Solfire Group, LLC et al v. Solfire Enterprises, LLC et al

Filing 37

MEMORANDUM AND ORDER. Having dismissed Plaintiffs' trademark claims and because the Court lacks diversity jurisdiction, the Court has no subject matter jurisdiction over Plaintiffs' state law claims. Accordingly, the Court dismisses Plaintiffs' state law claims without prejudice. The Clerk of the Court is directed to close this case. Ordered by Judge Margo K. Brodie on 5/5/2016. (Francis-McLeish, Ogoro)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
--------------------------------------------------------------SOLFIRE GROUP, LLC, SOLFIRE GEAR, LLC,
SHANE SABEL, Individually, CANDACE
SABEL, Individually, CHRISTOPHER
PESAVENTO, Individually, KRISTOPHER
BRAATEN, Individually, GREGORY BARBA,
Individually, and KATHERINE BARBA,
Individually,

MEMORANDUM & ORDER
14-CV-3054 (MKB)

Plaintiffs,
v.
SOLFIRE ENTERPRISES, LLC, SOLFIRE
CLOTHING COMPANY, LLC, BRENDAN
MURPHY, Individually, and JOHN ZIEGLER,
Individually,
Defendants.
--------------------------------------------------------------MARGO K. BRODIE, United States District Judge:
On May 15, 2014, Plaintiffs Solfire Group, LLC (“Solfire Group”), Solfire Gear, LLC
(“Solfire Gear”), Shane Sabel, Candace Sabel, Christopher Pesavento, Kristopher Braaten,
Gregory Barba and Katherine Barba commenced the above-captioned action against Defendants
Solfire Enterprises, LLC (“Solfire Enterprises”), Solfire Clothing Company, LLC (“Solfire
Clothing”), Brendan Murphy and John Ziegler. (Compl., Docket Entry No. 1.) On November
11, 2014, Plaintiffs filed an Amended Complaint alleging claims of (1) trademark infringement
pursuant to 15 U.S.C. § 1114, (2) false designation of origin and false advertising pursuant to
15 U.S.C. § 1125, (3) breach of fiduciary duty, (4) breach of contract, (5) aiding and abetting
breach of fiduciary duty, (6) tortious interference with contract and (7) unjust enrichment. (Am.
Compl. ¶¶ 61–119, Docket Entry No. 15.) Plaintiffs also seek a declaratory judgment, pursuant

to 28 U.S.C. § 2201, declaring them owners of the trademark at issue. (Id. ¶¶ 53–60.) On March
3, 2015, Defendants Solfire Clothing, Solfire Enterprises and John Ziegler (collectively the
“Ziegler Defendants”), moved to dismiss the Amended Complaint for failure to state a claim
pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. (Ziegler Defs. Mot. to
Dismiss, Docket Entry No. 24.) Defendant Murphy separately moved to dismiss all claims
against him. (Murphy Mot. to Dismiss, Docket Entry No. 30.) Plaintiffs opposed both motions
to dismiss. (Mem. in Opp’n to Ziegler Mot. to Dismiss, Docket Entry No. 27; Mem. in Opp’n to
Murphy Mot. to Dismiss, Docket Entry No. 29.)
On March 16, 2016, the Court heard oral arguments on the motions and, for the reasons
stated on the record, granted the motions in part, dismissing Plaintiffs’ trademark infringement
claim pursuant to 15 U.S.C. § 1114 and Plaintiffs’ false designation of origin and false
advertising claims pursuant to 15 U.S.C. § 1125. (Min. Order dated Mar. 16, 2016.) The Court
reserved decision as to Plaintiffs’ state law claims and granted Plaintiffs two weeks to decide
whether to replead their federal claims. (Id.) By letter dated March 29, 2016, Plaintiffs notified
the Court that they do not intend to replead their federal claims. (Pls. Letter dated Mar. 29, 2016,
Docket Entry No. 36.) As explained below, because the Court lacks jurisdiction over Plaintiffs’
state law claims, the Court dismisses Plaintiffs’ state law claims without prejudice.
I.

