Russell Road Food and Beverage, LLC v. Galam et al

Filing 127

ORDER that 91 Motion to Vacate 46 Preliminary Injunction is GRANTED. FURTHER ORDERED that the court's order granting plaintiff's motion for preliminary injunction 46 is VACATED. Signed by Judge James C. Mahan on 2/10/14. (Copies have been distributed pursuant to the NEF - MMM)

1
2
3
4
5
UNITED STATES DISTRICT COURT
6
DISTRICT OF NEVADA
7
8

RUSSELL ROAD FOOD AND
BEVERAGE, LLC,

9
10

2:13-CV-776 JCM (NJK)

Plaintiff(s),

11

v.

12
MIKE GALAM, et al.,
13
Defendant(s).

14
15
16

ORDER
Presently before the court is defendants’ motion for the court to vacate or modify preliminary

17

injunction. (Doc. # 91). Plaintiff filed a response in opposition (doc. # 98), and defendants filed a

18

reply (doc. # 101).

19

I.

Background

20

The instant case involves two Las Vegas strip clubs, each asserting claims against the other

21

under U.S. trademark law based on the use of the term “crazy horse.” Plaintiff Russell Road Food

22

and Beverage, LLC has owned and operated the Crazy Horse III since September 2009. Defendants

23

claim to be the rightful owners of the trademark “Crazy Horse Too.”

24

The Crazy Horse Too opened in Las Vegas in 1984, and was initially owned and operated

25

by Rick Rizzolo and The Power Company, Inc. In 2007, due to a violation of a plea agreement, all

26

of the assets of the Crazy Horse Too were seized by the United States federal government. On July

27

11, 2011, the U.S. Trustee sold the Crazy Horse Too assets to defendant Canico Capital Group, LLC.

28
James C. Mahan
U.S. District Judge

1

On May 5, 2013, the court issued a temporary restraining order enjoining the defendants from

2

operating their strip club under the name “Crazy Horse Too.” On May 22, 2013, the court held a

3

preliminary injunction hearing. During the hearing, defendants argued that a preliminary injunction

4

would not be appropriate because they had evidence demonstrating that they had purchased all of

5

the property associated with the Crazy Horse Too, including its trademarks.

6

Despite their claims, the documentation submitted by defendants indicated only that they had

7

purchased the real property associated with the Crazy Horse Too. As a result, the court found that

8

a preliminary injunction preventing defendants from using the name was warranted. The court issued

9

the preliminary injunction that same day. (Doc. # 46).

10

On May 23, 2013, the court received notice that the preliminary injunction had been appealed

11

to the Ninth Circuit. Subsequently, defendants filed a motion to reconsider the preliminary

12

injunction, this time providing a guaranty agreement showing that the Power Company, Inc. had used

13

the intellectual property of the Crazy Horse Too as part of the collateral for the loan upon which

14

defendants had foreclosed.

15

At that time, the court did not have jurisdiction to modify the preliminary injunction due to

16

the pending appeal before the Ninth Circuit. However, the court issued an indicative statement that

17

the defendants’ motion raised a substantial issue that may warrant reconsideration. The Ninth Circuit

18

has now remanded the appeal for the limited purpose of allowing the district court to consider

19

whether the preliminary injunction should be vacated.

20

II.

Legal standard

21

“A district court has inherent authority to modify a preliminary injunction in consideration

22

of new facts.” See A & M Records, Inc. v. Napster, 284 F.3d 1091, 1098 (9th Cir. 2002), citing

23

System Federation No. 91 v. Wright, 364 U.S. 642, 647–48 (1961) (holding that a district court has

24

“wide discretion” to modify an injunction based on changed circumstances or new facts.)).

25

“[A] motion to modify a preliminary injunction is meant only to relieve inequities that arise

26

after the original order.” Credit Suisse First Boston Corp. v. Grunwald, 400 F.3d 1119, 1124 (9th

27

Cir. 2005) (internal citation omitted). “Federal Rule of Civil Procedure 54(b) states that a district

28
James C. Mahan
U.S. District Judge

-2-

1

court can modify an interlocutory order ‘at any time’ before entry of a final judgment, and we have

2

long recognized ‘the well-established rule that a district judge always has power to modify or to

3

overturn an interlocutory order or decision while it remains interlocutory.’” Credit Suisse, 400 F.3d

4

at 1124 (9th Cir. 2005) (quoting Tanner Motor Livery, Ltd. v. Avis, Inc., 316 F.2d 804, 809 (9th

5

Cir.1963)).

