Mountain Mike's Pizza, LLC v. SV Adventures, Inc. ( 2021 )

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 EASTERN DISTRICT OF CALIFORNIA 10 11 MOUNTAIN MIKE’S PIZZA, LLC, No. 2:21-cv-02387-TLN-AC 12 Plaintiff, 13 v. ORDER DENYING PLAINTIFF’S MOTION FOR A TEMPORARY 14 SV ADVENTURES, INC.; SALVATORE RESTRAINING ORDER VISCUSO; SANDRA VISCUSO; and DC 15 MANAGEMENT, LLC, 16 Defendants. 17 18 This matter is before the Court on Plaintiff Mountain Mike’s Pizza, LLC’s (“Plaintiff”) 19 Motion for a Temporary Restraining Order (“TRO”). (ECF No. 4.) Defendants SV Adventures, 20 Inc., Salvatore Viscuso, and Sandra Viscuso (collectively, “Defendants”) filed an opposition. 21 (ECF No. 10.) Plaintiff filed a reply. (ECF No. 12.) For the reasons set forth below, the Court 22 hereby DENIES Plaintiff’s motion. 23 /// 24 /// 25 /// 26 /// 27 /// 28 /// 1 I. FACTUAL AND PROCEDURAL BACKGROUND 2 Plaintiff entered into a franchise agreement with Defendants (the “Franchise Agreement”) 3 for a Mountain Mike’s Pizza restaurant in El Dorado Hills. (ECF No. 1 at 2.) The Franchise 4 Agreement expires on January 2, 2022. (Id.) Plaintiff is a franchisor of Mountain Mike’s pizza 5 restaurants that operates using a number of trademarks.1 (Id. at 5.) On January 3, 2007, 6 Plaintiff’s predecessor entered into the Franchise Agreement with Khachatur Galstyan and Rita 7 Galstyan to operate a Mountain Mike’s pizza restaurant at 2201 Francisco Drive, Suite 110, El 8 Dorado Hills, California 95762. (Id. at 7–8.) On April 23, 2008, Khachatur Galstyan and Rita 9 Galstyan assigned the Franchise Agreement to SV Adventures, and SV Adventures assumed all 10 the contractual obligations under the Franchise Agreement pursuant to an Assignment and 11 Assumption Agreement. (Id. at 8.) In addition, Salvatore and Sandra Viscuso executed a 12 Guaranty and Assumption of Obligations on April 23, 2008 in which they “personally and 13 unconditionally” guaranteed that SV Adventures “will punctually pay and perform — each and 14 every undertaking, agreement, covenant set forth in the [Franchise] Agreement” and agreed to be 15 “personally bound by, and personally liable for the breach of, each and every provision in the 16 [Franchise] Agreement . . . . ” (Id. (citing ECF No. 1-13).) 17 In 2017, Salvatore and Sandra Viscuso moved operations of the restaurant to 2222 18 Francisco Drive, Suite 100, El Dorado Hills, CA 95762 (the “Premises”) pursuant to a lease 19 between SV Adventures and DC Management, LLC (the “Lease”). (Id. at 8–9.) On April 25, 20 2008, SV Adventures and DC Management, LLC executed an addendum (the “Addendum”) to 21 the Lease, which provides that the “Lessee shall be allowed to Assign the Lease to another 22 franchisee who will operate with the same Agreed Trade Name . . . so long as Assignee agrees to 23 accept full responsibility and obligations as Lessee under Lease, subject to Landlord’s review and 24 approval of full financial disclosure, and the maintenance of the guaranty as set with the lease.” 25 (Id. at 9 (citing ECF No. 1-15).) 26 1 Plaintiff operates using the following trademarks: U.S. Reg. No. 1,716,063; U.S. Reg. No. 27 1,716,062; U.S. Reg. No. 2,004,536; U.S Reg. No. 3,467,126; U.S. Reg. No. 2,174,312; U.S. Reg. No. 4,703,140; and Ser. No. 88/911,537; Ser. No. 90/639,262. (Id. at 6–7 (citing ECF Nos. 28 1-3, 1-4, 1-5, 1-6, 1-7, 1-8, 1-9, 1-10, 1-11).) 1 Section 1.D of the Franchise Agreement granted a franchise to SV Adventures to operate a 2 restaurant for 15 years from the date of the Franchise Agreement. (Id. at 9.) The Franchise 3 Agreement allows for a successor franchise but Defendants announced on August 3, 2021, that 4 they did not intend to continue as franchisees, meaning the Franchise Agreement is set to expire 5 on January 2, 2022. (Id.) Plaintiff alleges the two sections of the Franchise Agreement sets forth 6 its rights and obligations upon expiration. (Id.) First, § 15.E grants Plaintiff the right to purchase 7 the restaurant in addition to the leasehold right to the Premises that is exercisable by providing 8 notice within sixty days of the expiration of the Franchise Agreement. (Id. at 10.) Second, § 9 14.C gives Plaintiff the right to assume management of the restaurant while Plaintiff considers 10 whether to