A.V.E.L.A., Inc. v. The Estate of Marilyn Monroe, LLC et al
Filing
325
OPINION AND ORDER re: 290 MOTION to Dismiss V. INTERNATIONAL FINE ARTS PUBLISHING, INC. AND X ONE X MOVIE ARCHIVE, INCS AMENDED COUNTERCLAIMS. filed by The Estate of Marilyn Monroe, LLC, Authentic Brands Group, LLC, James Salter. For the reasons set forth above, the Estate Movants' partial motion to dismiss is GRANTED. The Clerk of Court is directed to terminate Docket Entry 290. The parties are hereby ORDERED to file a joint letter on or before March 19, 2018, advi sing the Court of the parties' present intent to file cross-motions for summary judgment, which were originally due on December 8, 2017, but were adjourned sine die pending the issuance of this Opinion. To the extent the parties still wish to file said motions, they are to include in their joint letter a proposed briefing schedule. (Signed by Judge Katherine Polk Failla on 3/5/2018) (kgo)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
------------------------------------------------------------- X
:
A.V.E.L.A., INC.,
:
:
Plaintiff, :
:
v.
:
:
THE ESTATE OF MARILYN MONROE, LLC, et al., :
:
Defendants. :
------------------------------------------------------------- X
:
THE ESTATE OF MARILYN MONROE, LLC,
:
:
Counterclaimant, :
:
v.
:
:
A.V.E.L.A., INC.,
:
:
Counter-Defendant,
:
:
LEO VALENCIA, IPL, INC.,
:
X ONE X MOVIE ARCHIVES INC.,
:
V. INTERNATIONAL FINE ARTS PUBLISHING,
:
INC.,
:
:
Third-Party Defendants.
:
------------------------------------------------------------- X
:
X ONE X MOVIE ARCHIVES INC.,
:
V. INTERNATIONAL FINE ARTS PUBLISHING,
:
INC.,
:
:
Counterclaimants,
:
v.
:
:
THE ESTATE OF MARILYN MONROE, LLC,
:
AUTHENTIC BRANDS GROUP, LLC,
:
JAMES SALTER,
:
Counter-Defendants. :
:
------------------------------------------------------------- X
USDC SDNY
DOCUMENT
ELECTRONICALLY FILED
DOC #: _________________
DATE FILED: March 5, 2018
______________
12 Civ. 4828 (KPF)
OPINION AND ORDER
KATHERINE POLK FAILLA, District Judge:
This Opinion is yet another installment in a sprawling, multi-party
dispute over the intellectual property rights associated with Marilyn Monroe,
one of the 20th century’s most iconic figures. It is also the latest in what is
now a trilogy of decisions that this Court has issued adjudicating the parties’
motions to dismiss.
In A.V.E.L.A., Inc. v. Estate of Marilyn Monroe, LLC, 131 F. Supp. 3d 196
(S.D.N.Y. 2015) (“AVELA I”), this Court granted in part and denied in part the
motions of X One X Movie Archives Inc. (“X One X”) and V. International Fine
Arts Publishing, Inc. (“V. International” and together with X One X, the
“Counter-Plaintiffs”) to dismiss the First Amended Counterclaim of the Estate
of Marilyn Monroe, LLC (“Monroe Estate”). After the Court issued AVELA I,
Counter-Plaintiffs filed answers to the First Amended Counterclaim. They also
brought claims of their own against the Monroe Estate, Authentic Brands
Group LLC (“ABG”), James Salter (“Salter,” and together with the Monroe
Estate and ABG, the “Estate Movants”), and Leonard Green & Partners, L.P.
(“LGP”).
The Estate Movants and LPG then moved to dismiss X One X’s and
V. International’s counterclaims. In A.V.E.L.A., Inc. v. Estate of Marilyn Monroe,
LLC, 241 F. Supp. 3d 461 (S.D.N.Y. 2017) (“AVELA II”), the Court dismissed
without prejudice Counter-Plaintiffs’ claims for (i) fraud on the United States
Patent and Trade Office, (ii) attempted monopolization, (iii) violations of New
York General Business Law § 349 (“Section 349”), (iv) tortious interference with
2
contract, and (v) alter-ego liability as to ABG, as well as (vi) V. International’s
claim for intentional interference with prospective economic advantage.
Counter-Plaintiffs have since filed amended counterclaims. Pending
before the Court is the Estate Movants’ motion to dismiss several of
Counter-Plaintiffs’ amended counterclaims. In particular, the Estate Movants
seek dismissal of (i) Counter-Plaintiffs’ renewed alter-ego claim,
(ii) Counter-Plaintiffs’ renewed Section 349 claims, (iii) V. International’s
renewed claim of tortious interference with contract, and (iv) Counter-Plaintiffs’
trademark-cancellation claims as to ABG.
In AVELA II, this Court expressed skepticism that any amended
counterclaims would survive future dispositive motions and advised
Counter-Plaintiffs “to consider this Opinion carefully in deciding whether and
what to replead.” 241 F. Supp. 3d at 468. Counter-Plaintiffs have not done so:
As in AVELA II, they advance many legal conclusions but few — and
insufficient — factual allegations. Accordingly, the Court grants in full the
Estate Movants’ motion to dismiss, this time with prejudice.
BACKGROUND 1
The Court discusses the underlying facts in this case only to the extent
necessary to resolve the instant motion and to provide relevant context, as the
1
This section draws on facts from the Answer of V. International Fine Arts Publishing,
Inc. to First Amended Counterclaim, and V. International Fine Arts Publishing, Inc.
First Amended Counterclaims (“V Intl. FAC” (Dkt. #282)), and from the Answer of X One
X Movie Archive, Inc. to First Amended Counterclaim, and Related Second Amended
Counterclaims (“X One X SAC” (Dkt. #284)). The Court also draws on facts from
documents referenced or incorporated within the V Intl. FAC and X One X SAC. See
DiFolco v. MSNBC Cable L.L.C., 622 F.3d 104, 111 (2d Cir. 2010) (“In considering a
motion to dismiss for failure to state a claim pursuant to Rule 12(b)(6), a district court
3
Court twice previously engaged in more exhaustive factual recitations. See
AVELA II, 241 F. Supp. 3d at 468-70; AVELA I, 131 F. Supp. 3d at 200-02.
A.
Factual Background
1.
The Parties
V. International is “a corporation duly organized and existing under the
laws of the State of California with its principal place of business … [in]
Carlsbad, California[.]” (V Intl. FAC ¶ 1). It “operates as a licensing agent for
A.V.E.L.A., Inc.” (Id.). X One X is a Nevada corporation that “creat[es] new
artistic works in print, graphic[,] and lithographic mediums … [;] obtains
copyrights registered with the United States Copyright Office … [;] and licenses
these artistic works to third parties.” (X One X SAC ¶ 1).
