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Strobel v. Rusch

United States District Court, D. New Mexico

January 3, 2020

VOLKER STROBEL, HEIKE STROBEL, and HANS BAUR, in their individual capacities and on behalf of UNC Holding LLC and V.I.P. DRINKS BOTTING LLC, Plaintiffs,
UWE RUSCH and DR. MABEL RUSCH, Defendants.



         Mr. Uwe Rusch began developing a brand of cordials in 1998 under the name CORDIALS V.I.P. Drinks. Mr. Rusch asserts ownership in the copyright to the brand and also registered the trademark to the brand's logo (the “Royal Logo”), which has been used to sell CORDIAL V.I.P. Drinks since 2005, primarily in Europe. In 2012, he formed UNC Holding LLC (“UNC-FL”) in Florida to establish his business in the United States. In 2013 Mr. Volker Strobel, Mrs. Heike Strobel, Mr. Hans Baur, and Mr. Gregor Fischer agreed to invest money with Defendants in the CORDIALS V.I.P. Drinks business. The parties later agreed to dissolve UNC-FL and re-establish the business in New Mexico under the name UNC-NM. At some point, their business relationship soured. Plaintiffs contend that Defendants violated the parties' agreement and brought this lawsuit for a variety of tort and contract claims. Defendants have filed 22 affirmative defenses and 14 counterclaims and argue that Plaintiffs' actions have infringed on their rights and have made any purported contract unenforceable. Plaintiffs move to dismiss the counterclaims and strike certain affirmative defenses. The Court will grant both motions in part.

         I. Factual Background[1]

         Mr. Rusch began developing a line of cordials in 1998. (Doc. 40 (Answer & Countercl.) ¶ 10.) He designed the Royal Logo for the CORDIALS V.I.P. Drinks brand and asserts that he has “sole ownership in the copyright of the design logo . . . .” (Id. ¶¶ 11-14.) He registered the CORDIALS V.I.P. Drinks logo as an international trademark through the World Intellectual Property Organization (WIPO) and later transferred ownership of the trademark to his wife, Dr. Mabel Rusch. (Id. ¶¶ 24-25.) He also “granted Dr. Rusch a non-exclusive license to . . . use the Royal Logo copyright . . . in connection with the sale, advertising, marketing, and services of CORDIALS V.I.P. Drinks.” (Id. ¶ 21.) Mr. Rusch has used the Royal Logo to market CORDIALS V.I.P. Drinks in Europe since 2005. (Id. ¶¶ 15-18.)

         Defendants moved to Florida in 2008 to establish their cordials business in the United States. (Id. ¶ 27.) They met the Strobels in 2012, and the Strobels became acquainted with the Rusches' cordials business. (Id. ¶¶ 30-35.) Mr. Strobel invested in another of Mr. Rusch's businesses, but after that enterprise failed “Mr. Strobel approached Mr. Rusch about investing in the CORDIALS V.I.P. Drinks business.” (Id. ¶¶ 36-45, 55.) Mr. Strobel, Mr. Rusch, and Mr. Baur met in Arizona in February 2013 to hammer out details of the agreement. (Id. ¶¶ 57-58.) The parties later brought Mr. Fischer into the partnership. (Id. ¶ 59.)

         The parties' Partnership Agreement for UNC, Holding LLC (the “Partnership Agreement”) provided that Dr. Rusch would convey to the business her trademark rights. (See Doc. 41-A at 2.) In May 2013 Dr. Rusch executed two documents that would initiate the transfer of the CORDIALS V.I.P. Drinks trademark to UNC-FL. (Answer & Countercl. ¶ 60.) Mr. Strobel was responsible for submitting the documents and the appropriate payments to the correct authorities. (Id. ¶ 61.) Mr. Strobel told his partners that the transfer had been initiated, but he never finalized the transfer and Dr. Rusch still owns the trademark. (Id. ¶¶ 62-65, 112.)

         In March 2014, Mr. Strobel asked Mr. Rusch to dissolve UNC-FL effective April 18, 2014, giving Mr. Strobel time to set up UNC-NM. (Id. ¶ 66.) Defendants contend that, despite his representations to the contrary, Mr. Strobel failed to comply with all requirements necessary to reestablish the business in New Mexico, such as retaining an attorney or transferring funds from UNC-FL's bank account to UNC-NM's bank account. (Id. ¶¶ 67-74.) Mr. Strobel took other actions without the input or approval of Mr. Rusch, including changing the business's CPA and dissolving one of the business's two independent subsidiaries. (Id. ¶¶ 75-81.)

