Duckhorn Wine Company v. Duck Walk Vineyards Inc.

Filing 21

MEMORANDUM & ORDER denying 7 Motion to Dismiss; For the foregoing reasons, Duck Walk's motion to dismiss the Complaint is DENIED. So Ordered by Judge Joanna Seybert on 6/9/2014. C/ECF (Valle, Christine)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
----------------------------------------X
DUCKHORN WINE COMPANY, a California
Corporation,
Plaintiff,
MEMORANDUM & ORDER
13-CV-1642(JS)(GRB)

-againstDUCK WALK VINEYARDS, INC., a New York
Corporation,

Defendant.
----------------------------------------X
APPEARANCES
For Plaintiff:
Gayle Rosenstein Klein, Esq.
John C. Briody, Esq.
McKool Smith PC
One Bryant Park, 47th Floor
New York, NY 10036
Henry C. Bunsow, Esq.
Jeffrey D. Chen, Esq.
Robin K. Curtis, Esq.
Bunsow De Mory Smith & Allison LLP
351 California Street, Suite 200
San Francisco, CA 94104
For Defendant:

Linda S. Agnew, Esq.
Steven R. Schlesinger, Esq.
Jaspan Schlesinger LLP
300 Garden City Plaza
Garden City, NY 11530

SEYBERT, District Judge:
Plaintiff

Duckhorn

Wine

Company

(“Plaintiff”

or

“Duckhorn”) commenced this action against Duck Walk Vineyards,
Inc. (“Defendant” or “Duck Walk”), alleging that Duck Walk breached
a settlement agreement between the parties that resolved a prior
trademark infringement action between them.

Duck Walk moves to

dismiss the Complaint for failure to state a claim pursuant to
Federal Rule of Civil Procedure 12(b)(6).

(Docket Entry 7.)

For

the following reasons, Duck Walk’s motion to dismiss is DENIED.
BACKGROUND1
Duckhorn is a California vineyard and winemaker with its
principal place of business in Saint Helena, California.
¶ 5.)

(Compl.

Duck Walk is a New York vineyard and winemaker with its

principal place of business in Water Mill, New York. (Compl. ¶ 6.)
As their names might suggest, both wineries use duck-related words
and imagery in connection with the marketing and distribution of
their wine products.
This action stems from a prior trademark infringement
action between Duckhorn and Duck Walk brought in this Court in
2001.

(Compl. ¶¶ 1, 15; see Duck Walk Vineyards, Inc. v. St.

Helena

Wine

(E.D.N.Y.).)

Co.,

d/b/a

Duckhorn

Vineyards,

No.

01-CV-4896

In September 2003, the parties entered into a Mutual

Release and Settlement Agreement (the “Settlement Agreement”) that
resolved that action.
places

certain

(Compl. Ex. 1.)

restrictions

and

The Settlement Agreement

requirements

on

Duck

Walk’s

ability to produce and distribute wines with duck images on the
labels.

(See generally Compl. Ex. 1.)

In this action, Duckhorn

1

The following facts are taken from the Complaint and are
presumed to be true for the purposes of this Memorandum and
Order.
2

alleges

that

Duck

Walk

breached

Paragraphs

2

and

3

of

the

Settlement Agreement.
Paragraph 2 of the Settlement Agreement restricts the
production volume and geographic distribution of Duck Walk wines
that have duck images on the labels.

It states in relevant part:

Duck Walk Vineyards, Inc. shall not in any one
calendar year produce and/or bottle and/or
authorize production and/or bottling of more
than 84,000 gallons (the “Gross Production”)
where the word “Duck” and/or the image or
picture of ducks will be employed on the label
except as part of the corporate name “Duck
Walk Vineyards, Inc.” . . . .
Duck Walk
Vineyards, Inc. shall not sell more than 50%
of the annual Gross Production outside of the
States
of
New
York,
New
Jersey
and
Connecticut, or sell to restaurants, or
others, where it will be served or resold
outside of the States of New York, New Jersey
and Connecticut.
(Compl. Ex. 1 ¶ 2.)

Duckhorn alleges that Duck Walk breached this

provision “[b]y selling more than 50% of Gross Production outside
of New York, New Jersey, and Connecticut . . . .”

(Compl. ¶ 54.)

