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A.V.E.L.A., Inc. v. Estate of Marilyn Monroe, LLC

United States District Court, S.D. New York

March 13, 2017

A.V.E.L.A., INC., Plaintiff,
v.
THE ESTATE OF MARILYN MONROE, LLC, et al., Defendants. THE ESTATE OF MARILYN MONROE, LLC, Counterclaimant,
v.
A.V.E.L.A., INC., Counter-Defendant, LEO VALENCIA, IPL, INC., X ONE X MOVIE ARCHIVES INC., V. INTERNATIONAL FINE ARTS PUBLISHING, INC., Third-Party Defendants. X ONE X MOVIE ARCHIVES INC., V. INTERNATIONAL FINE ARTS PUBLISHING, INC., Counterclaimants,
v.
THE ESTATE OF MARILYN MONROE, LLC, AUTHENTIC BRANDS GROUP, LLC, JAMES SALTER, LEONARD GREEN & PARTNERS, L.P. Counter-Defendants.

          OPINION AND ORDER

          KATHERINE POLK FAILLA, District Judge

         This Opinion is the latest installment of a multi-party, multi-claim, and multi-year intellectual-property dispute. What began in 2012 as a declaratory-judgment action has transmogrified into a sprawling conflict raising issues of trademark, antitrust, and state business law. And at the center of this controversy is one of the most iconic entertainers of the twentieth century: Marilyn Monroe.

         In A.V.E.L.A., Inc. v. Estate of Marilyn Monroe, LLC, 131 F.Supp.3d 196 (S.D.N.Y. 2015) (“AVELA I”), this Court granted in part the motions of X One X Movie Archives Inc. (“X One X”) and V. International Fine Arts Publishing, Inc. (“V. International”) to dismiss the First Amended Counterclaim (the “FAC”) of the Estate of Marilyn Monroe, LLC (the “Monroe Estate”). In the wake of AVELA I, X One X and V. International filed separate answers to the FAC, and brought counterclaims of their own against the Monroe Estate, Authentic Brands Group LLC (“ABG”), James Salter (“Salter”) (together, the “Estate Movants”), and Leonard Green & Partners, L.P. (“LGP”).[1]

         Now, the shoe is on the other foot. Pending before the Court are two motions to dismiss X One X's and V. International's counterclaims: one filed by the Estate Movants, and another filed by LGP. Both motions urge this Court to dismiss X One X's and V. International's counterclaims in their entirety.

         This, the Court will not do. To be clear, X One X and V. International assert many legal conclusions, but few factual allegations. And for that reason, the Court will dismiss several of their counterclaims. But some of X One X's and V. International's counterclaims raise fact-intensive issues that the Court cannot resolve at this stage. Others are supported by just enough factual allegations to survive a motion to dismiss under Fed.R.Civ.P. 12(b)(6). Accordingly, and for the reasons set forth below, LGP's motion to dismiss is granted, and the Estate Movants' motion to dismiss is granted in part and denied in part. The Court grants the requests of X One X and V. International for leave to replead; however, the Court expects each to consider this Opinion carefully in deciding whether and what to replead.

         BACKGROUND[2]

         The facts and history of this case are set forth in AVELA I. See 131 F.Supp.3d at 200-03. V. International and X One X, however, offer their own narrative of this case's operative events.[3] The Court will summarize that narrative here, then recount how this case's procedural history has developed since AVELA I.

         A. Factual Background

         1. The Parties

         V. International is a California corporation that “operates as a licensing agent for A.V.E.L.A.” (V. Int'l Countercl. ¶ 1). X One X is a Nevada corporation that performs a similar function: It “creat[es] new artistic works, ” “obtains copyrights” for those works, then “licenses these artistic works to third parties.” (X One X Am. Countercl. ¶ 1).

