Barrio Bros, LLC v. Revolucion, LLC
1:18-cv-02052
| N.D. Ohio | Oct 16, 2019

Background

  • Plaintiffs operate the Barrio chain (build-your-own tacos) with distinctive trade dress and operational features (e.g., “Day of the Dead” decor, checklist menus, paper-towel caddies, serving styles) that they allege are trade secrets/protected assets.
  • Defendant Joseph Kahn, formerly involved in Barrio and Cassyck, LLC, executed a 2014 Mutual Release & Settlement Agreement (RSA) that divested him of Barrio ownership and barred use/disclosure of Barrio’s name, marks, and trade secrets.
  • Months after the RSA, Kahn with Adams and DeSantis opened Condado Tacos, which Plaintiffs allege copies Barrio’s trade dress and misappropriates trade secrets; Condado expanded to multiple locations.
  • Plaintiffs filed suit in September 2018 asserting DTSA misappropriation (Count 1), Lanham Act trade dress/unfair competition (Count 2), Ohio Deceptive Trade Practices Act (Count 5), among other claims; Defendants moved under Rule 12(c) to dismiss certain counts as time-barred/laches.
  • Plaintiffs later moved for leave to file a Second Amended Complaint to add fraud/conspiracy claims based on newly produced emails, and moved to compel discovery.
  • Court: granted dismissal of Count 1 with prejudice as time-barred under the DTSA’s 3‑year limitations; denied dismissal of Counts 2 and 5 (laches defense unavailable at this stage because willfulness is adequately pled); granted leave to amend (excluding the dismissed DTSA count) and granted motion to compel discovery.

Issues

Issue Plaintiff's Argument Defendant's Argument Held
1. Is Count 1 (DTSA misappropriation) time‑barred? DTSA claim arises from RSA so eight‑year Ohio contract statute applies. DTSA claim governed by DTSA 3‑year statute; misappropriation discovered in 2014 when first Condado opened, suit filed in 2018. Dismissed. Court holds DTSA claim is statutory and subject to 3‑year limit; Complaint shows claim untimely.
2. Are Counts 2 (Lanham Act) and 5 (Ohio DTPA) barred by laches? Delay reasonable or governed by eight‑year contract rule; progressive encroachment and willfulness exceptions apply. Plaintiffs had constructive knowledge in 2014–2015; delay is presumptively unreasonable so laches applies. Not barred at pleading stage. Court finds Plaintiffs plausibly allege Defendants acted intentionally/willfully, giving Plaintiffs ‘‘clean hands’’ defense against laches; denial of partial judgment.
3. Should Plaintiffs be allowed to amend to add fraud/conspiracy claims? Newly produced emails show pre‑RSA intent to copy and that Kahn disclosed Barrio financials—meets Rule 9(b) particularity. Amendment is in bad faith, unduly delayed, and futile. Granted. Court finds no bad faith or undue prejudice and that the proposed fraud allegations satisfy pleading and Rule 9(b) standards.
4. Should Defendants be permitted to halt discovery pending resolution of disputes? N/A (Defs argued newly discovered evidence and counsel issues justified pausing discovery). Discovery should be stayed until issues resolved. Denied. Court orders discovery to proceed and grants Plaintiffs’ motion to compel.

Key Cases Cited

  • Vickers v. Fairfield Med. Ctr., 453 F.3d 757 (6th Cir. 2006) (Rule 12(c) reviewed like Rule 12(b)(6))
  • Cataldo v. U.S. Steel Corp., 676 F.3d 542 (6th Cir. 2012) (dismissal on limitations appropriate when complaint affirmatively shows claim is time‑barred)
  • Campbell v. Grand Trunk W. R. Co., 238 F.3d 772 (6th Cir. 2001) (burden on defendant to show statute of limitations ran; then burden shifts to plaintiff to show exception)
  • CMI Roadbuilding, Inc. v. Iowa Parts, Inc., 920 F.3d 560 (8th Cir. 2019) (DTSA limitations interpreted like state UTSA analogs)
  • Kehoe Component Sales, Inc. v. Best Lighting Products, Inc., 933 F. Supp. 2d 974 (S.D. Ohio 2013) (discovery rule for UTSA—limitations begins when plaintiff knew or should have known of misappropriation)
  • Nartron Corp. v. STMicroelectronics, Inc., 305 F.3d 397 (6th Cir. 2002) (laches begins when plaintiff has actual or constructive knowledge)
  • TWM Mfg. Co. v. Dura Corp., 592 F.2d 346 (6th Cir. 1979) (willful, deliberate infringement precludes laches defense)
  • Herman Miller, Inc. v. Palazzetti Imps. & Exps., Inc., 270 F.3d 298 (6th Cir. 2001) (discussed by court; did not decide effect of willfulness on laches)
  • Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) (plausibility standard for pleading)
  • Walburn v. Lockheed Martin Corp., 431 F.3d 966 (6th Cir. 2005) (Rule 9(b) particularity requirements for fraud)
  • Thiokol Corp. v. Dep’t of Treasury, State of Mich., 987 F.2d 376 (6th Cir. 1993) (courts need not permit amendments that would be futile)
  • Marks v. Shell Oil Co., 830 F.2d 68 (6th Cir. 1987) (Rule 15 leave to amend should be freely given)
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