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Lone Star Promotions, LLC v. Abbey Lane Quilts LLC

United States District Court, D. Utah, Northern Division

November 6, 2018

LONE STAR PROMOTIONS, LLC, Plaintiff,
v.
ABBEY LANE QUILTS, LLC; ABBEY LANE QUILTS; and JANICE LILJENQUIST, Defendants.

          MEMORANDUM DECISION AND ORDER

          DALE A KIMBALL United States District Judge

         This matter is before the court on Plaintiff Lone Star Promotions, LLC's Motion for TRO/Preliminary Injunction Barring the Utah State District Court In and For Weber County, Utah From Interfering With the Copyrights of Plaintiff Lone Star Promotions, LLC. The parties fully briefed the motion on an expedited basis, and, on October 29, 2018, the court held an expedited hearing on the motion. At the hearing, Plaintiff was represented by Randall B. Bateman, and Defendants were represented by Bruce Pritchett and Ryan A. Rudd. The court heard argument from counsel for both parties and took the motion under advisement.[1] After the hearing, Lone Star asked for leave to file supplemental briefing in response to arguments Defendants raised at the hearing. The court granted Lone Star leave, and Lone Star filed a supplement brief. After carefully considering the parties' arguments, as well as the law and facts relevant to the motion, the court enters the following Memorandum Decision and Order denying Plaintiff's motion for preliminary injunctive relief.

         FACTUAL BACKGROUND[2]

         Most of the following facts are taken from Lone Star's Amended Complaint and the Declaration filed by Defendant Janice Liljenquist. Lone Star is a single member Florida limited liability company with its principal place of business in North Ogden, Utah. Lone Star's owner and single member is Marcea Owen. In 2007, Marcea Owen started Lone Star to perform web design services and other design services.

         In 2008, Owen and Janice Liljenquist started a partnership selling quilt patterns and other products. Owen and Liljenquist now dispute what work each performed for the partnership, but Owen made a statement to a blog during the partnership that she was a little better at design and colors and Liljenquist was a little better at sewing and pattern writing. Owen and Liljenquist formed Abbey Lane Quilts as a Florida at-will general partnership in 2008. The state registration listed Owen and Liljenquist as the owners.

         Lone Star claims that Owen and Liljenquist marketed quilting patterns which included designs Owen created as owner of Lone Star. Liljenquist argues that the designs were a collaborative effort, citing Owen's statement made during the partnership that “we both throw in our two bits into each other's jobs, so it takes both of us to come up with a pattern.” Lone Star, however, contends that Liljenquist's contributions did not include any protectable expression to the patterns. Thus, Lone Star claims that it is the author of each quilting design sold by Abbey Lane Quilts, with the exception of one. Lone Star also alleges that it granted Abbey Lane Quilts an oral license to use Lone Star's designs, which amounted to more than 150 pattern designs.

         Defendants, however, claim that Liljenquist and Owen are joint authors of the designs and that Abbey Lane Quilts has an exclusive oral license to the copyrighted works. Liljenquist states that both she and Owen had to agree in order to finish a pattern, the quilting community viewed them as joint designers, Lone Star had no control over the design or creation of the quilting patterns, and she had never heard of an oral license between Lone Star and Abbey Lane Quilts prior to April 2017, when a dispute between Owen and Liljenquist arose. Liljenquist also contends that Lone Star was only a tax shelter Owen used so she could write off business expenses, but it never owned any rights to the patterns. Liljenquist submitted the past four years of balance sheets and tax returns for Abbey Lane Quilts, which provide no indication of any license agreement or royalty payment to Lone Star.

         On April 2, 2017, Lone Star claims that Liljenquist disassociated from the partnership by sending an email to Owen. In the email, Liljenquist stated that the business was too much for her and she proposed that Owen buy her out for $50, 000.00 or they shut down the company. Liljenquist and Owen unsuccessfully negotiated how to part ways and both partners appear to have taken actions to further their own interests. Lone Star claims that Liljenquist cancelled the partnership credit cards, failed to deposit checks, depleted checking accounts, ceased selling products, refused to send samples or product to Owen, refused to fulfill orders, and did not work in the partnership from April 2017 to February 2018.

         Owen alleges that she learned in April 2017 that Liljenquist had set up Abbey Lane Quilts LLC in December of 2016 without her knowledge. To avoid prejudicing Liljenquist's rights, Owen made the 2017 yearly filing for Abbey Lane Quilts LLC. However, Owen claims that the LLC is a shell entity that has never been capitalized or operated.

         After the April 2017 email, Owen notified customers and suppliers to send future communications to her address. Owen established a new business called 2 Abbey Lane, LLC, as a Utah limited liability company. Owen states that Lone Star continued to develop new quilt designs. Lone Star licensed 2 Abbey Lane LLC to start selling patterns based on the new designs.

         On August 25, 2017, Liljenquist and Abbey Lane Quilts LLC filed a lawsuit in the Second District Court in and for Weber County, Utah, seeking dissolution of Abbey Lane Quilts LLC and alleging claims against Owen and 2 Abbey Lane for intentional interference with economic relations, conversion, unfair competition, trademark infringement, misappropriation of trade secrets, unjust enrichment, breach of duty of loyalty and care, civil conspiracy. Liljenquist and Alley Lane Quilts also sought injunctive relief.

         On March 12, 2018, the Utah state court granted a preliminary injunction in favor of Liljenquist and Abbey Lane Quilts LLC which appeared to be an attempt to restore the status quo that existed between the parties when the dispute arose in April 2017. Although there were no copyright claims asserted in the state court action, the state court preliminary injunction bars Owen and 2 Abbey Lane from, among other things, selling designs that had been sold by Abbey Lane Quilts Partnership and Owens designs developed after Owen and Liljenquist had parted ways in April 2017 on the grounds of alleged misappropriation of trade secrets and unfair competition.

         Approximately three months later, Lone Star registered a copyright in one of the quilting designs. And, on June 28, 2018, filed the present lawsuit, alleging copyright violations. Four months later, on October 2, 2018, Lone Star filed the current motion for preliminary injunction.

         LEGAL ANALYSIS

         Lone Star's Motion for Temporary Restraining Order and ...


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