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Wine & Canvas Development LLC v. Weisser

United States District Court, S.D. Indiana, Indianapolis Division

July 7, 2017




         This matter is before the Court on a Motion for Turnover of Trademarks (and for any Funds Received as Royalties Since the Purported Transfer) (“Motion for Turnover”) filed by Defendant Christopher Muylle (“Muylle”) (Filing No. 620); a Motion to Strike or Disregard Unsupported Factual Assertions, Legal Conclusions and/or Other Irrelevant, Scandalous and/or Harassing Allegations filed by Plaintiff Wine & Canvas Development LLC (“WNC”) (Filing No. 627); and a Motion to Strike Omnibus Filing (ECF 628), for Admonishment of Muylle and Counsel; and, Alternatively, for Extension of Time filed by WNC (Filing No. 629). The Court will address each motion in turn.


         Muylle asks the Court to order that the “Wine and Canvas” trademark (the “Mark”) be turned over to him, along with any royalties earned therefrom, until his judgments in this case against counterclaim defendants WNC, Anthony Scott (“A. Scott”), and Tamara Scott (“T. Scott”) are satisfied. WNC originally registered the Mark, and it was owned by WNC when WNC commenced this suit. An agreement signed by WNC and non-party Wine and Canvas IP Holdings, LLC (“WNC IP”) on January 1, 2012, purports to assign the Mark to WNC IP. Muylle argues two legal bases to compel the surrender of the Mark to him. First, WNC's transfer of the Mark to WNC IP was a fraudulent transfer under Indiana Code §§ 32-18-2-14 and 32-18-2-15, and, second, WNC IP is the alter ego of WNC and/or the Scotts. Under the first theory, WNC's transfer of the Mark would be voidable and ineffective regarding Muylle, which permits him to reach the Mark and its royalties in the hands of either WNC or WNC IP as if the transfer did not occur. Under the second theory, WNC and WNC IP are deemed to be one entity, which permits Muylle to reach the Mark and its royalties from WNC. The Court will treat Muylle's Motion for Turnover as part of the proceedings supplemental to collect his judgments.

         A. Procedural Background

         This case was initiated on November 29, 2011, by WNC filing its original complaint in Indiana state court (Filing No. 1; Filing No. 1-1). Defendants Theodore Weisser (“Weisser”) and Muylle removed the case to this Court in December 2011. On September 4, 2012, WNC filed its operative Amended Verified Complaint for Declaratory Judgement, Injunctive Relief and Damages (“Complaint”) (Filing No. 36). The Complaint pled claims of trademark infringement, false designation of origin, trademark dilution, and counterfeit marks, all under the Lanham Act, based on Muylle's alleged use of WNC's trademarks, particularly the “Wine and Canvas” Mark at issue in this Motion.[1] In April 2013, Muylle filed his operative answer to WNC's Complaint (“Answer”) (Filing No. 66). In his Answer, Muylle pled counterclaims against WNC for cancellation of the Mark's registration and for abuse of process, and he joined non-parties Anthony Scott and Tamara Scott (“the Scotts”) as defendants to the abuse-of-process counterclaim.[2] WNC's and the Scotts' answer to Muylle's counterclaims-Amended Answer, Defenses & Counterclaims (Filing No. 101)-included state-law counterclaims by the Scotts against Muylle for abuse of process, improper taking, conversion, and unfair competition.

         On August 15, 2014, the Court entered summary judgment against Muylle's counterclaim to cancel the Mark and against all of WNC's claims against Muylle except for its claims for trademark infringement and false designation of origin (Filing No. 341). Muylle's counterclaim for abuse of process also survived summary judgment. All of the surviving claims were tried to a jury from November 17 through 20, 2014. The jury returned a verdict in favor of Muylle on WNC's claims against him and on his counterclaim for abuse of process. The jury awarded Muylle $81, 000.00 against WNC, $81, 000.00 against A. Scott, and $81, 000.00 against T. Scott (Filing No. 444). The Court later awarded Muylle his fees and costs in the amounts of $175, 882.68 against WNC and $1, 661.30 against WNC and the Scotts (Filing No. 535; Filing No. 549).