Paragraph 3 of the Settlement Agreement imposes certain
restrictions and requirements on the actual content of Duck Walk’s
labels.
Duck

Paragraph 3 first requires that the front label of any

Walk

wine

containing

duck

images

also

contain

language

identifying Duck Walk’s geographic location on Long Island, New
York (“Prefatory Language”):
The words “The Hamptons”, “South Hamptons”,
“South Fork” and/or “Long Island” or other
geographic designation of like import as may
3

be approved by BATF2 (the prefatory language)
shall be added on the front label of all of
the Gross Production.
Such words will be
added to the front label immediately above the
words “Duck Walk” or other use of the word
“Duck” in size and font lettering reasonably
legible to person looking at the front label,
and in accordance with approval by BATF.
(Compl. Ex. 1 ¶ 3 (footnote added).)
Duckhorn alleges that Duck Walk breached this provision
by failing to place Prefatory Language on the front labels of its
cabernet sauvignon, merlot, and brut sparkling wines.
¶ 41.)

(Compl.

In support of this allegation, the Complaint attaches

Certifications of Label Approval (“COLAs”) issued by the the BATF
in 2009 for each of the wines at issue.3

(Compl. Exs. 2-4.)

Affixed to the COLAs are the following labels:

2

“BATF” is the acronym for the Bureau of Alcohol, Tobacco,
Firearms and Explosives.
3

A COLA is a certification issued by the BATF “that authorizes
the bottling or packing of wine . . . for introduction into
commerce” on the condition that the wine “bears labels identical
to the labels affixed to the face of the certificate . . . .”
27 C.F.R. § 13.11.
4

The labels on the left depict a silhouette of two blue ducks, and
the labels on the right contain the product barcode, government
warnings, and the alcohol percentage.

Duckhorn alleges that

shortly after receiving the COLAs for these labels, Duck Walk began
using

the

labels

to

market

and
5

sell

its

wine

in

interstate

commerce, including by displaying on its website the labels on the
left as the front labels.

(Compl ¶¶ 32-40.)

Duckhorn alleges

that Duck Walk’s use of these labels constitutes a breach of the
Settlement Agreement because the labels on the left, which Duckhorn
alleges are the “front labels” within the meaning of Paragraph 3,
fail to contain the requisite Prefatory Language.

(Compl. ¶¶ 28-

37.)
Paragraph 3 next restricts Duck Walk’s use of duck images
to certain approved images or images similar to the approved
images.

(Compl. Ex. 1 ¶ 3 (“The picture or logo of ‘ducks’ on the

Duck Walk labels shall be the picture or depiction, or such similar
pictures or depictions, as shown on the labels attached hereto as
Exhibit A.”).)

Duckhorn alleges that Duck Walk breached this

provision because the image of the blue ducks displayed on the
labels above is not similar to any of the approved images contained
in Exhibit A.

(Compl. ¶ 42.)

On December 7, 2012, Duckhorn requested that Duck Walk
remedy these alleged breaches.

(Compl. ¶ 43.)

Shortly after

receiving this request, Duck Walk switched the images on its
website to display the reverse label of its merlot and cabernet
sauvignon wine bottles.

(Compl. ¶ 43, Exs. 11-12.)

Duck Walk has moved to dismiss the Complaint for failure
to state a claim, arguing that it has not breached any provision

6

of the Settlement Agreement.

This motion is currently pending

before the Court.
DISCUSSION
The Court will first set forth the legal standard on a
Rule 12(b)(6) motion to dismiss for failure to state a claim before
turning to Duck Walk’s motion specifically.
I.

Standard of Review
In deciding a Rule 12(b)(6) motion to dismiss, the Court

applies a “plausibility standard,” which is guided by “[t]wo
working principles.”

Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.

Ct. 1937, 173 L. Ed. 2d 868 (2009); accord Harris v. Mills, 572
F.3d 66, 71–72 (2d Cir. 2009).

First, although the Court must

accept all allegations as true, this “tenet” is “inapplicable to
legal conclusions;” thus, “[t]hreadbare recitals of the elements
of a cause of action, supported by mere conclusory statements, do
not suffice.”
72.

Iqbal, 556 U.S. at 678; accord Harris, 572 F.3d at

Second, only complaints that state a “plausible claim for

relief” can survive a Rule 12(b)(6) motion to dismiss.
U.S. at 679.

Iqbal, 556

Determining whether a complaint does so is “a

context-specific task that requires the reviewing court to draw on
its judicial experience and common sense.”