exercise its option to purchase. (Id. at 10–11.) Plaintiff alleges that it confirmed on 11 November 18, 2021 that the parties would not enter into a successor agreement and informed 12 Defendants it intended to exercise the option under § 15.E and to acquire the restaurant and 13 leasehold rights in the Lease. (Id. at 11.) Plaintiff notified Defendants on December 20, 2021 14 that it will assume management of the restaurant when the Franchise Agreement expires. (Id.) 15 Plaintiff alleges Defendants responded on December 9, 2021 and refused to sell the 16 restaurant to Plaintiff or assign the leasehold rights in the Lease. (Id.) Plaintiff further alleges 17 Defendants have already negotiated an amendment to the Lease to allow them to operate in the 18 same location under a different name after the Franchise Agreement expires and Defendants have 19 been advertising their intent to operate “Viscuso[’]s Pizza and Draft House” in January 2022. 20 (Id.) Plaintiff contends this shows Defendants’ intent to refuse to comply with the terms of the 21 Franchise Agreement. (Id.) Plaintiff asserts Defendants have also stated an intent to sell 22 Mountain Mike’s signage and believes Defendants “may waste and dispose of operating assets, 23 including fixtures, signs, furniture, equipment (including computers, telecopiers, and point of sale 24 systems), furnishings, or related items used in operating a Mountain Mike’s pizza restaurant, or 25 may damage the Premises to further obstruct [Plaintiff’s] right to purchase the [r]estaurant and 26 assume the Lease.” (Id. at 11–12.) 27 Plaintiff alleges Defendants’ conduct is an anticipatory breach of their contractual duties 28 “to the sell the [r]estaurant and assign the Lease to [Plaintiff] under [§] 15.E” and “to allow 1 [Plaintiff] to assume management of the restaurant when the Franchise Agreement expires under 2 [§] 14.C.” (Id. at 12.) Plaintiff maintains § 5(A) of the Franchise Agreement protects its rights to 3 its brand and trademarks and thereby limits Defendants’ use to operation of the restaurant 4 pursuant to the Franchise Agreement. (Id.) Plaintiff further alleges prior to the expiration of the 5 Franchise Agreement, “and with the goal of transferring good will in the Mountain Mike’s marks 6 from [Plaintiff] to themselves,” Defendants have begun to advertise and provide products for 7 Viscuso’s Pizza and Draft House out of the Premises while still using Mountain Mike’s marks. 8 (Id.) Plaintiff contends that this includes substantially copying the Mountain Mike’s pizza 9 restaurant menu and offering for sale and selling out of the Premises Viscuso’s Pizza and Draft 10 House food products on online and smartphone delivery websites. (Id. at 12–13.) Plaintiff 11 alleges Defendants “are trying to trade on the large amount of good-will owned and enjoyed by 12 [Plaintiff],” and “[c]onsumers will be misled that Viscuso’s Pizza and Draft House is in some 13 way connected with, sponsored by or affiliated with the well-established Mountain Mike’s [p]izza 14 [r]estaurants.” (Id. at 13.) 15 On December 21, 2021, Plaintiff filed its Complaint, alleging various claims for injunctive 16 and declaratory relief, trademark infringement, trademark dilution, unfair competition, breach of 17 contract, breach of warranty, and tortious interference with contracts. (See ECF No. 1.) On 18 December 22, 2021, Plaintiff filed the instant motion for a TRO. (ECF No. 4.) 19 II. STANDARD OF LAW 20 A TRO is an extraordinary remedy. The purpose of a TRO is to preserve the status quo 21 pending a fuller hearing. See Fed. R. Civ. P. 65. In general, “[TROs] are governed by the same 22 standard applicable to preliminary injunctions.” Aiello v. One West Bank, 2010 WL 406092, at 23 *1 (E.D. Cal. Jan. 29, 2010) (internal citations omitted); see also Eastern District of California 24 Local Rule (“Local Rule”) 231(a). 