Texas Roadhouse, Inc. et al v. Texas Corral Restaurants, Inc. et al

Filing 199

OPINION AND ORDER DENYING 112 MOTION to Dismiss for Failure to State a Claim by Defendant Paul Switzer. Signed by Judge Joseph S Van Bokkelen on 3/31/17. (cer)

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF INDIANA
HAMMOND DIVISION
TEXAS ROADHOUSE, INC., and
TEXAS ROADHOUSE DELAWARE, LLC,
Plaintiffs,
Case No. 2:16-CV-28 JVB

v.
TEXAS CORRAL RESTAURANTS, INC.,
TEXCOR, INC.,
TEXAS CORRAL RESTAURANT II, INC.,
T.C. OF MICHIGAN CITY, INC.,
T.C. OF KALAMAZOO, INC.,
CHICAGO ROADHOUSE CONCEPTS,
LLC,
T.C. OF OAK LAWN, INC.,
T.C. OF HARWOOD HEIGHTS, INC.,
TEXAS CORRAL INCORPORATED.,
MARTINSVILLE CORRAL, INC., and
PAUL SWITZER,
Defendants.

OPINION AND ORDER
The Texas Roadhouse Plaintiffs claim the Texas Corral Defendants infringe on Plaintiffs’
trade dress and trademarks, and engage in unfair competition.
Defendant Paul Switzer moves under Rule 12(b)(6) for dismissal of the federal trade
dress infringement claim (Count I) and the federal trademark infringement claim (Count II) for
failure to state a claim under the Lanham Act for personal liability. Mr. Switzer also moves for
dismissal of the state claims against him for lack of subject-matter jurisdiction following

dismissal of the federal claims.1 Finally, Mr. Switzer moves for dismissal of Counts III, IV, and
IX on the basis of various statutes of limitations.

A.

Standard for evaluating a motion to dismiss
The purpose of a motion to dismiss pursuant to Rule 12(b)(6) for failure to state a claim

is to test the sufficiency of the pleadings, not to decide the merits of the case. See Gibson v. Chi.,
910 F.2d 1510, 1520 (7th Cir. 1990). Rule 8(a)(2) provides that a complaint must contain “a
short and plain statement of the claim showing that the pleader is entitled to relief.” However,
“recitals of the elements of a cause of action, supported by mere conclusory statements, do not
suffice.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Bell Atl. Corp v. Twombly, 550 U.S.
544, 555 (2007)).2
As the Supreme Court stated, “the tenet that a court must accept as true all of the
allegations contained in a complaint is inapplicable to legal conclusions.” Id. Rather, “a
complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is
plausible on its face.’” Id. at 678 (quoting Twombly, 550 U.S. at 570). A complaint is facially
plausible if a court can reasonably infer from factual content in the pleading that the defendant is
liable for the alleged wrongdoing. Id. (citing Twombly, 550 U.S. at 556).

1

Mr. Switzer does not explicitly state in his motion to dismiss that he seeks failure-to-state-a
claim dismissal of the federal copyright claim presented in Count VIII.
2

In Twombly, the Supreme Court “retooled federal pleading standards, retiring the oft-quoted
[Conley v. Gibson, 355 U.S. 42, 47 (1957)] formulation that a pleading ‘should not be dismissed
for failure to state a claim unless it appears beyond doubt that the [pleader] can prove no set of
facts in support of his claim which would entitle him to relief.’” Killingsworth v. HSBC Bank
Nevada, N.A., 507 F.3d 614, 618 (7th Cir. 2007). 
2

The Seventh Circuit synthesized the standard into three requirements. See Brooks v. Ross,
578 F.3d 574, 581 (7th Cir. 2009). “First, a plaintiff must provide notice to defendants of her
claims. Second, courts must accept a plaintiff’s factual allegations as true, but some factual
allegations will be so sketchy or implausible that they fail to provide sufficient notice to
defendants of the plaintiff’s claim. Third, in considering the plaintiff’s factual allegations, courts
should not accept as adequate abstract recitations of the elements of a cause of action or
conclusory legal statements.” Id.

B.

Plaintiffs’ second amended complaint
Plaintiffs Texas Roadhouse, Inc., and Texas Roadhouse Delaware, LLC (collectively

“Texas Roadhouse Plaintiffs”) attempt to bring the same nine counts against each of 11 named
Defendants (collectively “Texas Corral Defendants”). One of these Defendants is an individual:
Paul Switzer.
In the second amended complaint, the Texas Roadhouse Plaintiffs make the following
claims.
Mr. Switzer owns:


Texas Corral Restaurant II, Inc.; and



T.C. of Kalamazoo, Inc.

