Sequin, LLC v. Renk

SEQUIN, LLC, Plaintiff, v. KIMBERLY RENK, GREGORY C. DRYER, and BUNNIES UNLIMITED, LLC, d/b/a SEQUIN, Defendants.

C.A. No. 20-62WES

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF RHODE ISLAND

October 2, 2020

MEMORANDUM AND ORDER

PATRICIA A. SULLIVAN, United States Magistrate Judge.

Invoking the abstention doctrine created by Colorado River Water Conservation District v. United States, 424 U.S. 800 (1976), Defendants have moved to stay Counts I-IV ("Counts I-IV") of Plaintiff's verified amended complaint pending the outcome of Renk v. Renk, Index No. 652439/2018 (N.Y. Sup. Ct.), a New York state court case that has been actively litigated since 2018 and is nearly trial-ready. ECF No. 29. For the reasons that follow, Defendants' motion to stay Counts I-IV is granted. Defendants have also moved to dismiss the remaining Counts (V and VI) of the amended complaint pursuant to Fed. R. Civ. P. 12(b)(6). ECF No. 30. The Court will separately address that motion by report and recommendation.¹ For now it remains under advisement.

I. BACKGROUND

This case arises out of a longstanding family fight over ownership and control of Sequin, LLC, ("Sequin"), a successful New York-based² seller of "well-priced, luxurious costume jewelry across the United States." ECF No. 3 at 6. Among the many matters in dispute, skirmishes have erupted regarding control over, and the use of, Sequin's trademarked name and eponymous brand. The internecine strife has pitted Kimberly Renk ("Kim") and her husband, Gregory C. Dryer ("Greg"), together with their company, Bunnies Unlimited, LLC, ("Bunnies"),³ against certain of Kim's family members: Kim's sister, Linda Renk ("Linda"), her brother, Richard John Renk, Jr. ("RJ"), and her father, Richard Renk, Sr. ("Richard"). Linda, RJ and Richard are the legal holders of ownership interests in Sequin that collectively constitute 100%. Kim claims that 50% of Sequin is hers. See generally ECF No. 29-18 at 30.

Since May 2018, this war has been waged in state court in New York. Then, on February 7, 2020, Sequin opened a second front in federal court in the District of Rhode Island. The federal case focuses principally on a single Sequin-branded store that was operated for nineteen non-consecutive days by Kim/Bunnies at 13 Touro Street, Newport, Rhode Island, yielded less than $4,000 in revenue, and had been closed for a month when the Rhode Island federal case was filed. See ECF No. 10-3 at 5 ¶¶ 16-17 & n.1; ECF No. 17 ¶ 10.

A. Renk v. Renk - New York State Court Litigation Pending Since May 2018

Since May 2018, the Renk family disagreement has been the subject of a case brought by Kim against Sequin, Linda, RJ and Richard that has been pending in the Supreme Court of New York County. Renk v. Renk, Index No. 652439/2018 (N.Y. Sup. Ct.) ("Renk v. Renk"). Discovery in Renk v. Renk is largely completed. ECF No. 29-8 ¶¶ 3-4.

In Renk v. Renk, Kim, claiming, inter alia, breach of contract, unjust enrichment, and seeking an accounting and the imposition of a constructive trust, alleges that she is a cofounder (with her sister, Linda) and the rightful owner of 50% of Sequin,⁴ as well as that Bunnies, a company operated by Kim and owned and financed by Kim and her husband, Greg, has collaborated with Sequin for many years by selling Sequin-branded products at retail stores in key locations, including in Rhode Island. ECF 29-18 at 30 ¶ 1; id. at 31 ¶ 4; id. at 42 ¶ 51. Kim's Renk v. Renk pleading asserts that Sequin has knowingly benefited from Bunnies' sales of Sequin-branded products in that Bunnies' success has dramatically increased Sequin'srevenues and added to its brand exposure. Id. ¶ 51. For their part, Sequin, Linda, RJ and Richard have admitted that Kim and Linda cofounded Sequin in 2000 and that Sequin celebrated Kim as its cofounder on its website. ECF 29-11 at 1-2. Further, in now-superseded pleadings, Linda and Richard (who control Sequin) conceded that Kim is entitled to some "interest" in Sequin beyond her status as an employee holding a "well-compensated managerial position," although they vigorously dispute her claim of entitlement to 50%. ECF Nos. 29-9 ¶¶ 1-2; 29-11 ¶¶ 1-2; Renk v. Renk, 2020 WL 2572384, at *1. In their original answer to what became ¶ 51, Sequin, Linda, RJ and Richard sidestepped Kim's allegations about Bunnies' authorized operation of Sequin-branded stores, denying only that they had information sufficient to form a belief that Bunnies' sales of Sequin-branded products in Rhode Island and elsewhere was "collaborative" with Sequin and that the collaboration benefited Sequin. ECF No. 29-11 ¶ 43.⁵