         In October 2016, Defendants received a letter from WIPO requesting renewal of the trademark, which was still listed under Dr. Rusch's name. (Id. ¶ 82.) Believing Mr. Strobel completed the transfer, Mr. Rusch had designed and printed product labels and updated the business's website to reflect that the trademark was owned by UNC, Holding LLC. (Id. ¶¶ 83-86.) Defendants asked Mr. Strobel to explain why the trademark had not been transferred, and he told them that the business had no money to pay for the renewal. (Id. ¶ 87.) Defendants contend that this statement was false. (Id. ¶ 88.) Defendants paid for the renewal costs themselves based on Mr. Strobel's representations that UNC-NM would repay them when it had funds. (Id. ¶ 89.)

         In February 2018, Mr. Strobel asked Mr. Rusch to meet with him and Mr. Baur to discuss the future of UNC-NM, but Mr. Rusch refused to meet them without all of the members present. (Id. ¶¶ 94-95.) At Mr. Strobel's request, Mr. Rusch organized a General Meeting to be held on April 19, 2018. (Id. ¶¶ 96-97.) On the day of the meeting, Mr. Strobel emailed to cancel participation in the meeting on behalf of himself, Mrs. Strobel, and Mr. Baur. (Id. ¶ 98.) Mr. Rusch and Mr. Fischer, who together “formed a quorum with a majority of 56% of the voting rights” in the business, went forward with the meeting and voted to dismiss Mr. Strobel as CEO of the second independent subsidiary. (Id. ¶¶ 100-01.) Despite his dismissal, Mr. Strobel later “seized the bank account of” the subsidiary and wrote a check to the CPA. (Id. ¶ 103.) Mr. Strobel also discovered that Mr. Strobel had, through the CPA, “eliminated Mr. Rusch's ‘Income Shares' in UNC-NM.” (Id. ¶ 104.) In May 2018, Mr. Strobel transferred money from the UNC-FL bank account to his own personal bank account. (Id. ¶ 106.) On March 1, 2019, Defendants registered the Royal Logo with the United States Copyright Office. (Id. ¶ 114; see also Doc. 40-1.)

         Plaintiffs filed this lawsuit on July 10, 2018, and contend that Defendants have infringed on UNC-NM's rights in the trademark and caused damage to Plaintiffs. (See Docs. 1; 62 (Am. Compl.).) Defendants assert 22 affirmative defenses and 14 counterclaims. (Doc. 40.) Plaintiffs now move to dismiss all of Defendants' counterclaims (Doc. 41) and to strike many of their affirmative defenses (Doc. 46).

         II. Legal Standards

         A. Motion to Dismiss Standard

         In reviewing a motion to dismiss under Fed.R.Civ.P. 12(b)(6), the Court “must accept all the well-pleaded allegations of the [counterclaim] as true and must construe them in the light most favorable to the [counterclaimant].” In re Gold Res. Corp. Sec. Litig., 776 F.3d 1103, 1108 (10th Cir. 2015) (citation omitted). “To survive a motion to dismiss, ” the counterclaim does not need to contain “detailed factual allegations, ” but it “must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 570 (2007)). “Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.” Id.

         “[W]hile ordinarily, a motion to dismiss must be converted to a motion for summary judgment when the court considers matters outside the complaint, see Fed. R. Civ. P. 12(d), matters that are judicially noticeable do not have that effect . . . .” Genesee Cty. Emps.' Ret. Sys. v. Thornburg Mortg. Sec. Tr. 2006-3, 825 F.Supp.2d 1082, 1122 (D.N.M. 2011) (citing Duprey v. Twelfth Judicial Dist. Court, 760 F.Supp.2d 1180, 1192-93 (D.N.M. 2009)).

[F]acts subject to judicial notice may be considered in a Rule 12(b)(6) motion without converting the motion to dismiss into a motion for summary judgment. This allows the court to take judicial notice of its own files and records, as well as facts which are a matter of public record. However, the documents may only be considered to show their contents, not to prove the truth of matters asserted therein.

Id. at 1122-23 (quoting Tal v. Hogan, 453 F.3d 1244, 1264 n.24 (10th Cir. 2006)).

         Plaintiffs ask the Court to take judicial notice of the Partnership Agreement (Doc. 41-A[2]) attached to their motion, as it is referenced in the Amended Complaint and the Counterclaims, and it is central to the lawsuit. (See Doc. 41 at 2 (citing Radian Asset Assurance Inc. v. Coll. of the Christian Bros. of N.M., No. CIV 09-0885 JB/DJS, 2011 WL 10977180, at *17 (D.N.M. Jan. 24, 2011)).) See also Raja v. Ohio Sec. Ins. Co., 305 F.Supp.3d 1206, 1238 n.9 (D.N.M. 2018). Although Defendants question whether the Partnership Agreement is valid and enforceable, they do not dispute its existence or its authenticity. (See Doc. 49.) As the “[C]ourt may take notice only of the authenticity and existence of [judicially noticeable] documents, not the validity of their contents[, ]” Port-A-Pour, Inc. v. Peak Innovations, Inc., No. 13-CV-01511-WYD-BNB, 2015 WL 292913, at *3 (D. Colo. Jan. 20, 2015) (citation omitted), the Court finds it may consider the Partnership Agreement.

