The opinion
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
ETDO PRODUCTIONS LLC CIVIL ACTION
VERSUS NO. 19-13184
ALFREDO CRUZ, ET AL SECTION "B"(3)
ORDER AND REASONS
Third-party defendants Jerry Lenaz and Francois Camenzuli
filed a motion to dismiss Disco Amigos Social Aid and Pleasure
Club’s counterclaim for lack of supplemental jurisdiction. Rec.
Doc. 34. Counterclaimant Disco Amigos Social Aid and Pleasure Club
filed a memorandum in opposition. Rec. Doc. 38. Third-party
defendants then sought, and were granted, leave to file a reply.
Rec. Doc. 41.
For the reasons discussed below,
IT IS ORDERED that the motion to dismiss is DENIED.
FACTUAL BACKGROUND AND PROCEDURAL HISTORY
This trademark dispute arises from the use of the name “Disco
Amigos” and a logo. Plaintiff, ETDO Productions LLC (“ETDO”), filed
this suit on October 18, 2019 seeking declaratory relief and
bringing claims for trademark infringement and dilution, unfair
competition, and unfair business practices against defendants,
Alfredo Cruz, Michelle Rossi, Michelle Hudak, Marisa Naquin, Sonya
Bourgeois, Lisette Bayle, Renee Pastor, and Disco Amigos Social
Aid and Pleasure Club (“Disco”). Rec. Doc. 1.
On January 10, 2020, defendants answered the complaint and
filed a counterclaim against ETDO and third-party defendants
Francois Camenzuli (“Camenzuli”) and Jerry Lenaz (“Lenaz”). Rec.
Doc. 30. Defendants asserted federal and state law claims against
ETDO for unfair competition, false advertisement, injury to
business reputation, and negligent interference. Id. Additionally,
defendants asserted counterclaims and against Camenzuli and Lenaz
for breach of fiduciary duty and breach of the duty of care as
members of Disco’s Board of Directors and Executive Committee. Id.
According to ETDO, Camenzuli created the phrase “Disco
Amigos” on November 16, 2011 and Lenaz created the logo of a disco
ball with horns and a nose ring on February 15, 2012. Rec. Doc. 1
at 6.
On May 16, 2012, Disco Amigos Social Aid and Pleasure Club,
a non-profit, was formed with Camenzuli and Lenaz serving as the
principal officers and board members of Disco. Id. at 7. According
to ETDO, Camenzuli and Lenaz granted Disco implied licenses which
allowed Disco to use the phrase “Disco Amigos” and the logo. Rec.
Doc. 34-1 at 2.
In 2015, Camenzuli and Lenaz founded ETDO to manage Disco’s
assets and events and the intellectual property rights belonging
to Camenzuli and Lenaz were transferred to ETDO. Rec. Doc. 34-1 at
3.
According to ETDO, on July 25, 2019, a proposal to sign a
formal license agreement between ETDO and Disco was presented and
discussed at a Disco Board meeting. Rec. Doc. 1 at 8 and 34-1 at
3. However, Disco’s Board of Directors became deadlocked over the
proposal and a final decision was not made. Id. According to
Camenzuli and Lenaz, three members of the Disco’s Board, who also
comprise the Executive Committee of the Board, agreed that a
license agreement with ETDO regarding Disco’s use of the trademark
was proper, but the other five Board members disagreed and insisted
that such an agreement was unnecessary. Rec. Doc. 34-1 at 3. Five
members of the Board argued that the trademark belonged entirely
to Disco, not ETDO. Id. The remaining three members of the Board,
who are also the Executive Committee of the Board of Directors,
disagreed and tried to stop Disco’s use of the trademark without
an executed license agreement. Id. Per ETDO, when Disco failed to
enter into a formal license agreement with ETDO, the implied
licenses previously granted to Disco were revoked. Id. However,
Disco continued and currently operates using the name and logo
without ETDO’s approval. Id.
Camenzuli and Lenaz filed the instant motion to dismiss
Disco’s counterclaims based on a lack of supplemental
jurisdiction. Rec. Doc. 34. Disco filed a response in opposition,
arguing that that the court has supplemental jurisdiction over its
counterclaims because the counterclaims arise out of the trademark
dispute. Rec. Doc. 38. Camenzuli and Lenaz then filed a reply
clarifying that its motion for dismissal for lack of supplemental
jurisdiction refer only to Disco’s counterclaims for the breach of
fiduciary duty and breach of the duty of care. Rec. Doc. 41.
LAW AND ANALYSIS
Rule 12(b)(1) of the Federal Rules of Civil Procedure permits
the dismissal of a case or a particular claim for lack of subject-
matter jurisdiction. “The standard of review applicable to motions
to dismiss under Rule 12(b)(1) is similar to that applicable to
motions to dismiss under Rule 12(b)(6).” Powell v. Hunter, 2012 WL
253105, No. 11-1640, at *2 (E.D. La. Jan. 25, 2012). However, when
considering a motion to dismiss under Rule 12(b)(1), courts may
look to: “(1) the complaint alone; (2) the complaint supplemented
by undisputed facts evidenced in the record; or (3) the complaint
supplemented by undisputed facts plus the court's resolution of
disputed facts.” Ramming v. United States, 281 F.3d 158, 161 (5th
Cir. 2001). “The burden of proof for a Rule 12(b)(1) motion to
dismiss is on the party asserting jurisdiction.” Id.
Subject Matter Jurisdiction Over Counterclaims
“Federal courts are courts of limited jurisdiction. They
possess only that power authorized by Constitution and statute.”
