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Duckhorn Wine Co. v. Duck Walk Vineyards, Inc.

United States District Court, E.D. New York

June 9, 2014

DUCKHORN WINE COMPANY, a California Corporation, Plaintiff,
v.
DUCK WALK VINEYARDS, INC., a New York Corporation, Defendant.

Gayle Rosenstein Klein, Esq., John C. Briody, Esq., McKool Smith PC, New York, NY.

Henry C. Bunsow, Esq., Jeffrey D. Chen, Esq., Robin K. Curtis, Esq., Bunsow De Mory Smith & Allison LLP, San Francisco, CA, for Plaintiff.

Linda S. Agnew, Esq., Steven R. Schlesinger, Esq., Jaspan Schlesinger LLP, Garden City, NY, for Defendant.

MEMORANDUM & ORDER

JOANNA SEYBERT, District Judge.

Plaintiff Duckhorn Wine Company ("Plaintiff" or "Duckhorn") commenced this action against Duck Walk Vineyards, Inc. ("Defendant" or "Duck Walk"), alleging that Duck Walk breached a settlement agreement between the parties that resolved a prior trademark infringement action between them. Duck Walk moves to dismiss the Complaint for failure to state a claim pursuant to Federal Rule of Civil Procedure 12(b)(6). (Docket Entry 7.) For the following reasons, Duck Walk's motion to dismiss is DENIED.

BACKGROUND[1]

Duckhorn is a California vineyard and winemaker with its principal place of business in Saint Helena, California. (Compl. ¶ 5.) Duck Walk is a New York vineyard and winemaker with its principal place of business in Water Mill, New York. (Compl. ¶ 6.) As their names might suggest, both wineries use duck-related words and imagery in connection with the marketing and distribution of their wine products.

This action stems from a prior trademark infringement action between Duckhorn and Duck Walk brought in this Court in 2001. (Compl. ¶¶ 1, 15; see Duck Walk Vineyards, Inc. v. St. Helena Wine Co., d/b/a Duckhorn Vineyards, No. 01-CV-4896 (E.D.N.Y.).) In September 2003, the parties entered into a Mutual Release and Settlement Agreement (the "Settlement Agreement") that resolved that action. (Compl. Ex. 1.) The Settlement Agreement places certain restrictions and requirements on Duck Walk's ability to produce and distribute wines with duck images on the labels. (See generally Compl. Ex. 1.) In this action, Duckhorn alleges that Duck Walk breached Paragraphs 2 and 3 of the Settlement Agreement.

Paragraph 2 of the Settlement Agreement restricts the production volume and geographic distribution of Duck Walk wines that have duck images on the labels. It states in relevant part:

Duck Walk Vineyards, Inc. shall not in any one calendar year produce and/or bottle and/or authorize production and/or bottling of more than 84, 000 gallons (the "Gross Production") where the word "Duck" and/or the image or picture of ducks will be employed on the label except as part of the corporate name "Duck Walk Vineyards, Inc.".... Duck Walk Vineyards, Inc. shall not sell more than 50% of the annual Gross Production outside of the States of New York, New Jersey and Connecticut, or sell to restaurants, or others, where it will be served or resold outside of the States of New York, New Jersey and Connecticut.

(Compl. Ex. 1 ¶ 2.) Duckhorn alleges that Duck Walk breached this provision "[b]y selling more than 50% of Gross Production outside of New York, New Jersey, and Connecticut...." (Compl. ¶ 54.)

Paragraph 3 of the Settlement Agreement imposes certain restrictions and requirements on the actual content of Duck Walk's labels. Paragraph 3 first requires that the front label of any Duck Walk wine containing duck images also contain language identifying Duck Walk's geographic location on Long Island, New York ("Prefatory Language"):

The words "The Hamptons", "South Hamptons", "South Fork" and/or "Long Island" or other geographic designation of like import as may be approved by BATF[2] (the prefatory language) shall be added on the front label of all of the Gross Production. Such words will be added to the front label immediately above the words "Duck Walk" or other use of the word "Duck" in size and font lettering ...

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