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Scala's Original Beef & Sausage Company LLC v. Alvarez

December 22, 2009

SCALA'S ORIGINAL BEEF & SAUSAGE COMPANY, LLC, PLAINTIFF,
v.
MICHAELANGELO ALVAREZ D/B/A MICHAELANGELO FOODS, DEFENDANTS.



The opinion of the court was delivered by: Robert M. Dow, Jr. United States District Judge

Magistrate Judge Maria Valdez

Judge Robert M. Dow, Jr.

MEMORANDUM OPINION AND ORDER

Plaintiff Scala's Original Beef & Sausage Company LLC ("Scala's") has filed suit against Defendants Michaelangelo Alvarez d/b/a Michaelangelo Foods and Michaelangelo Foods, LLC (collectively, "Defendants") alleging: (1) trademark infringement in violation of the Lanham Act, 15 U.S.C. § 1114(a); (2) unfair competition in violation of the Lanham Act, 15 U.S.C. § 1125(a); (3) violation of the Illinois Deceptive Trade Practices Act, 815 ILCS § 510/1 et seq.; and (4) violation of the Illinois Consumer Fraud and Deceptive Business Practices Act, 815 ILCS § 505/1 et seq. The complaint also seeks a declaratory judgment that Scala's is entitled to sell and distribute giardiniera under the "Scala's" and "Scala's Preferred" marks.

Currently before the Court is Scala's motion [6] for a temporary restraining order ("TRO") enjoining Defendants from the marketing or sale of giardiniera or other food products bearing the trademark of "Scala's Preferred" or "Scala's." Specifically, Plaintiff seeks an immediate order temporarily restraining Defendants from (1) infringing Plaintiff's two federally registered trademarks and (2) displaying content on Defendants' product labels and website that conveys an affiliation between Defendants' and Plaintiff's products. Although the motion presents a close call, the Court concludes that under the sliding scale standard that applies in this circuit, Scala's has not carried its burden of demonstrating a right to the extraordinary remedy of a TRO. Accordingly, Scala's motion [6] is respectfully denied.

I. Background

Scala's is a distributor of Italian meats and related food products. Scala's and its predecessors have been selling food products under the Scala's name since approximately 1925. In 1949, Pasquale Scala -- Scala's founder -- incorporated the business under the name, Scala Packing Co., Inc. ("SPCI"). In approximately 1960, SPCI began selling bottled giardiniera under the "Scala's" and "Scala's Preferred" brands. In August 2007, SPCI filed two applications with the United States Patent and Trademark Office seeking to register "Scala's Preferred" as a trademark for enumerated Italian style food products. On September 23, 2008, SPCI received the two trademarks for which they applied.

Defendant Alvarez began working for SPCI in 1996. On August 25, 2008, Alvarez, on behalf of his company Michaelangelo Foods, entered into an agreement with SPCI. In its entirety, the agreement consists of three paragraphs:

This Agreement, effective August 25, 2008, is between Scala Packing Co., Inc. ("SPCI") and Michaelangelo Alvarez D/B/A Michaelangelo Foods ("MAF"). SPCI hereby sells the entire prepared vegetable division to MAF for $1,000.00. SPCI is presently unable to finance the operation of this division. MAF has previously advanced $6,150.00 to SPCI, as a loan to enable the business to continue until this sale.

SPCI also hereby agrees to grant a license to MAF to exclusively use the "Scala" name, logo and any other intellectual property subject to any copyright for prepared vegetables and agrees not to compete with MAF and waives any interest in any and all prepared vegetables and the recipes that are used to make them. This agreement shall be binding on any successor or assigns of SPCI.

The agreement is silent as to its duration and it contains no termination clause.

Prior to August 2008, SPCI's giardiniera and other prepared vegetables were produced by E. Formella and Sons. According to Alvarez, at the time that he purchased SPCI's prepared vegetable division, E. Formella and Sons had refused to continue supplying SPCI because of past non-payment. SPCI's customers for giardiniera and prepared vegetables included Jewel, Super Fresh, and Piggly-Wiggly. However, Alvarez states in his declaration that, at the time that he purchased SPCI's prepared vegetable division, it had no pending orders and no inventory. In addition, Jewel had stopped placing orders with SPCI because of delivery problems.

Since Alvarez obtained the license, he has sold giardiniera and prepared vegetables to Jewel, Super Fresh, and Piggly-Wiggly under the Scala's label. During that time, Alvarez has invested nearly $50,000 in the business, which has annual gross revenue of $200,000.

On August 12, 2009, SPCI notified Defendants in writing that the license to use the "Scala's" name and logo on vegetable products was terminated, effective immediately. Despite the purported termination of the license agreement, Defendants continue to sell vegetable products, including giardiniera, under the "Scala's" name. Scala's alleges that the labels that Defendants use on their giardiniera and other products infringe Scala's trademarks. Defendants contend that Scala's has breached the agreement and maintain that the license remains valid and/or the trademark has been abandoned as to prepared vegetables.

In a letter dated October 27, 2009, Scala's demanded that Defendants cease distributing products bearing the "Scala's" name. Defendants refused to do so by letter dated November 9, 2009.

On November 5, 2009, SPCI and Scala's entered into an Asset Purchase Agreement under which Scala's was to acquire, among other assets, "all trademarks, trade names, logos, service marks, brand marks, brand names, [and] domain names" of SPCI's, as well as all goodwill relating to those assets. The closing of the Asset Purchase Agreement took place on November 23, 2009. That same day, Scala's initiated this lawsuit and filed its motion for a temporary restraining order. The motion was presented on December 2, 2009, at which time counsel for Plaintiff conducted a brief in-court direct examination of Defendant Alvarez and the Court set a schedule for additional briefing on the TRO motion. That motion is now fully and capably briefed and ready for decision.*fn1

II. Analysis

Like all forms of injunctive relief, a temporary restraining order is "an extraordinary remedy that should not be granted unless the movant, by a clear showing, carries the burden of persuasion." Mazurek v. Armstrong, 520 U.S. 968, 972 (1997) (emphasis in original). A party seeking a temporary restraining order must demonstrate as a threshold matter that (1) its case has some likelihood of succeeding on the merits; (2) no adequate remedy at law exists; and (3) it will suffer irreparable harm if preliminary relief is denied. Abbott Labs. v. Mead Johnson & Co., 971 F.2d 6, 11 (7th Cir. 1992). If the moving party meets this burden, then the court must consider the irreparable harm that the nonmoving party will suffer if preliminary relief is granted, balancing such harm against the irreparable harm the moving party will suffer if relief is denied. Storck USA, L.P. v. Farley Candy Co., 14 F.3d 311, 314 (7th Cir. 1994). Finally, the court considers the public interest served by granting or denying the relief, including the effects of the relief on non-parties. Id.; see also Credit Suisse First Boston, LLC v. Vender, 2004 WL 2806191, at *1 (N.D. Ill. Dec. 3, 2004). The court then weighs all of these factors, ...


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