         The Monroe Estate “is a Delaware limited liability company [(‘LLC')] with its principal place of business” in New York. (V. Int'l Countercl. ¶ 2; X One X Am. Countercl. ¶ 2). V. International and X One X allege that the Monroe Estate is in fact an alter ego of ABG, another Delaware LLC “with its principal place of business” in New York. (V. Int'l Countercl. ¶¶ 2-3; X One X Am. Countercl. ¶¶ 2-3). To this end, V. International and X One X allege that ABG and the Monroe Estate operate out of the same address, “share the same” management, and that “[w]ritten communications sent on behalf of [the Monroe Estate] are printed on ABG letterhead, ” with the ultimate effect that the Monroe Estate “functions as a mere facade or instrumentality for ABG.” (V. Int'l Countercl. ¶ 10; X One X Am. Countercl. ¶ 11). Salter is ABG's and the Monroe Estate's Chief Executive Officer. (V. Int'l Countercl. ¶ 4; X One X Am. Countercl. ¶ 4). Finally, LGP is a Delaware private-equity firm with its principal place of business in California; it owns several chain retail stores. (X One X Am. Countercl. ¶ 5).

         2. The Estate Movants' and LGP's Alleged Misconduct

         At root, this is a dispute over 12 registered word- and design-trademarks involving Monroe (the “Contested Marks”). (V. Int'l Countercl. ¶ 25; X One X Am. Countercl. ¶ 28).[4] Although neither V. International nor X One X indicates as much in their counterclaims, the Court adds that at least eight of the Contested Marks use the words “Marilyn” or “Marilyn Monroe.” AVELA I, 131 F.Supp.3d at 201.

         The Monroe Estate and MM-ABG LLC, “a subordinate entity” of the Monroe Estate, own the Contested Marks. (V. Int'l Countercl. ¶¶ 19, 25; X One X Am. Countercl. ¶¶ 22, 28). All of the Contested Marks were registered after Marilyn Monroe's death in 1962. (V. Int'l Countercl. ¶¶ 15, 17, 20, 23-25; X One X Am. Countercl. ¶¶ 18, 20, 23, 26-28).

         It is the shared contention of X One X and V. International that, despite owning the Contested Marks, the Estate Movants do not hold “exclusive rights to intellectual property related to Marilyn Monroe.” (V. Int'l Countercl. ¶ 26; X One X Am. Countercl. ¶ 29). During her lifetime, Monroe was photographed frequently, and today many individuals and entities claim “to own copyrights in images of” her. (V. Int'l Countercl. ¶ 27; X One X Am. Countercl. ¶ 30). And trademarks involving Monroe abound: There are trademarks and copyrights in films in which Monroe starred, characters Monroe portrayed, and Monroe's name. (V. Int'l Countercl. ¶ 28; X One X Am. Countercl. ¶ 31).

         X One X and V. International further contend that the Estate Movants act, improperly, as if they alone may lay claim to intellectual property in Monroe. Indeed, even the Monroe Estate's full name - “Estate of Marilyn Monroe, LLC” - is alleged to be a misleading contrivance, given that this entity is not in fact Monroe's estate. (V. Int'l Countercl. ¶¶ 21, 29; X One X Am. Countercl. ¶¶ 24, 33). And central to the Estate Movants' efforts at deception are the Contested Marks, which are merely “strategic litigation tools” that ABG (through the Monroe Estate) uses to assert dominion over “Monroe's image, likeness, and name in commerce.” (V. Int'l Countercl. ¶ 29; X One X Am. Countercl. ¶ 33). The Contested Marks, too, erroneously and unlawfully suggest an actual connection between the Monroe Estate and Monroe herself. (V. Int'l Countercl. ¶ 32; X One X Am. Countercl. ¶ 36).

         The Estate Movants' ultimate goal, V. International and X One X allege, is “to gain a monopoly over every use of Marilyn Monroe's image, likeness and/or name in commerce.” (V. Int'l Countercl. ¶ 30; X One X Am. Countercl. ¶ 34). In furtherance of this goal, the Estate Movants, misusing the Contested Marks, threaten to file and file lawsuits against entities such as X One X and V. International's licensees. (V. Int'l Countercl. ¶ 30; X One X Am. Countercl. ¶ 34). And in conjunction with LGP, ABG has endeavored “to create a vertical scheme” by “assur[ing] [its] licensees that their ABG-licensed Marilyn Monroe-related products will sell exclusively in retailers owned by [LGP].” (X One X Am. Countercl. ¶ 70).