Background
According to the Amended Complaint, Plaintiffs Solfire Group and Solfire Gear

(collectively the “LLC Plaintiffs”) are Florida limited liability companies.1 (Am. Compl.
¶¶ 1–2.) Plaintiffs S. Sabel, C. Sabel, Pesavento, Braaten, G. Barba and K. Barba (collectively

1

The allegations in the Amended Complaint are assumed to be true for the purposes of
this order.
2

the “Individual Plaintiffs”) are all members of the LLC Plaintiffs. (Id. ¶ 20.) The Amended
Complaint does not state the citizenship of the Individual Plaintiffs. (See id. ¶¶ 3–8.)
Defendants Solfire Enterprises and Solfire Clothing are New York limited liability companies.
(Id. ¶¶ 9–10.) Defendants Murphy and Ziegler are residents of New York and are members of
Solfire Enterprises and Solfire Clothing. (Id. ¶¶ 12–15.)
Plaintiff Solfire Group “manufactured, distributed, and sold tennis apparel marketed
under the SOLFIRE® trademark” (the “Mark”). (Id. ¶ 31.) S. Sabel and Murphy founded
Solfire Group in 2008. (Id. ¶ 21.) Murphy was a minority member of Plaintiff Solfire Group
and was one of its managing members, handling day-to-day operations. (Id. ¶ 26.)
Plaintiff Solfire Group applied to the U.S. Patent and Trademark Office (“USPTO”) to
register the Mark as a protected trademark. (Id. ¶ 32.) The UPSTO granted the application on
June 14, 2011 and registered the Mark under Registration Number 3979719. (Solfire USPTO
Registration 1,2 annexed to Decl. of Robert Pershes (“Pershes Decl.”), Docket Entry No. 28, as
Ex. 1.) Plaintiffs assert that, “unilaterally and without knowledge of the Plaintiffs or obtaining
consent from any of the members of Solfire Group,” Murphy pledged the Mark and its associated
goodwill “as collateral to Ziegler in exchange for $4 million in cash, which was solely paid to
Murphy or an entity at Murphy’s direction which was only for his benefit.” (Am. Compl. ¶¶ 36,
47.) Murphy subsequently defaulted on the loan, and the Mark was “assigned to Ziegler or an

2

“The Court may properly take judicial notice of official records of the United States
Patent and Trademark Office and the United States Copyright Office.” Telebrands Corp. v. Del
Labs., Inc., 719 F. Supp. 2d 283, 287 (S.D.N.Y. 2010) (first citing Island Software and Computer
Serv., Inc. v. Microsoft Corp., 413 F.3d 257, 261 (2d Cir. 2005) (copyright registration); and then
citing Duluth News–Tribune v. Mesabi Publ’g Co., 84 F.3d 1093, 1096 n.2 (8th Cir. 1996)
(trademark registration)).

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entity at his direction.” 3 (Id. ¶ 47.) Ziegler subsequently assigned the Mark to Defendant Solfire
Enterprises. 4 (Id. ¶ 38.) According to the USPTO’s record, Plaintiff Solfire Group is listed as
the original registrant of the Mark, and Defendant Solfire Enterprises is registered as the current
owner. 5 (Solfire USPTO Registration 1.) Defendants Solfire Enterprises and Solfire Clothing
are currently utilizing the Mark to manufacture and sell tennis apparel. (Am. Compl. ¶ 45–46.)
Plaintiffs contend that Plaintiff Solfire Group remains the true owner of the Mark because
“Ziegler and Murphy executed and recorded the assignments, knowing that, collectively,
Plaintiffs account for the majority ownership interest in Solfire Group, Solfire Group is the true
owner of the Mark, and knowing that they had no authority to execute those assignments.”6
(Id. ¶ 42.)
II. Discussion
a.

