Dong Phuong Bakery, Inc. v. Gemini Society, LLC

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF LOUISIANA

DONG PHUONG BAKERY, INC. CIVIL ACTION

VERSUS No. 21-1109

GEMINI SOCIETY, LLC SECTION: “J”(1)

ORDER & REASONS

Before the Court is a Rule 12(b) Motion for Partial Dismissal (Rec. Doc. 26)

filed by Defendant, The Gemini Society, LLC (hereinafter “Gemini”). The motion is

opposed by Plaintiff, Dong Phuong Bakery, Inc. (hereinafter “DPB”) (Rec. Doc. 29).

Having considered the motion and memoranda, the record, and the applicable law,

the Court finds that the motion should be DENIED.

FACTS AND PROCEDURAL BACKGROUND1

This declaratory judgment action arises from a contractual dispute between

the parties concerning certain trademarks for marketing DPB’s business.

On June 23, 2017, DPB retained Gemini to create a new website, king cake box

design, and other marketing material. Each subsequent year including 2021, DPB

retained Gemini via a new “Statement of Works” for various branding services.

On November 16, 2020, Gemini filed a trademark application with the United

States Patent & Trademark Office (“USPTO”) to register the DP Bakeshop Mark.

This application is still currently pending.

1 Information is taken from the Amended Complaint (Rec. Doc. 20).

Gemini told DPB to commission Gemini to build the website, pay Gemini a

percentage of gross revenues, and charge its resellers a “license fee.” Gemini insisted

DPB either adopt Gemini’s plan or terminate their relationship.

On April 12, 2012, Linh Garza, President of DPB, notified Gemini that they

were terminating their relationship due to Gemini’s insistence that DPB charge its

resellers a licensing fee. In response, Gemini demanded DPB cease use of all

branding, marketing, and packaging items. Further, Gemini asserted that there was

an outstanding invoice of $268,151.31 and that they exclusively owned all brand

logomarks and logoscripts, brand and product naming, packing and brand colors,

brand copy and positioning, brand artwork and characters. This same day, Gemini

also disabled DPB’s website, eliminating DPB’s online sale abilities.

DPB claims that, as a result of Gemini’s actions, DPB has been stripped of its

website and branding materials, lost revenue and market share without a website

during the pandemic, lost time, and incurred expenses including attorney fees and

professional design costs.

On May 8, 2021, DPB filed suit against Gemini. In response, on July 27, 2021,

Gemini moved to dismiss for failure to state a claim. On August 24, 2021, DPB

amended their complaint, rendering Gemini’s motion to dismiss moot.

In their Amended Complaint, DPB brought the following claims: (1) a

declaratory judgment claim that Plaintiff is the sole owner of the trademark rights

in the DP Bakeshop Mark and in the trade dress rights in the website and the king

cake boxes; (2) a declaratory judgment claim that Plaintiff, not Defendant, has the

right to apply for federal registration of the DP Bakeshop Mark; (3) a declaratory

judgment claim that Plaintiff has an irrevocable, fully paid license to use the DP

Bakeshop Mark, the website, the king cake boxes, and trade dress; (4) a declaratory

judgment claim that Plaintiff has paid all fees owed to Defendant under their

contracts; and (5) a claim that Defendant’s conduct violated the Louisiana Unfair

Trade Practices Act (“LUTPA”). Defendant now seeks dismissal of Counts II and V.

PARTIES’ ARGUMENTS

Regarding Count II, Gemini argues DPB does not have jurisdiction to grant a

declaratory judgment for three reasons: first, the issue is unripe because DPB has

not filed for registration; second, the Court lacks authority to grant relief; and third,

the Court should use its discretion to dismiss the claim. For Count V, they also

contend that the issue is unripe and DPB has failed to allege an ascertainable loss

under LUTPA.