         Similarly, the Court takes judicial notice of Defendants' March 1, 2019 registration of the Royal Logo with the United States Copyright Office, which they attached to their Answer and reference throughout their Counterclaims. (See Doc. 40-1.) While Plaintiffs contend that Mr. Rusch's claim to ownership of the copyright is invalid, they do not dispute the existence and authenticity of the registration record. (See Doc. 51 at 5.)

         B. Motion to Strike Affirmative Defense Standard

         “Federal Rule of Civil Procedure 12(f) permits the court to ‘strike from a pleading an insufficient defense.'” Wells v. Hi Country Auto Grp., 982 F.Supp.2d 1261, 1263 (D.N.M. 2013) (quoting Fed.R.Civ.P. 12(f)). “However, motions to strike affirmative defenses are generally disfavored.” Id. (citing Friends of Santa Fe Cty. v. LAC Minerals, Inc., 892 F.Supp. 1333, 1343 (D.N.M. 1995)). “To strike a defense, its legal insufficiency must be ‘clearly apparent.' A court ‘must be convinced that there are no questions of fact, that any questions of law are clear and not in dispute, and that under no set of circumstances could the defenses succeed.'” Id. (quoting Friends of Santa Fe Cty., 892 F.Supp. at 1343). The purpose of an affirmative defense is simply “to provide the plaintiff with fair notice.” Id. (citing Falley v. Friends Univ., 787 F.Supp.2d 1255, 1257 (D. Kan. 2011)). “Rule 12(f) is intended to minimize delay, prejudice and confusion by narrowing the issues for discovery and trial.” Id. (citing Hayne v. Green Ford Sales, Inc., 263 F.R.D. 647, 648-49 (D. Kan. 2009)).

         III. The Court will grant in part Plaintiffs' motion to dismiss.

         A. Defendants have sufficiently pleaded that Dr. Rusch owns the trademark and Mr. Rusch owns the copyright at issue.

         The Court first turns to Plaintiffs' contention that Defendants have failed to sufficiently plead that Dr. Rusch still owns the trademark at issue. (See Doc. 41 at 6-9.) Plaintiffs assert that the Partnership Agreement “conclusively” demonstrates that Dr. Rusch does not own the trademark, but instead transferred her rights in it to the business. (Id. at 9.) Yet in their Complaint, Plaintiffs allege that Dr. Rusch “is the current owner of the registration for the [trademark]” (Am. Compl. ¶ 14); that she “had agreed to transfer her rights in the [trademark] to [the business], never did so” (id. ¶ 22); and that she has “refused to transfer the ownership and registration of the [trademark] to UNC-NM” (id.). Thus, Plaintiffs' own pleadings contradict their argument.

         Moreover, the language of the Partnership Agreement itself does not provide the proof of transfer of ownership on which Plaintiffs rely. To the contrary, the Partnership Agreement provides that Dr. Rusch “hereby undertakes to convey to the Holding all rights to the CORDIALS trademark . . . .” (Doc. 41-1 at 2.) This language does not necessarily signify that Dr. Rusch had already performed the transfer of her rights in the trademark to the business, it could also mean that she had simply promised to do so. See Undertake, Black's Law Dictionary (10th ed. 2014) (to undertake is “to take on an obligation or task” or “to give a formal promise; guarantee”). The next paragraph clarifies the meaning: it states that “[t]he transfer of ownership of these rights will be initiated immediately after the signing of this agreement.” (Doc. 41-1 at 2 (emphasis added).) And as Defendants averred, Dr. Rusch indeed executed the necessary transfer documents, but Mr. Strobel, who was responsible for submitting the documents and the appropriate payments to finalize the transfer, never took the necessary actions. (Answer & Countercl. ¶¶ 60-65.) According to Defendants' allegations, therefore, the transfer was never consummated. Thus, the language of the Partnership Agreement does not provide irrefutable proof of ownership as Plaintiffs suggest.

         The same is true of Mr. Rusch's ownership of the copyright at issue, which he “granted Dr. Rusch a non-exclusive license to . . . use . . . .” (Id. ¶ 21.) The Partnership Agreement does not specify when or how Defendants were to transfer the copyright and/or the license to the business, and Plaintiffs do not specifically discuss ownership of the copyright in their Amended Complaint. (See Docs. 41-1; Am. Compl.)

