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Kashlan v. TCBY Systems

August 23, 2006

OSMAN KASHLAN, AN INDIVIDUAL PLAINTIFF/COUNTER-DEFENDANT
v.
TCBY SYSTEMS, LLC, A DELAWARE LIMITED LIABILITY COMPANY, AND TCBY OF JORDAN, INC., AN ARKANSAS CORPORATION DEFENDANTS/COUNTER-PLAINTIFFS



The opinion of the court was delivered by: Garnett Thomas Eisele United States District Judge

ORDER

Before the Court is a Motion to Dismiss filed by Plaintiff/Counter-Defendant Osman Kashlan. Mr. Kashlan, pursuant to Fed. R. Civ. P. 12(b)(1) and 12(b)(6) seeks to dismiss Counts II, III, IV, V, and VI of the Counterclaim filed by Defendants/Counter-Plaintiffs TCBY Systems, LLC and TCBY of Jordan, Inc. (collectively "TCBY"). TCBY has responded to the motion. The Court, after reviewing the motion papers, concludes that the motion should be denied.

FACTUAL BACKGROUND

Osman Kashlan ("Kashlan") is a former franchisee of the TCBY franchise system. Kashlan resides in Syria. Kashlan and TCBY entered into a TCBY Transnational Master Franchise Agreement ("Agreement") which granted Kashlan the exclusive right to own, operate, develop and subfranchise TCBY franchises in the Kingdoms of Jordan and Syria. The Agreement was subsequently terminated by Defendant TCBY of Jordan, Inc.

On April 20, 2006, Kashlan filed his Complaint in this Court. The Complaint contains two counts: (1) Declaratory Judgment; and (2) Breach of Contract and Breach of the Implied Covenant of Good Faith and Fair Dealing. Kashlan contends that TCBY breached and improperly terminated the Agreement.

On May 30, 2006, the TCBY Defendants filed their Answer and Counterclaim. The Counterclaim asserts the following causes of action: (1) Breach of Contract; (2) Trademark Infringement; (3) Trade Dress Infringement; (4) Dilution of Marks and Trade Name; (5) Acts of Unfair Competition; and (6) Declaratory Judgment.

On June 20, 2006, Kashlan filed the instant Motion to Dismiss. Therein, Kashlan seeks to dismiss all the claims related to Kashlan's alleged violation of TCBY's marks ("the trademark claims"). Said claims involve Counts II, III, IV and VI of TCBY's Counterclaim.

DISCUSSION

Kashlan contends that the standards required for the extraterritorial application of the Lanham Act, on which TCBY's trademark claims are based, are not satisfied in this case. The Eighth Circuit has not spoken on this issue. The parties appear to agree that the so-called "Vanity Fair Test" established by the Second Circuit in a 1956 case*fn1 (or various modified versions thereof) would be an acceptable test to apply to resolve the issue of the Lanham's Act extraterritorial reach. Not surprisingly, they differ on the appropriate conclusion to be reached from the application of such test.

The Court declines to conclude at the Rule 12 stage that the Lanham Act should not apply extraterritorially. The Court specifically finds that the TCBY Defendants have the better argument on the competing briefs. It will not hesitate, however, to reconsider the issue in the context of a fully developed factual record.

CONCLUSION

IT IS HEREBY ORDERED THAT Plaintiff/Counter-Defendant's Motion to Dismiss (docket entry # 13) be, and it is hereby, DENIED.

IT IS SO ORDERED this 23rd day of ...


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