The Monroe Estate is a Delaware limited liability company (“LLC”) with
its principal place of business in New York City. (V. Intl. FAC ¶ 2; X One X
SAC ¶ 2). Counter-Plaintiffs allege, as they did in AVELA II, that the Monroe
Estate is in fact an alter ego of ABG, another Delaware LLC with its principal
place of business in New York. (V. Intl. FAC ¶¶ 2-3; X One X SAC ¶¶ 2-3).
may consider the facts alleged in the complaint, documents attached to the complaint
as exhibits, and documents incorporated by reference in the complaint … [as well as
documents that are] integral to the complaint.” (internal quotation marks and citations
omitted)). For the purpose of adjudicating the Estate Movants’ motion to dismiss, the
Court accepts as true the well-pleaded allegations in Counter-Plaintiffs’ counterclaims.
See, e.g., Growblox Scis., Inc. v. GCM Admin. Servs., LLC, No. 14 Civ. 2280 (ER), 2016
WL 1275050, at *6 (S.D.N.Y. Mar. 31, 2016). For ease of reference, the Court refers to
the Estate Movants’ memorandum of law in support of their motion to dismiss as
“Estate Movants’ Br.” (Dkt. #291); V. International’s and X One X’s briefs in opposition
to the Estate Movants’ motion to dismiss, respectively, as “V. Intl. Opp.” (Dkt. #295) and
“X One X Opp.” (Dkt. #296); and the Estate Movants’ reply in further support of their
motion to dismiss as “Estate Movants’ Reply” (Dkt. #297).
4
Salter is ABG’s and the Monroe Estate’s Chief Executive Officer. (V. Intl. FAC ¶
4; X One X SAC ¶ 4).
2.
The Estate Movants’ Alleged Misconduct
As in AVELA I and AVELA II, the present dispute centers on registered
word and design trademarks involving Marilyn Monroe. In their amended
pleadings, Counter-Plaintiffs allege misconduct as to 15 trademarks (the
“Contested Marks”). (V. Intl. FAC ¶ 29; X One X SAC ¶ 30). Counter-Plaintiffs
allege that the Monroe Estate “purports to be the owner of the Contested Marks
and … uses its name to falsely and fraudulently imply that it is the estate of
Marilyn Monroe … in order to further its illegal scheme to monopolize any and
all uses of Marilyn Monroe’s name, image[,] and/or likeness[.]” (V. Intl. FAC
¶ 22; X One X SAC ¶ 23). The Monroe Estate also allegedly seeks “to prevent
members of the public … from: [i] using, licensing[,] and marketing public
domain images of Marilyn Monroe; and [ii] using copyrighted images of Marilyn
Monroe owned by anyone other than [ABG and the Monroe Estate].” (Id.).
Counter-Plaintiffs further claim that, despite ABG’s and the Monroe
Estate’s representations to the contrary, they “do not have exclusive rights to
intellectual property related to Marilyn Monroe.” (V. Intl. FAC ¶ 30; X One X
SAC ¶ 31). That is because “many photographs of the long-deceased Monroe
are within the public domain” (V. Intl. FAC ¶ 31; X One X SAC ¶ 32), and
“dozens … of photographers and/or entities purport to own copyrights in
images of Monroe” (id.). Additionally, “[o]ther entities own trademark and
5
copyright rights in Monroe’s films and characters[, and] in the name ‘Marilyn’
and even in ‘Norma Jeane [sic].’” (V. Intl. FAC ¶ 32; X One X SAC ¶ 33).
In Counter-Plaintiffs’ view, the Contested Marks “are, in essence,
strategic litigation tools by which ABG, under the misleading name ‘Estate of
Marilyn Monroe, LLC,’ purports to exercise exclusive ownership of the right to
exploit Marilyn Monroe’s image, likeness[,] and name[.]” (V. Intl. FAC ¶ 34;
X One X SAC ¶ 36). In an attempt to gain control over the use of Marilyn
Monroe’s image and name, ABG and the Monroe Estate allegedly “threaten and
intimidate other entities … to discourage and prevent their lawful use of
Marilyn Monroe’s image [and] name[.]” (V. Intl. FAC ¶ 35; X One X SAC ¶ 37).
The Estate Movants have sent “dozens [of] cease and desist letters
intended to prevent merchants and individuals from lawfully selling Marilyn
Monroe-related products or using any indicia of Marilyn Monroe[.]” (V. Intl.
FAC ¶ 37; X One X SAC ¶ 39). These “unsubstantiated threats of sham
litigation … deter[] lawful competition in the marketplace [and] … interfere[]
with [Counter-Plaintiffs’] ability to license [their] Marilyn Monroe images[.]”
(V. Intl. FAC ¶ 38; X One X SAC ¶ 40). Counter-Plaintiffs contend that
“[c]ontinued registration of the Contested Marks will damage
[Counter-Plaintiffs’] business by preventing [them] and other legitimate
competitors from lawfully licensing artistic works utilizing Marilyn Monroe’s
[image, likeness, and name] and from creating products from those works for
sale to consumers.” (V. Intl. FAC ¶ 47; X One X SAC ¶ 49).
6
B.
Procedural Developments After AVELA II
On March 13, 2017, the Court issued AVELA II, which recounts the
case’s procedural history through that date. See 241 F. Supp. 3d at 203. In
AVELA II, this Court rejected Counter-Plaintiffs’ alter-ego theory; denied the
motion to dismiss Counter-Plaintiffs’ trademark cancellation claims as to the
Monroe Estate and claim for intentional interference with prospective economic
advantage; and granted, without prejudice, the motion to dismiss the Section
349, attempted monopolization, fraud, and tortious-interference-with-contract
claims. The Court granted Counter-Plaintiffs leave to amend their pleadings.
In doing so, it advised them “to consider this Opinion carefully in deciding
whether and what to replead.” AVELA II, 241 F. Supp. 3d at 468.
V. International filed the following amended counterclaims:
(i)
Trademark Cancellation, Lack of Distinctiveness
(against the Monroe Estate and ABG): V. International
seeks to cancel the Contested Marks on the ground of
“lack of distinctiveness.” (V. Intl FAC ¶¶ 49-54).
(ii)
Trademark Cancellation, Functionality (against the
Monroe Estate and ABG): V. International argues that
the Contested Marks should be cancelled because they
are purely functional. (Id. at ¶¶ 55-60).
(iii)
New York General Business Law Section 349 (against
the Estate Movants): V. International alleges that the
Estate Movants have committed deceptive acts and
practices in violation of New York law. (Id. at ¶¶ 61-74).
(iv)
Tortious Interference with Contract (against the Estate
Movants): The Estate Movants, V. International claims,
disrupted two contracts that created licensing
arrangements for V. International. (Id. at ¶¶ 75-84).
