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Fraternity Collection, LLC v. Fargnoli

United States District Court, Southern District of Mississippi, Northern Division

March 31, 2015




Before the Court are motion to dismiss filed by both parties. Docket Nos. 20, 32. After reviewing the allegations, arguments, and applicable law, the plaintiff’s complaint will survive in full and the defendant’s counterclaims will survive in part.

I. Factual and Procedural History

Fraternity Collection is a Mississippi company that designs, manufactures, and sells shirts. It is proud of the “Pocket Shirt, ” a custom article of clothing in which customers pick a particular style of shirt and then select one of almost 200 designs to be the shirt pocket.

This suit grows out of Fraternity Collection’s collaboration with Elise Fargnoli, a clothing designer based in Connecticut. Fargnoli runs the “Francesca Joy” brand.

In 2012, the parties agreed that Fargnoli would design two new series of Pocket Shirts: one called “Francesca Joy” and another containing sorority themes (using unlicensed sorority images). Fraternity Collection thought it would be the exclusive seller of these designs. Sales of the first line commenced in fall 2012. The second line was never manufactured or sold; it was only designed.

In January 2013, Fraternity Collection learned that Fargnoli was selling her Francesca Joy designs to a competitor. It asked for clarification and was promised that it had an exclusive right to that line. Despite this promise, it claims it again found the Francesca Joy line for sale at the same competitor. Fraternity Collection was again promised exclusivity.

In March 2013, while their business relationship was ongoing, Fraternity Collection obtained a license to manufacture and sell products containing fraternity and sorority logos – a so-called “Greek license.” It hired a graphic artist to design sorority-themed Pocket Shirts. At this point, then, the looming conflict is apparent: Fargnoli had already designed a sorority-themed line of Pocket Shirts for Fraternity Collection, and now Fraternity Collection was designing its own sorority-themed line without her.

In June 2013, Fraternity Collection stopped doing business with Fargnoli and claims to have paid her all her royalties.

By September 2013, Fargnoli had returned to selling her clothing at Fraternity Collection’s competitor. She used the terms “#fratcollection” and “#fraternitycollection” in her social media accounts to promote her designs for the competitor.

The legal threats also started in September 2013. Fargnoli sent Fraternity Collection a cease and desist letter demanding that it stop selling the Francesca Joy line of Pocket Shirts and Fraternity Collection’s new sorority-themed Pocket Shirts. Fraternity Collection responded that it had already stopped selling the Francesca Joy line in June; that its sorority-themed designs were distinct from the ones Fargnoli had designed; and that Fargnoli should stop implying a relationship with Fraternity Collection on social media.

The parties’ letters did not resolve the dispute. Among other things, Fargnoli is mad about Fraternity Collection advertisements which contain the Francesca Joy line of Pocket Shirts, while Fraternity Collection is mad that Fargnoli’s “Francesca Joy” Facebook page contains an album of models wearing Fraternity Collection merchandise.

Fraternity filed this suit in October 2013. It seeks a declaratory judgment that its advertisements can contain Fargnoli-designed Pocket Shirts since they were properly licensed at the time of their manufacture and are no longer for sale. It then seeks a declaration that its own sorority-themed Pocket Shirts are not a knockoff of Fargnoli’s sorority-themed Pocket Shirts. Fraternity Collection also seeks damages for Fargnoli’s use of the terms “#fratcollection” and “#fraternitycollection” on social media. It claims that the terms cause consumer confusion which deprive Fraternity Collection of business and goodwill. The damages are sought under the Lanham Act and common law trademark infringement.

Fargnoli has counterclaimed. Her allegations express irritation that even during the fruitful time of their partnership, Fraternity Collection would advertise her Pocket Shirt designs without listing her by name in the advertisements. Her first 10 counterclaims allege that Fraternity Collection’s advertising of the Francesca Joy line and use of its own sorority-themed designs on Pocket Shirts constitute reverse passing off, false advertising, false designation of origin, unfair competition, and trademark infringement meriting damages under the Lanham Act. Counts 11-17 allege copyright infringement. Counts 18-25 are state law claims for unfair competition, breach of contract, intentional interference with existing business relations, and breach of the covenant of good faith and fair dealing. The final four counts are for the vicarious copyright infringement of Fraternity Collection’s resellers.[1]

The competing motions to dismiss followed shortly thereafter. Fargnoli’s motion will be treated as one for judgment on the pleadings since it was filed after she answered. See Jones v. Greninger, 188 F.3d 322, 324 (5th Cir. 1999).

II. Legal Standards

When considering a motion to dismiss, the Court accepts the plaintiff’s factual allegations as true and makes reasonable inferences in the plaintiff’s favor. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). The complaint must contain “more than an unadorned, the defendant-unlawfully-harmed-me accusation, ” but need not have “detailed factual allegations.” Id. (citation and quotation marks omitted). The plaintiff’s claims must also be plausible on their face, which means there is “factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. (citation omitted). “The purpose of a motion to dismiss is to test the sufficiency of the complaint, not to decide the merits.” Gibson v. City of Chicago, 910 F.2d 1510, 1520 (7th Cir. 1990) (citation omitted). “[A] well-pleaded complaint may proceed even if it strikes a savvy judge that actual proof of [the alleged] facts is improbable, and that a recovery is very remote and unlikely.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 556 (2007) (quotation marks and citation omitted).

The same standard applies to motions for judgment on the pleadings. See Guidry v. Am. Pub. Life Ins. Co., 512 F.3d 177, 180 (5th Cir. 2007).

III. Discussion

A. Fargnoli’s Motion for Judgment on the Pleadings

1. Declaratory Action

Fargnoli first argues that Fraternity Collection’s request for declaratory judgment fails because it was filed in anticipation of litigation she was planning to file. She specifically complains that Fraternity Collection filed suit instead of continuing to correspond with her counsel regarding settlement. Fargnoli contends that its request for declaratory judgment is effectively irrelevant because it is subsumed by her counterclaims.

In these situations, this Court “must determine: (1) whether the declaratory action is justiciable; (2) whether the court has the authority to grant declaratory relief; and (3) whether to exercise its discretion to decide or dismiss the action.” Sherwin-Williams Co. v. Holmes Cnty., 343 F.3d 383, 387 (5th Cir. 2003). It is obvious that the first two elements are satisfied: the parties have an actual controversy and this Court has authority to grant declaratory relief. The question, then, is whether the Court should decide or dismiss the declaratory judgment action.

Among other reasons, “declaratory judgment relief may be denied because of a pending state court proceeding in which the matters in controversy between the parties may be fully litigated, because the declaratory complaint was filed in anticipation of another suit and is being used for the purpose of forum shopping, because of possible inequities in permitting the plaintiff to gain precedence in time and forum, or because of inconvenience to the parties or the witnesses.” Rowan Companies, Inc. v. Griffin, 876 F.2d 26, 29 (5th Cir. 1989) (citation omitted); see, e.g., United Nat. Ins. Co. v. Jackson Redevelopment Auth. Bd. of Comm’rs, No. 3:14-CV-466, 2015 WL 144930, at *1 (S.D.Miss. Jan. 12, 2015).

In this case, there is no state court action to defer to. That simple fact brings our case out of the ambit of others cited by Fargnoli. E.g., Mission Ins. Co. v. Puritan Fashions Corp., 706 F.2d 599, 602 (5th Cir. 1983) (affirming district court’s decision to dismiss ...

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