In opposition, DPB argues that this issue is ripe, because they are forced into

a position to abandon their rights. Specifically at issue, DPB contends they have the

right to file for trademark registration as owner who uses the DP Bakeshop Mark in

commerce. Because any application for registration of the DP Bakeshop Mark would

be thrown out due to confusion over similar marks, they believe registration is a

futile, unnecessary action. Further, DPB argues their Amended Complaint contains

sufficient facts for a facially plausible ascertainable loss under LUTPA.

LEGAL STANDARD

In deciding a motion to dismiss for lack of subject matter jurisdiction under

Federal Rule of Civil Procedure 12(b)(1), “the district court is ‘free to weigh the

evidence and resolve factual disputes in order to satisfy itself that it has the power to

hear the case.’” Krim v. pcOrder.com, Inc., 402 F.3d 489, 494 (5th Cir. 2005). The

party asserting jurisdiction must carry the burden of proof for a Rule 12(b)(1) motion

to dismiss. Randall D. Wolcott, M.D., P.A. v. Sebelius, 635 F.3d 757, 762 (5th Cir.

2011). The standard of review for a motion to dismiss under Rule 12(b)(1) is the same

as that for a motion to dismiss pursuant to Rule 12(b)(6). United States v. City of New

Orleans, No. 02-3618, 2003 WL 22208578, at *1 (E.D. La. Sept. 19, 2003). If a court

lacks subject matter jurisdiction, it should dismiss without prejudice. In re Great

Lakes Dredge & Dock Co., 624 F.3d 201, 209 (5th Cir. 2010). When “a Rule 12(b)(1)

motion is filed in conjunction with other Rule 12 motions, the court should consider

the Rule 12(b)(1) jurisdictional attack before addressing any attack on the merits.”

Id. (internal quotation marks and citation omitted).

To survive a Rule 12(b)(6) motion to dismiss, the plaintiff must plead sufficient

facts to “‘state a claim to relief that is plausible on its face.’” Ashcroft v. Iqbal, 556

U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)).

A claim is facially plausible when the plaintiff pleads facts that allow the court to

“draw the reasonable inference that the defendant is liable for the misconduct

alleged.” Id. The factual allegations in the complaint “must be enough to raise a right

to relief above the speculative level.” Twombly, 550 U.S. at 555. “[D]etailed factual

allegations” are not required, but the pleading must present “more than an

unadorned, the-defendant-unlawfully-harmed-me accusation.” Iqbal, 556 U.S. at 678.

The court must accept all well-pleaded facts as true and must draw all reasonable

inferences in favor of the plaintiff. Lormand v. U.S. Unwired, Inc., 565 F.3d 228, 232

(5th Cir. 2009). However, “‘conclusory allegations or legal conclusions masquerading

as factual conclusions will not suffice to prevent a motion to dismiss.’” Beavers v.

Metro. Life Ins. Co., 566 F.3d 436, 439 (5th Cir. 2009) (citation omitted).

DISCUSSION

1. Count II: Declaratory Judgment of Right to Apply for U.S. Trademark

Registration

To have jurisdiction, a court must determine if the declaratory action is

justiciable, if the court has the authority to grant relief, and whether to exercise its

broad discretion to decide or dismiss. Orix Credit All., Inc. v. Wolfe, 212 F.3d 891, 895-

96 (5th Cir. 2000).

First, a declaratory action is justiciable if it can be presently litigated and is

not hypothetical. AXA Re Prop. & Cas. Ins. Co. v. Day, 162 F. App’x 316, 319 (5th Cir.

2006) (quoting Brown & Root, Inc. v. Big Rock Corp., 383 F.2d 662, 665 (5th Cir.

1967)). Frequently, justiciability boils down to an analysis of ripeness. Total Gas &

Power N. Am., Inc. v. FERC, 480 F.3d 1372, 1381 (5th Cir. 2017). An action for a

declaratory judgment is ripe when there is a case or controversy. Orix, 212 F.3d at

896; SanDisk Corp. v. STMicroelectronics NV, 480 F.3d 1372, 1381 (Fed. Cir. 2007).

In a trademark dispute, an actual case or controversy exists when there is “a

substantial controversy, between parties having adverse legal interest, of sufficient

immediacy and reality to warrant the issuance of a declaratory judgment,” even if

the trademark application has not yet been approved. MedImmune, Inc. v.

