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Prograde Ammo Group LLC v. Perry

United States District Court, D. Colorado

March 9, 2015

PROGRADE AMMO GROUP LLC, d/b/a BVAC, a Delaware limited liability company, Plaintiff,
CURT PERRY, an individual, KRISTEN PERRY, an individual, AMMO KAN, a Colorado limited liability company, AMMO CAN LLC, a Colorado limited liability company, AMMO CAN LLC, a Wyoming limited liability company, AMMO KAN FRANCHISE GROUP LLC, a Wyoming limited liability company, HIGH COUNTRY SALES, LLC, a Colorado limited liability company, HIGH COUNTRY WHOLESALE, LLC, a Wyoming limited liability company, HIGH COUNTRY SPORT, LLC, a Wyoming limited liability company, and JOHN DOES 1-5, Defendants.


PHILIP A. BRIMMER, District Judge.

This matter is before the Court on the Motion to Dismiss Amended Counterclaims filed by plaintiff ProGrade Ammo Group LLC ("ProGrade") [Docket No. 42]. The Court has jurisdiction pursuant to 28 U.S.C. § 1331.


Plaintiff, a manufacturer of ammunition and related products, sells products under the marks "Bitterroot Valley Ammunition & Components, " "Bitterroot Valley, " and "BVAC" (the "BVAC Marks"). Docket No. 1 at 5, ¶¶ 20-21. Plaintiff and its predecessor have used the BVAC Marks since 2008 in association with the sale of ammunition products. Id. ¶ 23. Plaintiff brings claims against defendant Curt Perry, his wife Kristen Perry, and a number of Colorado and Wyoming entities, each of which Mr. Perry is either the sole owner and member or a principal and part owner of (the "Ammo Kan.Entities").[2] Id. at 2-4, ¶¶ 2-10. Plaintiff and/or its predecessor have supplied ammunition to Mr. Perry and/or one of the Ammo Kan.Entities since at least 2011 for sale at Ammo Kan.booths at gun shows and at an "Ammo Kan" retail facility in Littleton, Colorado. Id. at 7, ¶¶ 30, 32. Between January and June 2013, Mr. Perry, purportedly on behalf of defendant Ammo Kan.LLC, ordered ammunition products from plaintiff and promised to pay for them. Id. ¶ 33. Plaintiff was never paid for the orders, which resulted in an outstanding balance of $377, 127.63 (the "outstanding balance"). Id. at 7-8, ¶¶ 33, 38.

The products that plaintiff sold to Mr. Perry and Ammo Kan.Colorado included a quantity of "plinkers, " ammunition that has cosmetic imperfections, but which is nonetheless usable, and factory rejects, which did not pass plaintiff's quality control requirements but which Mr. Perry intended to re-manufacture by salvaging usable components. Id. at 7-8, ¶¶ 34-35. Plaintiff does not authorize the use of the BVAC Marks on plinkers or factory rejects. Id. at 8, ¶ 36.

In the summer of 2013, Mr. Perry told representatives of plaintiff that he lacked the funds to pay the outstanding balance, but that defendants would pay plaintiff after new business ventures were successful. Docket No. 1 at 8, ¶ 39. Around the same time, one of plaintiff's representatives visited defendants' Littleton, Colorado facility and observed that defendants had begun manufacturing ammunition. Id. During that visit, Mr. Perry informed plaintiff's representative that he planned to move his business operations to Wyoming. Id.

Due to defendants' non-payment of the outstanding balance, plaintiff brought a lawsuit against Ammo Kan.Colorado and Mr. Perry in the District Court, Douglas County, Colorado (the "state court lawsuit"), which remains pending. Docket No. 1 at 8-9, ¶ 41. After the state court lawsuit was filed, plaintiff discovered that Mr. Perry had begun operating an ammunition manufacturing facility in Laramie, Wyoming operating under the name Maverick Ammunition. Id. at 9, ¶ 42.

In early 2014, plaintiff began receiving complaints about ammunition bearing the BVAC Marks that customers had purchased at gun shows from Ammo Kan.booths. Docket No. 1 at 10, ¶ 46. After investigating, plaintiff discovered that, on at least one instance, at a gun show in March 2014, an Ammo Kan.booth was selling ammunition using the BVAC Marks that had not been manufactured by plaintiff. Id. ¶¶ 49-50. Plaintiff alleges that defendants are either falsely selling ammunition manufactured by Maverick using the BVAC Marks, or are inappropriately using the BVAC Marks on ammunition that was sold as factory rejects, for which the use of the marks is not authorized. Id. at 11, ¶ 53. Plaintiff brings claims for false designation of origin under the Lanham Act, 15 U.S.C. § 1125(a), violation of Colorado's Deceptive Trade Practices Act, common law trademark infringement, common law unfair competition, unjust enrichment, tortious interference with prospective business advantage, fraudulent conveyance, alter ego, and civil conspiracy. See Docket No. 1.

Defendants assert five counterclaims, for declaratory judgment of non-infringement, breach of contract, "not properly named parties, " breach of the implied warranty of merchantability, and breach of the implied warranty of fitness for a particular purpose. See Docket No. 39. In support of their declaratory judgment claim, defendants allege that plaintiff provided defendants with a tablecloth bearing one of the BVAC Marks for use in selling defendants' products at gun shows. Docket No. 39 at 17, ¶ 152. Defendants also allege that they received ammunition from plaintiff in boxes marked with BVAC's name, and were never advised that this ammunition could not be sold in those factory boxes. Id. at 18, ¶ 153. Finally, defendants allege that plaintiff does not have a valid registration for the BVAC Marks. Id. ¶ 154.

In support of their remaining counterclaims, defendants allege that they had a longstanding positive relationship with plaintiff's predecessor company, Bitterroot Valley Ammunition Company, before plaintiff purchased the company in late 2011 or early 2012. Docket No. 39 at 16, ¶ 146. In late 2012 and early 2013, however, defendants purchased ammunition from plaintiff that was "defective, incompetently manufactured, badly engineered, and/or sold to [defendants] under the guise of a higher quality product." Id. ¶ 147. Due to customer dissatisfaction with plaintiff's allegedly inferior product, defendants have suffered loss of good will and reputational damage within the gun and ammunition community. Id. at 17, ¶ 150. Defendants have offered to return the faulty and defective ammunition for a full reimbursement, but plaintiff has refused defendants' offer. Id. ¶ 151. Finally, defendants allege that Kristen Perry, Curt Perry, Ammo Can, LLC (Colorado), Ammo Can, LLC (Wyoming), Ammo Kan.Franchise Group, LLC, High Country Sales, LLC, High Country Wholesale, LLC, and High Country Sport, LLC were never a party to any contract or agreement with plaintiff and were improperly named as defendants in this action. Id. at 21, ¶ 171.


Plaintiff moves to dismiss defendants' counterclaims, arguing that (1) defendants' declaratory judgment counterclaim is redundant to plaintiff's claim under the Lanham Act, (2) the Court either lacks jurisdiction over or should abstain from exercising jurisdiction over defendants' breach of contract and breach of warranty counterclaims because they are substantially similar to counterclaims that defendants asserted in the pending state court lawsuit, and (3) defendants' counterclaim for "not properly named parties" is not a cognizable claim for relief. See Docket No. 42.

A. Declaratory Judgment Counterclaim

Plaintiff argues that, to the extent defendants contend that they have not infringed the BVAC Marks in violation of the Lanham Act, their counterclaim will necessarily be resolved in connection with plaintiff's infringement claim. See Docket No. 56 at 3. Defendants argue that their declaratory judgment claim seeks a declaration both as to direct and indirect infringement, and ...

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