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Foodworks USA, Inc. v. Foodworks of Arlington Heights, LLC

United States District Court, N.D. Illinois, Eastern Division

September 30, 2014



MARY M. ROWLAND, Magistrate Judge.

Plaintiff has filed a Motion to Reconsider and Vacate the Court's August 14, 2012, July 1, 2013, and August 7, 2013 Orders. (Dkt. 188). For the reasons stated below, the Motion is denied.


Defendant Foodworks of Arlington Heights, LLC (FWAH), operates a Mexicanthemed restaurant in Arlington Heights, Illinois, known as the Fuego Mexican Grill and Margarita Bar (Fuego). Plaintiff Foodworks USA, Inc.'s (FUSA's) Complaint and Defendant's Counterclaim assert intellectual property violations relative to the name of the restaurant and the trade dress used at the restaurant. The parties have consented to the jurisdiction of the United States Magistrate Judge, pursuant to 28 U.S.C. § 636(c). The tortured history of this case is well known to the parties, but because the chronology is relevant to the instant Motion, the Court will revisit it.[1]

A. The Complaint and Counterclaim

Plaintiff filed its Complaint on February 15, 2010, alleging trademark infringement, trade dress infringement, unfair competition, dilution of trademark, dilution of trade dress, deceptive trade practices, and breach of contract. The gravamen of the Complaint is that from January 2005 through January 2010, Defendant operated Fuego under a license agreement and management agreement with Plaintiff, pursuant to which Plaintiff provided consulting services and Defendant was granted a nonexclusive license to use Plaintiff's registered servicemark, "Fuego Mexican Grill and Margarita Bar" to market and promote its restaurant business. (Compl. 1-2 & ¶ 10).

Defendant filed its Answer and Counterclaim on April 19, 2010, also alleging trademark infringement, trade dress infringement, unfair competition, dilution of trademark, and dilution of trade dress. In addition, the Counterclaim alleges fraudulent or false representation and conversion, and requests a declaratory judgment. Not surprisingly, the Counterclaim describes a different scenario from the Complaint. The Counterclaim asserts that Defendant's shareholders, which included Ayad Nahlawi, Plaintiff's principal owner, were responsible for developing the service mark and trade dress for the Fuego restaurant. (Counterclaim ¶¶ 14, 18-22, 24). An August 2004 operating agreement indicated that Nahlawi would be the manager of both Defendant and the restaurant, but said nothing about the restaurant operating under any form of an intellectual property license. ( Id. ¶ 16). In October 2006, Nahlawi circulated various documents to Defendant's shareholders, including a license agreement and a management agreement. (Counterclaim ¶ 26). These documents indicated that a company primarily owned by Nahlawi, known as Foodworks Management, Inc., was Fuego's general manager. ( Id. ¶ 27). According to the allegations in the counterclaim, although these documents indicated that they were approved by Defendant's shareholders on October 30, 2006 ( id. Exs. F, G), they were never approved by a majority of members ( id. ¶ 27). Instead, sometime after October 30, Nahlawi unilaterally executed these documents as Defendant's manager, without the requisite approval of Defendant's shareholders. ( Id. ¶¶ 27-28).

B. The Complaint is Dismissed for Failure to Prosecute

Plaintiff was first served with discovery requests in June 2010. (Dkt. 85 at ¶ 8, Exs. A-D). Over the subsequent 23 months, Plaintiff ignored deadlines to respond to Defendant's discovery despite the Court granting several extensions, Defendant filing a motion to compel, and Plaintiff repeatedly assuring the Court that responses were forthcoming. (Dkt. 66, 67, 72, 78, 79, 81, 82, 85 at ¶ 10). Finally, in late April and early May 2012, Plaintiff submitted responses to interrogatories, 13 documents. and a CD containing Defendant's financial statements, which were purportedly responsive to Defendant's discovery requests. (Dkt. 85 at ¶¶ 20, 23, 39 & Exs. F-I). However, the Court found the discovery responses grossly deficient. While the interrogatories were responded to without objections, the responses contained practically none of the facts and details requested. ( Id. ¶¶ 27-35, Ex. G). For example, Plaintiff's interrogatory responses, unsigned in violation of Rule 33, provided no information about the trademark and trade dress Defendant is alleged to have infringed. ( Id. ¶¶ 30-33, Ex. G). Further, Plaintiff's document production consisted primarily of Defendant's financial records. ( Id. ¶¶ 37, 39, Exs. F, I).

