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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1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 EASTERN DISTRICT OF CALIFORNIA 10 ----oo0oo---- 11 12 13 JOLI GRACE, LLC, a Louisiana Limited Liability Company, Plaintiff, 14 15 16 17 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. 18 19 AND RELATED COUNTERCLAIMS. 20 21 22 ----oo0oo---Plaintiff Joli Grace, LLC (“Joli Grace”) brought this 23 action against defendant Country Visions, Inc. (“Country 24 Visions”) for breach of contract and declaratory relief arising 25 from a series of franchise agreements for plaintiff’s use of 26 defendant’s retail stores under the name “Apricot Lane.” 27 Visions brought a counterclaim against Joli Grace, Stacie 28 Lancaster Children’s Trust (“Trust”), Christine Thornhill, Arthur 1 Country 1 Lancaster, Love Grace Holdings, Inc. (“Love Grace”), and Stacie 2 Lancaster (collectively “counter-defendants”) for breach of 3 contract, declaratory relief, violations of the Lanham Act, 4 violations of California Unfair Competition Law, violations of 5 Louisiana Unfair Trade Practices and Consumer Protection Law 6 (“LUTPA”), tortious interference with contracts, fraud, and 7 accounting arising out of the same franchise agreements. 8 the court are counter-defendants’ motion to dismiss pursuant to 9 Federal Rule of Civil Procedure 12(b)(2) and 12(b)(6) and Country 10 Visions’s motion for preliminary injunctive relief. 11 I. Before Factual and Procedural History 12 Country Visions is a California corporation that 13 operates and grants franchises for Apricot Lane, a women’s 14 specialty clothing boutique. 15 (Docket No. 14).) 16 Trust solely owns, Stacie Lancaster manages, and Stacie Lancaster 17 and her husband Arthur Lancaster founded. 18 24.) 19 solely owns and the Lancasters allegedly founded after the 20 founding of Joli Grace. 21 (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 22 approval and began opening a series of Apricot Lane boutiques as 23 a franchisee. 24 Grace, executed Franchise Agreements for these Apricot Lane 25 stores, which contained non-compete clauses and held Stacie 26 Lancaster personally liable for breaches of the Franchise (Id. ¶ 2.) Stacie Lancaster, on behalf of Joli 27 28 2 1 Agreements.1 2 the day-to-day tasks of Joli Grace on behalf of the Trust and 3 Arthur Lancaster is in charge of financial responsibilities for 4 Joli Grace. 5 (Id. ¶¶ 22-23.) Stacie Lancaster allegedly manages (Id. ¶ 25.) By April 2015, Love Grace opened its first Blu Spero 6 store. (Id. ¶¶ 29, 41.) Blu Spero boutiques allegedly sell the 7 same brands and merchandise as Apricot Lane. 8 Lancaster manages Blu Spero and is the sole owner, but a press 9 release previously identified Stacie Lancaster as the founder of 10 Blu Spero. 11 Grace and Stacie Lancaster have breached several aspects of the 12 Franchise Agreements since the opening of the Blu Spero stores. 13 (Id. ¶¶ 32-33, 35, 54(d).) 14 (Id. ¶¶ 39, 43.) (Id. ¶ 3.) Arthur Country Visions alleges that Joli In August 2016, Country Visions specifically terminated 15 the Franchise Agreement for Joli Grace’s Apricot Lane store in 16 Hattiesburg, Mississippi for failure to timely cure a default. 17 (Id. ¶¶ 57-59.) 18 Country Visions allegedly informed Joli Grace that it intended to 19 exercise its right to take possession of the premises of the 20 Hattiesburg store. 21 the Hattiesburg Lease to Country Visions. 22 23 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 24 1 25 26 27 28 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.) 3 1 relief regarding the enforceability of the non-compete clauses. 2 (See Docket No. 1.) 