Kokkonen v. Guardian Life Ins. Co. of America, 511 U.S. 375, 377
(1994). By statute, Congress has delineated two primary bases for
original subject-matter jurisdiction in federal courts: federal
question jurisdiction and diversity jurisdiction. 28 U.S.C. §§
1331-1332. Additionally, in 1990, Congress enacted the
supplemental jurisdiction statute, which provides in part: “in any
civil action of which the district courts have original
jurisdiction, the district courts shall have supplemental
jurisdiction over all other claims that are so related to claims
in the action within such original jurisdiction that they form
part of the same case or controversy under Article III of the
United States Constitution.” 28 U.S.C. § 1367(a). Accordingly,
certain claims may remain in federal court even if they do not
meet the requirements for original jurisdiction so long as they
form the same “case or controversy” as the claims with original
jurisdiction.
The Supreme Court of the United States defined the case-or-
controversy standard while explaining the outer limits of what was
then known as “pendent jurisdiction” in United Mine Workers of
America v. Gibbs, 383 U.S. 715 (1966). The Court defined a single
case or controversy as one in which all the claims “derive from a
common nucleus of operative fact,” such that one would expect them
to be tried in a single judicial proceeding. Gibbs, 383 U.S. at
725. “Legislative history makes clear that Congress intended to
codify the result in [Gibbs]” with the passage of § 1367. Wright
& Miller, et al, Federal Practice and Procedure § 3567.1. Since
then, courts have found that a “loose factual connection between
the claims is generally sufficient” to meet the common-nucleus
standard. CheckPoint Fluidic Sys. Int'l, Ltd. v. Guccione, No.
CIV.A. 10-4505, 2012 WL 195533, at *3 (E.D. La. Jan. 23, 2012).
Additionally, “[a] court's determination of whether to exercise
supplemental jurisdiction is guided by considerations of judicial
economy, convenience and fairness to litigants.” Id.
Camenzuli and Lenaz argue that Disco’s state law
counterclaims for breach of duties do not have a common nucleus of
operative facts to the trademark claims. Rec. Doc. 41. Camenzuli
and Lenaz assert that the state law claims for the breach of duties
do not address the same facts as the trademark dispute and although
there would be some overlap in witnesses, the focus of the
trademark claims and the claims for breach of duties are different.
Id.
In support of its assertion, Camenzuli and Lenaz cite a case
from the Eastern District of Virginia, which this court is not
bound to follow, Mason v. Richmond Motor Co., 625 F. Supp. 883
(E.D. Va. 1986), aff'd, 825 F.2d 407 (4th Cir. 1987). In Mason,
the Eastern District of Virginia refused to exercise pendent
jurisdiction over state law claims asserted by a plaintiff for
breach of oral contract and a duty of fair dealing in an action
brought under the Age Discrimination In Employment Act, 29 U.S.C.
§ 621, although the oral contract and fair dealing claim arose out
of the plaintiff’s employment with the defendant. Id. In
particular, the court in Mason took exception to the concept that
only a “loose factual connection” between the federal and State
claims is required to empower the federal court to exercise pendent
jurisdiction. Id. at 886. The court found that the facts which
operate to give rise to the federal claim must be the facts which
operate to give rise to a State claim. Id.
Disco’s memorandum in opposition opposes Camenzuli and Lenaz’s
logic and Disco argues that the state law claims for breach of
duties are so related to the trademark claims that the state law
violations resulted in the trademark dispute at issue. Rec. Doc.
38. Disco argues that the trademark dispute was the motivation
behind Camenzuli and Lenaz wrongful conduct underlying the claims
for breach of fiduciary duties and breach of the duty of care. Id.
at 8. Further, Disco asserts that Camenzuli and Lenaz’s defense
to the state law claims include proving ownership in the
intellectual property and that forcing these claims to proceed
separately may result in inconsistent results in the ownership of
the intellectual property at the root of the instant case. Id.
At the outset, Camenzuli and Lenaz’s reliance on Mason is
insufficient. As stated earlier, courts have found that a “loose
factual connection between the claims is generally sufficient” to
meet the common-nucleus standard. 13B Charles A. Wright, Arthur R.
Miller, and Edward H. Cooper, Federal Practice and Procedure §§
3567.1, at 117 (2d ed.1984); see Guccione, 2012 WL 195533 at *3;
Hankins v. Yellow Fin Marine Servs., LLC, No. CV 15-2494, 2015 WL
9004447, at *3 (E.D. La. Dec. 16, 2015); and Bennett v. Biamont,
No. CIV.A.01-2717, 2002 WL 1611639, at *2 (E.D. La. July 19, 2002).
This Court disagrees with Mason. Further, Camenzuli and Lenaz
provide nor has this Court found Fifth Circuit precedent that has
determined a loose factual connection is insufficient.
Here, while different allegations form the bases of ETDO’s claim
and Disco’s counterclaim, all of the allegations form a common
nucleus of facts. The main issue in this litigation is to determine
who owns the intellectual property. A pivotal part of Disco’s
counterclaims against Camenzuli and Lenaz lies on the issue of
whether Camenzuli and Lenaz, and eventually ETDO, own the
intellectual property. Moreover, all the claims stem from
Camenzuli and Lenaz interaction with both ETDO and Disco. Deciding
both sets of claims in a single proceeding will also facilitate
judicial economy and convenience by avoiding redundant
proceedings. Therefore, both sets of claims arise from a common
nucleus of operative fact and Disco’s counterclaim falls under the
umbrella of this Court's supplemental jurisdiction. Further, the
Court expresses no opinion on the merits of any of the claims.
New Orleans, Louisiana this 7th day of July, 2020
___________________________________
SENIOR UNITED STATES DISTRICT JUDGE