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Singas Famous Pizza Brands Corp. and Singas Famous Pizza & Restaurant v. New York Advertising LLC F/K/A Ganesha Oak

February 14, 2011

SINGAS FAMOUS PIZZA BRANDS CORP. AND SINGAS FAMOUS PIZZA & RESTAURANT CORP., PLAINTIFFS,
v.
NEW YORK ADVERTISING LLC F/K/A GANESHA OAK, LLC, KAMINI VADHAN, 11 CLASSIC, INC. AND SINGAS EXPRESS, INC., DEFENDANTS.



The opinion of the court was delivered by: Richard J. Holwell, District Judge

MEMORANDUM OPINION AND ORDER

Plaintiffs Singas Famous Pizza Brands Corp. and Singas Famous Pizza & Restaurant Corp. (together "Singas") are owners of a chain of franchised pizza restaurants and trademarks used in operating those restaurants. Singas brought this action alleging trademark infringement and breach of contract by defendants New York Advertising LLC, f/k/a Ganesha Oak, LLC, Kamini Vadhan, 11 Classic, Inc. and Singas Express, Inc., who are entities or persons in some way allegedly involved in owning or operating pizza restaurants at 94 Avenue C in Manhattan (the "Avenue C Restaurant") and/or 35-68 73rd Streetin Queens (the "Jackson Heights Restaurant"). Before the Court is Singas's motion for a preliminary injunction restraining the defendants from operating the Avenue C Restaurant and the Jackson Heights Restaurant or, in the alternative, from operating those restaurants using Singas's trademarks. For the following reasons, the motion is GRANTED.

BACKGROUND

Since 2004, Singas has owned and operated a franchise of pizza restaurants in New York, New Jersey, and Pennsylvania under the name of Singas Famous Pizza. (Tr. of Jan. 14, 2011 Hr'g ("Tr.") 3, 5.) The restaurants primarily sell ten-inch specialty pizzas, but also offer a series of other Italian foods and other food. (Tr. 19.) Since 1967, Singas has used the word mark "SINGAS FAMOUS PIZZA," which was registered with the United States Patent and Trademark Office on March 19, 1996. (Alemela Aff., Nov. 29, 2010, Ex. G.) Since 2006, Singas has used a logo for which it filed a trademark registration on August 10, 2010. (Id. ¶ 2.) Gregory Tsanis is the President of Singas and Enrique Almela is the operations manager. (Tr. 3, 6.)

On March 17, 2005, Singas entered into a franchise agreement (the "Agreement") with defendant Ganesha Oak LLC ("Ganesha Oak"). (Pl.'s Ex. 1 ("Agreement").) Tsanis signed that agreement on behalf of Singas and defendant Kamini Vadhan ("Kamini") signed on behalf of Ganesha Oak as President of that entity. (Tr. 6.) The Agreement contained the following relevant provisions, the first of which is known as the In-Term Covenant and the second of which is known as the Post-Term Covenant:

22.02 The Franchisee, and if applicable, any officers, directors and five percent (5%) or greater shareholders of a corporation which owns the franchisee shall not, during the period of Franchisee's Affiliation with Franchisor . . . engage, either directly or indirectly, in the ownership or operation, as a shareholder, through agents, affiliated or otherwise in any business which is the same or substantially similar to Singas (except for the Singas with which Franchisee's involvement has been authorized by Franchisor) including, without limitation, any Italian food business.

22.03 Upon termination or non-renewal of this Agreement, the Franchisee shall immediately cease all pizza service related business activities. The Franchisee, and if applicable, any officers, directors and five percent (5%) or greater shareholders of a corporation which owns the franchise, agrees for a period of two

(2) years from the date of termination . . . not to either directly or indirectly continue engaging in the Italian food service business, nor acquire any interest in any competitive Italian food service business or venture or any substantially similar business to that of a Singas franchise within ten (10) miles of the Singas where Franchisee had the Affiliation. Franchisee acknowledges that the terms and conditions of this covenant are fair and reasonable to both the time and distance restrictions.

In addition, the Agreement provided that "Franchisee acknowledges that the restrictions set forth in this Section 22 are reasonable and necessary for the protection of the proprietary interest of the Franchisor [and] the violation of them would cause substantial and irreparable injury to Franchisor . . . ." (Agreement ¶ 22.05). As an addendum to the Agreement, the parties also signed a Nondisclosure and Non-Competition Agreement (the "Non-Competition Agreement") that contained provisions materially identical to the In-Term and Post-Term Covenants. Kamini also signed a separate document in which she agreed to personally guarantee the obligations of a franchisee under the Agreement. (Almela Aff., Nov. 29, 2010, Ex. E.)