3 against Joli Grace and the other counter-defendants, alleging the 4 following causes of action: (1) breach of the Franchise 5 Agreements; (2) breach of the personal guarantees; (3) breach of 6 contract for failure to turn over the Hattiesburg Lease; (4) 7 breach of contract for failure to pay past due royalties; (5) 8 declaratory relief that the transfer of sole membership in Joli 9 Grace from Stacie Lancaster to the Trust is void; (6) violation 10 of the Lanham Act for the operation of Hattiesburg Apricot Lane 11 store; (7) violation of the Lanham Act for the operation of the 12 Blu Spero stores; (8) violation of California’s Unfair 13 Competition Law; (9) violation of LUTPA; (10) tortious 14 interference with contracts; (11) fraud; and (12) accounting. 15 Country Visions then filed a counterclaim Counter-defendants move to dismiss all causes of action 16 against Love Grace, Arthur Lancaster, the Trust, and Thornhill 17 for lack of personal jurisdiction, and some causes of actions on 18 other grounds. 19 relief requiring Joli Grace and Stacie Lancaster to turn over the 20 Hattiesburg Lease, requiring counter-defendants to cease 21 operating the Blu Spero boutique at the Hattiesburg store 22 location, and preventing counter-defendants from using the 23 Apricot Lane mark at the Hattiesburg store. 24 II. 25 26 Country Visions moves for preliminary injunctive Discussion A. Rule 12(b)(2) Motion A plaintiff has the burden of establishing that the 27 court has personal jurisdiction over a defendant. 28 Corp., 248 F.3d 915, 922 (9th Cir. 2001). 4 Doe v. Unocal Where the court does 1 not hold an evidentiary hearing and the motion is based on 2 written materials, the plaintiff need only establish a prima 3 facie showing of personal jurisdiction. 4 Martin Motor Co., 374 F.3d 797, 800 (9th Cir. 2004). 5 case, “[u]ncontroverted allegations in the complaint must be 6 taken as true” and “[c]onflicts between parties over statements 7 contained in affidavits must be resolved in the plaintiff’s 8 favor.” 9 Schwarzenegger v. Fred In such a Id. If there is no applicable federal statute governing 10 personal jurisdiction, the court applies the law of the state in 11 which it sits. 12 601, 608-09 (9th Cir. 2010). 13 statute is coextensive with federal due process requirements.” 14 Id.; see also Cal. Code Civ. Proc. § 410.10. 15 requires that for a nonresident defendant to be subject to the 16 court’s jurisdiction, the defendant must “have certain minimum 17 contacts with [the forum state] such that the maintenance of the 18 suit does not offend traditional notions of fair play and 19 substantial justice.” 20 310, 316 (1945) (citation omitted). 21 required depends on which of the two categories of personal 22 jurisdiction a litigant invokes: specific jurisdiction or general 23 jurisdiction. 24 2015) (citing Daimler AG v. Bauman, 134 S. Ct. 746, 754 (2014)). 25 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. 26 of or relate[s] to the defendant’s contacts with the forum.” 27 Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 28 414 n.8 (1984). The focus is on the “relationship among the 5 1 defendant, the forum, and the litigation.” 2 433 U.S. 186, 204 (1977). 3 contacts that the defendant himself creates with the forum 4 state.” 5 court must thus “look[] to the defendant’s contacts with the 6 forum State itself, not the defendant’s contacts with persons who 7 reside there.” 8 9 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 10 Mot. 7:10-14:26 (Docket No. 17-1).) 11 whether the court has personal jurisdiction over the remaining 12 counter-defendants. 13 1. 14 Thus, the question is Personal Jurisdiction over Arthur Lancaster and Love Grace 15 Country Visions argues the court has personal 16 jurisdiction over Arthur Lancaster and Love Grace because they 17 are alter egos of Stacie Lancaster and Joli Grace or, 18 alternatively, in connection with their tortious actions directed 19 at Country Visions.2 20 The court can exercise personal jurisdiction over an 21 entity that would not ordinarily be subject to personal 22 jurisdiction when it is an alter ego of an entity that the court 23 has personal jurisdiction over. 24 in the context of corporate liability, the veil separating 25 affiliated corporations may also be pierced to exercise personal 26 27 28 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. 