Sequin⁶ asserted counterclaims in Renk v. Renk against Kim. ECF No. 29-9; ECF No. 29-11. The Sequin counterclaim that is pertinent to the pending motion is Count III, which was first asserted on June 21, 2018. ECF No. 29-11 at 12 ¶¶ 12-15 ("Count III"). As presented to this Court, Count III is titled "FAILURE TO OBTAIN LICENSE TO USE SEQUIN'S NAME AND BRAND" and alleges that Kim has used Sequin's name and brand for commercial purposes in connection with her "Businesses," which conduct has damaged Sequin, including thedilution of its brand and the impairing of its reputation. Id. Count III pleads only facts; it is silent regarding the law Sequin contends should be applied to those facts. For Count III remedies, Sequin seeks damages and a permanent injunction barring Kim and "all those acting in concert . . . with her" from "using Sequin's name and brand in connection with [Kim]'s Businesses." Id. at 13. Not presented to this Court is Sequin's latest version of Count III of its counterclaim,⁷ which differs from the prior iteration in that it omits the allegation that the conduct is "continuing," as well as the reference to Kim's "Businesses." Renk v. Renk, Index No. 652439/2018, NYSCEF No. 238 at 19. However, it sustains the core allegation of improper use of Sequin's name and brand and seeks the same remedies - damages and an injunction barring Kim and "those acting in concert or participation with her" from continuing the use of Sequin's name and brand. Id. at 20.

The factual material developed through the nearly completed discovery (ECF No. 29-8 ¶¶ 3-4) in Renk v. Renk as bearing on Count III of the counterclaim appears to establish⁸ that Kim, acting through Bunnies, was authorized by Sequin at a Sequin "Management meeting," held in 2010 and attended by Kim, Linda, RJ, and Richard, to resell Sequin products through "pop-up"⁹ stores owned and operated by Bunnies. ECF No. 10-4 at 2-5. This material suggests that there is a dispute over whether Bunnies' ownership was supposed to be spread to other Renk family members or to Sequin itself (paralleling the battle over Sequin's ownership). See id. at 4; ECFNo. 11 at 9-10; ECF No. 12 ¶ 5. It also reflects that (1) Sequin supported Bunnies' sales of Sequin-branded products with advertising, including for the Bunnies-operated Sequin-branded stores in Newport, Rhode Island, ECF No. 10-3 at 5 ¶¶ 14-15; id. at 102-04; (2) Sequin treated the Bunnies sales at these stores as a separate line item of Sequin's business, ECF No. 10-3 at 108-29; (3) Linda and RJ strategized about what they referred to as Bunnies' "'Sequin' branded stores," ECF Nos. 10-5; 10-6; 10-8; 10-9; 10-10; (4) Bunnies provided Sequin (via emails directed to Linda and RJ among others) with daily store-by-store Sequin-branded sales reports (including for the Bunnies stores in Newport, Rhode Island), ECF No. 10-3 at 5 ¶ 15; id. at 14-64; id. at 66-100; ECF No. 10-7 at 3; and (5) as of 2010, Kim, RJ and Linda agreed that Sequin's "margins [were] 'huge'" on Bunnies' pop-up stores sales, ECF No. 10-4 at 5.

Apart from filing Count III,¹⁰ until January 6, 2020,¹¹ Sequin did nothing to inform Bunnies or Kim that this ongoing arrangement - Kim/Bunnies selling Sequin-branded products at seasonal pop-up stores in key locations, including in Newport, Rhode Island - had been canceled or was no longer authorized. ECF Nos. 10-7 at 3-5; 17 ¶ 43. That is, beginning either in 2010 or 2013 (the record is ambiguous regarding the start date), and continuing without interruption after Renk v. Renk was filed and into 2020, there is evidence developed in Renk v. Renk establishing that Kim/Bunnies used the Sequin name and brand to sell Sequin-branded products at seasonal pop-up stores in Newport, Rhode Island, and elsewhere, and emailed thedaily sales reports to Linda and RJ, yet no one from Sequin ever said that these sales were not authorized or that a license would be required to continue the sales. RJ admitted as much in his March 3, 2020, deposition taken in Renk v. Renk. ECF No. 10-7 at 3-5.

Consistent with this longstanding arrangement, into 2020, Kim/Bunnies opened and operated Newport pop-up stores; the last one, located at 13 Touro Street, opened on October 1, 2019. ECF No. 10-3 at 4-5. The 13 Touro Street store was open for a total of nineteen non-consecutive days during the 2019 holiday selling season, closing on January 6, 2020. Id. at 5. Consistent with the prior practice, Bunnies' sales reports for 13 Touro Street were emailed to Linda and RJ at Sequin beginning on the first day of operations (October 1, 2019). ECF No. 10-3 at 14-64. As presented to this Court, the report emailed on December 29, 2020 at 3:59 p.m. reflects the last sales from the 13 Touro Street store. Id. at 59. The emailed reports for January 4 and 5, 2020, report no sales. Id. at 63-64. In total, 13 Touro Street sales were less than $4,000. ECF No. 10-3 at 5 ¶ 16 n.1. After January 5, 2020, there are no more sales reports, confirming Kim's unrebutted averment that the store was open for returns on January 5 and 6, 2020, and has been closed since January 6, 2020. ECF No. 10-3 at 5 ¶¶ 16-17.

With discovery nearly done, the trial in Renk v. Renk is set to begin on January 4, 2021. See ECF No. 35-1 at 2 (Status Conference Order of June 1, 2020: "Court confirmed that the trial of this case will proceed on January 4, 2020[,]¹² and...