         The Estate Movants also stifle competition in ways that do not involve legal process. X One X alleges that Salter denounced its owner, Leo Valencia, as a “bootlegger” at a trade show, then proclaimed that he “own[ed] Marilyn Monroe.” (X One X Am. Countercl. ¶ 32). Salter has also discouraged retailers from working with X One X, and “has publicly and privately threatened to shut down X One X and Valencia's licensing of artwork featuring Marilyn Monroe's image.” (Id.).

         Again, the crux of V. International's and X One X's counterclaims is the Contested Marks. They allege that the Contested Marks' “[c]ontinued registration” will facilitate the Estate Movants' and LGP's monopolistic efforts and, in the process, damage V. International's and X One X's business. (V. International Countercl. ¶ 31; X One X Am. Countercl. ¶ 35).

         B. Procedural Background

         1. Motion Practice After AVELA I

         On September 18, 2015, the Court issued AVELA I, which recounts this case's procedural history through that date. AVELA I, 131 F.Supp.3d at 203. AVELA I denied the bulk of V. International's and X One X's motions to dismiss the FAC. Id. at 219.

         On October 30, 2015, X One X and V. International filed separate answers to the FAC and brought counterclaims of their own. (Dkt. #219, 223). V. International brought counterclaims against all three of the Estate Movants. (Dkt. #219, ¶¶ 2-4). X One X named the Estate Movants and LGP as counter-defendants. (Dkt. #223, ¶¶ 2-5).

         Here is where the procedural history underlying the instant Opinion becomes complicated. On November 20, 2015, the Monroe Estate filed a letter announcing its intention to move to dismiss all of X One X's and V. International's counterclaims. (Dkt. #231). And on February 11, 2016, the Court issued an endorsement setting a briefing schedule for the Estate Movants' motion to dismiss. (Dkt. #243).[5]

         Pursuant to the February 11, 2016 endorsement, the Estate Movants filed their motion to dismiss on March 4, 2016. (Dkt. #250). Three days later, LGP submitted a letter indicating that it, too, wished to move to dismiss X One X's counterclaims. (Dkt. #253).

         The Court held a pre-motion conference on LGP's proposed motion to dismiss on March 22, 2016. (Dkt. #263). During the conference, counsel for X One X stated that he wanted to amend X One X's counterclaims in light of arguments that LGP's counsel had raised. (Id. at 16-18). The Estate Movants' counsel raised a concern: that amended counterclaims from X One X could effectively moot the Estate Movants' then-pending motion to dismiss. (Id. at 22-23). As an accommodation, the Court - believing that X One X's amendments would have little effect on its counterclaims vis-à-vis the Estate Movants - offered to “work with” the Estate Movants to set a potential surreply schedule. (Id. at 23).

         One week after the pre-motion conference, X One X filed a letter attaching a redlined version of its amended counterclaims (Dkt. #256), then filed a final version of the same on March 31, 2016 (Dkt. #257). The following day - April 1, 2016 - X One X and V. International filed separate briefs opposing the Estate Movants' motion to dismiss. (Dkt. #258, 260). That same day, the Court issued a scheduling order setting a briefing schedule for LGP's motion to dismiss. (Dkt. #259).

         On April 4, 2016, the Estate Movants filed a letter requesting (i) an extension of time to file their reply brief and (ii) five additional pages for the brief, which would “obviate any need for” new briefing on X One X's amended counterclaims. (Dkt. #261). The Court issued an endorsement granting both of the Estate Movants' requests that same day. (Dkt. #262).

         Briefing on the Estate Movants' motion to dismiss concluded when the Estate Movants filed their reply on April 15, 2016. (Dkt. #267). Briefing on LGP's motion to dismiss began on May 2, 2016, when LGP filed its opening brief. (Dkt. #270). X One X responded on June 1, 2016 (Dkt. #273), and all briefing for this Opinion concluded when LGP filed its reply on June 15, 2016 (Dkt. #274).