The Agreement made Ganesha Oak a franchisee, but Kamini does not remember whether she ever obtained the corporate name of Ganesha Oak LLC. (K. Vadhan Dep. 26-27.) On December 26, 2007, the corporate name of Ganesha Oak LLC changed to New York Advertising LLC (Einbinder Aff. Ex. F), also named as a defendant, though Kamini claims to never have heard of New York Advertising LLC or the individual named as agent for service of process for that company. (Id. 25-26.) In any event, Kamini looked for years for a location to open a franchise. In 2009, she found a location at 94 Avenue C. Singas agreed to that location because Singas had a former franchise on Second Avenue that had enjoyed success. (Tr. 32.) After Singas approved the location, Kamini signed a lease for the property and attempted to use the name Temple, Inc. (K. Vadhan Dep. 34.) When the New York Secretary of State did not approve that name, Kamini formed defendant 11 Classic, Inc., with herself as President, as owner of the Avenue C Restaurant. (Tr. 57.) However, Kamini admits that she has no agreement with Singas to operate a franchise owned by 11 Classic, and Almela testified that he had never heard of that entity before filing this lawsuit. (Tr. 27, 41.) Defendants introduced a certificate for an insurance policy for 11 Classic (Defs.' Ex. A), which Kamini testified she obtained at Singas's request and sent to Singas. (Tr. 57-58) But Almela denied ever receiving the certificate (Tr. 41) and defendants introduced no evidence to the contrary. The Avenue C Restaurant opened for business in January 2010.

At some time late in the summer of 2010, Kamini's husband Arun, who had operated several restaurants in New York over the past two decades, contacted Almela about opening a Singas franchise at the current location of the Jackson Heights Restaurant, which is next to a location at which Arun operated an Indian restaurant until August 30, 2010. (Tr. 13; A. Vadhan Dep. 9-11.) In August, the Vadhans met with Almela in person at the Indian restaurant to discuss the matter. (Tr. 13.) While both sides agree that Tsanis, not Almela, would make the final decision, they disagree about how Almela reacted to the proposal. Almela testified that he told the Vadhans that he believed Tsaniswas unlikely to approve a franchise at the location because the space was too small and was located only a mile from Singas's flagship restaurant. (Tr. 13-14, 45.) Arun, however, testified that Almela told him that the location was promising and that Tsanis was likely to approve it. (Tr. 69; A. Vadhan Dep. 16.)

It is, however, undisputed that Tsanis ultimately rejected the location after meeting with Arun on site. (Tr. 46, 71.) Almela testified that it was his understanding that Tsanis rejected the location for the same reasons that Almela had found it unsuitable.

(Tr. 15, 46.) Arun testifiedthat Tsanis rejected the location because it was too close to Elmhurst Famous Pizza whose owner, Louie, had trained Tsanisand might be pushed to compete with Singas more aggressively if Singas opened a franchise in the area. (Tr. 71;

A. Vadhan Dep. 18-19.)

That left Arun in a difficult position. Neither of the Vadhans could provide much detail regarding how the Jackson Heights Restaurant was financed (K. Vadhan Dep. 17, A. Vadhan Dep. 10-13) and defendants failed to produce any documentation of the financing despite requests from Singas's counsel to do so. (Tr. 79.) But Arun testified that he had invested nearly $100,000 in the Jackson Heights location (Tr. 67-68), and had sold the Indian restaurant he operated next door. (A. Vadhan Dep. 10-11.) Whether for that reason or another, Arun pressed ahead and formed defendant Singas Express, Inc. as the owner of the restaurant at the Jackson Heights location. (Tr. 17-18.) He also purchased advertising in an Indian newspaper in Queens listing both the Jackson Heights Restaurant and the Avenue C Restaurant on the same page. (K. Vadhan Dep. 64-65; A. Vadhan Dep. 37.)The Jackson Heights Restaurant opened under the name of Famous Pizza on November 4, 2010. (Tr. 72.)

Almela became aware that the Jackson Heights Restaurant was about to open on November 1, 2010. (Almela Aff., Nov. 29, 2010, ΒΆ 10.) On November 3, 2010, Singas, through counsel, sent a letter to Ganesha Oak stating that operating the Jackson Heights Restaurant was a breach of the In-Term Covenant and demanding that Ganesha Oak and any of its officers or owners cease and desist from operating the Jackson Heights Restaurant. (Alemela Aff., Nov. 29, 2010, Ex. H.)The ...


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