Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_06-cv-02972/USCOURTS-azd-2_06-cv-02972-0/pdf.json

Nature of Suit Code: 840
Nature of Suit: Trademark
Cause of Action: 15:1051 Trademark Infringement

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WO

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

JAW Restaurant Management, LLC,

doing business as The Counter,

Plaintiff, 

vs.

Fox Restaurant Concepts, LLC, doing

business as The Counter.

Defendant. 

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No. CV-06-2972-PHX-DGC

ORDER

Plaintiff JAW Restaurant Management LLC (“JAW”) has filed a motion to dismiss

Count VI of the counterclaim filed by Defendant Fox Restaurant Concepts, LLC (“Fox”).

Dkt. #19. The Court has reviewed the memoranda submitted by the parties. Dkt. ##19, 27,

28. For reasons stated below, the Court will deny the motion.

I. Background.

In April of 2006, Plaintiff demanded that Defendant cease and desist the use of “The

Counter” in the name of any of its restaurants. Dkt. #19-2 at 3. The parties engaged in

settlement discussions and, Defendant claims, reached a settlement agreement. Plaintiff

disputes that an agreement was reached, but the Court must assume Defendant’s claim to be

true in ruling on this motion to dismiss. Dkt. #12 ¶ 92. Defendant claims the agreement

arose from a series of emails exchanged between the parties in July and August of 2006. Id.

¶¶ 93-99. According to Defendant, the agreement included the following terms:

(i) Fox would not have to change the name or the signage or any uses of

The Counter on-site at its existing store.

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(ii) Fox could open up to three more stores in the Phoenix and Scottsdale

area if it decided to expand.

(iii) The existing location of Fox’s The Counter would create a basic

template of what was acceptable under the agreement.

(iv) Fox agreed never to serve hamburgers at Fox’s The Counter shop.

(v) Fox agreed not to seek listing for “The Counter” or “The Counter

Restaurant” on the next phone and directory listings.

(vi) Fox agreed to add something after The Counter such as The Counter

Eat Shop Splurge.

(vii) New marketing materials of Fox would reference The Counter as a oneof-a-kind concept or as something different or distinguishing in some

manner from other ordinary restaurants in the Fox line.

(viii) Fox would not be required to remove or exclude The Counter name and

logo from the consolidated entities’ marketing materials.

(ix) The phase-out of nonconforming marketing materials would be

completed by July 2007 at the latest.

Dkt. #12 ¶ 98. The agreement was not signed. In late 2006, Plaintiff demanded the addition

of an anti-assignability clause, based on information that Defendant was trying to sell The

Counter. Id. ¶¶ 102, 107. Defendant refused to modify the agreement, and Plaintiff brought

suit on December 8, 2006. Id. ¶¶ 107-09; see also Dkt. #1. Defendant filed an answer and

counterclaim on February 8, 2007. Dkt. #12. Count VI of the counterclaim seeks specific

performance of the alleged agreement. Id. ¶¶ 168-74. 

II. Legal Standard.

A district court may not dismiss a complaint for failure to state a claim “unless it

appears beyond doubt that the plaintiff can prove no set of facts in support of his claims

which would entitle him to relief.” Barnett v. Centoni, 31 F.3d 813, 816 (9th Cir. 1994).

When analyzing a complaint for failure to state a claim, “[a]ll allegations of material fact are

taken as true and construed in the light most favorable to the non-moving party.” Smith v.

Jackson, 84 F.3d 1213, 1217 (9th Cir. 1996). In addition, the Court must assume that all

general allegations “embrace whatever specific facts might be necessary to support them.”

Peloza v. Capistrano Unified Sch. Dist., 37 F.3d 517, 521 (9th Cir. 1994). 

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III. Discussion.

Plaintiff denies that it entered into an agreement with Defendant, but argues that even

if it did, the use of terms such as “never” and “henceforth” bring the agreement within

Arizona’s statute of frauds. Dkt. #19-2 at 5-6. Under Arizona law, contracts that are “not

to be performed within one year of the making thereof” must be in writing and signed by the

party against whom enforcement of the contract is sought. A.R.S. § 44-101(5). Because the

alleged agreement was not signed by either party, Plaintiff argues that the statute of frauds

prevents Defendant from seeking its specific performance. Dkt. #19-2 at 5-6.

The statute of frauds “is narrowly construed.” Western Chance No. 2, Inc. v. KFC

Corp., 957 F.2d 1538, 1541 (9th Cir. 1992) (citing John D. Calamari & Joseph M. Perillo,

Contracts § 19-17 (3d ed. 1987)). “The mere possibility that performance can be completed

within one year – even if not contemplated by the parties – is usually sufficient to remove

the agreement from the statute of frauds.” Id. (citing Co-op Dairy, Inc. v. Dean, 435 P.2d

470, 472 (Ariz. 1967); Waugh v. Lennard, 211 P.2d 806, 813-14 (Ariz. 1949) (oral

employment contract not within the statute of frauds because employer could die within a

year); Healey v. Coury, 783 P.2d 795, 799 (Ariz. App. 1989) (the statute requires

impossibility of performance within a year)). The fact that performance may be completed

in more than one year is immaterial. Id. (citing Healey, 783 P.2d at 799). 

