Coscarelli v. Esquared Hospitality LLC
364 F. Supp. 3d 207
S.D. Ill.2019Background
- Chloe Coscarelli (individual) is a celebrity chef and owner of Chef Chloe LLC; in 2014 Chef Chloe LLC and ESquared formed CCSW LLC (now BC Hospitality Group) under an Operating Agreement; Coscarelli also signed a separate Name, Face and Likeness (NFL) Agreement individually.
- The Operating Agreement: defines the business (fast-casual restaurants and "Approved Projects" pre-approved by Chef Chloe LLC), vests ownership of the "By Chloe" mark in CCSW, and contains an arbitration clause with an express carve-out permitting a court action for claims seeking "immediate injunctive relief."
- The NFL Agreement grants CCSW limited rights to use Coscarelli's name/likeness "solely in connection" with restaurants and Approved Projects, reserves the By Chloe mark to CCSW, and contains a broad New York choice-of-law clause; it lacks an arbitration clause.
- An arbitrator found Chef Chloe LLC breached duties and terminated it "for Cause," the state courts confirmed that award, and ESquared purported to repurchase Chef Chloe LLC's membership interest.
- Plaintiffs sued in federal court asserting 21 claims (trademark, right of publicity, unfair competition, breach, etc.); defendants moved to compel arbitration and, alternatively, to dismiss certain California-law claims under New York choice-of-law; Plaintiffs sought a preliminary injunction to stop retail packaged-food sales under the "by Chloe" name and to declare Chef Chloe LLC a 50% member.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Chef Chloe LLC's claims under the Operating Agreement must be arbitrated now despite a request for preliminary injunctive relief | Chef Chloe LLC: arbitration clause allows court actions for "immediate injunctive relief" prior to arbitration | Defendants: clause requires arbitration and any court of "competent jurisdiction" means state court; relief must be sought immediately | Court: Section 20.19(e) permits Chef Chloe LLC to seek preliminary injunctive relief in court first; arbitration of Counts 2, 5, 6 is deferred until after injunction ruling |
| Whether Coscarelli (individual) is bound to arbitrate her personal claims under the Operating Agreement | Coscarelli: she is not a party to the OA and thus not bound; she separately is a party to the NFL Agreement | Defendants: Coscarelli signed the OA three times (including an individual signature) and should be bound | Court: Coscarelli is not a party to the OA; the OA arbitration clause applies to "parties" (the LLCs), so her individual claims are not arbitrable under the OA |
| Whether non-signatory LLCs (CC Hospitality Holdings, CKC Sales) must arbitrate | Plaintiffs: those LLCs are not signatories and not bound | Defendants: OA binds members, transferees, successors and assigns; these LLCs are effectively related/assigns | Court: Defendants failed to show these LLCs are transferees/assigns or otherwise bound; their claims are not subject to arbitration |
| Whether Coscarelli's California statutory and common-law claims must be dismissed because of choice-of-law provisions | Coscarelli: choice-of-law clauses are contract-limited and do not bar tort/statutory claims under California law | Defendants: NFL Agreement's broad clause governs the "legal relations between the parties," so New York law applies and California claims fail | Court: NFL Agreement's broad choice-of-law clause applies to the parties' legal relations; Coscarelli's California-law claims are dismissed with leave to replead under New York law |
| Whether preliminary injunctive relief should issue to stop retail packaged-food sales under "by Chloe" | Plaintiffs: retail packaged-food sales exceed CCSW's rights and were not approved as "Approved Projects"; they face irreparable harm and likelihood of success | Defendants: post-repurchase CCSW may use the By Chloe mark; Approved Projects restriction does not bind after repurchase; no urgent injury | Court: Plaintiffs showed delay and critical contract ambiguity about whether Chef Chloe LLC's approval requirement survives termination; Plaintiffs fail to show irreparable harm or likelihood of success; injunction denied |
| Whether certain filings/declarations should be stricken | Plaintiffs: several defense declarations contain improper argument, exceed page limits, or lack personal knowledge | Defendants: declarations admissible | Court: motions to strike denied as moot because the Court did not rely on those declarations |
Key Cases Cited
- Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1 (1983) (doubts about arbitrability are resolved in favor of arbitration)
- AT & T Techs., Inc. v. Comm'cns Workers of Am., 475 U.S. 643 (1986) (arbitration is a matter of consent; parties cannot be compelled to arbitrate disputes they did not agree to submit)
- First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938 (1995) (courts apply ordinary state-law contract principles to determine whether parties agreed to arbitrate)
- Granite Rock Co. v. Int'l Bhd. of Teamsters, 561 U.S. 287 (2010) (arbitration under the FAA is a matter of consent)
- Fin. One Pub. Co. v. Lehman Bros. Special Fin. Inc., 414 F.3d 325 (2d Cir. 2005) (New York law: choice-of-law provisions that govern contract construction typically do not extend to tort claims)
- Krock v. Lipsay, 97 F.3d 640 (2d Cir. 1996) (a sufficiently broad contractual choice-of-law clause can encompass tort claims incident to the contract)
- Meyer v. Uber Techs., Inc., 868 F.3d 66 (2d Cir. 2017) (standard for deciding motions to compel arbitration is similar to summary judgment)