Capriotti's Sandwich Shop, Inc. v. Taylor Family Holdings, Inc.

857 F. Supp. 2d 489, 2012 WL 1448514, 2012 U.S. Dist. LEXIS 57861
District Court, D. Delaware·Decided April 25, 2012·No. Civ. No. 12-28-SLR·Published·Cited by 7 cases

Opinion

MEMORANDUM OPINION

SUE L. ROBINSON, District Judge.

I. INTRODUCTION

On January 17, 2012, Capriotti’s Sandwich Shop (“plaintiff’ or Capriotti’s), a Nevada corporation with its principal place of business in Las Vegas, Nevada, filed suit against Taylor Family Holdings, Inc. (“TFH”), its franchisee, and Natalie Delucia Taylor (“Taylor”), the president and partial owner of TFH, (collectively, “defendants”). (D.I. 1) On that same day, plaintiff filed for a preliminary injunction. (D.I. 4) Defendants have responded to plaintiffs motion for a preliminary injunction; defendants have also filed motions to dismiss under Federal Rules of Civil Procedure (“Fed. R. Civ.P.”) 12(b)(2) and 12(b)(3), as well as a motion to transfer. (D.I. 12; 24) On April 11, 2012, the court heard oral argument on these motions. (D.I. 37). For the following reasons, the court grants in part and denies in part defendants’ motion to dismiss or transfer (D.I. 24) and denies plaintiffs motion for a preliminary injunction (D.I. 4).

II. BACKGROUND

A. Capriotti’s History and Marks

Plaintiff is the corporate owner (i.e., franchisor) of a national chain of sandwich shops. (D.I. 1 at ¶¶ 7;11) The Capriotti’s business began in 1986 in Wilmington, Delaware when Lois and Alan Margolet, a sister and brother team, opened up a sandwich shop on North Union Street and named it in honor of their grandfather, Phillip Capriotti. (Id. at ¶ 7; Ex. A) The goal of the founders was to “capture the hearts of ‘real turkey lovers’ ” by serving “made-to-order ... fresh roasted pulled turkey” sandwiches. (Id. at Ex. A) The business would succeed and expand and was eventually sold to the current Nevada-based owners. (Id. at ¶ 2-14) To date, there are approximately seventy-five Capriotti’s sandwich shops franchised throughout the United States, with Nevada being the largest market and Delaware being the second largest. (Id. at ¶ 11) THE BOBBIE, which contains roasted turkey, cranberry sauce and stuffing, would become, and remains, plaintiffs most recognizable sandwich. (Id. at ¶ 7)

Plaintiff is the owner of certain trademarks. These include:

[493] [[Image here]]

(D.1.1 at ¶ 8)

B. The Parties’ Franchise Agreement

TFH, and in particular, Taylor, run a Capriotti’s franchise at 4825 South Fort Apache Road in Las Vegas, Nevada.1 (Id. at ¶ 12) THF’s operation of this franchise is governed by a March 17, 2003 franchise agreement signed by Al-Lomar, Inc. (a Delaware-based corporation that was the original franchisor of Capriotti’s sandwich shops) and TFH. (Id.; Ex. D)

Section 5 of the franchisee agreement states, in pertinent part:

5. Trademark. Trade Names, and Trade Secrets: Franchisee acknowledges that it is required, to the extent possible, to prevent those persons or parties associated with or employed by [494] it from unauthorized use of the Franchisor’s Marks and Name ...
Franchisee therefore covenants and agrees to perform and abide by the following provisions:
(c) ... All advertising and promotion must conform to the standards and requirements specified by Al-Lomar. Franchisee must submit to Al-Lomar ... for prior written approval samples of all advertising and promotional plans and materials to be used by Franchisee in the Franchised Business.

(Id. at Ex. D, section 5)2 Failure to comply with the terms of the franchise agreement, including section 5, are grounds for termination of the agreement. (Id. at Ex. D, section 10(c))

C. The Alleged Breach of the Franchise Agreement

In November of 2011, plaintiff learned that the Crazy Horse III (“Crazy Horse” or “the club”), a Las Vegas-based gentleman’s club, was offering a happy hour promotion in which customers could receive a six-inch Capriotti’s sandwich and a beer for five dollars. (Id. at ¶ 16) A promotional flyer prepared by the club advertised this deal; the flyer featured an exotic dancer along with one of Capriotti’s marks (in particular, mark number 3,571,960). (D.I. 37 at Ex. JTX 3) The club also advertised the deal on its facebook page and the local ESPN radio affiliate. (Id. at 28; 42) The promotion was picked up by, and mentioned in, several Las Vegas-based blogs.3 (Id. at JTX 10; 11; 12). As plaintiff notes, Crazy Horse’s advertising and the internet-based publicity “falsely suggested that the promotion was sponsored or authorized by Capriotti’s.” (D.I. 1 at ¶ 17)

Plaintiff was “alarmed and disturbed” by this “direct[] and improper!] association of] the Capriotti’s Marks with sexually oriented entertainment.” (D.I. 5 at 4-5) After an investigation, plaintiff determined that Crazy Horse “had not acted independently and it was Defendants who had, without authorization, ‘teamed up’ with [Crazy Horse] to offer and promote Capriotti’s [sandwiches] ... in connection with ... topless dancing.” (Id.; D.I. 1 at ¶ 19) In response to this discovery, on November 15, 2011, plaintiff sent defendants a notice of default. (D.I. 1 at Ex. I) That notice explained that defendants’ “sale of food to an adult entertainment business for resale and promotion to their customers and their use of the Capriotti’s name and trademarks threaten to damage the reputation and goodwill of all existing and future [Capriotti’s sandwich shops].” (Id.) The letter further provided that defendants had five days in which to cure their defaults; refusal or failure to do so would result in termination of the franchise agreement. (Id.) Believing that sufficient curative actions had not occurred, plaintiff sent a notice of termination to defendants on November 28, 2011. (Id. at Ex. K)

The Crazy Horse eventually ceased promoting the Capriotti’s-based happy hour special. Regardless, plaintiff believes that defendants breached the service agreement and failed to cure and, therefore, [495] plaintiff seeks to terminate defendants’ association with Capriotti’s. Defendants dispute that a breach occurred, and they continue to operate the franchise as they did before the termination letter.

D. Subsequent Legal Proceedings

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Capriotti's Sandwich Shop, Inc. v. Taylor Family Holdings, Inc., 857 F. Supp. 2d 489, 2012 WL 1448514, 2012 U.S. Dist. LEXIS 57861 (D. Del. 2012).

857 F. Supp. 2d 489 (Capriotti's Sandwich Shop, Inc. v. Taylor Family Holdings, Inc.) — published by Counsel Stack Legal Research, free access to 12M+ legal documents.

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