He is the president of:


Texas Corral Restaurants, Inc.;



Texcor, Inc. (“president-CEO”);



T.C. of Michigan City, Inc.;
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

Chicago Roadhouse Concepts, LLC; and



Texas Corral Incorporated.

He, or one or more entities owned or controlled by him, is the licensor to:


all Texas Corral restaurants found on the Texas Corral website as of a certain
date, including the Amarillo Roadhouse restaurant;



any other entities or individuals that own the Texas Corral or Amarillo Roadhouse
restaurant concepts;



any other entities or individuals that have an ownership interest in any restaurants
listed in the second amended complaint and doing business as Texas Corral or
Amarillo Roadhouse; and



any other entities or individuals who may be liable to Texas Roadhouse for the
causes of action contained in the second amended complaint.

Mr. Switzer is the domain name registrant for www.texascorral.net (the “Texas Corral
website”). He is responsible for the content on that website, including the accused Texas Corral
logos. He created, or directed the creation, of that website and he is responsible (directly or
indirectly) for adding and updating its content.
The Texas Roadhouse Plaintiffs own all the rights in a family of Texas Roadhouserelated trademarks, service marks, trade names, logos, and designs (collectively “Texas
Roadhouse marks”). The Texas Roadhouse Plaintiffs also own all the rights in the image and
overall appearance of their restaurants (“Texas Roadhouse trade dress”). Plaintiffs promoted
their restaurants under their particular trade dress, marks, and registered work (collectively
“Texas Roadhouse IP”) for almost 20 years.
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But the Texas Corral Defendants operate a restaurant concept “that is markedly similar in
appearance to the Texas Roadhouse concept.” (Second Am. Compl., DE 95 at 9.) The Texas
Corral Defendants use trade dress, trademarks, service marks, trade names, designs, or logos
“that are confusingly similar to or copies of the Texas Roadhouse IP.” (Id.) Plaintiffs never
authorized this.
When the Texas Corral Defendants adopted their names and designs, they knew of the
Texas Roadhouse IP. Defendants used the Texas Roadhouse IP with the intent to trade on its
value and the goodwill it engenders.
Count I brings a claim for trade dress infringement under 15 U.S.C. § 1125(a) and
common law.
Count II brings a claim for trademark infringement under 15 U.S.C. §§ 1114 and
1125(a)(1).
Counts III, IV, and V bring claims for trademark infringement under the statutes of
Michigan, Indiana, and Illinois, respectively. Count VI brings a claim for trademark infringement
under common law.
Count VII brings a claim for violation of the Illinois Deceptive Trade Practices Act.
Count VIII brings a claim for copyright infringement under 17 U.S.C. § 101, et seq.
Count IX brings a claim for unfair competition under Michigan, Indiana, and Illinois
common law.

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C.

Mr. Switzer’s motion to dismiss
Mr. Switzer argues the second amended complaint does not allege a claim against him

personally. He also argues various statutes of limitations bar various claims.
As a threshold matter, Plaintiffs claim this motion to dismiss is an inappropriate “second
bite at the apple.” (Plas’ Opp’n Mot. Dismiss, DE 116 at 1.) The Court disagrees with Plaintiffs’
characterization of the record. After the Western District of Michigan transferred this case here
in January 2016, and after Plaintiffs filed their second amended complaint, a minute order (DE
111) entered on July 14, 2016, extended Mr. Switzer’s deadline to answer to July 18, 2016. Rule
12(b) says Mr. Switzer could move for Rule 12(b)(6) dismissal “before pleading.” Fed. R. Civ.
P. 12(b). The record shows he filed his motion on July 18, 2016, before filing an answer on the
same date. The Court sees no reason to disallow his motion as untimely or inappropriate.

D.

Individual liability
Mr. Switzer argues that Counts I and II of the second amended complaint fail to state a

claim against him in his individual capacity. The parties, and more importantly the Court, agree
that the Seventh Circuit’s 1926 decision in Dangler, and its progeny, remain valid.
A corporate officer generally is not individually liable for the actions of the corporation.
See, e.g., York Ctr. Park Dist. v. Krilich, 40 F.3d 205, 208 (7th Cir. 1994). But individual
liability in certain situations is possible. See, e.g., Baumann Farms, LLP v. Yin Wall City, Inc.,
No. 16-CV-605, 2016 WL 6989799 (E.D. Wisc. Nov. 29, 2016).
In Dangler, the Seventh Circuit held that “in the absence of some special showing, the
managing officers of a corporation are not liable for the infringements of such corporation,

