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Grooms v. Legge

May 22, 2009

JAMES GROOMS; BRYCEMARIE PHELAN; KNUCKLE,INC., A COLORADO CORPORATION, PLAINTIFFS,
v.
JOHN LEGGE; GWEN LEGGE; KNUKLE, INC., A CALIFORNIA CORPORATION; ARTILLERY DISTRIBUTION, AN ENTITY, FORM UNKNOWN; SEAN MYERS; DEVIN MERCADO; AND DOES 1 THROUGH 50 INCLUSIVE, DEFENDANTS.



The opinion of the court was delivered by: Irma E. Gonzalez, Chief Judge United States District Court

ORDER DENYING DEFENDANTS' MOTIONS TO DISMISS OR TRANSFER THE ACTION FOR IMPROPER VENUE [Doc. Nos. 44, 45.]

In this unfair competition action, Defendants submit three alternative motions: to dismiss for improper venue, to transfer for improper venue, or to transfer for convenience.*fn1 (Doc. Nos. 44, 45) Plaintiffs opposed both motions and Defendants replied. Having considered the parties' submissions, and for the reasons set forth below, the Court DENIES Defendants' motions.

BACKGROUND

A. The Parties

Plaintiffs James Grooms and Brycemarie Phelan are individuals residing in Colorado. Grooms and Phelan own plaintiff Knukle, Inc. ("Knukle Colorado"), a Colorado corporation.

Defendants John Legge and Gwen Legge (collectively the "Legges") are a married couple living in Orange County, California. The Legges own defendant Knukle, Inc. ("Knukle California"), a California corporation with a principal place of business in Orange County, California.

Defendants Sean Myers and Devin Mercado own and operate Artillery Distribution, which is a graphic design company. Myers, Mercado, and Artillery Distribution moved from San Diego to Orange County, California on March 1, 2009.

B. Factual Background

In May 2008, Grooms and Phelan created the name "Knukle Inc" ("Knukle" was deliberately misspelled by omitting the "c" and turning the second "k" backwards). Their designs, which combined the name Knukle Inc. with a symbol representing brass knuckles, became the genesis of a line of apparel and accessories targeted at fans of extreme sports and mixed martial arts.

On July 8, 2008, Grooms and Phelan approached Artillery Distribution, asked for its assistance refining the Knukle designs, and requested estimates for printing designs on apparel and accessories.

In late August 2008, Grooms and Phelan sought investors for Knukle Inc. through www.craigslist.com.*fn2 Gwen Legge wanted to invest and the parties agreed to meet.

On September 13, 2008, the parties met in Dana Point, California. The Legges orally agreed to invest $115,000 in exchange for 50% ownership of "Knukle Inc." The parties agreed to be "50-50 partners," but the terms of this oral agreement are disputed. Plaintiffs assert the parties agreed to be 50-50 partners, with no mention of the formation of a corporation or the transfer of the trademark. The Legges claim the parties orally agreed to form a California corporation, with the Legges providing financing and plaintiffs transferring the trademark application to Knukle California.

Based on this agreement, the Legges formed Knukle California. The Legges attempted to build the Knukle brand by paying for designs, silkscreening, artwork, promotions, sponsorships, and a booth at a major trade show. Additionally, they provided office space in Santa Ana, California. Plaintiffs never received shares of Knukle California and never transferred ownership of the Knukle mark.

On November 28, 2008, Grooms formed Knukle Colorado. On December 16, 2008, Gwen Legge called Plaintiffs and asked them to assign their rights to the Knukle mark and move the company's headquarters to Orange County, California. Plaintiffs declined both requests, which began the deterioration of the business relationship.

The Legges began marketing apparel using the brand name "Knukle Inc" (with the second "k" turned forwards) (the "Knukle California mark"). On December 18, 2008, Knukle California filed a federal "actual use" trademark application for the Knukle California mark. The Legges filed this application because they believed Plaintiffs would not transfer their rights to the Knukle mark.

On January 22-24, 2009, the Legges sent Myers and Mercado to the ASR trade show to sell "Knukle Inc." designs and merchandise. Plaintiffs did not attend the ASR show because Artillery Distribution released all of the "Knukle, Inc." merchandise to the Legges. Further, a trade show ...


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