Id.; accord Harris,

572 F.3d at 72.
The Court is confined to “the allegations contained
within the four corners of [the] complaint.”
7

Pani v. Empire Blue

Cross Blue Shield, 152 F.3d 67, 71 (2d Cir. 1998).

However, this

has been interpreted broadly to include any document attached to
the complaint, any statements or documents incorporated in the
complaint by reference, any document on which the complaint heavily
relies, and anything of which judicial notice may be taken.

See

Chambers v. Time Warner, Inc., 282 F.3d 147, 152–53 (2d Cir. 2002)
(citations omitted); Kramer v. Time Warner Inc., 937 F.2d 767, 773
(2d Cir. 1991).
II.

Duck Walk’s Motion to Dismiss
As noted, Duckhorn claims that Duck Walk breached the

Settlement Agreement in three ways: (1) by failing to include
Prefatory Language on the front labels on its cabernet sauvignon,
merlot, and brut sparkling wines in violation of Paragraph 3;
(2) by utilizing a duck image on its labels that is not similar to
the duck images approved for use under the Settlement Agreement,
also in violation of Paragraph 3; and (3) by selling its wines in
excess of the production and distribution limitations set forth in
Paragraph 2.
Duck Walk first moves to dismiss the claims that it
failed to comply with the labeling requirements of Paragraph 3,
arguing that the COLAs attached to the Complaint demonstrate that
Duck Walk did in fact comply with Paragraph 3.

The Court will

first address Duckhorn’s claim that Duck Walk failed to include

8

Prefatory Language on the front labels of its wines.

For ease of

reference, the relevant portion of Paragraph 3 states:
The words “The Hamptons”, “South Hamptons”,
“South Fork” and/or “Long Island” or other
geographic designation of like import as may
be approved by BATF (the prefatory language)
shall be added on the front label of all of
the Gross Production.
Such words will be
added to the front label immediately above the
words “Duck Walk” or other use of the word
“Duck” in size and font lettering reasonably
legible to persons looking at the front label,
and in accordance with approval by BATF.
(Compl. Ex. 1 ¶ 3.)
Duck

Walk

argues

that

“[t]he

clear

and

unambiguous

language of Paragraph 3 makes [Duck Walk’s] compliance expressly
contingent upon approval of the BATF.”
Dismiss, Docket Entry 9, at 4.)

(Duck Walk’s Br. to

Because, according to Duck Walk,

“[t]he BATF considers the ‘front label’ of the wine bottles at
issue to be that containing the alcohol percentage, government
warnings, and product bar code,” Duck Walk complied with Paragraph
3 by placing Prefatory Language on this label.
to Dismiss at 4.)

(Duck Walk’s Br.

In support of this argument, Duck Walk points

to the BATF’s notations on the COLAs that this label “must appear
on the front of the container.”
5.)

(Duck Walk’s Br. to Dismiss at 4-

Stated another way, Duck Walk contends that “[i]nasmuch as

BATF designated its understanding of ‘front label,’ [Duck Walk]
included the required prefatory language in a manner designed to
obtain BATF approval, and thereby comply with Paragraph 3.”
9

(Duck

Walk’s Br. to Dismiss at 5.)

As discussed below, this argument is

patently meritless.
“The primary objective in contract interpretation is to
give effect to the intent of the contracting parties ‘as revealed
by the language they chose to use.’”

Sayers v. Rochester Tel.

Corp. Supplemental Mgmt. Pension Plan, 7 F.3d 1091, 1094 (2d Cir.
1993) (quoting Seiden Assocs. v. ANC Holdings, Inc., 959 F.2d 425,
428 (2d Cir. 1992)).

A court may grant a motion to dismiss a

contract claim “only where the language of a contract is clear and
unambiguous.”

Readick v. Avis Budget Grp., Inc., No. 12-CV-3988,

2013 WL 3388225, at *4 (S.D.N.Y. July 3, 2013) (citation omitted).
“Contract language is ambiguous if it is capable of more than one
meaning when viewed objectively by a reasonably intelligent person
who has examined the context of the entire integrated agreement
and

who

is

cognizant

of

the

customs,

practices,

usages

and

terminology as generally understood in the particular trade or
business.”

Sayers, 7 F.3d at 1095 (internal quotation marks and

citation omitted).

On the other hand, “[n]o ambiguity exists when

contract language has a definite and precise meaning, unattended
by danger of misconception in the purport of the [contract] itself,
and concerning which there is no reasonable basis for a difference
of

opinion.”