Genentech, Inc., 549 U.S. 118, 273 (2007); Young v. Vannerson, 612 F. Supp. 2d 829,

841, 845 (S.D. Tex. 2009); Bell v. Accumetric, LLC, 2019 U.S. Dist. LEXIS 126241,

*4 (N.D. Tex. July 30, 2019). Although “mere awareness of a competing trademark

is insufficient, . . . the plaintiff need not risk damages from an infringement suit.”

Bell, LLC, 2019 U.S. Dist. LEXIS 126241 at *4; see MedImmune, 549 U.S. at 127;

see also SanDisk Corp., 480 F.3d at 1381. Rather, in a trademark dispute, a

declaratory judgment may be granted when the defendant forces the plaintiff into a

position to abandon their rights. Young, 612 F. Supp. 2d at 841 (citing SanDisk

Corp., 480 F.3d at 1381). If a defendant conducts infringing activity or taking

concrete steps to conduct such infringing activity, then the plaintiff may be forced

into a position to abandon their rights. OGD Equip. Co. v. Overhead Door Corp.,

2019 U.S. Dist. LEXIS 136440, *19 (E.D. Tex. July 15, 2019).

In Bell v. Accumetric, an actual case or controversy existed, because the

defendant demanded the plaintiff to stop commercial use of a trademark, change its

domain name, and limit the products sold. 2019 U.S. Dist. LEXIS 126241, *5-6.

Although the plaintiff’s application for trademark registration was still pending, the

Court found these actions gave rise to an actual case or controversy, because the

defendant asserted their rights and their desire to enforce those rights. Id. at *6.

In Young v. Vannerson, the Court also found that there was an actual case or

controversy, even though the trademark application had not matured into

registration. 612 F. Supp. 2d 829, 845. The defendants produced, sold, and distributed

products with a logo substantially like the plaintiff’s mark. Id. The Court reasoned

those actions constituted significant, concrete steps to conduct infringing activity and

created an actual case or controversy. Id. at 845-46.

Similarly, Gemini claimed ownership over all brand work, demanded DPB

cease use of all items with their branding or marketing, disabled DPB’s website, and

offered king cake boxes with the DP Bakeshop Mark to third parties. Through these

actions, Gemini asserted ownership rights and showed their desire to enforce those

rights. Moreover, by offering the king cake boxes to third parties, they took

significant, concrete steps to conduct infringing activity. Therefore, an actual case or

controversy exists under these facts, even though the trademark application is still

pending. DPB’s claim is justiciable.

Second, the Court must have authority to grant a declaratory judgment.

Travelers Ins. Co. v. La. Farm Bureau Fed’n, 996 F.2d 774, 776 (5th Cir. 1993). In

general, district courts have authority to determine the registrability of an applicant’s

mark. Std. Pressed Steel Co. v. Midwest Chrome Process Co., 418 F. Supp. 485, 493

(N.D. Ill. 1976). Especially when a defendant’s actions exceed the limited scope of

registration, district courts have jurisdiction to hear the case. Bell, 2019 U.S. Dist.

LEXIS 126241, at *6 (finding district court jurisdiction appropriate because

“Defendant exceeded the scope of the [Trademark Trial and Appeal Board (TTAB)]

proceeding by demanding Plaintiff cease using “BOSS” in its name, change its domain

name, and limit the products it sells”); Young, 612 F. Supp. 2d at 848 n.2 (“When, as

here, a parallel administrative proceeding is pending, courts have consistently

declined to defer to the TTAB when additional claims are raised that cannot be

resolved by the agency”). Even when parties could have filed a proceeding with the

USPTO, a district court still has jurisdiction to hear a trademark dispute, can issue

a declaratory judgment regarding a trademark, and is not required to defer to USPTO

proceedings. See Young, 612 F. Supp. 2d at 848 n.2 (citing Robin Singh Educ. Services

Inc. v. Excel Test Prep Inc., 274 Fed. Appx. 399, 403 (5th Cir. 2008) (“federal courts

are not obligated to defer to PTO proceedings nor are PTO’s findings on infringement

binding on federal courts”)).