Standard of review

A district court may dismiss an action for lack of subject matter jurisdiction pursuant to
Rule 12(b)(1) when the court “lacks the statutory or constitutional power to adjudicate it.”
Cortlandt St. Recovery Corp. v. Hellas Telecomms., S.À.R.L., 790 F.3d 411, 416–17 (2d Cir.
3

The assignment was memorialized in writing. (Assignment of U.S. Trademark
Registration dated Aug. 25, 2013, annexed to Pershes Decl. as Ex. 2.)
4

The second assignment was also memorialized in writing. (Assignment of U.S.
Trademark Registration dated Aug. 29, 2013, annexed to Decl. of Kevin Mulry, Docket Entry
No. 24, as Ex. 2.)
5

Both assignments are reflected in the Mark’s USPTO registration record, which
indicates that on August 25, 2013, the Mark was first assigned by Plaintiff Solfire Group to
Ziegler, who subsequently assigned the Mark on August 29, 2013 to Defendant Solfire
Enterprises. (Solfire USPTO Registration at 2–3.)
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Plaintiffs also allege that Murphy “without the knowledge or authorization of Plaintiffs,
failed to file the annual reports of [Solfire Group] and [Solfire Gear], allowed various trademark
applications to go abandoned, and failed to attend to administrative requirements of [Solfire
Group] and [Solfire Gear].” (Am. Compl. ¶ 33.)
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2015) (quoting Makarova v. United States, 201 F.3d 110, 113 (2d Cir. 2000)); Shabaj v. Holder,
718 F.3d 48, 50 (2d Cir. 2013) (quoting Aurecchione v. Schoolman Transp. Sys., Inc., 426 F.3d
635, 638 (2d Cir. 2005)). The plaintiff has the burden to prove that subject matter jurisdiction
exists, and in evaluating whether the plaintiff has met that burden, “‘[t]he court must take all
facts alleged in the complaint as true and draw all reasonable inferences in favor of plaintiff,’ but
‘jurisdiction must be shown affirmatively, and that showing is not made by drawing from the
pleadings inferences favorable to the party asserting it.’” Morrison v. Nat’l Austl. Bank Ltd., 547
F.3d 167, 170 (2d Cir. 2008) (citations omitted), aff’d, 561 U.S. 247 (2010). A court may
consider matters outside of the pleadings when determining whether subject matter jurisdiction
exists. M.E.S., Inc. v. Snell, 712 F.3d 666, 671 (2d Cir. 2013); Romano v. Kazacos, 609 F.3d
512, 520 (2d Cir. 2010).
b.

Dismissal of Plaintiffs’ trademark claims

In the Amended Complaint, Plaintiffs asserted claims of trademark infringement pursuant
to 15 U.S.C. § 1114(1), (Am. Compl. ¶ 62), and false designation of origin and false advertising
pursuant to 15 U.S.C. § 1125(a), (id. ¶¶ 78–79). At the oral argument held on March 16, 2016,
the Court held that Plaintiffs had failed to state a claim pursuant to either section 1114(1) or
section 1125(a). (Min. Order dated Mar. 16, 2016.)
As to Plaintiffs’ section 1114(1) claim, the Court determined that, because Plaintiffs
failed to allege any facts from which the Court could infer their use of the Mark, Plaintiffs failed
to sufficiently allege a likelihood of consumer confusion. See Starbucks Corp. v. Wolfe’s
Borough Coffee, Inc., 588 F.3d 97, 114 (2d Cir. 2009) (noting that, in order to prevail on a
trademark infringement claim, “the plaintiff must prove that the defendant’s use of the allegedly
infringing mark would likely cause confusion as to the origin or sponsorship of the defendant’s