On June 5, 2012, Defendant filed a Motion for Voluntary Dismissal for Failure to Prosecute, for Sanctions, and Other Relief. (Dkt. 85). Despite being granted two extensions, Plaintiff failed to respond to Defendant's motion. (Dkt. 84, 87, 89, 91). The final due date passed with no response or request for additional time.

On August 14, 2012, the Court granted Defendant's motion in part. (Dkt. 94). The Court found that Plaintiff failed to comply with Court orders and Courtimposed deadlines. The Court concluded that Plaintiff never had a serious intention to prosecute this case, which wasted the Court's time and clogged the Court's calendar. The Court also found that Defendant, required to attend many status hearings in an unsuccessful effort to get Plaintiff to respond to discovery requests, was prejudiced by Plaintiff's dilatory conduct. Moreover, the Court found that the merits of Plaintiff's case were seriously in doubt-Ayad Nahlawi, Plaintiff's principal owner and Defendant's former manager, surely must be in possession and control of relevant information relating to the trademark and trade dress claims that form the basis for Plaintiff's lawsuit. Yet, after numerous delays and missed deadlines, Plaintiff produced little, if any, information that supported its claims. Further, Plaintiff received "due warning" that its case was subject to dismissal. In sum, the Court found that the balance of factors governing dismissal under Rule 41(b) clearly favored dismissal for failure to prosecute and dismissed Plaintiff's complaint with prejudice. The Court, however, denied Defendant's request for a default judgment against Plaintiff on Defendant's Counterclaim.

C. The Parties File Motions for Reconsideration

Each party moved to reconsider the August 14, 2012 Order. (Dkt. 97, 109). The Court denied these requests on December 3, 2012. (Dkt. 122). In denying the Plaintiff's Motion to Reconsider, the Court found that Plaintiff neither identified any newly discovered evidence, nor did it argue that any manifest error of law or fact was committed. Instead, Plaintiff simply attempted to explain its failure to timely respond to discovery during the previous two years. (Dkt. 109 at ¶¶ 7-10). The Court reaffirmed its finding that despite Plaintiff's repeated assurances that discovery responses were forthcoming, only woefully inadequate discovery had ever been produced by Plaintiff. Accordingly, the Court found that Plaintiff did not provide any support for its statement that it has "meritorious and valid claims that are part of this proceeding." (Dkt. 122 at 7 (citing Dkt. 109 at ¶ 10)). Because Plaintiff had failed to prosecute its case, despite sufficient opportunity to do so, and failed to follow the Court's orders and schedules, the Court denied Plaintiff's Motion to Reconsider the Dismissal Order.

The Court's December 3, 2012 Order also denied Defendant's motion to reconsider the Court's refusal to enter a default judgment on Defendant's Counterclaim. In doing so, the Court gave Plaintiff "a final opportunity to fully respond to the interrogatories and requests to produce that were first served on June 16, 2010." (Dkt. 122 at 10) (emphasis in original). Specifically, the Court ordered Plaintiff to:

1. Revise its interrogatory responses, without objections, providing all facts and detail requested. For example, in responding to interrogatories 2 and 3, Plaintiff shall describe in detail the subject matter knowledge of each person identified. In responding to interrogatory 9, Plaintiff shall describe in detail all the steps that Plaintiff took "over a period of nearly 20 years" to develop the trade dress at issue. In responding to interrogatories 10, 11 and 12, Plaintiff shall describe in detail how third parties helped Plaintiff (not Defendant) develop the trade mark and trade dress at issue. In responding to interrogatory 16, Plaintiff shall describe in detail the license agreement with Foodworks 2047, including producing a copy of the agreement. In responding to interrogatory 18, Plaintiff shall describe in detail the information about who spent promotional dollars, including identifying the person(s) involved. In responding to ...

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