Asset Co. IM Rest, LLC v. Katzoff

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ASSET CO IM REST, LLC et al., Plaintiffs, v. GERALD “JERRY” KATZOFF et al., Defendants.

No. 23 Civ. 9691 (JPC)

United States District Court, S.D. New York

January 16, 2024

OPINION AND ORDER

JOHN P. CRONAN UNITED STATES DISTRICT JUDGE

This case adds the latest chapter to a years-long dispute over intellectual property related to a prominent chain of Italian restaurants under the Il Mulino brand. See, e.g. BSP Agency LLC v. Katzoff (In re KG Winddown, LLC) 632 B.R. 448 (Bankr. S.D.N.Y. 2021). Pending before this Court is the motion of Plaintiffs Asset Co IM Rest, LLC, Il Mulino Joint Ventures, LLC, and Receivables IM Rest, LLC for a preliminary injunction pursuant to Federal Rule of Civil Procedure 65. Plaintiffs seek to restrain Defendants Gerald “Jerry” Katzoff, IMNY GS, LLC, West 3rd Holdings LLC d/b/a Il Giglio Tribeca, West 3rd Products, LLC, IM LLC-I, and GFB Restaurant Corp. from using trade dress of a former restaurant on 361 Greenwich Street in Manhattan called Il Mulino Tribeca, Il Mulino's proprietary recipes property from Il Mulino Tribeca, and the names Il Giglio and Il Giglio Tribeca, all of which Plaintiffs claim either belong to them or cause confusion with intellectual property owned by them, including the registered trademarks IL MULINO and IL MULINO NEW YORK.

The Court heard argument on Plaintiffs' motion for a preliminary injunction at a hearing held on December 5, 2023. For the reasons that follow, the Court grants Plaintiffs' motion in part and denies it in part. In particular, based on the evidence presented, the Court finds that injunctive relief is appropriate with respect to the alleged trade dress, and otherwise denies the motion. As indicated below, however, the denial of other injunctive relief at this stage does not mean that Plaintiffs may not, after a more fully developed record, be able to establish their entitlement to broader relief.

I. Background

A. Findings of Fact^[1]

This case has an extensive factual record and involves a web of implicated corporate entities. The Court will only train on the parts of the record most relevant to the preliminary injunction motion.

In 1981, brothers Gino and Fernando Masci opened the first Il Mulino restaurant at 86 West Third Street in the Greenwich Village neighborhood of Manhattan. Dkt. 67 (“Katzoff Decl.”) ¶¶ 12; Dkt. 26 (“Galligan Decl.”) ¶ 4. The Masci brothers owned this restaurant through Defendant GFB Restaurant Corp. (“GFB”). Galligan Decl. ¶ 4; see also Katzoff Decl. ¶ 2. The restaurant proved very successful and was “rated the number one Italian restaurant in New York City by Zagat Survey for twenty . . . years.” Katzoff Decl. ¶ 3. Katzoff and Brian Galligan-both of whom were extensively involved in the development of the Il Mulino brand in later years- attributed the restaurant's success in large part to its high-end Italian cuisine, which featured several signature or proprietary recipes. Katzoff Decl. ¶ 9; Galligan Decl. ¶¶ 5-7.

At some point in the early 2000s, Katzoff and Galligan formed Defendant IM LLC-1 (“IM-1”); this entity came to be “the beneficial owner of all intellectual property” related to the original Il Mulino. Galligan Decl. ¶ 10; see Katzoff Decl. ¶ 6. According to Katzoff, IM-1 entered into a license agreement with GFB in September 2002, through which the former licensed Il Mulino-related intellectual property for GFB to use “in connection with the [o]riginal Il Mulino [l]ocation.” Katzoff Decl. ¶ 8. In 2004, IM LLC-III (“IM-3”) was formed “to raise additional capital for further expansion.” Id. ¶ 20; see Galligan Decl. ¶ 11. IM-1 licensed Il Mulino-related intellectual property to IM-3 the same year; IM-3 then proceed to assign its rights and interest in this license to an entity called Il Mulino USA (“IM USA”). Galligan Decl. ¶¶ 12-13; Katzoff Decl. ¶¶ 22-23. Through the license, IM-1 granted IM-3 “an exclusive, except for [certain] licenses[,] . . . royalty-free right and license to use the Intellectual Property” for a term of 20 years; this intellectual property included, most relevantly for purposes of this Opinion, “trade dress,” “recipes,” and “trademarks (common law and registered).” Dkt. 26-1 (“IM-3 IP License”) §§ 1.1, 6.1; id. at 1. Under this license, IM-1 also undertook an obligation to “apply to register the marks IL MULINO and IL MULINO NEW YORK with the U.S. Patent & Trademark Office,” id. § 3.2; these marks appear to be registered under U.S. Registration Numbers 2923240 and 2889810, respectively (collectively, the “Il Mulino Marks”). See Dkt. 13; Trademark States & Document Retrieval, United States Patent and Trademark Office, https://tsdr.uspto.gov/ (search for Registration Numbers 2923240 and 2889810) (last visited Jan. 14, 2024).

