The bit of interest in this case is the relationship between
trademark and bankruptcy law, which isn’t resolved on this motion
to dismiss but is worth watching. The mark at issue is
“Strawberry Hill Races” for a century-old steeplechase horse racing tradition
in Richmond, Virginia. As the court explained, in early 2012, defendants were
arranging to hold the event at Colonial Downs racetrack in the summer. But, shortly before the race, plaintiffs
bought the registered mark at a bankruptcy auction and sent a C&D even
before title was officially transferred.
The defendants held the race anyway, and plaintiffs sued for trademark
infringement and false advertising. The
defendants counterclaimed for defamation, breach of contract, and a variety of
business torts.
From 1973 to 2012, the State Fair of Virginia (SFVA)
operated the Strawberry Hill Races.
Since 2000, it was hosted at Colonial Downs, a racetrack operated by an
affiliated entity of Colonial Holdings (CH); Ian Stewart is the president of
Colonial Holdings and other affiliated entities.
After SFVA filed for Chapter 11 bankruptcy, the future of
the Strawberry Hill races was in doubt.
SFVA negotiated an agreement with CH to partner to hold the races, but
its bankruptcy was converted into Chapter 7 liquidation. The bankruptcy trustee notified Colonial
Holdings that its agreement was rejected (which defendants argue was a breach
of contract by SFVA). In addition, the
trustee told CH that it needed a temporary license to use the mark to proceed
with the event under that name.
Defendants, however, maintained that any transfer of the mark was
subject to the license they already had from SFVA.
In a footnote, the court noted legal uncertainty about the
effect of the trustee’s rejection of the agreement between SFVA and
defendants. One possibility is that the
rejection is a breach of contract for which only damages are available, and
defendants lost the right to use the mark.
The other is that a trademark licensee may retain the right to use a
mark after a licensing agreement is rejected.
The Bankruptcy Code might ultimately play a role in determining the
effect of the trustee’s action.
The parties disputed whether the ownership of the mark
transferred before or after the race, held on June 2—the bill of sale transferring
the mark was dated June 1, but the letter transmitting the bill of sale was
dated June 4. (The C&D was sent on
May 30, so there really wasn’t much time before the race.) The parties also disputed the extent to which
the mark was associated with the event; defendants contended that they worked
in good faith to strip the event of any reference to “Strawberry Hill Races”
once the dispute arose. On the day of the event, however, a Richmond newspaper
reported that Colonial Downs had acquired sole ownership of the Strawberry Hill
Races.
Relations deteriorated thereafter; plaintiffs accused
defendants of falsely representing that they’re the legitimate owners of the
mark; defendants held a contest inviting the public to rename the event
formerly known as the Strawberry Hill Races.
Plaintiffs sent a letter to defendants accusing them of trademark
infringement and other wrongs, including failure to pay vendors for the June 2
race. They cc’ed the letter to the
National Steeplechase Association and the Virginia Racing Commission, which was
behind the various counterclaims.
The court refused to dismiss the plaintiffs’ claims, even
though they targeted the defendants generally: the defendants were plausibly
alleged to be under the same control and acting together with respect to the
mark. Likewise, the defendants’
counterclaims survived. On tortious
interference, the defendants identified a specific contract, pled plaintiffs’
knowledge thereof, and pled interference that deprived defendants of the
benefit of their bargain—the use of the “Strawberry Hill Races” name.
Likewise, on a motion to dismiss, the defamation claim
survived; the court rejected plaintiffs’ argument that their statements were
absolutely privileged settlement communications, because they didn’t need to
disseminate the letter to the other organizations, whose legal rights wouldn’t
be affected by the dispute. Nor were the
allegedly defamatory aspects of the letter pure opinion. Failure to pay vendors is falsifiable and
thus actionable—perhaps even defamation per se as prejudicial to defendants’
profession or trade. In addition, the
court found that allegations of “illegal” conduct were “clearly” actionable, “because
an accusation that a person's conduct is ‘illegal’ is objectively provable,” not
mere legal opinion. “Ultimately, it will
be proven or disproven whether Defendants engaged in the conduct at issue and
whether such conduct is, in fact, illegal.”
In Virginia, defamation per se includes any statement alleging the
commission of a crime of moral turpitude for which the target may be convicted;
though that wasn’t necessarily what happened here, “the two [situations] are
sufficiently analogous to draw one conclusion—allegations of ‘illegal’ conduct
are not opinions. There is a difference between offering a legal opinion, which
is usually framed as an educated assessment, and unequivocally accusing another
of ‘illegal’ activities.” (Stated this
broadly, this conclusion just seems wrong.
Are all threat letters therefore plausibly the basis of a defamation
counterclaim if publicized?)
Counterclaims for civil conspiracy, unjust enrichment, and
breach of contract (the last two in the alternative) also survived.
Posts
No comments:
Post a Comment