Id.

(second

alteration

quotation marks and citation omitted).

10

in

original)

(internal

Paragraph 3 is not capable of the meaning Duck Walk
suggests.

Paragraph 3 does not provide that Duck Walk may comply

with the requirement that it place Prefatory Language on the front
label of its wine by simply obtaining BATF approval.
contrary,

a

plausible

and

extremely

reasonable

Paragraph 3 is the one that Duckhorn supplies:

To the

reading

of

that Prefatory

Language must be placed on the front label immediately above any
use of “Duck Walk” or the word “duck” and the size and font of the
Prefatory Language must be reasonably legible to persons looking
at the front label and must be “in accordance with approval by
BATF.”

If the Court accepted Duck Walk’s reading, then the “front

label” under Paragraph 3 could be a label placed anywhere on the
wine bottle as long as the label is approved by the BATF.
cannot be what the parties intended.

This

Duckhorn alleges that the

“front label” under Paragraph 3 is “the larger, more colorful,
dramatic and/or eye catching label” that will be “displayed to the
wine consuming public . . . .”

(Compl. ¶ 34.)

As shown in the

COLAs attached to the Complaint, this label for each of the wines
at issue lacks the requisite Prefatory Language.
therefore

stated

a

plausible

claim

for

breach

Duckhorn has
of

contract.

Accordingly, Duck Walk’s motion to dismiss Duckhorn’s claim that
Duck Walk breached the Settlement Agreement by failing to place
Prefatory Language on the front labels is DENIED.

11

Duckhorn next alleges that Duck Walk breached Paragraph
3 of the Settlement Agreement because the blue duck silhouette
that Duck Walk placed on its labels is not approved for use under
the Settlement Agreement.

For ease of reference, the relevant

portion of Paragraph 3 states:
The picture or logo of “ducks” on the Duck
Walk labels shall be the picture or depiction,
or such similar pictures or depictions, as
shown on the labels attached hereto as Exhibit
A.
(Compl. Ex. 1 ¶ 3.)

Exhibit A of the Settlement Agreement includes

seven images of ducks that are approved for use on Duck Walk’s
labels.

(Compl. Ex. 1 at Ex A.)

The images are of the same basic

depiction of nine or more white ducks in the foreground with
numerous other ducks in the background.

Representative samples of

the images in Exhibit A are included below:

This is an image of the blue duck silhouette that Duck Walk used
on its labels:

12

(See Compl. Exs. 2-4.)

Duckhorn alleges that Duck Walk’s use of

the blue duck silhouette constitutes a breach of the Settlement
Agreement because it is not similar to any of the approved images
set forth in Exhibit A.
Duck Walk moves to dismiss this claim, arguing that the
blue duck image does not violate Paragraph 3 because: (1) “[t]here
is no specific restriction on the color or amount of ducks that
[Duck Walk] may permissibly use,” (2) Duck Walk “has simply reduced
the number of ducks featured and colored them blue,” and (3) that
“[i]t is uncontested that the duck is the same or similar type of
duck that appears in the Approved Images.”
Dismiss at 7.)
rejects it.

(Duck Walk’s Br. to

This argument is absurd and the Court summarily

That the words of the Settlement Agreement do not

state a specific restriction on the number or color of ducks is
irrelevant. The clear language of the Settlement Agreement permits
Duck Walk to use only one of the approved images in Exhibit A or
“such similar pictures or depictions.”
13

(Compl. Ex. 1 ¶ 3.)

A

quick visual inspection of the images demonstrates that the only
thing similar about these images is that they contain ducks.
is readily apparent that the images are starkly different.
blue

duck

silhouette

silhouette.

consists

of

two

ducks

set

in

a

It
The
blue

The ducks appear to be standing still, facing the

left, and they lack detail.

In contrast, the approved images in

Exhibit A contain nine or more white ducks.

These white ducks are

considerably detailed; they have eyes, beaks, and feathers.

The

white ducks appear to be walking from left to right across the
image.

Given these visual disparities, Duckhorn clearly has

alleged a plausible claim that Duck Walk breached the Settlement
Agreement by using the blue duck silhouette.

Accordingly, Duck

Walk’s motion to dismiss Duckhorn’s claim that Duck Walk used an
unapproved image on its wine labels is DENIED.
Finally, Duckhorn alleges that Duck Walk breached the
Settlement Agreement by selling its wines in violation of the
restrictions on production volume and geographic distribution set
forth in Paragraph 2 of the Settlement Agreement.

