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Lone Star Promotions, LLC v. Abbey Lane Quilts, LLC

United States District Court, D. Utah

April 11, 2019

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 Defendants' Motion to Dismiss Plaintiffs' Second Amended Complaint for lack of subject matter jurisdiction pursuant to Federal Rule of Civil Procedure 12(b)(1). On March 22, 2019, the court held a hearing on the motion. At the hearing, Plaintiffs were represented by Randall B. Bateman, and Defendants were represented by Bruce Pritchett. The court heard argument from counsel and took the motion under advisement. 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.

         BACKGROUND

         Lone Star is a single member Florida limited liability company, owned by Marcea Owen, which has its principal place of business in North Ogden, Utah. 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 to the blog 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, and that Lone Star granted Abbey Lane Quilts an oral license to use Lone Star's designs, which amounted to more than 150 pattern designs.

         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 the dispute between Owen and Liljenquist arose. Liljenquist contends that Lone Star was 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.

         Both Owen and Liljenquist were responsible for going to the “market” to sell the patterns for quilts to retailers and for printing and fulfilling orders. Liljenquist possesses the physical assets of the partnership in her home in Oviedo, Florida and at a nearby storage unit. Owen lacks access to any of these items.

         On April 2, 2017, Liljenquist sent an email to Owen proposing that Owen buy her out of their partnership for $50, 000.00 or that they simply shut down the company. Liljenquist allegedly cancelled the partnership credit cards, failed to deposit checks, depleted checking accounts, ceased selling products, refused to send samples or product to Owen, and refused to fulfill orders. Liljenquist 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 any of 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 attempted to continue Abbey Lane Quilts while negotiating with Liljenquist. Liljenquist allegedly refused to negotiate and insisted that Owen could not use any of the pattern designs without paying Liljenquist $50, 000.

         Because Owen did not believe that Liljenquist was negotiating in good faith, 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 quilting 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. The lawsuit also alleged claims against Owen and 2 Abbey Lane Quilts 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, and sought injunctive relief.

         The Utah state district court granted a preliminary injunction in favor of Abbey Lane Quilts LLC barring Owen and 2 Abbey Lane from selling designs that had been sold by Abbey Lane Quilts Partnership. After the Utah court entered the March 2018 Preliminary Injunction, Owen filed an action against Defendants in Florida state court. The Utah case has now been stayed pending resolution of the Florida case. The Florida case was then ...


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