         The Court earlier had entered default judgment against defendants Weisser, YN Canvas CA, LLC, and Weisser Management Group, LLC on WNC's claims, and the Court held a hearing on damages on March 2, 2015. It awarded WNC damages of $5, 088.39 against YN Canvas CA, LLC. The Court also awarded WNC its costs and issued an injunction prohibiting these three defendants from infringing WNC's trademarks (Filing No. 510).

         According to Muylle, as of June 2016, the only payments that he has received on his judgments has been T. Scott's remittance of $3, 515.65 pursuant to a garnishment order (Filing No. 620 at 2). He has pursued proceedings supplemental to collect on his judgments.

         B. Factual Background[3]

         On January 1, 2012, A. Scott signed an Intellectual Property Agreement (“IP Agreement”) (Filing No. 613) as “Manager” for the two signatory parties, WNC and WNC IP. The IP Agreement transferred all rights, title, and interest in all of WNC's intellectual property (including trademarks, copyrights, and domain names), except for the Mark, to WNC IP. The Mark was temporarily retained by WNC with the provision that,

ownership of the Mark shall not vest in Transferee [WNC IP] until the occurrence of any of the following (whichever shall occur first): (1) the dismissal of all claims against all parties WITH PREJUDICE in Litigation [meaning this lawsuit]; (2) a final judgment as to all parties and all claims in the Litigation, (3) the trial on the merits in the Litigation, (4) a settlement signed by all parties to the Litigation, (5) a written document executed by both Transferor and Transferee subsequent to date hereof transferring ownership of the Mark by Transferor to Transferee; or (6) upon the passage of ten (10) years from the date hereof, at which time ownership of the Mark shall automatically vest in Transferee . . . .

         IP Agreement, ¶ 1. The agreement also provided that, in the interim, before full ownership “vested”, WNC IP would have an irrevocable and exclusive worldwide license to use the Mark in its discretion, including “the exclusive right to license the Mark and to generate income therefrom.” Id. The agreement provided that WNC IP would pay WNC one hundred dollars and grant it an irrevocable non-exclusive license to use the Mark in connection with WNC's Indianapolis location for a term of twenty years. Id.

         The January 1, 2012 execution of the IP Agreement occurred one month after this suit was filed, nine months before Muylle filed his first counterclaims against WNC (for violation of California's franchising code and cancellation of the Mark), and sixteen months before Muylle filed his operative amended counterclaims, which added the claim for abuse of process and added the Scotts as counterclaim defendants on that claim.

         The IP Agreement's initial recitals include an acknowledgement of the pendency of this suit. It also includes a recital explaining the genesis of the agreement. It states that, prior to this suit being filed, Weisser, serving as a consultant, was in the process of developing a system for expanding the Wine & Canvas concept throughout the United States. That system included the creation of WNC and WNC IP with WNC owning and operating the Indianapolis location and WNC IP owning and controlling all of the intellectual property. However, after Weisser left, it was discovered that he had organized only WNC and not WNC IP. The recital noted that WNC IP had si nce been organized[4] and that the IP Agreement was intended to fulfill the original business plan for WNC IP to acquire and hold WNC's intellectual property. IP Agreement at 1.

         On August 29, 2014, an affidavit by A. Scott was submitted in support of WNC's motion to dismiss a separate copyright suit in the Middle District of Florida (Filing No. 626-1 at 51-75). In this affidavit, A. Scott states that WNC IP “is the exclusive owners of multiple trademarks (by rights granted by [WNC] and by title), both unregistered and registered. Such marks include common law trademarks, service marks, other marks and (1) that certain trademark ‘WINE AND CANVAS' registered with United States Patent and Trademark Office . . . .” Id. at 51-52. On November 3, 2014, A. Scott submitted a second affidavit in support of WNC's reply in order to refute an assertion that WNC IP had falsely averred that it was the exclusive owner of the Mark. In this affidavit, A. Scott amended his previous one by averring that, while WNC IP acquired other trademarks of WNC and acquired some exclusive rights in the Mark, WNC, not WNC IP, was the owner of the Mark. Id. at 76-81, ¶¶ 8-10.