Again, for ease

of reference, Paragraph 2 states in relevant part:
Duck Walk Vineyards, Inc. shall not in any one
calendar year produce and/or bottle and/or
authorize production and/or bottling of more
than 84,000 gallons (the “Gross Production”)
where the word “Duck” and/or the image or
picture of ducks will be employed on the label
except as part of the corporate name “Duck
Walk Vineyards, Inc.” . . . .
Duck Walk
Vineyards, Inc. shall not sell more than 50%
14

of the annual Gross Production outside of the
States
of
New
York,
New
Jersey
and
Connecticut, or sell to restaurants, or
others, where it will be served or resold
outside of the States of New York, New Jersey
and Connecticut.
(Compl. Ex. 1 ¶ 2.)

Duckhorn alleges that Duck Walk breached this

provision “[b]y selling more than 50% of Gross Production outside
of New York, New Jersey, and Connecticut . . . .”

(Compl. ¶ 54.)

Duck Walk moves to dismiss this claim, contending that
it has not sold more than 50% of its annual Gross Production
outside of New York, New Jersey, and Connecticut.
Br. to Dismiss at 7-9.)

(Duck Walk’s

In support of this contention, Duck Walk

submits a declaration from its chief executive officer, which
introduces numerous factual allegations and documents outside of
the Complaint.

(See Krejci Decl., Docket Entry 8.)

However, when

deciding a motion to dismiss pursuant to Rule 12(b)(6), the Court’s
“review is limited to the facts as asserted within the four corners
of the complaint, the documents attached to the complaint as
exhibits, and any documents incorporated in the complaint by
reference.”

McCarthy v. Dun & Bradstreet Corp., 482 F.3d 184, 191

(2d Cir. 2007) (citation omitted).

Thus, the Court may not

consider these facts and documents without converting Duck Walk’s
motion

to

dismiss

into

one

for

summary

judgment,

which,

discussed below, would be inappropriate at this juncture.

15

as

Federal Rule of Civil Procedure 12(d) does permit a court
to convert a Rule 12(b)(6) motion to dismiss into a motion for
summary judgment if “matters outside the pleadings are presented
to and not excluded by the court . . . .”

FED. R. CIV. P. 12(d).

However, a court is not required “to convert a 12(b)(6) motion to
one for summary judgment in every case in which a defendant seeks
to rely on matters outside the complaint in support of a 12(b)(6)
motion; it may, at its discretion, exclude the extraneous material
and construe the motion as one under Rule 12(b)(6).” United States
v. Int’l Longshoremen’s Ass’n, 518 F. Supp. 2d 422, 450 (E.D.N.Y.
2007).
Here,

Duck

Walk

has

submitted

a

declaration

and

documents that present factual questions going to the weight of
the evidence in support of Duckhorn’s allegations.

However, the

resolution of a factual dispute, “in the absence of any discovery
or evidentiary hearing, is not appropriate on a motion to dismiss.”
In re Bear Stearns Cos. Secs., Derivative, & ERISA Litig., 763 F.
Supp. 2d 423, 502-03 (S.D.N.Y. 2011); see Alston v. 1749-1753 First
Ave. Garage Corp., No. 12-CV-2676, 2013 WL 3340484, at *3 (E.D.N.Y.
July 2, 2013) (declining to convert motion to dismiss into one for
summary judgment based on affidavits from defendant corporation’s
president because the arguments presented by defendant in favor of
dismissal were “fact-intensive” and affidavits “from key witnesses
are not equal replacements for depositions and other discovery”);
16

Novie v. Vill. of Montebello, No. 10-CV-9436, 2012 WL 3542222, at
*9 (S.D.N.Y. Aug. 16, 2012) (“[I]t is improper for a court to
consider declarations and affidavits on a motion to dismiss.”)
(collecting cases).

Accordingly, the Court declines to convert

Duck Walk’s motion into one for summary judgment, and Duck Walk’s
motion

to

dismiss

Duckhorn’s

claim

that

Duck

Walk

breached

Paragraph 2 of the Settlement Agreement is therefore DENIED.
CONCLUSION
For the foregoing reasons, Duck Walk’s motion to dismiss
the Complaint is DENIED.
SO ORDERED.

/s/ JOANNA SEYBERT
Joanna Seybert, U.S.D.J.

Dated:

June
9 , 2014
Central Islip, New York

17