Grgurev v. Licul

229 F.Supp.3d 267

Ferdo GRGUREV and Omer Grgurev, individually and derivatively, Plaintiffs,

v. Milan LICUL, Branco Turcinovic, Dennis Turcinovic, Five "M" Corp., 268 SH Restaurant Corp., Delmonico's Distribution LLC, and 268 SH Restaurant Corp., Defendants,andOcinomled Ltd. and 50/50 Restaurant Corp., Nominal Defendants.

1:15–cv–9805–GHW

United States District Court, S.D. New York.

Signed January 26, 2017

Jamie Mark Brickell, Maryaneh Mona Simonian, Pryor Cashman LLP, Alan C. Trachtman, Nourse & Bowles, LLP, New York, NY, for Plaintiffs.

Alan C. Trachtman, Nourse & Bowles, LLP, Laura M. Trachtman, Law Office of Alan C. Trachtman, New York, NY, for Defendants.

MEMORANDUM OPINION AND ORDER

GREGORY H. WOODS, United States District Judge:

Plaintiffs Omer and Ferdo Grgurev and Defendants Milan Licul and Branko Turcinovic are experienced restaurateurs who have owned and operated restaurants together for many years. Unfortunately, the relationship between them has now gone to pot, devolving into this acrid stew which, after long simmering, has now come to a boil. The amended complaint asserts a smorgasbord of fourteen derivative and direct claims ranging from trademark infringement to tortious interference. Defendants have asserted five counterclaims, including a petition for dissolution of one of the corporations that they co-own with Plaintiffs. In addition, all parties have informed the Court of their intention to bring cross-motions for sanctions, and Plaintiffs have recently moved for a preliminary injunction barring Defendants from making any repairs, renovations, or improvements to one of their jointly owned restaurants while this action is pending. Now before the Court, however, is Defendants' motion to realign the parties and to dismiss twelve of Plaintiffs' claims. For the reasons that follow, Defendants' motion to dismiss is GRANTED IN PART and DENIED IN PART.

I. BACKGROUND¹

A. The Relationship Between the Parties

Plaintiffs Omer and Ferdo Grgurev and Defendants Milan Licul and Branko Turcinovic (the "Co–Owner Defendants," and collectively with Plaintiffs, the "Co–Owner Parties") are equal co-owners of Nominal Defendants Ocinomled Ltd. ("Ocinomled") and 50/50 Restaurant Corporation ("50/50"). ECF No. 26, Am. Compl. ("AC"), ¶¶ 16–19. Because they each hold a 25% ownership stake, the Plaintiffs together and the Co–Owner Defendants together each represent half of the voting power of each these entities.

The Co–Owner Parties formed Ocinomled "in or around 1998" for the purpose of purchasing Delmonico's, a restaurant located at 56 Beaver Street in Manhattan.² AC ¶ 16. Ocinomled is a closely held corporation and does not have a governing operating agreement or shareholders' agreement. AC ¶ 18, 97.

Prior to forming Ocinomled, the Co–Owner Parties had partnered together for many years in the operation of other restaurants, including Scaletta. AC ¶ 19. Scaletta is located at 50 West 77th Street in Manhattan and is operated through Nominal Defendant 50/50. Id. The Co–Owner Defendants have owned other restaurants separate and apart from those that they own with Plaintiffs, including Murano and Arno, the latter of which they own and operate through Balarini Restaurant Corporation. AC ¶ 20.

According to the amended complaint, Defendant Milan Licul was, "at all relevant times," responsible for maintaining the financial books and records of both Delmonico's (through Ocinomled) and Scaletta (through 50/50). AC ¶ 21, 122. Licul engaged the same accountant to maintain the books for both restaurants. AC ¶ 123. Licul was also the president of 50/50. AC ¶ 193.

B. Delmonico's and the DELMONICO'S Marks

Delmonico's has been described by the New York Times as "possibly the most famous name in American restaurant history." AC ¶ 27, Ex. A. "In operating and promoting its restaurant, Ocinomled maintains the classic and upscale ambience for which Delmonico's is famous, and its menu includes classic Delmonico's dishes, such as Lobster Newburg, Oysters Rockefeller, Baked Alaska, Eggs Benedict, Chicken a la Keene and, of course, Delmonico's Steak." AC ¶ 23. According to Plaintiffs, the "high-end reputation of the restaurant is inextricably tied to the DELMONICO'S name." Id. Plaintiffs allege that Delmonico's "has been extremely profitable for the last fifteen years" and has averaged annual net revenues of at least $5 million for the past several years. AC ¶¶ 29–30.