(v)
Intentional Interference with Prospective Economic
Advantage
(against
the
Estate
Movants):
7
V. International alleges that the Estate Movants
interfered with a licensing agreement into which
V. International planned to enter. (Id. at ¶¶ 85-92).
X One X filed just three amended counterclaims, substantially identical to the
first three of V. International’s amended counterclaims listed above. (See
X One X SAC ¶¶ 51-75). Both X One X and V. International replead their
alter-ego allegations. (V. Intl. FAC ¶¶ 10-12; X One X SAC ¶¶ 10-13).
On May 30, 2017, the Estate Movants moved to dismiss (i) the
Counter-Plaintiffs’ theory of alter-ego liability, (ii) their trademark-cancellation
claims as to ABG, (iii) their Section 349 claims, and (iv) V. International’s
tortious-interference-with-contract claim. On June 29, 2017, V. International
and X One X filed their opposition papers. (Dkt. #295, 296). On July 13,
2017, the Estate Movants filed a reply in further support of their motion to
dismiss. (Dkt. #297).
DISCUSSION
A.
Motions to Dismiss Counterclaims Under Rule 12(b)(6)
“A motion to dismiss a counterclaim for failure to state a claim is
evaluated using the same standard as a motion to dismiss a complaint.”
AVELA II, 241 F. Supp. 3d at 473. “On a motion under Rule 12(b)(6) to dismiss
a complaint for failure to state a claim, the only facts to be considered are
those alleged in the complaint, and the court must accept them, drawing all
reasonable inferences in the plaintiff’s favor, in deciding whether the complaint
alleges sufficient facts to survive.” Doe v. Columbia Univ., 831 F.3d 46, 48 (2d
Cir. 2016). “To survive a [Rule 12(b)(6)] motion to dismiss, a complaint must
8
contain sufficient factual matter, accepted as true, to ‘state a claim to relief
that is plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)
(quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). And “[a] claim
has facial plausibility when the plaintiff pleads factual content that allows the
court to draw the reasonable inference that the defendant is liable for the
misconduct alleged.” Id.
“[A]lthough a court” adjudicating a Rule 12(b)(6) motion “must accept as
true all of the allegations contained in a complaint, that tenet is inapplicable to
legal conclusions[.]” Harris v. Mills, 572 F.3d 66, 72 (2d Cir. 2009) (internal
quotation marks omitted) (quoting Iqbal, 556 U.S. at 678). “Threadbare recitals
of the elements of a cause of action, supported by mere conclusory statements,
do not suffice” to save a complaint from dismissal. Iqbal, 556 U.S. at 678. Nor
must a court “accept as truth … pleadings … that are contradicted either by
statements in the complaint itself or by documents upon which its pleadings
rely, or by facts of which the court may take judicial notice.” In re Livent, Inc.
Noteholders Secs. Litig., 151 F. Supp. 2d 371, 405-06 (S.D.N.Y. 2001)
(collecting cases). In sum, “[a] motion to dismiss should be granted ‘where the
well-pleaded facts do not permit the court to infer more than the mere
possibility of misconduct.’” Nielsen v. AECOM Tech. Corp., 762 F.3d 214, 218
(2d Cir. 2014) (quoting Iqbal, 556 U.S. at 679).
B.
The Estate Movants’ Motion to Dismiss
Before the Court are eight counterclaims — three by X One X, and five by
V. International. X One X’s counterclaims are substantially identical to those
9
filed by V. International. Accordingly, the Court analyzes both parties’
counterclaims together. In AVELA II, this Court remarked that “[t]he chief flaw
in [Counter-Plaintiffs’] counterclaims is that they contain few well-pleaded
factual allegations.” 241 F. Supp. 3d at 473. The amended pleadings suffer
from the same flaw and, for that reason, must be dismissed.
1.
Dismissal of Counter-Plaintiffs’ Alter-Ego Allegations Is
Warranted
a.
Applicable Law
In AVELA II, this Court conducted a choice-of-law analysis and held that
Delaware law governs Counter-Plaintiffs’ alter-ego claim. See 241 F. Supp. 3d
at 474 (“Because the Monroe Estate is a Delaware LLC, the Court will look to
Delaware law to address V. International’s argument that the Monroe Estate is
ABG’s alter ego.” (internal citations omitted)). As the Court then noted, “a
plaintiff seeking to persuade a Delaware court to disregard [an LLC’s] corporate
structure faces ‘a difficult task[.]’” Id. (quoting NetJets Aviation, Inc. v. LHC
Commc’ns (hereinafter, “NetJets”), 537 F.3d 168, 176 (2d Cir. 2008) (internal
quotation marks and citation omitted); see also Nat’l Gear & Piston, Inc.
v. Cummins Power Sys., LLC, 975 F. Supp. 2d 392, 401-02 (S.D.N.Y. 2013)
(Because “Delaware courts especially take the corporate form very seriously
and will disregard it only in the exceptional case[,]” a plaintiff arguing that a
court should disregard the corporate form “faces a heavy burden.” (internal
quotation marks and citation omitted))).
Under Delaware law, a Court may pierce the corporate veil only “where
there is fraud” or “where [the LLC] is in fact a mere instrumentality or alter ego
10
of its owner.” NetJets, 537 F.3d at 176 (quoting Geyer v. Ingersoll Publ’ns Co.,
621 A.2d 784, 793 (Del. Ch. 1992)). To establish that an LLC is the alter ego of
another entity, a party must establish that: (i) “the entities in question
operated as a single economic entity,” and (ii) “there [is] an overall element of
injustice or unfairness.” Id. at 177.
Factors relevant to the first, single-economic-entity showing include
whether the corporation was adequately capitalized for
the corporate undertaking; whether the corporation was
solvent; whether dividends were paid, corporate records
kept, officers and directors functioned properly, and
other corporate formalities were observed; whether the
dominant shareholder siphoned corporate funds; and
whether, in general, the corporation simply functioned
as a facade for the dominant shareholder.
Fletcher v. Atex, Inc., 68 F.3d 1451, 1458 (2d Cir. 1995) (internal quotation
marks and citations omitted); see also NetJets, 537 F.3d at 178 (observing that
principles relevant to piercing veil of Delaware corporations “are generally
applicable as well where one of the entities in question is an LLC rather than a
corporation,” but that “somewhat less emphasis is placed on whether the LLC
observed internal formalities because fewer such formalities are legally
required”).
To make the second, injustice-or-unfairness showing, a plaintiff must
establish that the LLC “effectively … exist[s] as a sham or shell through which
the parent company perpetrates injustice.” Nat’l Gear & Piston, Inc., 975 F.
Supp. 2d at 406. The injustice or unfairness must be “a result of an abuse of
the corporate form” and “must consist of more than merely the [tort or breach
11
of contract] that is the basis of the plaintiff’s lawsuit[.]” Id. (internal quotation
marks and citation omitted).
b.
