229 F. Supp. 3d 267
S.D.N.Y.2017Background
- Four experienced restaurateurs (Plaintiffs Omer and Ferdo Grgurev; Defendants Milan Licul and Branko Turcinovic) are 25% shareholders each in closely held corporations Ocinomled Ltd. (owns Delmonico’s) and 50/50 Restaurant Corp. (owns Scaletta); the two plaintiff shareholders together control 50% and the two defendant shareholders control 50%.
- Ocinomled applied to register the DELMONICO’S marks (restaurant and product classes); those USPTO applications are suspended pending resolution of a concurrent-use matter involving a third party.
- Plaintiffs allege the Co-Owner Defendants used DELMONICO’S without authorization for: (a) branded sauces (via Delmonico’s Distribution LLC) and (b) other restaurants (Delmonico’s Kitchen and Delmonico’s of Southampton), and failed to account/pay royalties to Ocinomled.
- Plaintiffs further allege defendants siphoned cash (including FEMA proceeds), misused corporate funds to finance the unrelated businesses, manipulated books, and altered salaries (cutting plaintiffs’ pay while raising defendants’ pay).
- Procedural posture: Plaintiffs filed an amended complaint asserting derivative and direct claims (trademark claims under the Lanham Act plus multiple state-law claims). Defendants moved to realign parties and to dismiss 12 claims; the court granted realignment and granted/denied parts of the dismissal motion.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Realignment of parties (nominal defendants) | Plaintiffs initially named Ocinomled and 50/50 as nominal defendants in derivative suit | Defendants: corporations should be realigned as plaintiffs | Court: realignment granted — 50/50 deadlock means corporations are neutral so should be treated as plaintiffs for diversity purposes |
| Derivative claim under 15 U.S.C. § 1114(1) (trademark infringement) | Ocinomled has filed trademark applications and TTAB favored Ocinomled on a third‑party dispute; thus §1114 claim should proceed | Defendants: §1114 protects only registered marks/registrants; pending applications are insufficient | Court: §1114 claim dismissed without prejudice — only registrants of registered marks may invoke §1114 |
| Derivative conversion (misappropriation of funds and goodwill) | Plaintiffs allege defendants converted Delmonico’s cash receipts, FEMA funds, and goodwill/value of the marks | Defendants: allegations are too vague (no specific identifiable fund) and goodwill is intangible so not convertible | Court: conversion claim survives as to allegedly identifiable funds (cash/FEMA proceeds) but fails with prejudice as to alleged conversion of intangible goodwill/value of marks |
| Accounting (equitable claim) as to non-fiduciary defendants (Five M, SH Realty, SH Restaurant, Delmonico’s Distribution, Dennis Turcinovic) | Plaintiffs seek equitable accounting to trace funds and damages | Defendants: no fiduciary/confidential relationship with these defendants to support equitable accounting | Court: accounting dismissed with prejudice as to those defendants for lack of fiduciary relationship (claims at law remain available) |
| Direct conversion and unjust enrichment claims (direct vs. derivative) | Plaintiffs assert direct claims for withholding of salaries/distributions and other misappropriation | Defendants: direct claims conflict with derivative claims or improperly assert conversion for non-identifiable funds; some conduct is corporate injury | Court: direct conversion dismissed with prejudice (misstated as mere right to payment or corporate injury); direct unjust enrichment allowed only to the extent it seeks recovery for withheld salaries/distributions; other aspects are derivative |
Key Cases Cited
- Ashcroft v. Iqbal, 556 U.S. 662 (pleading standards; legal conclusions vs. factual allegations)
- Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (plausibility standard for complaints)
- Fed. Treasury Enter. Sojuzplodoimport v. SPI Spirits Ltd., 726 F.3d 62 (§1114 applies to registrants of registered marks)
- Fed. Treasury Enter. Sojuzplodoimport v. Spirits Int’l B.V., 809 F.3d 737 (owners of registered trademarks have §1114 cause of action)
- Thyroff v. Nationwide Mut. Ins. Co., 8 N.Y.3d 283 (intangible rights may support conversion only when merged in tangible document)
- Georgia Malone & Co. v. Rieder, 19 N.Y.3d 511 (elements of unjust enrichment)
- Tooley v. Donaldson, Lufkin & Jenrette, Inc., 845 A.2d 1031 (framework for distinguishing direct vs. derivative shareholder claims)