25 Injunctive relief is “an extraordinary remedy that may only be awarded upon a clear 26 showing that the plaintiff is entitled to such relief.” Winter v. Nat. Res. Def. Council, Inc., 555 27 U.S. 7, 22 (2008) (citing Mazurek v. Armstrong, 520 U.S. 968, 972 (1997) (per curiam)). “The 28 purpose of a preliminary injunction is merely to preserve the relative positions of the parties until 1 a trial on the merits can be held.” Univ. of Tex. v. Camenisch, 451 U.S. 390, 395 (1981); see also 2 Costa Mesa City Emps. Ass’n v. City of Costa Mesa, 209 Cal. App. 4th 298, 305 (2012) (“The 3 purpose of such an order is to preserve the status quo until a final determination following a 4 trial.”); GoTo.com, Inc. v. Walt Disney, Co., 202 F.3d 1199, 1210 (9th Cir. 2000) (“The status quo 5 ante litem refers not simply to any situation before the filing of a lawsuit, but instead to the last 6 uncontested status which preceded the pending controversy.”). 7 “A plaintiff seeking a preliminary injunction must establish [1] that he is likely to succeed 8 on the merits, [2] that he is likely to suffer irreparable harm in the absence of preliminary relief, 9 [3] that the balance of equities tips in his favor, and [4] that an injunction is in the public interest.” 10 Winter, 555 U.S. at 20. A plaintiff must “make a showing on all four prongs” of the Winter test 11 to obtain a preliminary injunction. Alliance for the Wild Rockies v. Cottrell, 632 F.3d 1127, 1135 12 (9th Cir. 2011). In evaluating a plaintiff’s motion for preliminary injunction, a district court may 13 weigh the plaintiff’s showings on the Winter elements using a sliding-scale approach. Id. A 14 stronger showing on the balance of the hardships may support issuing a preliminary injunction 15 even where the plaintiff shows that there are “serious questions on the merits . . . so long as the 16 plaintiff also shows that there is a likelihood of irreparable injury and that the injunction is in the 17 public interest.” Id. Simply put, plaintiffs must demonstrate, “that [if] serious questions going to 18 the merits were raised [then] the balance of hardships [must] tip[ ] sharply” in [p]laintiffs’ favor 19 in order to succeed in a request for preliminary injunction. Id. at 1134–35. 20 III. ANALYSIS 21 Plaintiff requests the Court enjoin Defendants’ alleged trademark infringement and 22 maintain the status quo pending arbitration. (See ECF No. 4.) As to the trademark claims, 23 Plaintiff asserts Defendants are essentially operating a competing restaurant under the Plaintiff’s 24 marks because: (1) Defendants advertise their competing “Viscuso’s Pizza and Draft House” 25 products on smartphone application-based delivery services (e.g., DoorDash) to be picked up 26 from the restaurant which bears Plaintiff’s marks; (2) Defendants’ online menu is copied and 27 pasted from Plaintiff; and (3) Defendants adopt Plaintiff’s product names, pizza size conventions, 28 and product descriptions on the online menu. (ECF No. 4 at 2, 3, 18, 20.) Plaintiff submits 1 screenshots taken on December 17, 2021 of a DoorDash account for “Viscuso’s Pizza” at the 2 franchise location. (ECF Nos. 4-3, 4-8, 4-9.) Plaintiff also submits a picture of a sign on the door 3 at the franchise location advertising that “Viscuso’s Pizza and Draft House” is coming in January 4 2022. (ECF No. 4-5 at 2.) 5 To prevail on a trademark infringement claim, a plaintiff must establish that: “[1] it has a 6 valid, protectable mark, and [2] the defendant’s use of the mark is likely to cause consumer 7 confusion.” OTR Wheel Eng’g, Inc. v. W. Worldwide Servs., Inc., 897 F.3d 1008, (9th Cir. 2018). 8 Plaintiff argues it has valid, protectable marks and Defendants’ conduct is likely to confuse 9 consumers to believe Viscuso’s Pizza and Draft house is connected with Plaintiff. (ECF No. 4 at 10 20.) Plaintiff therefore contends there is a rebuttable presumption of irreparable harm. (Id. at 24 11 (citing 15 U.S.C. § 1116(a) (“[a] plaintiff seeking any such injunction shall be entitled to a 12 rebuttable presumption of irreparable harm . . . upon a finding of likelihood of success on the 13 merits for a violation . . . [for] a preliminary injunction of temporary restraining order.”)).) 14 Plaintiff further argues if Defendants’ conduct continues, it will cause irreparable harm to 15 Plaintiff by “dilution of its trademark, loss of goodwill, loss of consumers, and harm to its brand.” 16 (Id. at 10–11, 24.) 