Stockade Companies, LLC v. Kelly Restaurant Group, LLC
1:17-cv-00143
W.D. Tex.Jul 31, 2017Background
- Plaintiffs Stockade Companies, LLC and Stockade Franchising, LP own/license trademarks for Sirloin Stockade, Coyote Canyon, and Montana Mike’s and sued Kelly Restaurant Group (KRG) on Feb 24, 2017.
- Court granted Plaintiffs a preliminary injunction in part (May 31, 2017), ordering KRG to de-brand its franchise restaurants within 21 days.
- Plaintiffs alleged KRG intended to make cosmetic changes post-debranding but continue using Stockade’s trade secrets, and sought expedited discovery on that issue.
- KRG moved to dismiss for failure to state a claim and lack of subject-matter jurisdiction, arguing arbitration and other defenses under the franchise agreements; KRG also moved to strike an amended pleading (denied).
- Plaintiffs moved for leave to file a Second Amended Complaint adding factual allegations; KRG opposed, arguing futility and bad faith (attempt to avoid dismissal).
- The court granted leave to amend, found the proposed amendments not futile or filed in bad faith, dismissed KRG’s pending Motion to Dismiss as moot, and allowed KRG to reassert its arguments in a new filing.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether leave to file a Second Amended Complaint should be granted | Stockade sought to add factual allegations about KRG’s post-debranding conduct and trade-secret use | KRG argued amendment is futile and filed to avoid ruling on its Motion to Dismiss; alleged bad faith/delay | Court granted leave: no undue delay or bad faith; amendments not futile |
| Whether arbitration or loss of jurisdiction bars judicial relief now that KRG de-branded | Stockade contended judicial relief may still be appropriate to protect marks/rights and to address trade-secret misuse | KRG argued franchise arbitration clause requires arbitration now that it fully de-branded, stripping jurisdiction/venue | Court rejected as foreclosed: contract permits judicial action to protect marks or other rights; not a foregone conclusion that arbitration is required |
| Whether Plaintiffs’ proposed amendments cure alleged pleading defects | Plaintiffs added several pages of new factual allegations and revised legal theories | KRG maintained the amendments fail to establish jurisdiction/venue or state a claim | Court found the proposed amendments materially added facts and arguments, so futility not shown |
| Whether the pending Motion to Dismiss should be resolved now or rendered moot by granting leave to amend | Plaintiffs did not formally respond but filed amended complaint; sought leave to file it | KRG argued leave was tactic to avoid decision on its Motion to Dismiss | Court granted leave and dismissed Motion to Dismiss as moot, permitting KRG to re-urge arguments in a new filing |
Key Cases Cited
- Wimm v. Jack Eckerd Corp., 3 F.3d 137 (5th Cir. 1993) (leave to amend is freely given but not automatic; factors to consider).
- Foman v. Davis, 371 U.S. 178 (U.S. 1962) (court may deny leave to amend for undue delay, bad faith, repeated failure to cure, undue prejudice, or futility).
- Avatar Exploration, Inc. v. Chevron U.S.A., Inc., 933 F.2d 314 (5th Cir. 1991) (district court’s grant/denial of leave to amend is reviewed for abuse of discretion).