Katiroll Co. v. Kati Junction, Inc.

33 F.Supp.3d 359

The KATIROLL COMPANY, INC., Plaintiff

v.KATI JUNCTION, INC., John Doe # 1, Md. Akhter Hossain, Md. Jewel Hossain, Md. Kamal Hossain, Md. Tariqul Islam, Md. Nur Nobi, Shaikh Nuhul Alam, and Nurun Nabi Chowdhury, Defendants.

No. 14–cv–1750 SAS.

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

Signed July 15, 2014.

Filed July 16, 2014.

Elizabeth Shieldkret, Esq., Forest Hills, NY, for Plaintiff.

Kalpana Nagampalli, Esq., Feldman Law Group, P.C., New York, NY, for Defendants.

OPINION AND ORDER

SHIRA A. SCHEINDLIN, District Judge.

I. INTRODUCTION

Plaintiff, The KatiRoll Company, Inc. (“TKRC”), brings this action against Kati Junction, Inc. and eight of its employees.¹ TKRC asserts eight causes of action: (1) infringement of a federally registered service mark against Kati Junction and the John Doe defendant; (2) trade dress infringement against all defendants; (3) unfair competition under the Lanham Act against all defendants; (4) state statutory infringement and unfair competition against all defendants; (5) common law unfair competition against all defendants; (6) breach of duty of loyalty against employee defendants; (7) breach of contract against defendants Islam and Alam; and (8) misappropriation of trade secret and/or proprietary and confidential information against all defendants. Defendants move to dismiss counts two through eight of the Complaint. For the reasons that follow, defendants' motion is DENIED.

II. BACKGROUND

A. The KatiRoll Company, Inc.

TKRC is a carry-out style restaurant that first opened in June 2002 on MacDougal Street in Manhattan.² TKRC primarily sells Indian food, using flatbread (paratha or roti) prepared on a griddle and then wrapped around one or more fillings such as kebab meats, eggs, cheese, or vegetables.³ Since TKRC first opened in 2002, it has used a “2–for” discount when a customer purchases two of the same item.⁴

There are currently four TKRC restaurants, three in Manhattan and one in London, England.⁵ Each of the restaurants uses orange and white signage, has an orange awning with the company's word mark in white lettering and an orange banner with the company's word mark in white lettering.⁶ The layout of each TKRC restaurant features an open glass front with unobstructed windows, limited seating in front with a counter further back and an open kitchen plan to enhance the customer experience by allowing customers to observe preparation of the food.⁷ The stores use wood facing on the counters and wood surrounds on the trash bins.⁸

It took many months for TKRC to develop the recipes for each of its dishes as well as the proprietary processes used to create desired textures and to keep ingredients ready for use without artificial preservatives.⁹ Additionally, the company spent approximately six months perfecting its roti recipe before introducing it in the restaurant.¹⁰ Employees were told to keep the recipes secret as part of their job training and in the employee manual.¹¹ Employees also signed non-disclosure agreements.¹²

TKRC employees wear a uniform that includes a t-shirt with the company mark, a hat, and an apron.¹³ The company name and design trademarks appear on the back of the shirt to ensure they are not obstructed by the apron.¹⁴

B. Kati Junction, Inc.

In February 2014, Kati Junction, Inc. opened a takeout-style restaurant called Kati Junction at 200 West 40th Street in Manhattan, approximately three blocks from a TKRC restaurant.¹⁵ Kati Junction uses orange and white signage.¹⁶ Kati Junction's menu is nearly identical to TKRC's, including the names of the menu items and descriptions of those items.¹⁷ Kati Junction sells the same menu items as the TKRC restaurants and does not offer any additional or different rolls from the TKRC menu—Kati Junction also offers a “2–for” discount when a customer purchases two of the same item.¹⁸ The flavor profile and texture of Kati Junction's fillings, sauces, and breads are very similar to TKRC's.¹⁹

Kati Junction's restaurant features an unobstructed open glass front, limited seating in front with a counter further back, an open kitchen plan, and uses wood facing on the counters and wood surrounds for trash bins.²⁰ Employees wear a uniform that includes a t-shirt with the Kati Junction orange and white design on the back, a hat, and an apron.²¹

Kati Junction hired seven “current and former” TKRC employees.²² These employees are allegedly using TKRC's proprietary recipes and techniques to copy the TKRC menu.²³ Since Kati Junction opened, more than one customer has asked TKRC about its new branch, demonstrating that customers are confused and believe Kati Junction is a TKRC restaurant.²⁴