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goods with plaintiff’s goods” (citations omitted)); Ahmed v. GEO USA LLC, No. 14-CV-7486,
2015 WL 1408895, at *3 (S.D.N.Y. Mar. 27, 2015) (holding that the plaintiff failed to establish
likelihood of consumer confusion because he failed “to prove that the parties offer the same
goods or services” and instead stated his business in conclusory fashion, without factual detail).
Plaintiffs’ section 1125(a) infringement claim failed for the same reason. See Starbucks,
588 F.3d at 114 (noting that infringement claims pursuant to either section 1114(1) or section
1125(a) require a plaintiff to establish a likelihood of consumer confusion); Virgin Enters. Ltd. v.
Nawab, 335 F.3d 141, 146 (2d Cir. 2003) (noting that infringement claims, “whether brought
under 15 U.S.C. § 1114(1) . . . or 15 U.S.C. § 1125(a),” are analyzed under the same standard,
which requires plaintiffs to establish that a “defendant’s use of the mark [at issue] is likely to
cause consumers confusion as to the origin or sponsorship of the defendant’s goods”); Ahmed,
2015 WL 1408895, at *2 (dismissing section 1125(a) claim where the plaintiff did not “provide
any facts about his actual use of the mark” and where it was “impossible to tell from the
[c]omplaint the products or services with which the mark was supposedly used”).
As to Plaintiffs’ section 1125(a) false advertisement claim, the Court determined that,
because Plaintiffs did not allege that Defendants’ actions harmed a current commercial interest,
Plaintiffs failed to establish that they suffered an injury proximately caused by a violation of
section 1125(a). See Lexmark Intern., Inc. v. Static Control Components, Inc., 572 U.S. ---, ---,
134 S. Ct. 1377, 1395 (2014) (holding that, in order to bring a section 1125(a) false advertising
claim, “a plaintiff must plead (and ultimately prove) an injury to a commercial interest in sales or
business reputation proximately caused by the defendant’s misrepresentations”); Avalos v.
IAC/Interactivecorp., No. 13-CV-8351, 2014 WL 5493242, at *5 (S.D.N.Y. Oct. 30, 2014)
(dismissing section 1125(a) false advertising claim because allegations of harm were speculative

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where the plaintiff did not sufficiently allege that the defendant’s actions resulted in consumers
withholding trade from the plaintiff by, for example, using its services less often).
Accordingly, the Court dismissed Plaintiffs’ claims pursuant to both section 1114(1) and
section 1125(a). (Min. Order dated Mar. 16, 2016.) By letter dated March 29, 2016, Plaintiffs
notified the Court that they do not intend to replead their federal claims. (Pls. Letter dated
Mar. 29, 2016.)
c.

The Court lacks subject matter jurisdiction over Plaintiffs’ state law claims

The Ziegler Defendants argue that by dismissing Plaintiffs’ trademark claims, the Court
lacks subject matter jurisdiction over Plaintiffs’ state law claims because the parties are not
completely diverse. (Mem. of Law in Supp. of Ziegler Defs. Mot. to Dismiss 13.) Plaintiffs
have not responded to this argument.
Diversity jurisdiction gives federal district courts jurisdiction over suits where plaintiffs
and defendants are citizens of different states and “the matter in controversy exceeds the sum or
value of $75,000, exclusive of interest and costs.” 28 U.S.C. § 1332(a); see also Bayerische
Landesbank, N.Y. Branch v. Aladdin Capital Mgmt. LLC, 692 F.3d 42, 48 (2d Cir. 2012) (citing
28 U.S.C. § 1332(a)). There must be complete diversity of citizenship between all plaintiffs and
all defendants. Pa. Pub. Sch. Emps.’ Ret. Sys. v. Morgan Stanley & Co., 772 F.3d 111, 117–18
(2d Cir.), as amended, (Nov. 12, 2014) (“Subject matter jurisdiction is based on 28 U.S.C.
§ 1332, which requires ‘complete diversity,’ i.e. all plaintiffs must be citizens of states diverse
from those of all defendants.” (citation omitted)); Lovejoy v. Watson, 475 F. App’x 792, 792 (2d
Cir. 2012) (“The complaint alleged that Lovejoy and the defendant resided in New York, thereby
precluding diversity jurisdiction.”). For the purpose of determining whether complete diversity
between the parties exists, “a limited liability company . . . takes the citizenship of each of its