6 1 jurisdiction over a foreign defendant in certain limited 2 circumstances.”). 3 Transamerica Corp. v. Compana, LLC, Civ. No. 05-00549 MJJ, 2005 4 WL 2035594, at *4 (N.D. Cal. Aug. 22, 2005) (quoting Patin v. 5 Thoroughbred Power Boats Inc., 294 F.3d 640, 653 (5th Cir. 6 2002)). 7 defendant under an alter ego theory, two conditions must exist: 8 “(1) there is such unity of interest and ownership that the 9 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 10 that failure to disregard [their separate identities] would 11 result in fraud or injustice.” 12 (alteration in original) (quoting Unocal, 248 F.3d at 926). 13 Ranza, 793 F.3d at 1073 The first prong looks for “pervasive control,” id., and 14 whether “the parent controls the subsidiary ‘to such a degree as 15 to render the latter the mere instrumentality of the former,’” 16 Unocal, 248 F.3d at 926 (quoting Calvert v. Huckins, 875 F. Supp. 17 674, 678 (E.D. Cal. 1995) (Whelan, J.)). 18 considered include (1) commingling of funds and assets; (2) 19 observation of corporate formalities; (3) use of the same offices 20 and employees; (4) identity of directors and officers; (5) sole 21 ownership of all stock by one individual or members of a family; 22 (6) inadequate capitalization; (7) failure to maintain arm’s 23 length relationship; (8) use of the corporation as a shell for a 24 single venture or the business of an individual or another 25 corporation; and (9) manipulation of assets and liabilities 26 between entities. 27 JLS POR, 2011 WL 5036027, at *3 (S.D. Cal. Oct. 24, 2011); 28 Associated Vendors, Inc. v. Oakland Meat Co., 210 Cal. App. 2d Factors to be Hall-Magner Grp. v. Firsten, Civ. No. 11-312 7 1 825, 838-40 (1st Dist. 1962). 2 courts have found “no alter ego relationship [is] created [even 3 when a] parent company guaranteed loans for the subsidiary, 4 reviewed and approved major decisions, placed several of its 5 directors on the subsidiary’s board, and was closely involved in 6 the subsidiary’s pricing decisions.” 7 (quoting Unocal, 248 F.3d at 928). 8 This is a high standard, and Ranza, 793 F.3d at 1074-75 Applying the nine factors and taking conflicts between 9 affidavits in favor of Country Visions, there are insufficient 10 allegations that Love Grace and Arthur Lancaster are alter egos 11 of Joli Grace and Stacie Lancaster. 12 no under-capitalization in this case. 13 Corp. v. Hempel Fin. Corp., 859 F.2d 92, 94 (9th Cir. 1988) (“We 14 have held that under California law the ‘kind of inequitable 15 result that makes alter ego liability appropriate is an abuse of 16 the corporate form, such as under-capitalization . . . .’” 17 (quoting Orloff v. Allman, 819 F.2d 904, 909 (9th Cir. 1987))). 18 If an entity is a shell without assets, the plaintiff is 19 effectively prevented from recovery. 20 assets in excess of $2 million with a net worth in excess of 21 $650,000. 22 (Docket No. 17-2).) 23 that Arthur Lancaster or Love Grace treat Joli Grace’s assets as 24 their own assets. 25 strongly in favor of finding Joli Grace is not an alter ego of 26 Arthur Lancaster or Love Grace. 27 28 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 8 1 stores operated by Joli Grace sell Blu Spero merchandise. 2 Am. Countercl. ¶ 42; Liming Decl. ¶¶ 2, 6 (Docket No. 26); Liming 3 Decl. Exs. 2-4 (Docket Nos. 26-2 to -4).) 4 alleges at least two former Apricot Lane stores are now Blu Spero 5 stores operated by Arthur Lancaster and Love Grace, even though 6 the Blu Spero stores still sell Apricot Lane clothing inside. 7 (First Am. Countercl. ¶ 41; Petersen Decl. ¶ 21; Petersen Decl. 8 Exs. N-O (Docket No. 25-14 to -15); Martin Decl. ¶¶ 3, 5, Exs. A- 9 B (Docket No. 27).) (First Country Visions also 10 It is uncontroverted that Joli Grace maintains 11 corporate formalities and Joli Grace and Love Grace have separate 12 directors and officers. 13 stated that Joli Grace maintains separate books and records. 14 (Stacie Decl. ¶ 4.) 