6

The Supreme Court has stated that courts must consider the following factors in determining

7

whether a preliminary injunction is appropriate: (1) likelihood of irreparable injury if preliminary

8

relief is not granted; (2) a likelihood of success on the merits; (3) balance of hardships; and (4)

9

advancement of the public interest. Winter v. N.R.D.C., 555 U.S. 7, 20 (2008).

10

II.

Analysis

11

During the May 22, 2013, preliminary injunction hearing, the court decided to grant the

12

injunction due to the fact that defendants provided no evidence showing that they had purchased

13

anything other than the real property of the Crazy Horse Too. However, the guaranty documents that

14

have since been produced by defendants demonstrate that The Power Company, Inc., the prior owner

15

of the Crazy Horse Too trademarks, agreed to grant defendants’ predecessor-in-interest a security

16

interest in “any and all property (whether real or personal, tangible, or intangible) belonging to the

17

corporation, as collateral security for any and all [b]orrower’s indebtedness. . . .” (Doc. # 91-4 p. 1).

18

Defendants’ claim is further corroborated by financing statements from defendant’s

19

predecessor in interest which state that “all trade names, trademarks, trade styles, service marks,

20

domain names, . . . advertising symbols, goodwill, telephone numbers, advertising rights, . . And

21

other media items used or intended to be used in connection with [the Crazy Horse Too]” were

22

included as collateral. (Docs. ## 91-7 & 91-8).

23

Additionally, the evidence shoes that on May 31, 2006, the shareholders and board of

24

directors of The Power Company approved a resolution authorizing a plea memorandum with the

25

U.S. government requiring the forfeiture of $4.25 million dollars.

26

On August 17, 2007 an order was issued in U.S. v. Power Company, Inc., Case No. 2:06-cr-

27

00186-PMP-PAL, substituting the real property and intellectual property of the Crazy Horse Too for

28
James C. Mahan
U.S. District Judge

-3-

1

the forfeiture obligation of The Power Company and Ric Rizzolo under the entered plea agreement

2

to pay $4.25 million dollars to the government.

3

On December 22, 2010, Judge Phillip Pro ordered that the government sell the Crazy Horse

4

Too assets. On July 11, 2011, defendant Canico Capital Group LLC, who held the deed of trust to

5

the previously discussed loan agreement, purchased the entire interest in the Crazy Horse Too that

6

was secured under the loan.

7

Therefore, this detailed chain of documents, now supplemented with the guaranty agreement

8

showing that the trademarks of the Crazy Horse Too were included in the collateral of the loan,

9

indicates that defendants are the rightful owners of not only the real property associated with the

10

Crazy Horse Too, but also its goodwill, intellectual property, trademarks and trade names. See Mut.

11

Life Ins. Co. v. Menin, 115 F.2d 975, 977 (2d Cir. 1940) (“There can be no question of the power

12

of the court to sell the ‘good-will‘ of the bankrupt along with its other assets”); Merry Hull & Co.

13

v. Hi-Line Co., 243 F.Supp. 45, 52 (S.D.N.Y. 1965) (holding that assets of business purchased

14

through bankruptcy sale were sufficient to convey title in trademark to defendant purchaser).

15

These evidentiary developments substantially change the foundation upon which the

16

preliminary injunction was laid. When the court issued the preliminary injunction, defendants could

17

present no evidence indicating that they had an interest in anything but the real property of the Crazy

18

Horse Too. Now it is clear that the intellectual property of the business was purchased as well, and

19

it is very likely that the trademarks have not been abandoned. In consideration of the Winter factors,

20

the court finds that plaintiff now lacks a significant probability of success on the merits in this case,

21

and therefore the court will vacate its order granting a preliminary injunction.

22

Accordingly,

23

IT IS HEREBY ORDERED, ADJUDGED, AND DECREED that defendants’ motion for the

24

court to vacate or modify a preliminary injunction (doc. # 91) be, and at the same time hereby is,

25

GRANTED.

26

...

27

...

28
James C. Mahan
U.S. District Judge

-4-

1
2
3

IT IS FURTHER ORDERED that the court’s order granting plaintiff’s motion for
preliminary injunction (Doc. # 46) is VACATED.
DATED February 10, 2014.

4
5
UNITED STATES DISTRICT JUDGE
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
James C. Mahan
U.S. District Judge

-5-