III. LEGAL STANDARD

A. Motion to Dismiss

In deciding a motion to dismiss under Rule 12(b)(6), the court must “accept [ ] all factual allegations in the complaint as true, and draw[ ] all reasonable inferences in the plaintiff's favor.”²⁵ The court evaluates the complaint under the “two-pronged approach” set forth in Ashcroft v. Iqbal.²⁶ First, a court may “identify[ ] pleadings that, because they are no more than conclusions, are not entitled to the assumption of truth.”²⁷ “Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice” to withstand a motion to dismiss.²⁸ Second, “[w]hen there are well-pleaded factual allegations, a court should assume their veracity and then determine whether they plausibly give rise to an entitlement for relief.”²⁹

A claim is facially plausible “when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.”³⁰ Plausibility “is not akin to a probability requirement,” rather, plausibility requires “more than a sheer possibility that a defendant has acted unlawfully.”³¹

In considering a motion to dismiss for failure to state a claim pursuant to Rule 12(b)(6), a district court may consider “only the complaint, ... any documents attached thereto or incorporated by reference and documents upon which the complaint relies heavily.”³² “[T]he court generally cannot consider affidavits and exhibits on a motion to dismiss.”³³ Allegations in the complaint that are “contradicted by more specific allegations or documentary evidence” are not entitled to a presumption of truthfulness.³⁴

B. Pleading Requirements

1. Rule 8

Rule 8(a)(2) requires “a short and plain statement of the claim showing that the pleader is entitled to relief.”³⁵ To survive a Rule 12(b)(6) motion, the allegations in the complaint must meet the plausibility standard, as discussed above.³⁶

IV. APPLICABLE LAW

A. Lanham Act Claims

1. Trade Dress Infringement

Pursuant to section 1125(a) of Title 15 of the United States Code, a cause of action for trade dress infringement may be sustained under the Lanham Act.³⁷ Section 43(a) of the Lanham Act provides:

[a]ny person who, on or in connection with any goods or services, or any container for goods, uses in commerce any word, term, name, symbol, or device, or any combination thereof, or any false designation of origin, false or misleading description of fact, or false or misleading representation of fact, which [ ] is likely to cause confusion, or to cause mistake, or to deceive as to the affiliation, connection, or association of such person with another person, or as to the origin, sponsorship, or approval of his or her goods, services, or commercial activities by another person [ ] shall be liable in a civil action by any person who believes that he or she is or is likely to be damaged by such act.³⁸

In Two Pesos v. Taco Cabana, the Supreme Court held that “[t]rade dress is the total image of the business” and “may include the shape and general appearance of the exterior of the restaurant, the identifying sign, the interior kitchen floor plan, the decor, the menu, the equipment used to serve food, the servers' uniforms and other features reflecting the total image of the restaurant.”³⁹ The purpose of trade dress protection is to “secure to the owner of the [trade dress] the goodwill of his business and to protect the ability of consumers to distinguish among competing producers.”⁴⁰

A plaintiff must prove “that (1) the claimed trade dress is non-functional; (2) the claimed trade dress has secondary meaning; and (3) there is a likelihood of confusion between the plaintiff's goods and the defendant's.”⁴¹ “A plaintiff must also offer a precise expression of the character and scope of the claimed trade dress,”⁴² and articulate the “elements of ... design with specificity to be afforded trade dress protection.”⁴³

The Second Circuit cautions that in analyzing trade dress claims, “courts must not lose sight of the underlying purpose of the Lanham Act, which is protecting consumers and manufacturers from deceptive representations of affiliation and origin.”⁴⁴ Trade dress “analysis requires courts to balance the policy of protecting consumers from confusion against that in favor of free competition.”⁴⁵

In assessing the likelihood of customer confusion “[t]he Lanham Act seeks to prevent consumer confusion that enables a seller to pass off his goods as the goods of another.”⁴⁶ The relevant confusion is “that which affects the purchasing and selling of the goods or services in question.”⁴⁷ Thus, “trademark infringement protects only against mistaken purchasing decisions and not against confusion generally.”⁴⁸

2. Unfair Competition

At its core, an unfair competition claim under the Lanham Act examines “whether the public is likely to be misled into believing that the defendant is distributing products manufactured or vouched for by the plaintiff.”⁴⁹ The Lanham Act, section 1125(a) of Title 15 of the United States Code, prohibits any misrepresentation likely to cause confusion about the source of a product, in particular the use by any person of “any ... name ... likely to cause confusion, or to cause mistake, or to deceive as to the affiliation, connection or association ... with another...