808 F. Supp. 2d 552
S.D.N.Y.2011Background
- HRCI owns the Hard Rock trademarks and licensed exclusive rights to the Hard Rock Defendants west of the Mississippi for hotel/casino operations; the license allows sublicensing and reserves all ungranted rights to HRCI.
- The Hard Rock Defendants include HR Holdings, HR Inc., HR IP, Morgans Hotel Group entities, and the DLJ Defendants, with interlocking ownership and management structures; Morgans Management operates the Hotel and allegedly supervised its trademark activity.
- HRCI asserts breach of contract and various Lanham Act and New York law trademark-related claims against all Defendants; the Hard Rock Defendants counterclaim for breach of contract, breach of the covenant of good faith and fair dealing, and tortious interference.
- The dispute centers on the 1996 License Agreement’s scope, quality-control provisions, best-efforts duties, and the Defendants’ use and sublicensing of the Hard Rock Marks, including Rehab TV, Tulsa/Albuquerque properties, and related marketing.
- The Equity Holder Defendants move to dismiss the claims against them; the Hard Rock Defendants seek arbitration and dismissal of some counterclaims; HRCI moves to dismiss certain counterclaims.
- The Court grants arbitration on Rehab-related and Tulsa/Albuquerque property claims, dismisses some Equity Holder Defendants, and resolves several counterclaims with a mix of dismissals and denials.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Equity Holder Defendants are joint tortfeasors | HRCI alleges they directly authorized and participated in infringing acts | Equity Holders did not directly participate or bind third parties | Some claims against Equity Holders dismissed; Morgans Management liable for supervision of Hotel's operations |
| Enforceability of the Best Efforts Clause | Best efforts were breached by actions subverting the contract | No explicit objective standards to measure best efforts | Best efforts clause viability discussed; not dismissed; merits unresolved on pleadings |
| Scope of arbitration under the Agreement | Rehab and Tulsa/Albuquerque claims fall outside arbitration | Claims relate to quality control and licensed services and are arbitrable | Arbitration compelled for Rehab and Tulsa/Albuquerque claims; some remaining claims not stayed |
| Breach of the License Agreement counterclaims (Morton Territories, domain, web pages, ads) | Counterclaims plead breaches of exclusive rights | Counterclaims fall within license terms or ambiguity | Morton Territories development counterclaim dismissed; other counterclaims denied or unresolved as to ambiguity; damages claim preserved |
| Tortious interference with business relations | Interference with specific third-party relationships | Relationships not specified; failure to plead concrete third-party relationships | Counterclaim dismissed for lack of specific third-party relationships |
Key Cases Cited
- City of Pontiac Gen. Empls.' Ret. Sys. v. MBIA, Inc., 637 F.3d 169 (2d Cir. 2011) (pleading standard; plausibility under Iqbal/Twombly)
- Ashcroft v. Iqbal, 556 U.S. 662 (U.S. 2009) (plausibility standard for showing entitlement to relief)
- Twombly v. Bell Atl. Corp., 550 U.S. 544 (U.S. 2007) (pleading standard requires more than mere allegations of conclusions)
- Fendi Adele S.R.L. v. Filene's Basement, Inc., 696 F. Supp. 2d 368 (S.D.N.Y. 2010) (joint tortfeasor and control/participation considerations)
- Microsoft Corp. v. AGA Solutions, Inc., 589 F. Supp. 2d 195 (E.D.N.Y. 2008) (individual participation necessary for joint liability)
- Piccoli A/S v. Calvin Klein Jeanswear Co., 19 F. Supp. 2d 157 (S.D.N.Y. 1998) (joint tortfeasor framework; participation required)
- K. Bell & Assocs. Inc. v. Lloyd's Underwriters, 97 F.3d 632 (2d Cir. 1996) (ambiguous contract interpretation and scope of exclusive license)
- Revson v. Cinque & Cinque, P.C., 221 F.3d 59 (2d Cir. 2000) (contract interpretation and implied covenants context)
- W.W.W. Assocs., Inc. v. Giancontieri, 77 N.Y.2d 565 (N.Y. 1990) (interpretation of contract terms and ambiguity standard)