17 In opposition, Defendants argue they have not at any time operated or performed business 18 under any name other than Mountain Mike’s Pizza and do not intend to do so until the Franchise 19 Agreement expires on January 2, 2022. (ECF No. 10 at 9–10.) Defendants filed a declaration 20 explaining that they reached out to DoorDash to create an account that was to be activated after 21 January 2, 2022. (ECF No. 10-1 at 3.) Defendants were not aware the account had been 22 activated prematurely until receiving an order on December 17, 2021. (Id.) The order had been 23 cancelled, and Defendants assert they immediately deactivated the account, no money was 24 exchanged under the name Viscuso’s Pizza and Draft House, and no product was received by the 25 consumer from Viscuso’s Pizza and Draft House. (Id.) As for the signage at the franchise 26 location, Defendants contend they immediately removed the signage after being told it was in 27 violation of the Franchise Agreement. (ECF No. 10-1 at 2.) Defendants argue that because they 28 1 are not currently infringing any trademarks and do not intend to do so, Plaintiff’s request for 2 injunctive relief as to its trademark claims is moot. (ECF No. 10 at 8.) 3 Plaintiff has not persuaded the Court that it is likely to suffer immediate, irreparable harm 4 in the absence of emergency relief. Even assuming there is a rebuttable presumption of 5 irreparable harm, Defendants have submitted evidence indicating that they have ceased the 6 alleged infringing conduct by taking down signage about Viscuso’s Pizza and Draft House at the 7 franchise location and deactivating the DoorDash account. (See ECF No. 10-1.) Regardless of 8 whether Defendants’ signage and representations on DoorDash harmed Plaintiff in the past, 9 Plaintiff “must still show that the threat of injury in the future is ‘certainly impending’ or that it 10 presents a ‘substantial risk’ of recurrence for the court to hear [its] claim for prospective relief.” 11 Munns v. Kerry, 782 F.3d 402, 411–12 (9th Cir. 2015). The Court cannot conclude that 12 preliminary injunctive relief is warranted based on the current record because there is insufficient 13 evidence — beyond mere speculation — that Defendants will continue to use Plaintiff’s protected 14 marks after the Franchise Agreement ends.2 See, e.g., Flip Flop Shops Franchise Co., LLC v. 15 Neb, No. CV 16-7259-JFW (EX), 2016 WL 9308328, at *2 (C.D. Cal. Oct. 4, 2016) (finding that 16 based on evidence that the defendants were no longer using the plaintiff’s marks, brand, or 17 proprietary system, the plaintiffs could not “demonstrate the requisite irreparable injury necessary 18 to support the issuance of a temporary restraining order or an order to show cause”)). 19 Even if Defendants resume the allegedly infringing conduct after January 2, 2022, 20 economic injury is insufficient to constitute irreparable harm. Herb Reed Enters., LLC v. Fla. 21 2 In reply, Plaintiff argues “the DoorDash menu and front window sign infringement are 22 only part of the equation.” (ECF No. 12 at 7.) However, Plaintiff ignores that these were the 23 only grounds for infringement raised in the initial motion. (See ECF No. 4.) For the first time in reply, Plaintiff seems to suggest that a Facebook post by the El Dorado Hills Chamber of 24 Commerce describing the upcoming “rebranding” of the location to Viscuso’s Pizza and Draft House constitutes ongoing infringement. (ECF No. 12 at 7; ECF No. 13 at 3.) Plaintiff also 25 argues in reply that Defendants will infringe on Plaintiff’s marks in various ways after the Franchise Agreement ends, such as continued use of the exterior sign, colored trade dress, 26 branded fixtures, and layout. (ECF No. 12 at 7.) Not only were these arguments improperly 27 raised for the first time in Plaintiff’s reply, but neither argument is persuasive. Plaintiff fails to explain how Defendants can be held liable for a third party’s Facebook post, and Plaintiff’s 28 arguments as to operations after the Franchise Agreement ends are too speculative at this time. 1 Entm’t Mgmt., Inc., 736 F.3d 1239, 1249–50 (9th Cir. 2013). While loss of goodwill may 2 constitute irreparable harm, a plaintiff who attempts to establish irreparable harm via loss of 3 business reputation and goodwill must proffer evidence of that loss — a district court may not 4 base a finding of reputational harm on “platitudes rather than evidence.” Id. As a result, 5 evidence of reputational damage or harm to business