Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_03-cv-02353/USCOURTS-azd-2_03-cv-02353-0/pdf.json

Nature of Suit Code: 840
Nature of Suit: Trademark
Cause of Action: 15:1114 Trademark Infringement

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1 The Court will deny the request for oral argument because the parties have

submitted memoranda thoroughly discussing the law and evidence and the Court

concludes that oral argument will not aid its decisional process. See Mahon v. Credit Bur.

of Placer County, Inc., 171 F.3d 1197, 1200 (9th Cir. 1999); Partridge v. Reich, 141 F.3d 920,

926 (9t h Cir. 1998); Lake at Las Vegas Investors Group, Inc. v. Pacific. Dev. Malibu Corp.,

933 F.2d 724, 729 (9th Cir. 1991), cert denied, 503 U.S. 920 (1992).

WO

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

Century 21 Real Estate Corporation, 

 Plaintiff/Counterdefendant, 

vs.

Daryush B. Motlagh and Jennifer

Motlagh, husband and wife; and

Integrity Assurance, Inc., an Arizona

corporation, 

 Defendants/Counterclaimants. 

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No. CV-03-2353-PHX-DGC

ORDER

Pending before the Court are Plaintiff’s renewed motion to dismiss counterclaims

and motion for summary judgment on Plaintiff’s breach of contract and unjust enrichment

claims. Docs. ##50-51. Also pending is Defendants’ motion to reinstate counterclaims.

Doc. #59. For the reasons set forth below, the Court will grant Plaintiff’s mot ion t o dismiss

in part, deny its motion for summary judgment without prejudice, and deny Defendants’

motion to reinstate counterclaims as moot. The Court also will set a st atus conference in

this matter for December 14, 2005, at 4:00 p.m.1

Case 2:03-cv-02353-DGC Document 63 Filed 11/28/05 Page 1 of 4
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Discussion

A. The Renewed Motion to Dismiss and Motion to Reinstate Counterclaims.

In a June 2, 2004 order, the Court denied Plaintiff’s original motion to dismiss

because it was unclear whet her t he counterclaims belonged to Defendants or the

bankruptcy estate. Doc. #28 at 6-7. On October 26, 2004, the Bankruptcy Court held that

the counterclaims belonged to the estate and t hat the proper party to pursue them was the

trustee, not Defendants. In re Motlagh, 2:01-bk-17367-RJH (Bankr. D. Ariz. Oct. 26, 2004

Order). In an Ap ril 18, 2005 discovery order, this Court acknowledged that Defendants

could not assert the counterclaims in light of the Bankruptcy Court’s determination (

Doc. #47 at 1-2), but the Court did not formally dismiss the counterclaims. Id.

Plaintiff renewed it s motion to dismiss on May 13, 2005, arguing that Defendants do

not have standing t o p ursue the counterclaims in light of the Bankruptcy Court’s order.

Doc. #50 at 1-2. Defendants have moved to “reinstate” the counterclaims on the ground

that Daryush Motlagh purchased the claims at a bankruptcy estate auction on August 30,

2005. Doc. #59 at 2, Ex. 2. Plaintiff admits that Daryush Motlagh purchased the

counterclaims from the bankruptcy estate. Doc. #61 at 1.

Under Arizona law, the counterclaims constitute the community property of

Dary ush and Jennifer Motlagh. See A.R.S. §§ 25-211 (“All property acquired by either

husband or wife during the marriage is the community propert y of the husband and

wife[.]”); 25-214(C) (“Either spouse separately may acquire . . . community property[.]”);

In re Estate of Stephens, 574 P.2d 67, 73 n. 4 (Ariz. Ct. App. 1978) (stating that one-half of

a husband’s income belonged to his wife “[s]ince Arizona is a communit y property state”);

see also Docs. ##1 ¶¶ 2-4, 13 at 2. The Court will accordingly deny Plaintiff’s motion t o

dismiss with respect to Defendants Daryush and Jennifer Motlagh because t hey now own

and have standing to pursue the counterclaims. The Court will grant the motion with

respect to Defendant Integrity Assurance because it did not purchase the counterclaims

and thus does not have standing to pursue them. The Court need not “reinstate” the

counterclaims because they have never been dismissed; they may now be pursued by the

Case 2:03-cv-02353-DGC Document 63 Filed 11/28/05 Page 2 of 4
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Motlaghs.

B. Plaintiff’s Motion for Summary Judgment.

Plaintiff filed the present motion for summary judgment on May 13, 2005. Doc. #51.

Plaintiff argues that Daryush Motlagh breached the franchise agreement by failing to make

required payments. Id. at 5. Plaint iff cont ends that Defendants cannot argue that

Plaintiff’s alleged breach of the franchise agreement excused Motlagh’s breach because

Defendants do not own the counterclaims and, as a matter of law, a franchisee may not

refuse to make payments under a franchise agreement while continuing to accept the

benefits of t he agreement. Id. at 5-6 (citing Dunkin’ Donuts, Inc. v. Donuts, Inc., No. 99-

CV-1141, 2000 WL 1808517 (N.D. Ill. Dec. 6, 2000)).

The Court will deny the motion for summary judgment without prejudice. As

discussed above, the counterclaims now belong to Daryush and Jennifer Motlagh,

undercutting a portion of Plaintiff’s argument. Moreover, the Court concludes that the

holding in Dunkin’ Donuts does not at this stage entitle Plaint iff to summary judgment on

its breach of cont ract claim because in that case it was undisputed that the franchise

agreement was validly terminated by the franchisor based on the franchisee’s numerous

violations of health and safet y standards. Dunkin’ Donuts, 2000 WL 1808517 at *9. In this

case, Defendant s allege that Plaintiff improperly sought to terminate the franchise

agreement when the automatic bankruptcy stay was in effect and thereafter repudiated the

agreement and refused to acknowledge Daryush Mot lagh’s franchise. Docs. ##1 ¶ 41, 13

at 3-10, 54 at 2-3, 8. Furthermore, t he district court in Dunkin’ Donuts did not apply New

Jersey law, which governs the franchise agreement in t his case. See Doc. #1 Ex. A ¶ 25(A).

The factual issues regarding Plaintiff’s breach of contract claim also preclude summary

judgment on its unjust enrichment claim against Defendant Integrity Assurance.

The Court will deny Plaintiff’s motion without p rejudice because discovery to be

conducted on the counterclaims may establish facts that can later be asserted in sup p ort

of summary judgment. The Court will permit discovery on the counterclaims and the filing

of dispositive motions on all claims at issue. 

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/ / /

The parties shall be prepared to address new discovery and disp osit ive motion

deadlines at a status conference to be held on December 14, 2005. The parties shall file a

joint proposal regarding such deadlines by December 9, 2005.

IT IS ORDERED:

1. Plaint iff’s renewed motion to dismiss counterclaims (Doc. #50) is granted in

part and denied in part as set forth in this order.

2. Plaintiff’s motion for summary judgment (Doc. #51) is denied without

prejudice.

3. Defendants’ motion to reinstat e counterclaims (Doc. #59) is denied as moot.

4. A status conference is set for December 14, 2005, at 4:00 p.m.

5. The parties shall file a joint proposal regarding new discovery and dispositive

motion deadlines by December 9, 2005.

DATED this 28th day of November, 2005.

Case 2:03-cv-02353-DGC Document 63 Filed 11/28/05 Page 4 of 4