GEEKY BABY, LLC. v. IDEA VILLAGE PRODUCTS, CORP.

Filing 14

OPINION. Signed by Judge Jose L. Linares on 8/21/15. (DD, )

NOT FOR PUBLICATION

UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY

GEEKY BABY, LLC,
Civil Action No. 15-3454 (JLL) (JAD)

Plaintiff,
v.

OPINION

IDEA VILLAGE PRODUCTS, CORP.
Defendant.

LINARES, District Judge.
This matter comes before the Court by way of Defendant Idea Village Products, Corp.
(“Defendant”)’s motion to dismiss or in the alternative stay Plaintiff Geeky Baby (“Plaintiff’)’s
Complaint (ECF No. 1) pursuant to Federal Rule of Civil Procedure 12(b)(6). (ECF No. 9). The
Court has considered the parties’ submissions in support of and in opposition to the instant
motion and decides this matter without oral argument pursuant to Federal Rule of Civil
Procedure 78. For the reasons set forth below, the Court GRANTS IN PART Defendant’s
motion.
I. BACKGROUNW

Plaintiff is a limited liability company organized and located in Miami Beach, Florida.
(Comp. at ¶ 1). Defendant is a corporation organized and located in Wayne, New Jersey. (Id. at
¶
2). Plaintiff and Defendant entered into a Marketing Agreement (“The Agreement”) dated

‘The following facts are taken as true solely for the purposes of this motion.

August 15, 2013 and an addendum (“The Addendum”) thereto on July 25, 2014. (Id. at 3).
¶
Plaintiff was formed to develop, market and sell a “single-piece case plastic loom which is used
to create rubber band bracelets and other items,” known as “FunLoom”. (Id. at 8). The
¶
Agreement called for Defendant to pay royalties to Plaintiff for all sales of FunLoom. (Id. at
¶
12). Plaintiff alleges that Defendant failed to pay these royalties. (Id. at 13). Further, Plaintiff
¶
contends that Defendant was only allowed to “offer for sale a refill package of bands consisting
of a multi-colored variety pack of solid colored hybrid silicone and rubber replacement bands.”
(Id. at ¶ 14). Plaintiff alleges that Defendant breached this limitation set forth in the Agreement
by selling 100% silicone bands and by selling colors and styles of bands it was not authorized to
sell. (Id. atJ15).
The parties attempted to resolve these issues by entering into the Addendum which left
intact Defendant’s responsibility to pay royalties going forward, but did decrease the royalty
amount for international sales only. (Id. at ¶J 17-18). The Addendum further required Defendant
to pay a lump sum of $100,000 for royalties related to replacement bands, though this amount
was contingent upon Defendant’s representation as to the accuracy of certain sales figures for
replacement bands. (Id. at ¶ 19). The Addendum further required a lump sum of back royalties
for the FunLoom in the amount of $151,895. (Id. at ¶ 20). The Addendum required Defendant to
pay Plaintiff a non-recourse royalty in the amount of $10,000 per month for at least six (6)
months beginning in June of 2014. (Id. at ¶ 21). Finally, the Addendum included an obligation
for Defendant to use its best efforts to assist Plaintiff in selling its remaining inventory of
FunLoom products not manufactured in conjunction with Defendant. (Id. at 22).
¶
Since the Addendum was signed, Defendant paid only three (3) $10,000 non-recourse
royalty to Plaintiff. (Id. at ¶ 23). Defendant failed to pay the other three (3) non-recourse

payments, royalties as agreed on regarding FunLoom product sales, and Defendant has
not used
its best efforts to assist Plaintiff in its selling of remaining inventory of FunLoom produc
ts. (Id.
at ¶J 23-25). Moreover, Plaintiff alleges that the sales figures provided to the Addendum are
inaccurate and created false representations upon which the Addendum was made. (Id.
at ¶ 26).
Plaintiff alleges that except as explicitly changes, the Addendum left intact the language of
the
original Agreement. (Id. at ¶ 27). In addition to the alleged breaches of the Agreement that led
to
the execution of the Addendum, there were other obligations of Defendant under the Agreem
ent
which have been breached. (Id. at ¶ 28).
Plaintiff alleges that in direct violation of the Agreement, Defendant has marketed,
advertised, distributed and sold competing products known as the “Mini-FunLoom” and
the
“Pocket-Loom”. (Id. at ¶ 31). The Agreement also required FunLoom products produc
ed by
Plaintiff to be promoted on all instructional materials and replacement band packag
ing. (Id. at
¶32). Specifically, products from FunLoomPlus.com were to be promoted on these materi
als and
the FunLoornPlus.com URL was to be printed on these materials. (Id.) The products to
be
promoted included “premium” replacement bands available exclusively through Plainti
ff. (Id.)
Plaintiff alleges that Defendant breached this obligation as well. (Id.) Moreover, all packag
es of
replacement band not provided by Plaintiff were to be marked as “standard” bands,
in contrast to
the “premium” bands offered by Plaintiff. (Id. at 33). Plaintiff contends that Defend
¶
ant
breached this obligation as well. (Id.). Finally Plaintiff alleges that Defendant breach
ed the
Agreement by failing to make timely payments or royalties, as well as failing to
provide sales
reports within seven (7) days of the end of each month. (Id. at 34-35).
¶J
In June of 2014, Choon’s Design LLC (“Choon’s”), a company that marketed and
sold a
competitor product known as the Rainbow Loom, alleged that the FunLoom was an
infringement