In acquiring the Delmonico's restaurant, Ocinomled also acquired the right to use the "Delmonico's" name, as well as "all other rights" to that name held by the seller, CIBE Beaver LLC. AC ¶ 17. In 2004, Ocinomled filed an application with the U.S. Patent and Trademark Office (the "USPTO") for registration of the DELMONICO'S service mark in Class 43 for Restaurant Services (the "Restaurant Mark"). AC ¶ 24. That application is assigned U.S. Serial Number 76577253. Id. In 2007, Ocinomled filed an application with the USPTO for registration of the DELMONICO'S trademark and service marks for various products and services covered by Classes 8, 16, 18, 21, 25, 29, 30, 34, and 41, including cutlery, cookbooks, bags and briefcases, dinnerware, clothing, prepared foods, salad dressings and sauces, cigars and cigar accessories, and entertainment services (the "Product Mark," and collectively with the Restaurant Mark, the "Marks"). AC ¶ 25. That application is assigned U.S. Serial Number 77301695. Id.

Both of Ocinomled's registration applications are "suspended in accordance with USPTO procedure pending resolution of a concurrent use registration application made by an unrelated party in connection with its operation of an unrelated restaurant using the Delmonico's name in or around Albany, New York." AC ¶ 26.

Plaintiffs alleges that the Marks "are famous and are an iconic symbol of a fine dining steakhouse." AC ¶ 27. They also allege that the Marks "invoke the goodwill associated with the historical roots of the Delmonico's restaurant." Id.

C. The Operation of Delmonico's and Scaletta

After the Co–Owner Parties purchased Delmonico's through Ocinomled, they closed the restaurant for refurbishment and reopened it in mid–May 1998.³ AC ¶ 22. They "jointly decided that none of them would be directly involved in the day-to-day operations of the restaurant." AC ¶ 31. The Co–Owner Defendants devoted their time to managing their other restaurants, Murano and Arno, while Plaintiffs continued managing the day-to-day operations of Scaletta. Id.

The Co–Owner Defendants appointed Defendant Dennis Turcinovic—Defendant Branko Turcinovic's son—as one of two co-managers of Delmonico's. AC ¶ 32. As co-manager, he had regular access to the cash received during the course of Delmonico's daily operations. AC ¶ 103.

Defendant Milan Licul "conducts the bookkeeping" for Delmonico's and "maintains the financial books and records of Delmonico's at the offices of Arno," the restaurant jointly owned by the Co–Owner Defendants. AC ¶ 33. Plaintiffs allege that Defendants Milan Licul and Dennis Turcinovic "were and are responsible for collecting all cash receipts from Delmonico's restaurant." AC ¶ 34.

Defendant Milan Licul also is responsible for maintaining the books and records for the other restaurants jointly owned by the Co–Owner Parties, including Scaletta. AC ¶ 96.

The Co–Owner parties received regular salaries from Ocinomled, which "were determined by Defendant Milan [Licul] and paid out through the company's payroll." AC ¶ 35. Initially, Plaintiffs were paid $500 per week, but their salaries were subsequently raised to $1,500 per week. AC ¶ 36. Defendant Branko Turcinovic was also paid $1,500 per week, while Defendant Milan Licul paid himself $2,000 per week. Id.

D. Defendants' Alleged Unauthorized Exploitation of the Marks

Plaintiffs allege that, based on the success of Delmonico's restaurant, the Co–Owner Defendants "saw an opportunity to capitalize on the DELMONICO'S marks." AC ¶ 39. "[R]ather than expanding the brand for the benefit of Ocinomled," however, the Co–Owner Defendants "elected to pursue opportunities for their own benefit, to the detriment of Ocinomled" by using the Marks in connection with various sauces and other restaurants. AC ¶ 40; id. ¶¶ 40–90.

1. The Sauces and Delmonico's Distribution LLC

According to the amended complaint, the Co–Owner Defendants "undertook to manufacture, distribute and sell products under the DELMONICO'S Product Mark, including Delmonico's steak sauce ... as well as other sauces, salad dressings and marinades." AC ¶ 41. The Co–Owner Defendants presented Plaintiffs with the idea of developing and marketing a steak sauce under the DELMONICO'S Product Mark. AC ¶ 42. Based upon a representation that royalties would be paid to Ocinomled for that use of the Product Mark, Plaintiffs did not object to the idea. AC ¶¶ 43–44. Thereafter, the Co–Owner Defendants began manufacturing, distributing, and selling steak sauce under the DELMONICO'S Product Mark, but Ocinomled has not received any royalties or other compensation. AC ¶ 44–45.

In addition to the use of the Product Mark in connection with the steak sauce, Plaintiffs allege that the Co–Owner Defendants "unilaterally decided to use the DELMONICO'S Product Mark for pasta sauces, salad dressings and marinades." AC ¶ 47. They did not inform Plaintiffs of their plan to do so, nor did they obtain a license or consent from Ocinomled for the use of the Product Mark in connection with those products. AC ¶ 48–49.

The Co–Owner Defendants formed Defendant Delmonico's Distribution LLC ("Delmonico's Distribution") for the purpose of manufacturing, distributing, and selling these sauces, and Plaintiffs allege that Delmonico's Distribution "is currently selling these products nationwide online and in stores" at the direction of the Co–Owner Defendants. AC ¶¶ 51–52. Neither Delmonico's Distribution nor the Co–Owner Defendants have reported their earnings from the manufacture, distribution, and sale of these products to Ocinomled or to Plaintiffs. AC ¶ 53. They...