Analysis
Counter-Plaintiffs allege — as they did in their prior pleadings — that the
Court should hold that the Monroe Estate is ABG’s alter ego. In AVELA II, this
Court noted that Counter-Plaintiffs “alleged virtually no facts to substantiate
this claim”; the Court therefore “reject[ed their] alter-ego theory of liability[.]”
241 F. Supp. 3d at 475. Here, too, Counter-Plaintiffs have failed adequately to
allege, as they must, that the Monroe Estate and ABG “operate[ ] as a single
economic entity” and that “there [is] an overall element of injustice or
unfairness.” NetJets, 537 F.3d at 177.
While Counter-Plaintiffs have added considerable verbiage to their
pleadings, they have not remedied the deficiencies identified by the Court in its
earlier opinion. Broadly speaking, the new allegations are that: (i) ABG and
the Monroe Estate share the same telephone system and number; (ii) ABG is
the Monroe Estate’s sole manager; (iii) ABG and the Monroe Estate share legal
and finance departments; (iv) the Monroe Estate’s contracts direct licensees to
submit financial statements and other mail to ABG; (v) the Monroe Estate
purports to own certain trademarks in Marilyn Monroe’s name when in fact the
Monroe Estate’s address on the trademark registration is listed “care of” ABG;
(vi) ABG and the Monroe Estate claim to own and operate the same website;
(vii) the Monroe Estate’s licensees have remitted royalties to ABG; and
12
(viii) ABG pays the Monroe Estate’s overhead and expenses. (V. Intl. FAC ¶ 10;
X One X SAC ¶ 10).
These new allegations add little to Counter-Plaintiffs’ previous pleadings.
Some of the new allegations are sufficiently similar to the previous pleadings as
to have only the slightest effect. The allegation that ABG and the Monroe
Estate share legal and finance departments, for example, echoes the earlier
claim that the companies share a General Counsel and other officers and
managers; and the allegation that ABG and the Monroe Estate share the same
telephone system, telephone number, and website echoes the earlier claim that
the companies share the same address and office space. (See Dkt. #223 ¶ 11).
More to the point, these new allegations do not show that ABG and the Monroe
Estate operated as a single entity. It “is well-established that … subsidiaries
may share officers, directors and employees with their parent, without
requiring the court to infer that the subsidiary is a mere instrumentality for the
parent[.]” In re BHS & B Holdings LLC, 420 B.R. 112, 138 (Bankr. S.D.N.Y.
2009), aff’d as modified, 807 F. Supp. 2d 199 (S.D.N.Y. 2011). Similarly,
allegations of shared office space or a shared website are insufficient to find
that corporate entities are a single economic entity. Unterberg v. ExxonMobil
Oil Corp., 203 F. Supp. 3d 324, 329 (S.D.N.Y. 2016) (holding that the mere fact
that “a parent and subsidiary hold themselves out as being … controlled and
managed from the parent’s offices” is “not enough” to pierce the corporate veil
(internal citation omitted)).
13
The other allegations similarly fall short. Counter-Plaintiffs’ contention
that the Monroe Estate’s licensees have remitted royalties to ABG and that
ABG pays the Monroe Estate’s overhead and expenses do not establish “an
actual commingling of assets.” Harco Nat’l Ins. Co. v. Green Farms, Inc., Civ. A.
No. 1131 (MAH), 1989 WL 110537, at *6 (Del. Ch. Sept. 19, 1989). The claim
that the Monroe Estate directs licensees to send correspondence to ABG fails to
show that the two companies operate as a single entity, particularly given that
the Monroe Estate shares an address with ABG, which as mentioned above is
of little consequence to the single-entity analysis. And, even if true, the
suggestion that ABG is the Monroe Estate’s sole manager offers little evidence
that the two companies operate as a single entity. Nowhere do
Counter-Plaintiffs allege that the Monroe Estate was inadequately capitalized or
insolvent, or that ABG siphoned the Monroe Estate’s funds. Nor do the factual
allegations suggest that the Monroe Estate “functioned as a facade for [ABG.]”
Fletcher, 68 F.3d at 1458.
The two cases on which Counter-Plaintiffs rely are inapposite. In De Sole
v. Knoedler Gallery, LLC, the Court’s finding of a mingling of operations hinged
in large part on the existence of money transfers between the entities, executed
without written agreements and recorded in the “balance sheet as
‘interdivisional receivables.’” 139 F. Supp. 3d 618, 666-67 (S.D.N.Y. 2015).
That the transactions were performed “without observing the formalities and
procedures typical of an arm’s-length transaction is persuasive evidence that
the two entities are ‘one and the same.’” Id. The court was further persuaded
14
by the fact that one entity “siphoned approximately $23.9 million from [the
other].” Id. And in Soroof Trading Development Company Ltd. v. GE Fuel Cell
Systems LLC, there was evidence that the alter ego “had no cash assets at the
time of dissolution,” which was the result of “intentional and improper
undercapitalization.” 842 F. Supp. 2d 502, 521-22 (S.D.N.Y. 2012). Here, by
contrast, there are no allegations interest-free loans, “interdivisional”
transactions, siphoned funds, or intentional under-capitalization. For that
reason, neither Knoedler Gallery nor Soroof Trading is factually analogous to
the case at bar.
Counter-Plaintiffs also have failed to show “an overall element of injustice
or unfairness” in the relationship between ABG and the Monroe Estate.
Counter-Plaintiffs’ amended allegations are substantially similar to their
original pleadings on this count. The only relevant difference is that the
amended pleadings contain conclusory allegations of harm to consumers.
Failure to pierce the LLC veil, Counter-Plaintiffs now claim, would be unjust
because “it may permit ABG to continue to deceive the public and consumers
by perpetuating ABG’s false claims that [the Monroe Estate] is actually
Monroe’s estate” and “would also permit ABG to continue to send countless
individuals and entities cease and desist letters and institute sham litigation[.]”
(V. Intl. FAC ¶ 11; X One X SAC ¶ 11).
Without more, those allegations fail to establish the requisite injustice or
unfairness. Counter-Plaintiffs do not allege with any detail or specificity that
respecting the Monroe Estate’s LLC form “would promote an injustice separate
15
and apart from the causes of action [Counter-Plaintiffs] bring[] in [their]
counterclaims.” AVELA II, 241 F. Supp. 3d at 476 (citing Knoedler Gallery,
LLC, 139 F. Supp. 3d at 665). To be sure, they speculate that they and the
public have been harmed “through limited choices, potentially higher prices,
and … restrictions on the use of any indicia of Marilyn Monroe.” (V. Intl. FAC
¶ 74; X One X SAC 75). Yet those speculative harms are largely duplicative of
those that Counter-Plaintiffs themselves claim to have suffered.