A number of Il Mulino-related restaurants were opened under the auspices of this licensing structure in the 2000s and 2010s. Galligan Decl. ¶ 16; Katzoff Decl. ¶¶ 24, 26-31. Galligan declared that “every new Il Mulino-branded restaurant obtained rights to use Il Mulino IP through a sublicense from IM USA or one of its subsidiaries.” Galligan Decl. ¶ 17. Most importantly for present purposes, Defendant IMNY GS was formed in 2017 to open what would become Il Mulino Tribeca in 2018. Id. ¶ 20; see Katzoff Decl. ¶ 68. Much like the other newer Il Mulino restaurants, “IMNY GS obtained a sublicense from IM USA to use the Il Mulino IP, including the Il Mulino [r]ecipes, in connection with the operation of Il Mulino Tribeca.” Galligan Decl. ¶ 22. Galligan also declared that “IMNY GS spent more than $240,000 to acquire unique decor, fixtures, artwork, and tableware for use at Il Mulino Tribeca” (collectively, the “Il Mulino Tribeca Personal Property”) and that “the restaurant space for Il Mulino Tribeca was designed to include several unique elements” (the “Il Mulino Tribeca Trade Dress” or the “Trade Dress”). Id. ¶¶ 23-24. The Il Mulino Tribeca Trade Dress is described and discussed at length below. See infra III.A.1.

According to Katzoff and Galligan, Il Mulino Tribeca struggled financially at the very least after the onset of the COVID-19 pandemic, although the two appear to disagree about the underlying cause of the restaurant's financial condition. Galligan Decl. ¶ 33; Katzoff Decl. ¶¶ 4445, 48. In any case, IM USA and several other entities-including IM-3-filed a voluntary bankruptcy petition in the United States Bankruptcy Court for the Southern District of New York in July 2020. In re KG Winddown, LLC, et al., No. 20-11723-mg (S.D.N.Y. Bankr.), Dkt. 1 at 6; see Katzoff Decl. ¶ 59; Galligan Decl. ¶ 34. Later that year, BSP Agency LLC-an entity that had entered into a credit agreement with IM-3 and IM USA, among other parties, in 2015-bought “substantially all of the [b]ankruptcy [p]arties' assets under an asset purchase agreement.” Katzoff Decl. ¶¶ 34-36, 61. Richard Shinder-a member of the board of managers of an entity that, in one form or another, functionally controls Plaintiffs-declared that these assets, including the Il Mulino-related intellectual property interest held by IM USA, was transferred to Plaintiffs as a result of the bankruptcy sale. Dkt. 27 (“Shinder Decl.”) ¶ 6.^[2]

Per Katzoff, Il Mulino Tribeca reopened after the pandemic in early 2022. Katzoff Decl. ¶ 82. The restaurant continued to face financial difficulties, however, which Shinder attributed to Katzoff's “poor management.” Shinder Decl. ¶ 12. But see Katzoff Decl. ¶ 83 (attributing these difficulties to “slow” business). The response to these difficulties is a source of much contention between the parties. Katzoff declared that the restaurant fell behind on rent in early 2023 but BSP Agency refused to provide more funding for the restaurant, leaving him with essentially no choice but to close Il Mulino Tribeca. Katzoff Decl. ¶¶ 98-99. In late March 2023, Katzoff wrote to BSP Agency about his intention to “open a new restaurant, with different ownership, in the [same] location once a new liquor license was obtained.” Id. ¶ 100. Shinder declared that once Plaintiffs “became aware” of Katzoff's plans, he sent a letter to Katzoff to warn him against using the Il Mulino's intellectual property that was sold as part of the bankruptcy sale, “[b]ecause of concerns caused by Mr. Katzoff's prior self-dealing and attempts to use the Il Mulino IP without valid rights.” Shinder Decl. ¶ 15. Shinder also declared that Katzoff responded that “[a] deal is being made with the land lord [sic] to take back the restaurant and all its assets for the satisfaction of the back rent owed and a new tenant will take over the space at the time of the issuance of the new license,” which Shinder took to mean both that “Mr. Katzoff recognized he did not have any rights to use the Il Mulino IP at a new restaurant under his ownership after Il Mulino Tribeca closed” and that Katzoff would “transfer Il Mulino Tribeca's personal property . . . to IMNY GS'[s] creditors.” Id. ¶¶ 17-18; see also Motion at 10 (“Given Katzoff's . . . response [to Shinder], Plaintiffs were surprised to learn in August 2023 that the ‘new tenant' might be Katzoff himself.” (citing Shinder Decl. ¶ 19)). The parties more generally contest the extent to which Katzoff made Plaintiffs aware of his plans for the new restaurant, but these disputes are of no real moment for purposes of the preliminary injunction motion. Compare Dkt. 51 (“Opposition”) at 14-15 with Dkt. 53 (“Shinder Reply Decl.”) ¶¶ 4-14.

Il Mulino Tribeca closed on September 5 or 6, 2023. Katzoff Decl. ¶ 105. According to Shinder, on August 31 and September 15, 2023, “Plaintiffs sent two demand letters to Defendants objecting to any use of the Il Mulino IP or Il Mulino Tribeca's personal property at [the] planned restaurant.” Shinder Decl. ¶ 20. Il Giglio opened at the same...