignores the California Supreme Court’s position that the economic
loss rule does not preclude recovery for fraudulent inducement.
Erlich, 21 Cal. 4th at 551-52; see Robinson, 34 Cal. 4th at 990.
22

1
2

motion to dismiss the accounting claim.
C.

3

Preliminary Injunction
Country Visions also seeks preliminary injunctions

4

against counter-defendants.

In order to obtain a preliminary

5

injunction, the moving party must establish (1) it is likely to

6

succeed on the merits, (2) it is likely to suffer irreparable

7

harm in the absence of preliminary relief, (3) the balance of

8

equities tips in its favor, and (4) an injunction is in the

9

public interest.

Winter v. Nat. Res. Def. Council, Inc., 555

10

U.S. 7, 20-21 (2008); Humane Soc. of the U.S. v. Gutierrez, 558

11

F.3d 896, 896 (9th Cir. 2009).

12

extraordinary and drastic remedy, one that should not be granted

13

unless the movant, by a clear showing, carries the burden of

14

persuasion.”

15

curiam).

16

1.

Injunctive relief is “an

Mazurek v. Armstrong, 520 U.S. 968, 972 (1997) (per

Preliminary Injunction Requiring the Turn-Over of

17

Hattiesburg Store or Prohibiting Blu Spero from

18

Operating in the Hattiesburg Store

19

Country Visions first seeks a preliminary injunction

20

against Stacie Lancaster and Joli Grace that requires them to

21

turn over the Hattiesburg store and lease pursuant to the terms

22

of the Hattiesburg Franchise Agreement or, in the alternative, a

23

preliminary injunction that prevents counter-defendants from

24

operating the Blu Spero store that is currently operating at the

25

Hattiesburg store location.

26

The court need not reach the merits of Country

27

Visions’s requests.

Country Visions first seeks a mandatory

28

injunction--which is subject to a higher standard--ordering Joli
23

1

Grace and Stacie Lancaster to turn over the Hattiesburg Lease.

2

See Stanley v. Univ. of S. Cal., 13 F.3d 1313, 1320 (9th Cir.

3

1994) (“A mandatory injunction goes well beyond simply

4

maintaining the status quo pendent lite [and] is particularly

5

disfavored.” (alteration in original) (citations omitted)).

6

Stacie Lancaster and Joli Grace already signed a document turning

7

over the Hattiesburg Lease to Country Visions when they signed

8

the Collateral Assignment of the Hattiesburg Lease.

9

Decl. Ex. 1, at 3-4 (Docket No. 32-1).)

10

(Stacie

The parties note that the Hattiesburg landlord did not

11

accept the Collateral Assignment, but Country Visions contends

12

that the landlord will accept a lease assignment upon an order by

13

the court.

14

however.

15

the landlord and cannot compel the landlord’s actions.

16

Paccar Int’l, Inc. v. Commercial Bank of Kuwait, S.A.K., 757 F.2d

17

1058, 1061 (9th Cir. 1985) (vacating district court’s order

18

granting preliminary injunction for lack of personal

19

jurisdiction); 11A Charles Alan Wright & Arthur R. Miller,

20

Federal Practice and Procedure § 2956 (3d ed.) (noting a court

21

does not have power to enjoin a non-party).

22

going to draft, or order Joli Grace and Stacie Lancaster to

23

draft, an order or assignment of the Hattiesburg Lease that

24

satisfies the landlord.

25

action, the court will not issue an affirmative preliminary

26

injunction requiring the assignment of the lease.

27
28

The Hattiesburg landlord is not before the court,
The court is unable to inquire into what will satisfy
See

The court is not

Absent the landlord’s presence in this

The court will also not enjoin the operation of the Blu
Spero store at the Hattiesburg store location.
24

A district court

1

has no authority to grant relief in the form of a preliminary

2

injunction where it has no personal jurisdiction over the

3

parties.

4

Marathon Oil Co., 526 U.S. 574, 584 (1999) (“Personal

5

jurisdiction, too, is an essential element of the jurisdiction of

6

a district . . . court, without which the court is powerless to

7

proceed to an adjudication.” (alteration in original)).

8

federal court may issue an injunction if it has personal

9

jurisdiction over the parties and subject matter jurisdiction

10

over the claim; it may not attempt to determine the rights of

11

persons not before the court.”

12

Naturalization Serv., 753 F.2d 719, 727 (9th Cir. 1985).

13

Paccar Int’l, 757 F.2d at 1061; see Ruhrgas AG v.

“A

Zepeda v. U.S. Immigration and

Here, in order to grant Country Visions’s desired

14

relief--preventing the operation of a Blu Spero store at the

15

Hattiesburg store location--the court must have jurisdiction over

16

Love Grace.

17

currently possesses the Hattiesburg Lease and operates the Blu

18

Spero store at that location.

19

Stacie Decl. ¶ 5.)