In Young, plaintiffs sought a declaration that they had the exclusive rights to

the marks and the defendants had no rights in the marks. 612 F. Supp. 2d at 833.

Even though no registration had been issued and there was a pending proceeding

with the TTAB, the district court still had jurisdiction to hear the case and issue a

declaratory judgment in favor of the plaintiffs. Id. at 837-46.

Here, DPB seeks a declaration that they have the right to file for registration

and that Gemini does not have rights in the DP Bakeshop Mark. Not only is

registration at issue in this case, but fraudulent and infringing conduct is as well.

Thus, even though trademark registration is pending and USPTO could also

potentially have jurisdiction, this Court still has authority to grant declaratory

judgment relief in the present matter.

Third, it is well settled that district courts have broad discretion whether to

dismiss or decide a declaratory judgment action. Travelers, 996 F2d at 778. There are

several factors that courts consider when determining if they have jurisdiction over

a declaratory judgment action, one of which is “whether retaining the lawsuit in

federal court would serve the purposes of judicial economy.” Id. To note, declaratory

judgment actions are considered especially useful in trademark disputes, so finding

district courts to have jurisdiction should be determined with some liberality. See

Young, 612 F. Supp. at 839 (quoting Starter Corp. v. Converse, Inc., 84 F.3d 592 (2nd

Cir. 1996)).

In this case, denying Gemini’s motion to dismiss is in the interest of judicial

economy. DPB points out that Gemini only disputes Count I, but they do not move for

dismissal. Count I would establish DPB as the owner of the DP Bakeshop Mark, and

accordingly, the Lanham Act would provide DPB with the exclusive right to file for

registration. 15 U.S.C. 15(a)(1). Rather than wasting court and party resources in

litigation, if DPB can carry their burden of proof, a declaratory judgment that they

have the right to file would be in the interest of judicial economy.

Accordingly, this Court has jurisdiction over Count II.

2. Count V: Unfair Competition and Deceptive Trade Practices

Gemini argues that Count V should be dismissed for two reasons: first, the

claim is not ripe; and second, DPB has failed to state a claim under LUTPA,

specifically that they have not alleged an ascertainable loss.

First, for the reasons described above, DPB’s LUTPA claim is ripe. “A case

becomes ripe for determination when the ‘harm asserted has matured sufficiently to

warrant judicial intervention.’” Blitch v. City of Slidell, 260 F. Supp. 3d 656, 662 (E.D.

La. 2017) (citing Contender Farms, L.L.P. v. U.S. Dep’t of Agriculture, 779 F.3d 258,

267 (5th Cir. 2015)). Here, Gemini’s conduct has harmed DPB sufficiently so that

judicial intervention is appropriate. Hence, Count V is ripe.

Second, DPB alleged sufficient facts to have a facially plausible claim under

LUTPA. LUTPA prohibits unfair or deceptive acts or practices in the conduct of any

trade or commerce. La. R.S. 51:1405(A). LUTPA sanctions “egregious [conduct]

involving elements of fraud, misrepresentation, deception, or other unethical

conduct.” Cheramie Servs. V. Shell Deepwater Prod., 09-1633 (La. 04/23/10), 35 So. 3d

1053, 1060. Moreover, the alleged conduct must offend public policy and be “immoral,

unethical, oppressive, or substantially injurious.” Id. at 1059. Pursuant to LUTPA,

“[a]ny person who suffers any ascertainable loss of money or movable property,

corporeal or incorporeal, as a result of the use or employment by another person of

an unfair or deceptive method, act or practice . . . [may] recover actual damages.” La.

Rev. Stat. § 51:1409(A). LUTPA permits an award of attorney’s fees and costs if

damages are awarded. Id.