Counter-Plaintiffs have not adequately alleged, as they must do at this stage,
that the corporation has committed an injustice beyond the harm caused to
Counter-Plaintiffs. For these reasons, Counter-Plaintiffs have again fallen
short of their obligation to plead adequately that the Monroe Estate is “a sham
and exist[s] for no other purpose than as a vehicle for fraud.” Carotek, Inc.
v. Kobayashi Ventures, LLC, 875 F. Supp. 2d 313, 350 (S.D.N.Y. 2012) (internal
quotation marks and citation omitted).
The Court recognizes, as it did in AVELA II, that alter-ego theories of
liability “are generally fact intensive.” Credit Suisse Sec. (USA) LLC v. W. Coast
Opportunity Fund, LLC, Civ. A. No. 4380 (VCN), 2009 WL 2356881, at *3 n.23
(Del. Ch. July 30, 2009). “And for that reason, whether an LLC’s form should
be disregarded is a question ‘generally submitted to the jury.’” AVELA II, 241
F. Supp. 3d at 476 (quoting Overton v. Art Fin. Partners LLC, 166 F. Supp. 3d
388, 404 (S.D.N.Y. 2016)). But Counter-Plaintiffs have again fallen well short
of alleging plausibly that the Monroe Estate is ABG’s alter ego. The Court
therefore rejects Counter-Plaintiffs’ alter-ego claims once more.
16
2.
Counter-Plaintiffs’ Trademark-Cancellation Claims as to ABG
Fail
a.
Applicable Law
Counter-Plaintiffs call for the Court to cancel the Contested Marks as to
ABG on two grounds: lack of distinctiveness and functionality. In AVELA II,
this Court recited at length the law governing trademark cancellation on each
of those grounds. 241 F. Supp. 3d at 476-79. 2 For that reason, and because
the present motion raises an antecedent issue — whether ABG is a proper
defendant for cancellation of the Contested Marks — the Court does not here
discuss the substantive law relevant to trademark cancellation, but instead
focuses on the law relevant to the antecedent proper-party question.
The issue before the Court is whether an entity other than the trademark
registrant and owner may properly be sued for trademark cancellation. The
Second Circuit has yet to address that question. To be sure, the Second
Circuit has held that trademark infringement claims under the Lanham Act
may only be brought by the owner of the trademark. See Fed. Treas. Enterp.
Sojuzplodoimport v. Spirits Int’l N.V., 623 F.3d 61, 69 (2d Cir. 2010)
(“[O]wnership of the relevant trademark is one of the ‘necessary elements … of
trademark infringement under the Lanham Act.’” (quoting Island Software &
Comput. Serv., Inc. v. Microsoft Corp., 413 F.3d 257, 259-60 (2d Cir. 2005)));
2
In AVELA II, the Court adjudicated a motion to dismiss Counter-Plaintiffs’
trademark-cancellation claims as to the Monroe Estate. It found that the issues raised
were sufficiently fact-intensive that they could not be decided on a motion to dismiss.
AVELA II, 241 F. Supp. 3d at 477, 479. In their amended pleadings, Counter-Plaintiffs
have asserted the same trademark-cancellation claims, but this time against both the
Monroe Estate and ABG.
17
accord Fed. Treas. Enterp. Sojuzplodoimport v. Spirits Intern. B.V., No. 04 Civ.
8510 (GBD), 2011 WL 4005321, at *8 (S.D.N.Y. Sept. 1, 2011) (collecting
cases). But the Court has not addressed whether a party other than the
trademark owner may be named in a trademark-cancellation claim. And the
Lanham Act does not provide a ready answer: Neither 15 U.S.C. § 1119, which
provides for concurrent jurisdiction of the federal courts and the Trademark
Trial and Appeal Board over cancellation of trademarks, nor 15 U.S.C. § 1064,
which identifies the party who may bring a trademark-cancellation action,
explicitly addresses the question.
Courts in this and other districts that have addressed the issue have
held that trademark-cancellation claims may only be brought against the
trademark owner. In Informix Software, Inc. v. Oracle Corp., a software
company sued the owner of a trademark and the licensee of the trademark for,
inter alia, cancellation of trademark. 927 F. Supp. 1283, 1284 (N.D. Cal.
1996). In deciding whether the trademark-cancellation claim could be brought
against the licensee, the court noted that 15 U.S.C. § 1119 “provides that the
Court may rectify the trademark register with respect to ‘the registrations of
any party to the action,’” and found that the statutory language “suggests that
a complaint for trademark cancellation should proceed against the party who
currently owns the trademark.” Id. at 1286 (quoting 15 U.S.C. § 1119).
The district court in Informix further held that, though “an exclusive
licensee stands in the shoes of the trademark owner[,]” the Lanham Act
“imposes a duty upon the licensor … to supervise a licensee’s use of its
18
trademark … [and] specif[ies] that a registrant’s trademark may be cancelled if
the registrant fails to control its licensee’s use of the licensed mark.” 927 F.
Supp. at 1286. “This duty imposed by statute also strongly suggests that the
ultimate responsibility for the validity of a trademark lies with the licensor, not
with the licensee.” Id. Ultimately, the court held that “the owner of the
trademark is the only proper defendant.” Id. Other courts have held similarly.
See, e.g., Hokto Kinoko Co. v. Concord Farms, Inc., 810 F. Supp. 2d 1013, 1034
(C.D. Cal. 2011) (“[A] complaint for trademark cancellation in federal court
must proceed against the party who currently owns the trademark[.]”), aff’d,
738 F.3d 1085 (9th Cir. 2013); Van Well Nursery, Inc. v. Mony Life Ins. Co., 421
F. Supp. 2d 1321, 1332 (E.D. Wash. 2006); Iowa Health Sys. v. Trinity Health
Corp., 177 F. Supp. 2d 897, 911 (N.D. Iowa 2001); cf. Sojuzplodoimport, 2011
WL 4005321, at *8 n.17 (noting without analysis that for a trademarkcancellation claim, “the relief sought cannot be obtained from these nonregistrant/owner defendants”).
This Court finds persuasive the reasoning adopted by these other courts.
Counter-Plaintiffs have identified no basis, either in law or in logic, to allow
them to bring a trademark-cancellation claim against anyone other than the
trademark’s registrant/owner. This Court believes that no such basis exists.
Accordingly, this Court holds that Counter-Plaintiffs may only bring their
trademark-cancellation claim against the trademark owner.
19
b.
Analysis
The question, then, is whether Counter-Plaintiffs have sufficiently alleged
that ABG is the owner of the Contested Marks. X One X claims that it has
“alleged sufficient facts indicating [that] ABG controls the nature and quality of
the ‘official’ Monroe products at issue sold under the Contested Marks.”