of the intellectual property of Choon’ s. (Id. at ¶f 36-38). Defendant was made aware
of Choon’ s
infringement claims prior to the execution of Agreement. (Id. at 39). On August 19, 2013,
¶
Choon’s filed a complaint in the Eastern District of Michigan against Plaintiff, Zenaco
n, LLC
(the inventor of the FunLoom), and Steven Verona (employee of Zenacon), allegin
g in part that
the importation, offer for sale, sale, advertisement and distribution of FunLoom directly and
indirectly infringed the corresponding Rainbow Loom patent and diluted the corresponding
trademark registration. (Id. at ¶ 40). Subsequently, Defendant was added as a party the
to
Choon’s lawsuit upon the allegation that the FunLoom infringed upon an additional patent.
(Id.
at ¶41). Recently, Verona, Zenacon and Plaintiff settled the Choon’s lawsuit, but the suit
remains pending against Defendant.
Plaintiff asserts the following causes of action against Plaintiff: (1) Breach of Marketing
Agreement; (2) Declaratory Judgement; (3) Breach of Marketing Addendum; (4)
Indemnification; and (5) Trademark Violation.
II. LEGAL STANDARD

For a complaint to survive dismissal, it “must contain sufficient factual matter, accept
ed as
true, to ‘state a claim to relief that is plausible on its face.” Ashcrofl v. Iqbal,
556 U.S. 662, 678
(2009) (citing Bell Ati. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). “Federal
Rule of Civil
Procedure 8(a) (2) requires only ‘a short and plain statement of the claim showing that
the pleader
is entitled to relief,’ in order to ‘give the defendant fair notice of what the

.

.

.

claim is and the

grounds upon which it rests.” Twombly, 550 U.S. at 545 (quoting Conley v. Gibson
, 355 U.S. 41,
47 (1957)).

In evaluating the sufficiency of a complaint, a court must accept all well-pleaded factual
allegations as true and draw all reasonable inferences in favor ofthe non-moving party. See

Phillips

v. County ofAllegheny, 515 F.3d 224, 234 (3rd Cir. 2008). “Factual allegations must be
enough to
raise a right to relief above the speculative level.” Twomblv, 55 U.S. at 555. Furthe
r, “[a] pleading
that offers ‘labels and conclusions’ or ‘a formulaic recitation of the elements of a
cause of action
will not do.” Iqbal, 556 U.S. at 678 (citing Twombly, 550 U.S. at 555, 557). “Threa
dbare recitals
of the elements of a cause of action, supported by mere conclusory statements, do not
suffice.” id.
Thus. legal conclusions draped in the guise of factual allegations may not benefit
from the
presumption of truthfulness. Id. Additionally, in evaluating a plaintiffs claims, genera
lly “a court
looks only to the facts alleged in the complaint and its attachments without reference
to other parts
of the record.” Jordan v. Fox, Rothschild, O’Brien & Fran/ce!, 20 F.3d 1250, 1261 (3rd
Cir. 1994).
III. DISCUSSION
A. Motions Before the Court
I. Defendant’s Motion

Defendant argues that dismissal is warranted on the following grounds: (1) Plainti
ff’s
indemnification claim is not ripe for adjudication while the underlying infring
ement action is
pending and should be dismissed or in the alternative, stayed; and (2) The Court should
exercise
its discretion and decline jurisdiction over Plaintiffs related declaratory judgement,
trademark
violation and breach of contract claims.
2. Plaintiff’s Opposition
Plaintiff refutes Defendant’s argument by stating that: (1) Defendant cites no
authority
that supports the stay or dismissal of Plaintiff’s indemnification action; (2) There
is no basis to
stay or dismiss Plaintiffs remaining causes of action; and (3) Plaintiffs settlem
ent of the
Choon’ s case does not violate its agreements with Defendant.
B. Analysis

