First to File and Scope of Broader Claims – Trademark
Expanded Scope of Claims and First-to-File Rule: What Happens Next?
Booze Pops, LLC (“Booze Pops”), Booze Pops Corporate, LLC (“Booze Corporate”) and Booze Pops Distribution, LLC (“Booze Distribution”, collectively “Booze Pop”) manufacture and sell alcohol (“AIP”) on ice cream trucks and other moving vehicles. RE Flipz, LLC (“Flipz”), does business under the trade name “Buzz Pop Cocktails”, a manufacturer and distributor of AIP, Ruskaboy Holdings, LLC (“Ruskaboy”), Buzz Pop Cocktails Corporation, LLC (“BPCC”), Joseph Isaacs and Juan C. Sastre (collectively, “Buzz Pop”) An agreement was signed between Booze Pops and Buzz Pop which prevented Buzz Pop to sell AIPs while the contract was in force, which was allegedly violated by Buzz Pop. Booze Pop further alleged that Buzz Pop breached its trademark as well. Booze Pop sued Buzz Pop in the United States District Court, District of Charleston, South Carolina (“the Court”) (Buzz Pop Cocktails Corp v Booze Pop Civil Action No. 2:20-cv-691-RMG (DSC June 21, 2020)) in several ways. Buzz Pop challenged the jurisdiction of the Court and challenged Booze Pops’ complaint. The Court has ruled that Buzz Pops’ motion is granted in part and denied in part because Ruskaboy Holdings, LLC and Juan C. Sastre are dismissed as defendants for lack of jurisdiction.
Joseph Isaacs reportedly dissolved RE Flipz on January 31, 2019 and BPCC, the interested successor to RE Flipz, acquired all assets owned by RE Flipz, including the fictitious name “Buzz Pop Cocktails”.
Around July 2017, Booze Pops began supplying AIPs made by RE Flipz. On May 17, 2018, Plaintiffs and RE Flipz entered into an Exclusive Retail Agreement (“ERSA”), the ERSA granted Booze Pop the exclusive right to distribute and sell AIPs manufactured by RE Flipz to sellers of mobile retail and Booze Corporate franchisees throughout the United States of America and its territories (“Territory”).
Pursuant to the ERSA, RE Flipz has agreed not to sell the Products to any other person or entity for use, sale or distribution in the Territory for mobile distributor sales. ERSA has a three-year mandate. The ERSA includes a “non-competition” clause whereby RE Flipz undertakes not to compete with the applicants in the territory in the context of competitive activities in the mobile sale of the products during the term of the contract and for two years. after termination of the contract. The ERSA is governed by the law of South Carolina and contains a choice of forum clause whereby the parties agree that the courts of South Carolina, whether state or federal, shall have exclusive jurisdiction over any matter arising from the interpretation, purpose, effect or operation of ERSA. .
Booze Pop and RE Flipz have together decided that the venue will be in Charleston County and that they waive any right to assert jurisdiction or venue in any court other than the one decided. Booze Pop found that RE Flipz and BPCC (the successor to RE Flipz in the interest) violated ERSA because they were involved in the mobile sale and franchise of AIP in violation of ERSA.
Booze Pop further discovered that Isaacs, RE Flipz and Ruskaboy wrongly got three trademark registrations of the United States Patent and Trademark Office (“USPTO”) and that RE Flipz and BPCC are using said marks to infringe Booze Pop’s own trademark, i.e. “BOOZE POPS”. The three brands at issue are: (1) BUZZPOPS (2) BPC LICK and (3) BUZZ POP COCKTAILS. Booze Pop alleged that Isaacs, RE Flipz and Ruskaboy made false and misleading statements to the USPTO in the trademark applicationss.
On February 11, 2020, Booze Pop filed a lawsuit in the United States District Court, District of South Carolina, Division of Charleston (“the court”). Booze Pop sought action on 11 counts: (1) federal false advertising (2) cancellation of Trademark registrations (3) Fraud in Obtaining Trademark Registrations (4) Federal Trademark Counterfeit, False association, false designation of origin and unfair competition (5) South Carolina Trademark infringement (6) Unfair Trade Practices in South Carolina (7) Breach of Contract (8) Breach of Contract with Fraudulent Act (9) Breach of Express Warranties (10) Deceptive and Unfair Trade Practices in Florida (11) Unfair Competition at Common law in Florida.
On April 13, 2020, Buzz Pop filed a motion to dismiss or transfer the venue. Buzz Pop argued that: (1) this Court does not have personal jurisdiction over all of the defendants; and that, (2) even if this Court had personal jurisdiction over the defendants, the “first to file” rule dictates that the Court transfer this action to the Middle District of Florida.
The Court, after hearing from both sides, decided to settle Buzz Pops’ claims to dismiss and concluded that there was little to support the use of the first-to-file rule in this case. . Although a lawsuit in Florida was filed first by Buzz Pop, any reason for transfer or stay ended there. The stakes were not exactly the same. While both actions related, in part, to the defendants’ trade-marks, this action was broader in scope than the action in Florida. The Court found no basis for applying the first-to-file rule.
Regarding Buzz Pop’s claim that the Court lacked jurisdiction over the Defendants (“Buzz Pop”), the Court said that RE Flipz and BPCC created a substantial connection with South Carolina, while Ruskaboy did not. The Court has personal jurisdiction over RE Flipz and BPCC because both entities are signatories to the ERSA and have therefore consented to the jurisdiction of the South Carolina courts, both state and federal if the matter arises under the ERSA. The Court therefore concluded that RE Flipz and BPCC had the minimum contacts required to enable the Court to exercise personal jurisdiction over them.
The Court then considered Isaacs’ contacts with South Carolina to determine its jurisdiction over him. The complaint alleged that Isaacs was the chief operating officer of BPCC, the person who controlled and operated RE Flipz and Ruskaboy at all times in connection with the conduct alleged in this complaint. The Court found that it had personal jurisdiction over Isaacs. The complaint contained allegations of wrongdoing against Isaacs, chief operating officer of BPCC, allegedly directed or committed while they were physically in South Carolina.
Finally, the Court considered the contacts Sastre had with South Carolina to determine its jurisdiction over it. In their complaint, the plaintiffs alleged that as president of BPCC, Sastre was a driving force directing and/or materially participating in the wrongful conduct alleged in this complaint. After reviewing the complaint and the attachments, the Court concluded that it did not have personal jurisdiction over Sastre.
Based on the above findings, the Court decided that Buzz Pops’ motion should be granted in part and denied in part as Ruskaboy Holdings, LLC and Juan C. Sastre were dismissed as defendants.
The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.