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members.” Bayerische Landesbank, 692 F.3d at 49. “Furthermore, it is well established that the
party seeking to invoke jurisdiction under 28 U.S.C. § 1332 bears the burden of demonstrating
that the grounds for diversity exist and that diversity is complete.” Herrick Co. v. SCS
Commc’ns, Inc., 251 F.3d 315, 322 (2d Cir. 2001) (alteration, citations and internal quotation
marks omitted).
The Amended Complaint states that the LLC Plaintiffs are Florida limited liability
companies and that Defendants, including Murphy, are New York citizens. (Am. Compl. ¶¶ 1–2,
9–15.) However, the Amended Complaint fails to state the citizenship of the Individual
Plaintiffs. (See id. ¶¶ 3–8.) Because Plaintiffs bear the burden of establishing complete
diversity, by failing to plead the citizenship of the Individual Plaintiffs, Plaintiffs fail to establish
diversity jurisdiction. See Receiveables Exch., LLC v. Hotton, No. 11-CV-292, 2011 WL
239865, at *1 (E.D.N.Y. Jan. 21, 2011) (dismissing complaint for failure to allege citizenship of
each member of the plaintiff limited liability company (collecting cases)); Infinity Consulting
Grp., LLC v. Am. Cybersystems, Inc., No. 09-CV-1744, 2010 WL 456897, at *1 (E.D.N.Y.
Feb. 3, 2010) (same). Moreover, based on the facts alleged in the Amended Complaint,
Defendant Murphy is a citizen of New York and a member of the LLC Plaintiffs. 7 (Am. Compl.

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While Plaintiffs allege that Murphy “constructively abandoned his position as a
member and managing member” of Solfire Group, (Am. Compl. ¶ 11), Plaintiffs have not
presented any facts to support their legal conclusion that Murphy is no longer a member of the
LLC Plaintiffs for the purposes of diversity jurisdiction. Plaintiffs have not alleged that Murphy
filed a statement of dissociation, Fla. Stat. Ann. § 605.0216 (detailing how a member of a limited
liability company may dissociate himself or herself from the entity), or that he expressly
dissociated himself from the Plaintiff LLCs, Fla. Stat. Ann. § 605.0601(1) (“A person has the
power to dissociate as a member at any time, rightfully or wrongfully, by withdrawing as a
member by express will . . . .”), or that any of the events enumerated in section 605.0602 of the
statute occurred, Fla. Stat. Ann. § 605.0602 (enumerating the events that cause dissociation, for
example “[a]n event stated in the operating agreement as causing the person’s dissociation
occurs” or “[t]he person is expelled as a member pursuant to the operating agreement”).
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¶¶ 11–13, 26–27, 47.) Therefore, because Murphy is a member of the LLC Plaintiffs, the LLC
Plaintiffs are also citizens of New York. See Bayerische Landesbank, 692 F.3d at 49 (“[A]
limited liability company . . . takes the citizenship of each of its members.”). Because the LLC
Plaintiffs and Defendant Murphy are citizens of New York, Plaintiffs have failed to meet their
burden to demonstrate complete diversity between the parties, as necessary for the Court to
exercise diversity jurisdiction over Plaintiffs’ state law claims. See Pa. Pub. Sch. Emps.’ Ret.
Sys., 772 F.3d at 117–18 (noting that diversity jurisdiction requires that “all plaintiffs must be
citizens of states diverse from those of all defendants”).
Having dismissed Plaintiffs’ trademark claims and because the Court lacks diversity
jurisdiction, the Court has no subject matter jurisdiction over Plaintiffs’ state law claims.
Accordingly, the Court dismisses Plaintiffs’ state law claims without prejudice.
III. Conclusion
For the foregoing reasons, the Court dismisses Plaintiffs’ state law claims without
prejudice.
SO ORDERED:
s/ MKB
MARGO K. BRODIE
United States District Judge
Dated: May 5, 2016
Brooklyn, New York

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