15 Arthur Lancaster loaned Joli Grace money, suggesting Joli Grace 16 is maintaining its corporate formalities. 17 cf. Kramer Motors, Inc. v. Britis Leyland, Ltd., 628 F.2d 1175, 18 1177 (9th Cir. 1980) (holding no alter ego relationship was 19 created when parent company guaranteed loans for subsidiary, 20 among other factors). 21 affirm that there is no overlap between directors and officers in 22 Love Grace and Joli Grace. 23 Decl. (“Arthur Decl.”) ¶ 4 (Docket No. 17-3).) 24 factors favor a finding of no alter ego. 25 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 26 work for both Love Grace and Joli Grace. 27 This includes Arthur Lancaster, who has been Joli Grace’s primary 28 contact person with Country Visions for new stores, construction, 9 (Arthur Decl. ¶ 7.) 1 royalties, and financial matters. 2 Love Grace, Stacie Lancaster has her own phone extension where 3 there is a voicemail that states, “You have reached Stacie 4 Lancaster with Love Grace.” 5 defendants also concede that Love Grace and Joli Grace have the 6 same corporate address. 7 however, are insufficient to justify viewing Joli Grace as Love 8 Grace and Arthur Lancaster’s alter ego. 9 1074 (finding employees moving between entities is not enough to 10 undermine the entities’ formal separation); Martinez v. Manheim 11 Cent. Cal., Civ. No. 1:10-1511 SKO, 2011 WL 1466684, at *6 (E.D. 12 Cal. Apr. 18, 2011) (“The fact that [a parent corporation] is 13 headquartered in the same place as its subsidiary and shares one 14 common director with [the subsidiary] does not indicate that the 15 two corporations have indistinct personalities.”). 16 (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 17 a finding of no alter ego. 18 Stacie Lancaster manages Joli Grace as the trustor of the Trust. 19 (Stacie Decl. ¶ 3.) Arthur Lancaster solely owns Love Grace. 20 (Arthur Decl. ¶ 3.) While Stacie Lancaster, on at least one 21 occasion, represented to the public that she is the founder of 22 Blu Spero, (Petersen Decl. Ex. F (Docket No. 25-6)), her 23 management of Love Grace and Joli Grace would not be enough to 24 establish an alter ego relationship, Patterson v. Home Depot, 25 USA, Inc., 684 F. Supp. 2d 1170, 1178-79 (D. Ariz. 2010) (holding 26 that a parent and subsidiary having the same president was 27 insufficient to justify disregarding the corporate form). 28 The Trust solely owns Joli Grace, and The factor most indicative of an alter ego relationship 10 1 is the lack of an arm’s length relationship. 2 Apricot Lane store issues receipts stating “Follow us on Social 3 Media @ BluSpero.” 4 16).) 5 store, an employee informed all customers that the store 6 underwent a name change, “but everything else is the same.” 7 (Martin Decl. ¶ 4.) 8 Grace’s behalf, Arthur Lancaster repeatedly represented that “we 9 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 10 added); Petersen Decl. Ex. C (Docket No. 25-3).) 11 Country Visions’s favor, Arthur Lancaster’s use of “we” 12 demonstrates control and involvement in Joli Grace’s operations. 13 Even after Arthur Lancaster informed Country Visions that he 14 would no longer be involved with the day-to-day operations of 15 Joli Grace, he continued to act as the primary point of contact 16 on financial and royalties matters. 17 27, Ex. M; Petersen Decl. ¶ 7, Ex. D (Docket No. 25-4).) 18 Viewed in (See First Am. Countercl. ¶ Country Visions has presented a wealth of evidence in 19 support of a relationship between Love Grace and Joli Grace, but 20 this evidence does not show that there was such a unity of 21 interest that their separate corporate personalities no longer 22 existed. 23 1177 (holding no alter ego relationship existed when parent 24 guaranteed loans for the subsidiary, reviewed and approved major 25 decisions, placed several of its directors on the subsidiary’s 26 board, and was closely involved in the subsidiary’s pricing 27 decisions). 28 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 11 1 Lancaster and Love Grace’s] control of [Joli Grace]’s internal 2 affairs or daily operations.” 