Plaintiff argues that the term “never” is “on [its] face perpetually executory” and by

definition could not be performed within one year. Dkt. #28 at 2. While there is no Arizona

precedent that directly addresses the issue, the law generally treats over-broad statements

relating to duration of contracts as “indefinite terms.” See, e.g., C.R. Klewin, Inc. v. Flagship

Properties, Inc., 600 A.2d 772, 779 (Conn. 1991) (“We therefore hold that an oral contract

that does not say, in express terms, that performance is to have a specific duration beyond

one year is, as a matter of law, the functional equivalent of a contract of indefinite duration

for the purposes of the statute of frauds. Like a contract of indefinite duration, such a

contract is enforceable because it is outside the proscriptive force of the statute regardless of

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Other provisions of the agreement could definitely be performed within one year. See Dkt.

#12-4 at 5, 7 (“My client will agree to phase out nonconforming stuff within 240 days or 8

months . . .”; “[M]y client is agreeable on the phone directory listings to take immediate steps

(within 10 business days of signing) to alert all phone directories . . .”).

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how long completion of performance will actually take.”).1 

Employment contracts that are “for life” or “until death” are the most common types

of contracts having broad duration, and yet have been held to fall outside the statue of frauds.

See, e.g., Carnig v. Carr, 46 N.E. 117 (Mass. 1897); Silverman v. Bernot, 239 S.E.2d 118,

121-23 (Va. 1977). This “same principle has been applied to promises in terms of unlimited

duration made by or to a corporation when performance of the promise is, by nature, limited

to the life of the corporation or the continuance of its business.” 9 Williston on Contracts §

24:5 (4th ed.); see also Richmond Union Pass. Ry. Co. v. Richmond, F. & P. R. Co., 32 S.E.

787 (Va. 1899) (oral contract between two companies that had no fixed time period within

which it was to be performed was found outside the statute of frauds because a change of

circumstances surrounding the parties might at any time have terminated the contract). 

The agreement in this case falls outside the statute of frauds because it was not

impossible for performance to be completed within one year. Plaintiff’s corporation could

have dissolved within a one-year period, and surely Defendant would not be expected to

refrain from ever selling hamburgers or expanding to more than three restaurants if Plaintiff

no longer existed. Defendant’s corporation could also have dissolved within one year, or

Defendant could have decided to change its name completely, thus fulfilling its obligations

to refrain from the activities listed in the agreement. See Carnig, 46 N.E. 117 (An oral

agreement of defendant to employ plaintiff so long as he had work to do in a certain

occupation would have been completely performed within one year if defendant had ceased

to carry on business within that time, and hence is not within the statute). Although the

dissolution of the parties’ corporations within a year may not have been contemplated at the

time of the agreement, such contemplation is not required by Arizona law. See Western

Chance No. 2, Inc., 957 F.2d at 1541.

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Plaintiff argues that “unless expressly limited to a term of less than one year, licenses

under intellectual property and corresponding covenants not to sue have been universally

held to fall within the Statute of Frauds.” Dkt. #19-2 at 7 (citing Commonwealth Film

Processing, Inc. v. Courtaulds United States, Inc., 717 F. Supp. 1157, 1158 (W.D. Va 1989);

Schick Service, Inc. v. Jones, 173 F.2d 969, 976 (9th Cir. 1949); Sun Studs, Inc. v. Applied

Theory Associates, Inc., 772 F.2d 1557, 1562-63 (Fed. Cir. 1985)). Commonwealth Film

Processing stated that license agreements are subject to the statute of frauds if they “cannot

be fully performed within one year,” 717 F.Supp. at 1158, but the Court has already

explained why the agreement in this case could be performed within a year. Sun Studs

interpreted a different State’s statute of frauds that rendered an oral contract void if “by its

terms it is not to be performed within a year,” and relied on precedent that applied the statute

of frauds to oral agreements that granted a license on a patent whose remaining term was

more than one year. 772 F.2d at 1562-63 (citing Schick). Sun Studs is inapplicable because

Arizona’s statute of frauds focuses on whether performance within one year is possible even

if the contractual terms do not call for performance within one year, and because this case

does not involve a license on a trademark whose life, like a patent’s, is some definite term

greater than one year. 

Plaintiff makes a variety of arguments regarding why the agreement does not fall

within any of the exceptions to the statute of frauds. Dkt. #19-2 at 7-11. Because the Court

concludes that the statute of frauds does not govern the alleged agreement, the Court need

not address the statute’s exceptions. 

IT IS ORDERED that Plaintiff’s motion to dismiss (Dkt. #19) is denied.

DATED this 26th day of April, 2007.

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