         2. V. International's and X One X's Counterclaims

         Lest they be lost in the thicket of these parallel briefing schedules, the operative counterclaims are V. International's October 30, 2015 counterclaims (Dkt. #219), and X One X's March 31, 2016 amended counterclaims (Dkt. #257). Both parties bring seven counterclaims. Broadly speaking, the counterclaims fall into three categories: (i) trademark claims, (ii) antitrust claims, and (iii) state-law claims.

         V. International brings seven counterclaims against the Estate Movants, although it fails to specify the parties against whom it brings each counterclaim:

(i) Counterclaim One - Trademark Cancellation, Lack of Distinctiveness: V. International seeks to cancel the Contested Marks on the ground of “lack of distinctiveness.” (V. Int'l Countercl. ¶¶ 33-38).
(ii) Counterclaim Two - Trademark Cancellation, Functionality: V. International argues that the Contested Marks should be cancelled because they are functional. (Id. at ¶¶ 39-44).
(iii) Counterclaim Three - Trademark Cancellation, Fraud: V. International argues that the Estate Movants committed fraud on the United States Patent and Trade Office (“USPTO”) when they applied for the Contested Marks. (Id. at ¶¶ 45-52).
(iv) Counterclaim Four - Attempted Monopolization: V. International contends that the Estate Movants have violated Section Two of the Sherman Act, 15 U.S.C. § 2. (Id. at ¶¶ 53-70).
(v) Counterclaim Five - New York General Business Law Section 349: V. International alleges that the Estate Movants have committed deceptive acts and practices in violation of New York law. (Id. at ¶¶ 71-78).
(vi) Counterclaim Six - Tortious Interference with Existing Contractual Relationships Under New York Law: The Estate Movants, V. International claims, disrupted two contracts that created licensing arrangements for V. International. (Id. at ¶¶ 79-86).
(vii) Counterclaim Seven - Intentional Interference with Prospective Economic Advantage Under New York Law: Finally, V. International alleges that the Estate Movants interfered with a prospective licensing agreement into which V. International planned to enter. (Id. at ¶¶ 87-94).

         X One X brings seven very similar counterclaims against the Estate Movants and LGP; the Court will note where they differ in substance from V. International's counterclaims. Unlike V. International, X One X specifies the parties against whom it brings its counterclaims:

(i) Counterclaim One - Trademark Cancellation, Lack of Distinctiveness (against the Monroe Estate). (X One X Am. Countercl. ¶¶ 37-42).
(ii) Counterclaim Two - Trademark Cancellation, Functionality (against the Monroe Estate). (Id. at ¶¶ 43-48)
(iii) Counterclaim Three - Trademark Cancellation, Fraud (against the Monroe Estate). (Id. at ¶¶ 49-56).
(iv) Counterclaim Four - Attempted Monopolization (against the Estate Movants and LGP): X One X adds a slight gloss to V. International's Sherman Act counterclaim. X One X alleges that the Estate Movants and LGP have conspired to monopolize the Monroe market. (Id. at ¶ 58). X One X also alleges that ABG and LGP have attempted to create a vertical scheme pursuant to which ABG funnels its licensees' products into stores that LGP owns. (Id. at ¶ 70).
(v) Counterclaim Five - New York General Business Law Section 349 (against the Estate Movants and LGP). (Id. at ¶¶ 76-83).
(vi) Counterclaim Six - Attempted Monopolization Under the Nevada Unfair Trade Practices Act, Nev. Rev. Stat. §§ 598A.010-598A.280 (against the Estate Movants and LGP): The Nevada Unfair Trade Practices Act (the “NUPTA”) mirrors the Sherman Act. In this counterclaim, X One X repackages its antirust argument from Counterclaim Four. (Id. at ¶¶ 84-91).
(vii) Counterclaim Seven - Unfair Competition Under Nevada Law (against the Estate Movants and LGP): Finally, X One X alleges that the Estate Movants' and LGP's collective misconduct violated Nevada common law. (Id. at ¶¶ 92-95).