(X One X Opp. 9). 3 It points to allegations in the amended pleadings that
(i) “[t]he Contested Marks are, in essence, strategic litigation tools by which
ABG … purport[s] to exercise exclusive ownership of the right to exploit Marilyn
Monroe’s image, likeness[,] and name” (id. (quoting X One X SAC ¶ 36));
(ii) “ABG claims to be the exclusive licensor of products bearing Marilyn
Monroe’s image, likeness[,] and name” (id. (quoting X One X SAC ¶ 38)); and
(iii) ABG is the true owner of trademark registration numbers 4527088,
4743834, and 4336364. (Id. (citing X One X SAC ¶¶ 26, 28, 30)). It further
asserts, without citing any case law, that “[t]he entity which controls the nature
and quality of the goods sold under a mark is the owner of that mark.” (Id.).
Though that test may apply where prior ownership cannot be established or in
the licensing context, see, e.g., In re Wella A.G., 787 F.2d 1549, 1554 (Fed. Cir.
1986); Dawn Donut Co. v. Hart’s Food Stores, Inc., 267 F.2d 358, 367 (2d Cir.
1959); Liebowitz v. Elsevier Science Ltd., 927 F. Supp. 688, 696 (S.D.N.Y.
1996), it has no bearing here.
3
V. International “joins in, and incorporates by reference, the arguments raised [by]
X One X[.]” (V. Intl. Opp. 4).
20
It is well-settled that the trademark registrant is considered the
trademark owner. Under the Latham Act, it is the “owner of a trademark” who
“may request registration of its trademark on the principal register.” 15 U.S.C.
§ 1051. As the Supreme Court has recently explained, federal registration
“confers important legal rights and benefits on trademark owners who register
their marks.” Matal v. Tam, 137 S. Ct. 1744, 1753 (2017) (emphasis added)
(internal quotation marks and citation omitted).
Here, there is little doubt that the trademark owner is the Monroe Estate,
not ABG. The trademark registrations themselves belie Counter-Plaintiffs’
assertion to the contrary: They indisputably list the Monroe Estate as the
owner. 4 The only reference to ABG is in the Monroe Estate’s street address,
which is listed as: “100 West 33rd Street, Suite 1007, c/o Authentic Brands
Group, LLC, New York, NY 10001.” (Dkt. #292-1, Ex. 1, 2). The mere fact that
the Monroe Estate’s address references ABG does not, and could not, establish
that ABG owns the trademarks. It establishes only that the Monroe Estate —
the entity named on the trademark registration — lists its address in “care of”
ABG, presumably because it shares office space with ABG. That fact alone
4
On a motion to dismiss, the Court takes as true all of the non-movant’s well-pleaded
factual allegations. However, the Court may also properly consider documents that are
incorporated by reference or that are integral to the complaint. DiFolco, 622 F.3d at
111. The trademark registrations are integral to the Counter-Plaintiffs’ amended
complaints, and are referenced therein. (See V. Intl. FAC ¶ 29; X One X SAC ¶ 30).
This Court may therefore consider those documents. And where, as here, documents
properly considered on a motion to dismiss contradict the pleadings, the Court need not
accept those pleadings as true. See In re Livent, Inc. Noteholders Secs. Litig., 151 F.
Supp. 2d 371, 405-06 (S.D.N.Y. 2001) (“a court need not feel constrained to accept as
truth conflicting pleadings that make no sense, or that would render a claim
incoherent, or that are contradicted … by documents upon which its pleadings rely, or
by facts of which the court may take judicial notice” (quoting Hirsch v. Arthur Andersen
& Co., 72 F.3d 1085, 1095 (2d Cir. 1995))).
21
cannot reasonably be understood to suggest that ABG is the trademark owner.
Accordingly, the Monroe Estate is the only party against whom
Counter-Plaintiffs may bring their trademark-cancellation claims; the Court
therefore dismisses those claims as to ABG.
3.
Counter-Plaintiffs Have Not Plausibly Alleged That the Estate
Movants Violated New York General Business Law § 349
a.
Applicable Law
In their amended pleadings, Counter-Plaintiffs reassert a claim against
the Estate Movants under Section 349 of New York’s General Business Law,
which protects against “[d]eceptive acts or practices in the conduct of any
business, trade[,] or commerce or in the furnishing of any service in” the State
of New York. N.Y. Gen. Bus. Law § 349(a). “To state a prima facie claim under
[Section 349], a plaintiff must allege that the defendant [i] engaged in
consumer-oriented conduct; [ii] that the conduct was materially misleading;
and [iii] that the plaintiff suffered injury as a result of the allegedly deceptive
act or practice.” Weisblum v. Prophase Labs, Inc., 88 F. Supp. 3d 283, 292
(S.D.N.Y. 2015).
As this Court noted in AVELA II, the consumer-orientation requirement
“cabins the statute.” 241 F. Supp. 3d at 483. “[C]ourts routinely reject …
attempts to fashion Section 349 … claims from garden variety disputes
between competitors.” Perfect Pearl Co. v. Majestic Pearl & Stone, Inc., 887 F.
Supp. 2d 519, 542 (S.D.N.Y. 2012) (internal quotation marks and citation
omitted). Though “[c]ompetitors also have standing to sue [under
Section 349],” Grgurev v. Licul, 229 F. Supp. 3d 267, 292 (S.D.N.Y. 2017)
22
(internal quotation marks and citations omitted), a plaintiff must advance
allegations that go beyond “conclusory allegations of impact on consumers at
large,” Miller v. HSBC Bank U.S.A., N.A., No. 13 Civ. 7500 (RWS), 2015 WL
585589, at *8 (S.D.N.Y. Feb. 11, 2015). And “a party’s claim that consumers
will be confused, on its own, does not meet the threshold for liability under
[Section 349].” RCA Trademark Mgmt. S.A.S. v. VOXX Int’l Corp., No. 14 Civ.
6294 (LTS), 2015 WL 5008762, at *5 (S.D.N.Y. Aug. 24, 2015) (internal
quotation marks and citation omitted). Instead, there must be “specific and
substantial injury to the public interest over and above … ordinary trademark
infringement.” AVELA II, 241 F. Supp. 3d at 484 (internal quotation marks and
citation omitted).
b.
Analysis
In AVELA II, this Court found that Counter-Plaintiffs had failed to state a
claim under Section 349 because they had not adequately alleged that the
misconduct targeted or harmed consumers. Counter-Plaintiffs’ renewed
Section 349 claim suffers from the same fatal flaw. The renewed claim is based
on allegations that “ABG intentionally chose the name [the Monroe Estate] for
its purported subsidiary to make consumers and the public believe that [the
Monroe Estate] is the actual estate of the late Marilyn Monroe and/or that
[ABG and the Monroe Estate] have a relationship with the estate” (V. Intl. FAC
¶ 63; X One X SAC ¶ 65); that “ABG has deceived the public by falsely
claiming … that [the Monroe Estate] is the exclusive owner of rights to all
intellectual property relating to Monroe” (V. Intl. FAC ¶ 64; X One X SAC ¶ 66);
23
that “ABG sends baseless cease and desist letters to merchants and other
legitimately-operating entities purporting to be the estate of Marilyn Monroe, in
an effort to deceive those entities into either entering into license agreements
with [ABG and the Monroe Estate] or to cease selling lawfully made products”
(V. Intl. FAC ¶ 65; X One X SAC ¶ 67); and that ABG “has prevented the public
from creating and maintaining community fan pages for Monroe” (V. Intl. FAC
¶ 67; X One X SAC ¶ 69).
