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Chronic Tacos Enterprises, Inc. v. Chronic Tacos Huntington Beach

April 26, 2011

CHRONIC TACOS ENTERPRISES, INC.
v.
CHRONIC TACOS HUNTINGTON BEACH, INC., ROB SLEENHOFF, AND LOES SLEENHOFF



The opinion of the court was delivered by: The Honorable David O. Carter, Judge

CIVIL MINUTES - GENERAL

Julie Barrera Not Present Courtroom Clerk Court Reporter

ATTORNEYS PRESENT FOR PLAINTIFFS: ATTORNEYS PRESENT FOR DEFENDANTS:

NONE PRESENT NONE PRESENT

PROCEEDING (IN CHAMBERS): ORDER GRANTING IN PART AND DENYING IN PART COUNTERDEFENDANTS' MOTION TO DISMISS COUNTERCLAIMANTS' SECOND AMENDED COUNTERCLAIM

Plaintiffs / Counterdefendants Chronic Tacos Enterprises, Inc., Randall Wyner, and Dan Biello (collectively, "Counterdefendants") bring the instant Motion to Dismiss Defendants / Counterclaimants Rob Sleenhof, Loes Sleenhof, and Chronic Tacos Huntington Beach, Inc.'s (collectively, "Counterclaimants") Second Amended Counterclaim ("Motion") (Docket 40).*fn1 The court finds this matter appropriate for decision without oral argument. Fed.R.Civ. P. 78; Local Rule 7-15. After considering the moving, opposing and replying papers, and for the reasons stated below, the Court hereby GRANTS in part and DENIES in part the Motion.

I. BACKGROUND

The facts, according to Counterclaimants' Second Amended Counterclaim ("SACC"), are as follows. Chronic Tacos Enterprises, Inc. ("CTE") is the owner of the "Chronic Tacos" trademark ("CT Trademark"), registered with the Patent and Trademark Office ("PTO") on October 1, 2002. On or about June 2005, Counterdefendants Randall Wyner ("Wyner"), Dan Biello ("Biello"), and Counterclaimant Rob Sleenhof entered into an agreement to create Chronic Tacos Huntington Beach, Inc. ("CTHB") (the "Shareholder Agreement"). SACC ¶ 15. The Shareholder Agreement licensed the use of the CT Trademark to CTHB and specified that all shareholders must give notice of any intent to transfer shares and give the other shareholders the right of first refusal to purchase the shares. Id. at 16. Biello and Wyner presumably have a proprietary interest in the CT Trademark.

Between July 2009 and February 2010, Biello and Wyner allegedly transferred shares of CTHB without providing the necessary notice or right of first refusal to Counterclaimants. Id. Following these transfers, both Wyner and Biello ceased to be CTHB shareholders and terminated CTHB's temporary license. Id. at 17. Wyner and Biello subsequently offered to extend CTHB's license to use the CT Trademark if CTHB became a CTE franchise. Id. CTHB allegedly declined to sign a franchise agreement. Id.

Plaintiffs / Counterdefendants filed a Complaint in this Court on September 17, 2010, alleging (1) Trademark Infringement, 15 U.S.C. § 1114, (2) Lanham Act violation, (3) Common Law Trademark Infringement, and (4) Unfair Business Practices. In response to the Complaint, Defendants / Counterclaimants filed an Answer and Counterclaim on November 2, 2010. Counterclaimants filed a First Amended Counterclaim on March 10, 2010, asserting five causes of action: (1) Fraudulent Inducement, (2) Breach of Contract, (3) Conversion, (4) Declaratory Relief and Permanent Injunction, and (5) Unfair Competition. The first, fourth, and fifth causes of action were brought against CTE. The first, second, fourth, and fifth causes of action were brought against Wyner. All five causes of action were brought against Biello. In an Order dated February 22, 2011, the Court dismissed claims for Conversion and Permanent Injunction with prejudice and dismissed claims for Fraudulent Inducement and Unfair Competition with leave to amend. The Court declined to dismiss claims for Breach of Contract or Declaratory Relief. Counterclaimants filed a SACC on March 10, 2011, alleging (1) Fraudulent Inducement, (2) Breach of Contract, (3) Declaratory Relief, and (4) Common Law Unfair Competition (Docket 39). In response, Counterdefendants filed the instant Motion to dismiss the first and fourth causes of action.

II. LEGAL STANDARD

Under Federal Rule of Civil Procedure 12(b)(6), a complaint must be dismissed when a plaintiff's allegations fail to state a claim upon which relief can be granted. Dismissal for failure to state a claim does not require the appearance, beyond a doubt, that the plaintiff can prove "no set of facts" in support of its claim that would entitle it to relief. Bell Atl. Corp. v. Twombly, 127 S. Ct. 1955, 1968 (2007) (abrogating Conley v. Gibson, 355 U.S. 41, 45-46, 78 S. Ct. 99 (1957)). In order for a complaint to survive a 12(b)(6) motion, it must state a claim for relief that is plausible on its face. Ashcroft v., 129 S.Ct. 1937, 1950 (2009). A claim for relief is facially plausible when the plaintiff pleads enough facts, taken as true, to allow a court to draw a reasonable inference that the defendant is liable for the alleged conduct. Id. at 1949. If the facts only allow a court to draw a reasonable inference that the defendant is possibly liable, then the complaint must be dismissed. Id. Mere legal conclusions are not to be accepted as true and do not establish a plausible claim for relief. Id. at 1950.Determining whether a complaint states a plausible claim for relief will be a context-specific task requiring the court to draw on its judicial experience and common sense. Id.

In general, when ruling on a 12(b)(6) motion a court may not consider documents outside See Fed. R. Civ. P. 12(b). However, to show that the plaintiff has failed to state a claim a defendant may attach documents that are referred to in the complaint, if neither side questions the authenticity of the documents. See Branch v. Tunnell, 14 F.3d 449, 454 (9th Cir. 1994). A court may consider even documents not specifically or expressly referred to in the complaint if, as before, the authenticity of the document is not questioned and "the plaintiff's complaint necessarily relies" upon Parrino v. FHP, Inc., 146 F.3d 699, 706 (9th Cir. 1998).

Dismissal without leave to amend is appropriate only when the Court is satisfied that the deficiencies in the complaint could not possibly be cured by amendment. Jackson v. Carey, 353 F.3d 750, 758 (9th Cir. 2003) (citing Chang v. Chen, 80 F.3d 1293, 1296 ...


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