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though committed under their general direction.” Dangler v. Imperial Mach. Co., 11 F.2d 945,
947 (7th Cir. 1926).
The Court further explained:
It is when the officer acts willfully and knowingly—that is, when he
personally participates in the manufacture or sale of the infringing article
(acts other than as an officer), or when he uses the corporation as an
instrument to carry out his own willful and deliberate infringements, or
when he knowingly uses an irresponsible corporation with the purpose of
avoiding personal liability—that officers are held jointly with the company.
The foregoing are by no means cited as the only instances when the officers
may be held liable, but they are sufficient for the present case.
Id.
The Court concluded that the case before it was “the usual one where a bona fide
corporation embarked on a business which it found was covered by numerous patents”
and that the showing fell “far short” of establishing the liability of an individual officer.
Id. at 948.
In 1998, a sister district within the Seventh Circuit recognized that Dangler
remained the law of this Circuit and also accorded with decisions of the United States
Court of Appeals for the Federal Circuit. Drink Group, Inc., v. Gulfstream Commc’ns,
Inc., 7 F. Supp. 2d 1009, 1010 (N.D. Ill. 1998).
In Drink Group, the court held that the plaintiff failed to allege any facts
demonstrating wrongdoing by the individual defendants. Id. at 1010–11. The mere fact
that individual defendants incorporated the accused entity was “innocuous in the absence
of allegations that, at the time of incorporation, they were motivated by some improper
purpose or acting outside the scope of their corporate duties.” Id. at 1011. The court held

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that other allegations against the individual defendants were merely conclusory
statements without supporting facts. Id.
Here, however, Plaintiffs plead enough facts to make a special showing to support
individual liability sufficient to survive the motion to dismiss. The second amended
complaint shows the plausibility of Mr. Switzer’s individual liability.
Plaintiffs do not merely claim Mr. Switzer owned the Defendant entities or
exercised only general control over them. Rather, Plaintiffs claim he is the domain name
registrant for the Texas Corral website, he created or directed the creation of that website,
he is responsible for the content found on that website including the accused Texas Corral
logos, and he is responsible for adding and updating the content on that website.
Moreover, Plaintiffs allege facts supporting the existence of a situation in which
Mr. Switzer owns and controls restaurants centered on an allegedly infringing identity. In
other words, if the Court accepts Plaintiffs well-plead factual allegations as true, as it
must at this stage, then this is a situation in which Plaintiffs accuse the very heart,
essence, and model of the Defendants’ businesses of infringement and other wrongs.
This is (allegedly) not a situation in which an individual started a bona fide
corporation which innocently embarked on business only to find out later that it might
have committed some incidental trademark infringements. Instead, Plaintiffs allege that
the Texas Corral Defendants (including Mr. Switzer) knew of the Texas Roadhouse IP
when they adopted the Texas Corral names and designs, that the Defendants (including
Mr. Switzer) used the Texas Roadhouse IP with the intent to trade on its value, and that

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the Defendants (including Mr. Switzer) profited by the acts of infringement and unfair
competition.
Accepting these factual allegations as true at this stage, and drawing all
reasonable inferences in Plaintiffs’ favor, the Court concludes that individual liability is
plausible. Maybe it will turn out Plaintiffs actually cannot prove the facts necessary to
satisfy the “special showing” for individual liability. But that is an issue for the summary
judgment or trial stages.

E.

Statutes of limitations
Mr. Switzer argues various statutes of limitations bar various claims against him.

But a statute-of-limitations defense ordinarily is better suited for a motion for summary
judgment than for a motion to dismiss. See Koch v. CGM Grp., No. THOO-0216-C-M/H,
2001 WL 392523, at *4 (S.D. Ind. Apr. 3, 2001).
There might be fact-specific reasons the statutes of limitations don’t apply, or the
clocks haven’t started to run, or clocks are tolled. A statute of limitations “is an
affirmative defense, and a plaintiff is not required to negate an affirmative defense in his
complaint.” Tregenza v. Great Am. Commc’ns Co., 12 F.3d 717, 718 (7th Cir. 1993).
Although a plaintiff might plead himself out of court by alleging facts establishing
a clear and definitive basis for dismissal pursuant to a statute of limitations, Plaintiffs did
not do that here.

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F.

Conclusion
The Court therefore DENIES Mr. Switzer’s motion to dismiss (DE 112).
SO ORDERED on March 31, 2017.
s/ Joseph S. Van Bokkelen
JOSEPH S. VAN BOKKELEN
UNITED STATES DISTRICT JUDGE

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