         DISCUSSION

         A. Motions to Dismiss Counterclaims Under Rule 12(b)(6)

         “A motion to dismiss a counterclaim for failure to state a claim is evaluated using the same standard as a motion to dismiss a complaint.” AVELA I, 131 F.Supp.3d at 203. “On a motion under Rule 12(b)(6) to dismiss a complaint for failure to state a claim, the only facts to be considered are those alleged in the complaint, and the court must accept them, drawing all reasonable inferences in the plaintiff's favor, in deciding whether the complaint alleges sufficient facts to survive.” Doe v. Columbia Univ., 831 F.3d 46, 48 (2d Cir. 2016). “To survive a [Rule 12(b)(6)] motion to dismiss, a complaint 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, 570 (2007)). And “[a] claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id.

         “[A]lthough a court” adjudicating a Rule 12(b)(6) motion “must accept as true all of the allegations contained in a complaint, that tenet is inapplicable to legal conclusions.” Harris v. Mills, 572 F.3d 66, 72 (2d Cir. 2009) (internal quotation marks omitted) (quoting Iqbal, 556 U.S. at 678). And “[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice” to save a complaint from dismissal. Iqbal, 556 U.S. at 678. In sum, “[a] motion to dismiss should be granted ‘where the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct.'” Nielsen v. AECOM Tech. Corp., 762 F.3d 214, 218 (2d Cir. 2014) (quoting Iqbal, 556 U.S. at 679).

         B. The Estate Movants' and LGP's Motions to Dismiss

         Before the Court are fourteen counterclaims, seven briefs, and six parties. To be sure, there is plenty of overlap between V. International's and X One X's counterclaims and, by extension, the Estate Movants' and LGP's motions to dismiss. But the sheer number of counterclaims at issue, and the unorthodox briefing schedule occasioned by X One X's decision to amend its counterclaims, both work to make this Opinion a complex one.

         The chief flaw in X One X's and V. International's counterclaims is that they contain few well-pleaded factual allegations. Because of these pleading deficiencies, the Court will grant the Estate Movants' motion to dismiss insofar as it seeks dismissal of: (i) V. International's and X One X's Third Counterclaims (fraud on the USPTO); (ii) V. International's and X One X's Fourth Counterclaims (attempted monopolization under the Sherman Act); (iii) V. International's and X One X's Fifth Counterclaims (Section 349 of the New York General Business Law); (iv) V. International's Sixth Counterclaim (New York tortious interference with contract); (v) X One X's Sixth Counterclaim (attempted monopolization under the NUPTA); and (vi) X One X's Seventh Counterclaim (Nevada unfair competition).

         The Court grants LGP's motion in full. Again, V. International brings no counterclaims against LGP. X One X does, and the Court will dismiss all of X One X's counterclaims that name LGP as a defendant: (i) X One X's Fourth Counterclaim (attempted monopolization under the Sherman Act); (ii) X One X's Fifth Counterclaim (Section 349); (vi) X One X's Sixth Counterclaim (attempted monopolization under the NUPTA); and (vii) X One X's Seventh Counterclaim (Nevada unfair competition). However, as explained further infra, the dismissals are without prejudice, and X One X and V. International are given leave to replead.

         Resolution of the motions to dismiss leaves the following counterclaims intact: (i) V. International's and X One X's First Counterclaims (trademark cancellation for “lack of distinctiveness”); (ii) V. International's and X One X's Second Counterclaims (trademark cancellation for functionality); and (iii) V. International's Seventh Counterclaim (intentional interference with prospective economic advantage). These counterclaims either rely on fact-specific causes of action or are substantiated by factual allegations sufficient to pass Rule 12(b)(6)'s muster. In turn, the Court cannot dismiss these counterclaims at this stage.

         The rest of this Opinion proceeds as follows. The Court will begin by addressing V. International's counterclaims: It will consider V. International's theory that the Monroe Estate is ABG's alter ego, then analyze sequentially all seven of V. International's counterclaims. The Court will then perform a similar analysis of X One X's counterclaims. Finally, the Court will explain why it is denying without prejudice X One X's and V. International's counterclaims.

         1. V. International's Counterclaims

         a. V. International Has Not Established That the MonroeEstate Is ...


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