These factual allegations regarding consumer-related harm, though more
detailed than in Counter-Plaintiffs’ prior pleadings, are no more sufficient to
state a claim under Section 349. The allegations regarding the cease-anddesist letters involve harm to merchants like Counter-Plaintiffs, rather than
harm directly to consumers. And most of the other allegations of public harm
are suggestive of little more than consumer confusion, which courts in this
Circuit have found to be insufficient to meet the threshold for Section 349
liability. See, e.g., RCA Trademark Mgmt. SAS, 2015 WL 5008762, at *5;
Perfect Pearl Co., 887 F. Supp. 3d at 542. The only allegation that is neither
focused on consumer confusion nor derivative of harm to merchants — that
ABG has created obstacles for online community fan pages for Monroe — does
not rise to the level of harm required to state a Section 349 claim. See, e.g.,
Perfect Pearl Co., 887 F. Supp. 2d at 542-43.
Most importantly, the gravamen of Counter-Plaintiffs’ allegations
continues to be the harm that Counter-Plaintiffs themselves (and other
businesses similarly situated) suffered. This is evidenced by the fact that (i) the
24
relief they seek is aimed at protecting Counter-Plaintiffs’ commercial interests
rather than the public interest, and (ii) the alleged public harms are derivative
of the harms that Counter-Plaintiffs themselves have allegedly suffered. The
allegations of harm as to Counter-Plaintiffs far outstrip those relating to any
public harm. For these reasons, Counter-Plaintiffs’ Section 349 claim fails as a
matter of law.
Counter-Plaintiffs’ effort to resist that conclusion misses the mark.
Counter-Plaintiffs rely primarily on In re Houbigant Inc., 914 F. Supp. 964,
983-84 (S.D.N.Y. 1995), to support their assertion that, “[w]here a defendant is
part of an unlawful scheme to deceive consumers … with the intent to cause
confusion and mistake, a defendant’s false advertising can be found to involve
a public harm.” (X One X Opp. 11). That reliance is misplaced, both because
In re Houbigant — unlike the instant case — involved a potential public-safety
concern due to the sale of counterfeit goods, and because the court never
addressed whether the alleged harm extended beyond consumer confusion.
914 F. Supp. at 971-72, 983. As such, In re Houbigant cannot bear the weight
that Counter-Plaintiffs place on it. Nor do Counter-Plaintiffs’ other assertions,
which Counter-Plaintiffs fail to ground in relevant case law or other authority,
alter this Court’s conclusion that the Section 349 claim fails for the reasons
outlined above.
25
4.
V. International Has Failed to Allege a Plausible Claim for
Tortious Interference with Contract Under New York Law
a.
Applicable Law
Finally, the Estate Movants move to dismiss V. International’s renewed
tortious-interference-with-contract claim, the prior iteration of which this Court
dismissed without prejudice in AVELA II. Under New York law, the elements of
tortious interference with contract are: “[i] ‘the existence of a valid contract
between the plaintiff and a third party’; [ii] the ‘defendant’s knowledge of the
contract’; [iii] the ‘defendant’s intentional procurement of the third-party’s
breach of the contract without justification’; [iv] ‘actual breach of the contract’;
and [v] ‘damages resulting therefrom.’” Kirch v. Liberty Media Corp., 449 F.3d
388, 401-02 (2d Cir. 2006) (quoting Lama Holding Co. v. Smith Barney Inc., 88
N.Y.2d 413, 424 (1996)).
b.
Analysis
V. International alleges that the Estate Movants tortiously interfered with
two contracts: one between A.V.E.L.A., Inc. (“AVELA”) and Freeze, a division of
Central Mills, Inc.; and another between AVELA and Silver Buffalo, LLC. It
claims that the contract with Freeze was in force from June 16, 2005, to 2014;
the contract with Silver Buffalo, between June 11, 2006, and 2014. (V. Intl.
FAC ¶ 76). Under both contracts, V. International operated as a licensing
agent in exchange for a commission fee. (Id.). V. International alleges that the
Estate Movants “knew or should have known of the existence of such
contract[s] and the business relationship[s] between V[.] International and
Freeze … and Silver Buffalo.” (Id. at ¶ 77). Armed with that putative
26
knowledge, the Estate Movants allegedly “disrupted the business
relationships … by … making knowingly false representations related to
V[.] International’s licensing business, by initiating litigation against
V[.] International on the basis of alter ego allegations which they knew were
false, and … by threatening Freeze and Silver Buffalo.” (Id. at ¶ 79). “As a
result of [the Estate Movants’] actions, Freeze and Silver Buffalo ceased
licensing artwork … [and] breached their contracts and business relationships
with AVELA and V[.] International.” (Id. at ¶¶ 80-81).
V. International’s amended pleadings fail as a matter of law for at least
two reasons. First, the allegations as to the Estate Movants’ knowledge of the
contracts are insufficient to support a claim. General allegations that a party
“knew or should have known” about the contract in question fall short. See,
e.g., Ferring B.V. v. Allergan, Inc., 4 F. Supp. 3d 612, 626-27 (S.D.N.Y. 2014)
(dismissing claim with prejudice because “Plaintiffs’ proposed allegations are
inconsistent with the pleading of ‘actual knowledge’”); Roche Diagnostics GmbH
v. Enzo Biochem, Inc., 992 F. Supp. 2d 213, 221 (S.D.N.Y. 2013)
(“[C]onstructive knowledge is inadequate to demonstrate [party’s] knowledge for
purposes of tortious interference.”); Medtech Products Inc. v. Ranir, LLC, 596 F.
Supp. 2d 778, 814 (S.D.N.Y. 2008) (“[T]he allegations that DenTek ‘knew or
should have known’ about the contracts … is mere speculation unsupported by
the specific allegations of actual knowledge necessary to survive a motion to
dismiss a claim of tortious interference with contractual relations.”); Ahluwalia
v. St. George’s Univ., LLC, 63 F. Supp. 3d 251, 266 (E.D.N.Y. 2014) (holding
27
that plaintiff failed to adequately plead the elements of the tort where it did not
plead “that [defendant] had actual knowledge of any contract between the
[p]laintiff and [the] third party”); Yong Ki Hong v. KBS Am., Inc., 951 F. Supp.