         Finally, the trademark's registration record[3] reflects ownership by Dr. Rusch; and the copyright's registration record reflects ownership by Mr. Rusch. (Doc. 40-1.) Plaintiffs note that “‘the law will not permit' the presumptions of ownership evidenced by a registration ‘to supersede a contractual arrangement between the parties.'” (Doc. 41 at 9 (quoting Blue Planet Software, Inc. v. Games Int'l, LLC, 334 F.Supp.2d 425, 437-38 (S.D.N.Y. 2004)).) See also GTE Corp. v. Williams, 904 F.2d 536, 539 (10th Cir. 1990) (discussing “the evidentiary presumption under 15 U.S.C. § 1115(a) of exclusive right to use a registered mark”) (citation omitted). However, Plaintiffs cite no authority to establish that they have overcome this presumption when they have demonstrated that the transfer of ownership was never completed and that Defendants have continued to use the trademark “in connection with businesses they are operating, for the purpose of producing and marketing beverages under that mark . . . .” (Am. Compl. ¶ 27.) Thus, whether the Court analyzes the motion under the standard of review applicable to a motion to dismiss or a motion for summary judgment, the Court finds this issue should be resolved in Defendants' favor.

         B. Counterclaim I: False Designation of Origin and False Advertising under 15 U.S.C. § 1125(a)

         Defendants bring their first counterclaim under Section 43(a) of the Lanham Act (15 U.S.C. § 1125(a)). (See Answer & Countercl. ¶¶ 122-32.) Section 1125(a) “creates two distinct bases of liability: false association [(also known as false designation of origin]), § 1125(a)(1)(A), and false advertising, § 1125(a)(1)(B).” Intermountain Stroke Ctr., Inc. v. Intermountain Heath Care, Inc., 638 Fed.Appx. 778, 784 (10th Cir. 2016) (quoting Lexmark Int'l, Inc. v. Static Control Components, Inc., 572 U.S. 118, 122 (2014)) (subsequent citation omitted). Defendants do not specify which section they bring their claim under, but it appears that they are bringing a claim for false designation of origin under § 1125(a)(1)(A). To state such a claim, Defendants must demonstrate that: (1) they have “a protectable interest in the mark; (2) that [Plaintiffs have] used ‘an identical or similar mark' in commerce”; and (3) that Plaintiffs' “use is likely to confuse consumers.” 1-800 Contacts, Inc. v., Inc., 722 F.3d 1229, 1238 (10th Cir. 2013) (internal quotation and citation omitted).

         Defendants assert that: (1) “Dr. Rusch has a protectable ownership interest in the CORDIALS V.I.P. Drinks trademark” (Answer & Countercl. ¶ 124); (2) Plaintiffs used Dr. Rusch's trademark to promote, advertise, and sell goods in commerce (id. ¶ 128); and (3) this use is likely to confuse consumers regarding the origin of the goods (id. ¶¶ 129-30).

         Plaintiffs' arguments that Defendants “have not adequately alleged they own the trademark, and have failed to state a claim under 15 U.S.C. § 1125(a)” (Doc. 41 at 12 (citation omitted)), or that Dr. Rusch “cannot allege an injury given that . . . she does not own the subject trademark rights” (id. at 13), are moot given the Court's finding above. Plaintiffs do not attack the other two prongs, and the Court finds that Plaintiffs' motion should be denied as to the false designation of origin claim under § 1125(a)(1)(A).

         Plaintiffs further argue that “Dr. Rusch has not alleged such facts or any statements made by [Plaintiffs] in connection with the commercial advertising or promotion of a product . . . .” (Id.) This is relevant to a claim for false advertising under § 1125(a)(1)(B). To demonstrate a claim under § 1125(a)(1)(B), Defendants must show:

(i) that [Plaintiffs] made a false or misleading statement of fact in a commercial advertisement about [their] own or another's product; (ii) the misrepresentation is material, in that it is likely to influence the purchasing decision; (iii) the misrepresentation actually deceives or has the tendency to deceive a substantial segment of its audience; (iv) [Plaintiffs] placed the false or misleading statement in interstate commerce; and (v) the Defendants have been or are likely to be injured as a result of the misrepresentation, either by direct diversion of sales or by a lessening of goodwill associated with [their] products.

Guidance Endodontics, LLC v. Dentsply Int'l, Inc., 708 F.Supp.2d 1209, 1239 (D.N.M. 2010) (citing Zoller Labs., LLC v. NBTY, Inc., 111 F. App'x. 978, 982 (10th Cir. 2004)) (subsequent citations omitted). Defendants' allegations in Counterclaim I do not specifically address these elements, and the Court declines to dig through the remainder of their pleadings to make this argument for them. Consequently, the Court will grant Plaintiffs' motion with respect to a claim for false advertising under § 1125(a)(1)(B).

         C. Counterclaim II: Registered Trademark Infringement under ...

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