         Near the end of the jury trial in November 2014, Muylle filed his Motion for Judgment as a Matter of Law (Filing No. 434). He argued that WNC lacked standing to maintain a claim for infringement of the Mark because it had assigned the Mark to WNC IP. Citing Specht v. Google, Inc., 747 F.3d 929, 933 (7th Cir. 2014), he argued that only the current owner or registrant of a trademark has standing to assert an infringement claim. The Court heard argument and took testimony on the motion. The factual basis for his contention that WNC had transferred the Mark to WNC IP was A. Scott's averments in his first Florida affidavit that WNC IP is the exclusive owner of the Mark (Filing No. 626-1 at 14, 29, 42-45). A. Scott testified that WNC is the exclusive owner of the Mark while WNC IP has the exclusive right to license the Mark as well as owning other trademarks. Id. at 32-33, 35, 38, 46. The Court denied Muylle's motion, concluding that there was no evidence that anyone other than WNC was the owner of the Mark at the time that it was registered. Id. at 48.

         On January 1, 2015, WNC and WNC IP executed a Trademark Ownership Acknowledgement (“Acknowledgement”). Id. at 9. A. Scott again signed on behalf of both parties, this time in his capacity as “President” of each entity. By this instrument, WNC and WNC IP acknowledged the occurrence of one of the “trigger events” in the IP Agreement by which WNC IP “automatically acquired ownership of the Mark, ” namely, the completion of the trial on the merits in this suit. They agreed that, pursuant thereto, “all rights, title and interest in and to the Mark that have no[t] previously been transferred by [WNC] to [WNC IP] are now transferred in full . . . .” Id. The Acknowledgement was executed after the November 2014 trial and verdict but before the March 2, 2015 damages hearing on the defaulted claims.

         There has been no assertion or showing that copies of the IP Agreement or the Acknowledgement were produced, or their terms were disclosed, to Muylle until March 2016.

         C. Discussion

         In his Motion for Turnover, Muylle asserts that his counsel first became aware of the IP Agreement and the Acknowledgement on March 7, 2016, when his counsel was given copies of the documents during a creditors' meeting in WNC's bankruptcy proceeding. He asserts that the documents show that WNC did not own the Mark as of, at the latest, January 1, 2015, the date of the Acknowledgement. He also contends that the consideration that WNC IP gave to WNC for the transfer was substantially less than the reasonable value of the Mark. Muylle does not affirmatively and decisively assert that the Mark was, in fact, transferred to WNC IP. Rather he argues under two theories that, even if it was transferred, he is entitled to a turnover of the Mark and all royalties earned therefrom until his judgments are satisfied.

         First, a transfer from WNC to WNC IP was a fraudulent transfer which renders it voidable as to him under Indiana Code §§ 32-18-2-14 and 32-18-2-15. In support of this argument, Muylle relies on the IP Agreement, the Acknowledgement, A. Scott's trial testimony, and the U.S. Patent and Trademark Office's electronic registration record of the Mark as of May 11, 2016, which shows WNC as the owner of the Mark. Second, Muylle argues that WNC IP is only an alter ego of WNC and/or the Scotts, which renders the Mark reachable through WNC. In support of this theory, Muylle refers to the Scotts' testimony at the hearing on proceedings supplemental and discovery responses.

         WNC gives several responses. First, it argues that Muylle has not designated or authenticated admissible evidence in support of his motion. Second, because obtaining the Mark from WNC IP's possession under the theory of fraudulent transfer or from WNC's possession under an alter ego theory requires that a transfer occurred, Muylle must assert that there was a transfer, yet he takes no position on the question and has previously asserted that no transfer took place. Third, the Court lacks jurisdiction to hear what amounts to a new claim against non-party WNC IP to quiet title to the Mark without all the proper procedures of an independent suit, including trial.[5] Fourth, WNC argues that the elements of a fraudulent transfer are not shown. WNC does not address the merits of Muylle's alter ego argument.

         1. Fraudulent transfer under Indiana Code § 32-18-2-14.

         A transfer made or an obligation incurred by a debtor is fraudulent as to a creditor, whether the creditor's claim arose before or after the transfer was made or the obligation was incurred, if the debtor made the transfer or incurred the obligation:

(1) with actual intent to hinder, delay, or defraud any creditor of the debtor; or
(2) without receiving a reasonably equivalent value in exchange for the transfer or obligation, and the debtor:
(A) was engaged or was about to engage in a business or a transaction for which the remaining assets of the debtor were unreasonably small in relation to the business or transaction; or
(B) intended to incur or believed or reasonably should have believed that the debtor would incur debts beyond the debtor's ...

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