3 Because Country Visions has not met the unity of interest prong, 4 the court need not address the second prong--whether failure to 5 disregard the separate identities would result in fraud or 6 injustice. 7 exercise personal jurisdiction over Arthur Lancaster and Love 8 Grace on the basis of an alter ego relationship. 9 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 10 over Arthur Lancaster and Love Grace for claims seven, eight, 11 nine, and ten. 12 to dismiss, Country Visions argues Love Grace and Arthur 13 Lancaster’s actions were intended to harm a California entity-- 14 Country Visions--and thus they are subject to this court’s 15 jurisdiction. 16 24).) 17 connection to the forum.” 18 “[T]he plaintiff cannot be the only link between the defendant 19 and the forum.” 20 evidence that Love Grace and Arthur Lancaster directed their 21 actions to the forum state, and thus Country Visions has not met 22 its burden establishing that the court has specific jurisdiction 23 over Love Grace and Arthur Lancaster. 24 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’ 25 12(b)(2) motion to dismiss Country Visions’s claims against 26 Arthur Lancaster and Love Grace.3 27 28 3 Because the court lacks personal jurisdiction over Arthur Lancaster and Love Grace, the court need not consider 12 1 2. 2 3 Personal Jurisdiction over Thornhill and the Trust Counter-defendants also argue that the court does not 4 have personal jurisdiction over the Trust or Thornhill. 5 Visions contends it has personal jurisdiction over the Trust and 6 Thornhill because of the forum selection clauses in the Franchise 7 Agreements. 8 9 Country It is well established that personal jurisdiction is a waivable right. See, e.g., Burger King v. Rudzewicz, 471 U.S. 10 462, 472 n.14 (1985). 11 personal jurisdiction through the execution of a valid forum 12 selection clause. 13 advance to submit their controversies for resolution within a 14 particular jurisdiction.”); Nat’l Equip. Rental, Ltd. v. 15 Szukhent, 375 U.S. 311, 315-16 (1964) (“[P]arties to a contract 16 may agree in advance to submit to the jurisdiction of a given 17 court . . . .”). 18 Relevant here, a defendant may consent to See id. (“[P]arties frequently stipulate in Here, the language of the pertinent forum selection 19 clause is clear. 20 and consent to the exclusive jurisdiction of the state and 21 federal courts with proper subject matter jurisdiction located in 22 the county or the judicial district in which Franchisor maintains 23 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)). 13 26 27 28 The “Franchisee and Franchisor hereby submit (Petersen 1 It is undisputed that Joli Grace is the Franchisee, not the Trust 2 or Thornhill. 3 signatories to any agreement, let alone an agreement with a forum 4 selection clause binding more than only Joli Grace as the 5 Franchisee. 6 the Trust and Thornhill did not waive personal jurisdiction. 7 (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 9 and Thornhill. The Trust is a Louisiana entity and Thornhill is 10 a Louisiana resident, and there are no allegations that either 11 counter-defendant has sufficient minimum contacts with California 12 to justify the court exercising personal jurisdiction over the 13 Trust or Thornhill. 14 (See Stacie Decl. ¶ 3.) Accordingly, the court will grant counter-defendants’ 15 Rule 12(b)(2) motion to dismiss Country Visions’s claims against 16 the Trust and Thornhill. 17 18 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 25 plausible on its face.” 26 544, 570 (2007). 27 ‘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.” 5 standard, “a well-pleaded complaint may proceed even if it 6 strikes a savvy judge that actual proof of those facts is 7 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. 14 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 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 28

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