20

of a store it does not operate.

21

Visions’s injunction by enjoining Love Grace.

22

court’s jurisdictional reach fails to extend to Love Grace and

23

the court cannot enjoin Love Grace.

24

direct Love Grace either to turn over the Hattiesburg Lease or

25

cease operating the Blu Spero store.

26

Both parties agree that Love Grace, not Joli Grace,

(Martin Decl. ¶¶ 3-5, Exs. A-B;

The court cannot stop Joli Grace’s operation
The court can only grant Country
However, the

The court therefore cannot

Even if Country Visions could satisfy all the Winter

27

factors justifying extraordinary injunctive relief under Rule 65,

28

the court simply lacks jurisdiction over Arthur Lancaster and
25

1

Love Grace--whom Country Visions seeks to enjoin.

2

v. Brown, Civ. No. 3:14-0773 GPC BLM, 2016 WL 4376852, at *4-5

3

(S.D. Cal. Aug. 17, 2016) (refusing to issue an injunction where

4

the court lacks jurisdiction over the parties plaintiff seeks to

5

enjoin).

6

motion for a preliminary injunction requiring Stacie Lancaster

7

and Joli Grace to turn over the Hattiesburg Lease or preventing

8

counter-defendants from operating the Blu Spero store at the

9

Hattiesburg location.

10

2.

Accordingly, the court will deny Country Visions’s

11
12

See Carranza

Preliminary Injunction Preventing Use of Apricot
Lane Mark

Country Visions also seeks a preliminary injunction

13

against Joli Grace, Love Grace, Stacie Lancaster, and Arthur

14

Lancaster that prevents them from using the Apricot Lane mark in

15

connection with the Hattiesburg store.

16

A plaintiff “must establish that irreparable harm is

17

likely, not just possible, in order to obtain a preliminary

18

injunction.”

19

1127, 1131 (9th Cir. 2011) (emphasis in original) (citing Winter,

20

555 U.S. at 22).

21

to obtain a permanent [or preliminary] injunction in a trademark

22

infringement action.”

23

Mgmt., Inc., 736 F.3d 1239, 1249-50 (9th Cir. 2013).

24

not presume irreparable harm once plaintiffs have shown a

25

likelihood of success on the merits.

26

days when once the plaintiff in an infringement action has

27

established a likelihood of confusion, it is ordinarily presumed

28

that the plaintiff will suffer irreparable harm if injunctive

All. for the Wild Rockies v. Cottrell, 632 F.3d

“[A]ctual irreparable harm must be demonstrated

Herb Reed Enters., LLC v. Fla. Entm’t

26

Courts do

Id. at 1250 (“Gone are the

1
2

relief does not issue.”).
Here, there is no evidence that Joli Grace and Stacie

3

Lancaster continue to use the Apricot Lane mark at the

4

Hattiesburg store.

5

operating the Hattiesburg Apricot Lane store, have assigned the

6

lease to Love Grace, and thus lack the ability to use the Apricot

7

Lane mark at the Hattiesburg store.

8

Country Visions has not shown that Stacie Lancaster and Joli

9

Grace are able to use the Apricot Lane mark in a way that would

10
11

Stacie Lancaster and Joli Grace have stopped

(Stacie Decl. ¶¶ 4-6.)

likely cause irreparable injury to Country Visions.
Additionally, the court does not have personal

12

jurisdiction over Arthur Lancaster and Love Grace, so the court

13

will not enjoin them from selling products with the Apricot Lane

14

mark at the Blu Spero Hattiesburg store.

15

Country Visions has failed to meet the second prong for

16

a preliminary injunction.

The court does not need to address the

17

remaining prongs.

18

plaintiff must establish that all four prongs are met and

19

irreparable harm is likely, not just possible).

See Winter, 555 U.S. at 20-21 (holding a

20

IT IS THEREFORE ORDERED that Arthur Lancaster and Love

21

Grace’s motion to dismiss be, and the same hereby is, GRANTED on

22

the ground of lack of personal jurisdiction.

23

IT IS FURTHER ORDERED that the Trust and Thornhill’s

24

motion to dismiss be, and the same hereby is, GRANTED on the

25

ground of lack of personal jurisdiction.

26

IT IS FURTHER ORDERED that Stacie Lancaster and Joli

27

Grace’s Rule 12(b)(6) motion to dismiss counter-claimant’s first

28

amended counterclaim be, and the same hereby is:
27

1

(1)

2

GRANTED with respect to claims seven, eight, and
nine; and

3

(2)

4

IT IS FURTHER ORDERED that counter-claimant’s motion

5

for preliminary injunction be, and the same hereby is, DENIED.

6

DENIED in all other respects.

Counter-claimant has twenty days from the date of this

7

Order to file an amended counterclaim, if it can do so consistent

8

with this Order.

9

Dated:

November 30, 2016

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