2d 402, 422 (E.D.N.Y. 2013) (“‘[A]lthough a defendant need not be aware of all
the details of a contract, it must have actual knowledge of the specific contract’
that is the subject of the claim.” (internal citation omitted)). Here,
Counter-Plaintiffs have failed to allege that the Estate Movants had knowledge
of the contracts at issue.
Second, V. International has failed to plead the alleged breach with
sufficient particularity to survive a motion to dismiss. Under New York law, it
is insufficient, for purposes of stating a viable claim for tortious interference
with contract, to allege in conclusory terms that a contract existed and was
breached. See, e.g., Kirch v. Liberty Media Corp., 449 F.3d 388, 401-02 (2d Cir.
2006) (finding allegation that a contract counterparty “walked away” from a
project insufficient to establish that terms of a contract were violated);
Leadsinger, Inc. v. Cole, 05 Civ. 5606 (HBP), 2006 WL 2320544, at *11-12
(S.D.N.Y. Aug. 10, 2006) (dismissing claim for tortious interference where party
failed to adequately allege the specific breach); Masefield AG v. Colonial Oil
Indus., No. 05 Civ. 2231 (PKL), 2006 WL 346178, at *4-6 (S.D.N.Y. Feb. 15,
2006) (dismissing counterclaim where defendant “alleged no specific action on
the part of [Plaintiff] to cause [third party] to breach the Contract”); Pitcock v.
Kasowitz, Benson, Torres & Friedman, LLP, 915 N.Y.S.2d 239, 241 (1st Dep’t
2011) (“[P]laintiff has failed to state [a claim for tortious interference with
28
contract because he] has not alleged, in non[-]conclusory language, the
essential terms of the parties’ contract, including the specific provisions upon
which liability is predicated[.]”); Bennett v. State Farm Fire and Cas. Co., 26
N.Y.S.3d 554, 555 (2d Dep’t 2016) (noting that a party must “plead the terms of
the alleged underlying contract … and any specific breach thereof”).
V. International’s pleadings regarding the alleged breaches are
conclusory and lack the specificity required under New York law. The relevant
pleadings are captured in two sentences: “As a result of the Counterclaim
Defendants’ actions, Freeze and Silver Buffalo ceased licensing artwork from
AVELA through V[.] International” (id. at ¶ 80); and, “[a]s a result of the
Counterclaim Defendants’ actions, Freeze and Silver Buffalo breached their
contracts and business relationships with AVELA and V[.] International” (id. at
¶ 81). Counter-Plaintiffs fail to allege which terms of the contracts were
breached when Freeze and Silver Buffalo ceased to license artwork from them,
or even to state clearly that Freeze’s and Silver Buffalo’s decisions to cease
licensing artwork constituted a breach at all. For that reason, and because
Counter-Plaintiffs have failed to plead that the Estate Movants had actual
knowledge of either contract, dismissal of the claim for tortious interference
with contract is warranted.
5.
The Court Dismisses Counter-Plaintiffs’ Counterclaims with
Prejudice
The sole remaining question is whether this Court should dismiss the
counterclaims with prejudice. Rule 15(a)(1) allows a party to “amend its
pleading once as a matter of course within … 21 days after serving it, or … if
29
the pleading is one to which a responsive pleading is required, 21 days after
service of a responsive pleading[.]” Fed. R. Civ. P. 15(a)(1). But once that
period has expired, “a party may amend its pleading only with the opposing
party’s written consent or the court’s leave.” Fed. R. Civ. P. 15(a)(2). Rule
15(a)(2) further states: “The court should freely give leave when justice so
requires.” Fed. R. Civ. P. 15(a)(2).
The Second Circuit has explained that “the ‘permissive standard’ of
Rule 15 ‘is consistent with [its] strong preference for resolving disputes on the
merits.’” Loreley Fin. (Jersey) No. 3 Ltd. v. Wells Fargo Sec., LLC, 797 F.3d 160,
190 (2d Cir. 2015) (quoting Williams v. Citigroup Inc., 659 F.3d 208, 212-13 (2d
Cir. 2011) (per curiam)). Consistent with that, “[t]he rule in this Circuit has
been to allow a party to amend its pleadings in the absence of a showing by the
nonmovant of prejudice or bad faith.” AEP Energy Servs. Gas Holding Co.
v. Bank of Am., N.A., 626 F.3d 699, 725 (2d Cir. 2010) (quoting Block v. First
Blood Assocs., 988 F.2d 344, 350 (2d Cir. 1993)).
But Rule 15’s permissive standard applies with less force when, as here,
the Court has already provided notice of the deficiencies in the pleadings and
granted leave to amend. See, e.g., Denny v. Barber, 576 F.2d 465, 471 (2d Cir.
1978) (dismissing with prejudice where plaintiff received notice of deficiencies
at time of first amendment and was therefore not entitled to a “third
go-around”); Treppel v. Biovail Corp., No. 03 Civ. 3002 (PKL), 2005 WL
2086339, at *12 (S.D.N.Y. Aug. 30, 2005) (dismissing action with prejudice
where “plaintiff has already had two bites at the apple and they have proven
30
fruitless”); Rosza v. May Davis Grp., Inc., 187 F. Supp. 2d 123, 132 (S.D.N.Y.
2002) (dismissing action with prejudice where plaintiff failed in his “second
effort to state a claim”).
In AVELA II, this Court expressed doubt as to whether “V. International
or X One X w[ould] be able to amend their dismissed counterclaims such that
they can survive future dispositive motions.” 241 F. Supp. 3d at 490.
Counter-Plaintiffs have proven that this Court’s doubts were warranted. At
this juncture, the Court has even graver doubts than before as to
Counter-Plaintiffs’ ability to cure the deficiencies in their pleadings. The Court
does not believe that a third bite at the apple would yield a result different from
the previous two. Nothing in the Counter-Plaintiffs’ original or amended
pleadings suggests that they will be able adequately to plead that (i) the Monroe
Estate operates as ABG’s alter ego, (ii) ABG owns the Contested Marks, (iii) the
public was harmed in a manner that supports a Section 349 claim, or (iv) the
Estate Movants had knowledge of the contracts with Freeze and Silver Buffalo.
Accordingly, the Court will not grant further leave to amend.
CONCLUSION
For the reasons set forth above, the Estate Movants’ partial motion to
dismiss is GRANTED. The Clerk of Court is directed to terminate Docket Entry
290. The parties are hereby ORDERED to file a joint letter on or before
March 19, 2018, advising the Court of the parties’ present intent to file
cross-motions for summary judgment, which were originally due on December
8, 2017, but were adjourned sine die pending the issuance of this Opinion. To
31
the extent the parties still wish to file said motions, they are to include in their
joint letter a proposed briefing schedule.
SO ORDERED.
Dated:
March 5, 2018
New York, New York
__________________________________
KATHERINE POLK FAILLA
United States District Judge
32
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