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Osteostrong Franchising, LLC v. Richter

United States District Court, D. New Mexico

July 10, 2019

OSTEOSTRONG FRANCHISING, LLC, Plaintiff,
v.
ROLAND RICHTER, SHEILA NIXON, JDAP, INC. AND DANCINGBONES, LLC, Defendants.

          MEMORANDUM OPINION AND ORDER DENYING DEFENDANTS' RULE 41(d) MOTION FOR COSTS AND FEES AND FOR STAY OF PROCEEDINGS

         THIS MATTER comes before the Court upon Defendants' Rule 41(d) Motion for Costs and Fees and for Stay of Proceedings, filed on February 22, 2019 by Defendants Richter, Nixon, JDAP, Inc. (“JDAP”) and Dancingbones LLC (“Dancingbones”) (Doc. 12). Having reviewed the parties' pleadings and the applicable law, the Court finds that Defendants' Motion is not well-taken and, therefore, is denied.

         BACKGROUND

         This is a trademark infringement case. According to the complaint and Joint Status Report (Doc. 21), Defendants Richter and Nixon (“Defendants”) became interested in opening an OsteoStrong franchise in Santa Fe. Plaintiff, in preparing Nixon and Richter to open an OsteoStrong location, disclosed confidential information and trade secrets about OsteoStrong. Plaintiff decided not to open a Santa Fe OsteoStrong location in order to allow Defendants to open their own OsteoStrong location there instead. Defendants eventually changed their mind about purchasing an OsteoStrong franchise and instead opened a competing business in Santa Fe under the name DancingBones, offering virtually the same services as OsteoStrong and using the same equipment, layout and confidential trade secret information detailing how to successfully operate an OsteoStrong franchise. Defendants also advertised and held themselves out as OsteoStrong on the Internet. Defendants Nixon and Richter also own and operate the corporation JDAP, which operates as Joe's Diner and sent out Joe's Diner newsletters which published OsteoStrong's trademark without permission or authorization. The newsletters were circulated on the Internet over the course of several months in an effort to generate business and advertise services that ultimately inured for the benefit of DancingBones.

         Defendants maintain that they engaged in good-faith preparations to open the Santa Fe OsteoStrong location, and signed a non-disclosure agreement as part of their discussion. However, repeated communications failures by Plaintiff and its developers left Defendants with serious concerns about proceeding with the project. Defendants deny that they were ever provided any confidential or trade secret information. They also claim that OsteoStrong made substantive changes to the terms the parties had negotiated and under which the Defendants thought they would become franchisees. Defendants deny using any of the information they obtained from OsteoStrong or their developer and also deny using OsteoStrong's mark without permission.

         The Complaint and Application for Injunctive Relief asserts five claims for relief:

Count 1 - Misappropriation (Defend Trade Secrets Act of 2016, or “DTSA”);
Count 2 - Misappropriation (New Mexico Uniform Trade Secrets Act (“NMUTSA”);
Count 3 - Breach of Contract;
Count 4 - Unfair Competition, 15 U.S.C. §1125
Count 5 - Trademark Infringement, 15 U.S.C. §1114(1)

         In addition, Plaintiff seeks to enjoin Defendants from using or disclosing OsteoStrong's trade secrets and confidential information.

         DISCUSSION

         Defendants seek costs of a previously dismissed action under Fed.R.Civ.P. 41(d). In December 2017, Plaintiff filed an almost identical lawsuit in the Southern District of Texas, Houston Division (“Texas case”) alleging identical claims against the same Defendants. Doc. 12-1. In response to the complaint in the Texas case, Defendants filed a Motion to Dismiss based on lack of personal jurisdiction. Plaintiff did not respond to the motion but instead voluntarily dismissed the Texas case under Rule ...


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