Virginia Lawyers Weekly VA Lawyers Weekly
Where defendants argued a company lacked standing to assert a trademark cancellation claim because they had voluntarily surrendered the trademark, the court rejected that argument. The company alleged it was damaged prior to the voluntary surrender, which was sufficient to confer standing.
Background
Makina ve Kimya Endustrisi A.S., a Turkish company that manufactures firearms, has filed suit against Kutlay Kaya, Zenith Quest Corporation, or ZQC, Zenith Quest International Inc., or ZQI, and Zenith Firearms Inc. or ZF. Defendants have asserted counterclaims against plaintiff. Both parties have filed motions to dismiss.
Veil-piercing
Plaintiff can only assert claims against Kaya through veil-piercing. Plaintiff alleges that one of the corporate entities, ZQI, “agreed to pay an outstanding debt owed by and personally guaranteed by Kaya.” The court construes this as a fact warranting piercing the veil.
Breach of contract
Defendants have moved to dismiss plaintiff’s claims that they breached the 2013 and 2017 agreements. Defendants assert that plaintiff has not pled facts that, taken as true, would establish plaintiff incurred any damages as a result of the alleged breaches of the 2013 and 2017 agreements, because the 2019 agreement restructured these debts.
Under Virginia law, if a plaintiff fails to prove damages after presenting its case in chief, claim dismissal is warranted. But plaintiff has sufficiently alleged the element of damages at this stage of litigation. Defendants’ motion to dismiss the claims related to the 2013 and 2017 agreements will be denied.
Trademark standing
Plaintiff asserts that defendants illegally filed a trademark application for the MKE Mark. Defendants assert that, because ZFI voluntarily surrendered the trademark on April 20, 2022, plaintiff no longer retains standing to brings its cancellation claims. However plaintiff has standing, as, at least for the period leading up to defendants surrendering the trademark, plaintiff put forward factual allegations supporting that plaintiff was likely to be damaged by the registration.
Defendant’s counterclaims
Defendants allege that plaintiff breached the parties’ 2019 contract by (1) failing to deliver defendants’ firearms in exchange for a May 28, 2019, down payment and (2) applying defendants’ May 28, 2019, payment to defendants’ outstanding debt. Plaintiff moves to dismiss this claim, arguing that, under the 2019 contract, “[a]s a condition precedent to [plaintiff] making timely shipments, Defendants were required to make ‘timely payments’ pursuant to the 2019 Agreement’s terms,” which they failed to do. This is a question of contractual analysis in which factual allegations support both parties’ arguments, and thus, this claim will survive the motion to dismiss.
Defendants next allege that plaintiff “repeatedly and materially breached its duties in connection with the 2017 contract by failing to produce and prepare firearms as requested by ZQC.” In response, plaintiff contends that “Defendants fail to allege the existence of a signed writing sufficient to indicate that a contract for sale of the purported 250 firearms was made. Defendants have thus failed to sufficiently allege that [plaintiff] breached an obligation to Defendants.” This court construes the pleadings to allege that the contract was a signed writing.
Plaintiff also argues that “[t]he 2017 Contract did not obligate [plaintiff] to apply the August, 2018 payment toward a rejected order, and [plaintiff] was fully entitled to apply it toward Defendants’ outstanding debt obligations.” However, defendants have alleged two other bases for damages beyond the down-payment. Therefore, plaintiff’s motion to dismiss this count of the counterclaims will be denied.
Defendants also allege that “[plaintiff] repeatedly and materially breached its duties in connection with the 2013 Contract by refusing to hold [Zenith] harmless for the losses, damages, and expenses [] incurred and suffered arising out of the parties [sic] activities relating to the 2013 Contract.” Plaintiff contends that this claim is time-barred. Since the facts establishing the defense are not facially apparent, however, the court will not dismiss the 2013 contract claim based on a statute of limitations defense.
Plaintiff nevertheless asserts that defendants have not alleged sufficient facts to show that plaintiff breached a valid contractual obligation relating to the 2013 contract. But the allegation that plaintiff failed to provide ZQC, ZQI or ZF with weapons pursuant to the 2013 agreement allows this count of the counterclaims to survive. Finally, plaintiff has pleaded sufficient facts to assert a counterclaim for unjust enrichment, in the alternative.
Plaintiff’s motion to dismiss counterclaims denied. Defendants’ partial motion to dismiss denied.
Makina ve Kimya Endustrisi A.S. v. Kaya, Case No. 3:20-cv-00072, Feb. 17, 2023. WDVA at Charlottesville (Moon). VLW 023-3-067. 25 pp.