The ripeness doctrine “serves to ‘determine whether a party has brought an action
prematurely and counsels abstention until such time as a dispute is sufficiently concre
te to satisfy
the constitutional and prudential requirements of the doctrine.” Khodara Envtl., Inc. v. Blakey
,
376 F.3d 187, 196 (3d Cir. 2004) (quoting Peach/urn v. City of York, 333 F.3d 429, 433
(3d Cir.
2003)). Ripeness prevents courts from “entangling themselves in abstract disagreements” and
rendering opinions that “advis[ej what the law would be on a hypothetical state of facts.”
Surrick
v. Killion, 449 F.3d 520, 527 (3d Cir. 2006). By abstaining from deciding a case until
it is ripe, a
court ensures that it will decide only “a real and substantial controversy admitting of specifi
c
relief through a decree of a conclusive character.” Id.
To determine whether a case is ripe, courts “generally examine: ‘(1) the fitness of the
issues for judicial decision, and (2) the hardship to the parties of withholding court
consideration.” Khodara Envtl., Inc. v. Blakey, 376 F.3d 187, 196 (3d Cir. 2004) (quotin
g
Peach/urn, 333 F.3d at 434) (additional internal quotation marks and citation omitte
d). In

assessing the ripeness in the declaratory relief context, the Third Circuit considers whethe
r: “(1)
the parties must have adverse legal interests; (2) the facts must be sufficiently concre
te to allow
for a conclusive legal judgment, and (3) the judgment must be useful to the parties.”
See StepSaver Data Sys., Inc. v. Wyse Tech., 912 F.2d 643, 647 (3d Cir. 1990). The conclu
siveness prong
of the ripeness inquiry addresses “whether the parties’ rights will be definitively
decided by a
declaratory judgment.” Step-Saver, 912 F.2d at 649 n.9.
Defendant argues that this Court should stay these proceedings because final resolut
ion of
the Underlying Infringement Action is necessary in order to adjudicate Plaintiffis
claims, as well
as Defendant’s defenses and putative counterclaims, including the respective claims
of Plaintiff
and Defendant against the other for indemnification arising out of the Choon
Infringement

Action. Defendant notes that Plaintiff agreed to “indemnify, release and hold [Defen
dant]
harmless from and against any and all claims, lawsuits, costs (including reasonable
external
attorney’s fees and expenses), liabilities, damages, fines, settlements, loses or other
expense
incurred by or asserted against [Defendant] arising from (i) Licensor’s breach
of any of the
representations, warranties or covenants in this Agreement, including, but not limited
to third
party infringement claims

.. ..“

(See Comp. Ex A). Defendant contends that Plaintiff’s

Complaint, containing claims for indemnification, declaratory relief, trademark
violation and
breach of contract, is not ripe for judicial review while the Choon Infringement Action
is
pending. Defendant asserts that even if Plaintiff’s claims were deemed ripe for
adjudication by
this Court, there are sound policy reasons dictating that this Court should exercise its
discretion
and dismiss or stay this action pending final resolution of the Choon Infringement
Action.
Plaintiff responds to Defendant’s arguments by stating that Plaintiff’s indemnificat
ion
claim is not contingent on the Choon lawsuit. Plaintiff argues that because Plainti
ff has already
settled its portion of the Choon lawsuit, Plaintiff’s costs and liability from said
lawsuit are
already set. Therefore, Plaintiff argues, there is nothing contingent about Plainti
ff’s
indemnification claim and waiting of the Choon litigation to conclude will
add nothing to the
determination of Plaintiff’s claim.
The Court agrees with Defendants that this case should be stayed pending
the outcome of
the Choon lawsuit. As Defendant notes, should Defendant prevail on the merits
in the Choon
Infringement Action, there would be no basis for Plaintiff’s claim for indemnificatio
n against
Defendant, notwithstanding its settlement with Choon. However, an advers
e finding against
Defendant in the Choon Infringement Action may give rise to a claim by
Defendant for
indemnification against Plaintiff’, which represented and warranted to Defend
ant that Plaintiff

was the rightfiil owner of the intellectual property at issue both in the Choon Infringement
Action and in this case. Defendant notes, and the Court agrees, that this Court would be
rendering nothing more than an “if/then” declaratory decision, which would be improper in this
instance. Given the contingent nature of the claims, this Court hereby stays this action pending
the outcome of the Choon lawsuit in the Eastern District of Michigan. Once a decision has been
rendered in the Choon lawsuit, the stay in this case may be lifted in order for the Court to
adjudicate the remaining claims on their merits.
IV. CONCLUSION
For the reasons set forth above, this action is hereby stayed pending resolution of the
underlying patent and trademark infringement action pending in the Eastern District of
Michigan,
Date: August

f, 2015

Y

t’

Je L. Linares
United States District Judge