In McFadden v. Import One, Inc., the plaintiff entered into a sales agreement

with the defendant for a new car on the condition that the defendant obtain financing

for the plaintiff at a certain rate. 10-952 (La App. 3d Cir. 02/09/11), 56 So.3d 1212,

1215. The plaintiff traded in her old car and was allowed to take the new car while

the defendant obtained financing. Id. However, the defendant was only able to obtain

financing at a higher rate, which the plaintiff refused, demanding financing at the

agreed-upon rate or the return of her car. Id. at 1215-16. The plaintiff attempted to

return the new car several times, but the defendant refused and threatened to report

the new car as stolen if she did not agree to purchase it. Id. at 1216. The defendant

reported the new car as stolen, and the police went to the plaintiff’s workplace to

repossess the car. Id. The defendant refused to return the plaintiff’s original car until

months after she filed suit. Id. The trial court entered judgment for the plaintiff but

declined to award her treble damages under LUTPA. Id. The court of appeal reversed,

holding that the defendant’s conduct in “essentially holding McFadden’s vehicle

hostage in an attempt to coerce a sale from her” violated LUTPA. Id. at 1221.

McFadden is analogous to the instant matter in that the defendant (1) falsely

asserted rights to property owned by the plaintiff and (2) made false statements to a

government agency to disadvantage the plaintiff while (3) attempting to increase the

purchase price of an already agreed-upon deal.

In this case, DPB alleges that Gemini “misrepresented to the USPTO that

Gemini owned the DP Bakeshop Mark through use of the mark in commerce, and

falsely stated that no one else had any right to use the mark in commerce,” despite

the fact that Defendant “never used the DP Bakeshop Mark, website or king cake

boxes in commerce, as Gemini is not a bakery or a restaurant.” (Rec. Doc. 20, at 10,

11). Because of this, Plaintiff contends that it “is unable to register the DP Bakeshop

Mark with the U.S. Patent & Trademark Office because Defendant has a senior,

pending trademark application to register the exact same mark” and that “[a]ny

federal trademark application Plaintiff files for the DP Bakeshop Mark will be

refused by the U.S. Patent & Trademark Office due to a likelihood of confusion with

the exact same DP Bakeshop Mark in the fraudulent trademark application.” Id. at

21. DPB further alleges that Gemini sent DPB an “outstanding invoice” of

$268,151.31 for work already paid for. Id. at 13. This sufficiently alleges egregious

conduct to state a claim under LUTPA.

Next, Gemini contends DPB failed to allege an ascertainable loss. Gemini cites

Advance Prods. & Sys. v. CCI Pining Sys., in which the Counter-Plaintiff/Defendant

only alleged damages of attorney’s fees and costs under LUTPA. Advance Prods. &

Sys. v. CCI Piping Sys. L.L.C., 2018 U.S. Dist. LEXIS 14814, *6 (W.D. La. Jan. 24,

2018). The Court determined these damages were ancillary to the LUTPA claim and

were incurred as a result of the pending patent infringement claim against Counter-

Plaintiff/Defendant. Id. at *6-7. Because these were the only damages alleged under

LUTPA, the outcome of the patent infringement claim was not yet determined, and

it was uncertain which party would prevail, the alleged damages were not yet

ascertainable. Id.

This case is distinguishable from Advance Prods., because DPB alleges

damages caused by Gemini’s conduct in addition to attorney’s fees and costs. (Rec.

Doc. 21, 23). For example, DPB alleges Gemini caused them to incur rebranding costs,

loss of revenue, and loss of market share. Id. at 21. If DPB prevails on their claim,

Gemini will pay for these ascertainable losses and additionally, the court may grant

an ancillary award of attorney’s fees and costs.

In sum, Count V contains sufficient facts for a facially plausible claim under

LUTPA.

CONCLUSION

Accordingly,

IT IS HEREBY ORDERED that Defendant’s Rule 12(6) Motion for Partial

Dismissal (Rec. Doc. 26) is DENIED.

New Orleans, Louisiana, this 29 day of October, 2021.

abe

CARL J. BARBIER™

UNITED STAVES DISTRICT JUDGE

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