goodwill sufficient to merit entry of 6 preliminary relief typically incorporates information provided by, or from the perspective of, 7 market-based sources external to the plaintiff itself. See, e.g., Disney Enters., Inc. v. VidAngel, 8 Inc., 869 F.3d 848, 865 (9th Cir. 2017) (finding likelihood of harm to business goodwill was 9 supported by declaration that incorporated statements from plaintiff’s customers raising concerns 10 about general behavior of competitor companies like defendant’s); Titaness Light Shop, LLC v. 11 Sunlight Supply, Inc., 585 F. App’x 390, 391 (9th Cir. 2014) (finding insufficient showing of 12 reputational harm alleged to result from non-movant’s website’s association with marijuana, 13 where evidence failed to establish that movant’s customers were aware of non-movant’s website 14 or its association with marijuana); DFO, LLC v. Denny Bar Co., LLC, No. 2:18-cv-02226-JAM- 15 KJN, 2018 WL 5880813, at *2 (E.D. Cal. Nov. 8, 2018) (holding that declaration submitted by 16 plaintiff’s employee was insufficient to establish likelihood of harm to business goodwill because 17 it was based only on the declarant’s opinion and experience regarding the relevant market, and 18 therefore “fail[ed] to present any concrete evidence that a loss of control of [plaintiff’s] business 19 reputation has occurred or is likely to occur at all”). In the instant case, Plaintiff’s conclusory 20 assertions that Defendant’s conduct will irreparably harm its goodwill and reputation, without 21 more, are insufficient. 22 This analysis also forecloses Plaintiff’s claim of irreparable harm in the context of the 23 breach of contract claims. In addition to the alleged harms already addressed above, Plaintiff 24 argues it will also lose an interest in real property to which it has a contractual right unless the 25 Court allows Plaintiff to manage the franchise pending arbitration. (ECF No. 4 at 29.) Plaintiff 26 cites two cases: Park Village Apartments v. Mortimer Howard Trust, 636 F.3d 1150, 1159 (9th 27 Cir. 2011), and Stockton v. Newman, 148 Cal. App. 2d 558, 564 (1957). Both cases are 28 distinguishable. Park Village involved tenants facing eviction from their homes. 636 F.3d at 1 | 1159. Stockton involved the sale of real property pursuant to a notice of default. 148 Cal. App. 2 | 2d at 564. Here, Plaintiff is not facing eviction nor is the leasehold interest being sold as 3 | Defendants have purportedly signed a lease to remain at the subject location until 2027. (ECF 4 | No. 4at 14.) Plaintiff thus fails to persuade the Court that it is likely at risk of losing a property 5 | interest in such a way to warrant emergency relief. 6 Lastly, it bears mentioning that Plaintiffs delay in bringing this motion — waiting until 7 | less than two weeks before the end of the Franchise Agreement — bolsters the Court’s conclusion 8 | that Plaintiff has not shown it is likely to suffer irreparable harm. See Garcia v. Google, Inc., 786 9 | F.3d 733, 746 (9th Cir. 2015). According to Plaintiff's own briefing, it was aware as early as 10 || mid-November that Defendants intended to open a new restaurant at the franchise location upon 11 || expiration of the Franchising Agreement. (ECF No. 4 at 16.) To the extent Plaintiff was 12 | concerned about the potential breach of contract or trademark infringement, Plaintiff could have 13 || brought a motion for preliminary injunction over a month sooner. See L.R. 231(b). 14 Plaintiff must make a clear showing on all four prongs of the Winter test to be eligible for 15 | the extraordinary remedy of a temporary restraining order. See All. for the Wild Rockies, 632 16 | F.3d at 1135. Since the Court concludes Plaintiff has not made the required showing of imminent 17 | and irreparable harm in the absence of a temporary restraining order, the Court declines to 18 | address the remaining Winter factors. See MD Helicopters, Inc. v. Aerometals, Inc., No. 2:16-cv- 19 | 02249-TLN-AC, 2018 WL 489102, at *2 (E.D. Cal. Jan. 19, 2018). 20 IV. CONCLUSION 21 For the foregoing reasons, the Court hereby DENIES Plaintiff's Motion for a Temporary 22 | Restraining Order. (ECF No. 4.) 23 IT IS SO ORDERED. 24 | DATED: December 29, 2021 /) fs 26 “ Man Vishay 27 Troy L. Nuhlep ] United States District Judge 28