Counter-claims for Unfair Competition and Opposes Preliminary Injunction

Regal Baking Company challenges claims made by Monaco Baking Company in a trade dress dispute over common cookie designs, and has filed a counter-claim for unfair competition and an opposition to a preliminary injunction.

The Hon. Consuelo B. Marshall presides over the case filed on August 21, 2000 in the US District Court, Central District of California, Western Division. Counter-plaintiff Regal Baking Company seeks at least $5 million in damages and to have the case dismissed. The company is represented by William E. Levin with Levin & Hawes, LLP in Laguna Beach, Calif. and Wilbank J. Roche with Roche & Holt in Santa Monica, Calif. Seven Lives, Inc., d.b.a. Monaco Baking Company vs. Regal Baking Company, Case No. CV 00-08851 CBM (Ctx).

Attorney Levin explains: "As alleged in the counterclaims, this case is really about a vendetta between Monaco Baking Company and Samuel Montoya, a master cookie designer, a loyal employee who quit his job on principle after the company abused him, falsely accused him of theft, and reneged on promises to share profits in the business with him. Montoya then found employment with Regal Baking Company. Rather than leave well enough alone, Counter-defendants filed what clearly appear to be baseless charges against Montoya simply to harass and punish him, and to prevent his new employer from effectively competing in the gourmet cookie business."

Counter-plaintiff Regal Baking Company and Regal Cake Gallery (Regal) are fictitious business names for Thomson Investment Company, Inc. of which Patrick M. Leung and his wife, Rosa, are shareholders and officers. Established in 1951, Regal is one of Los Angeles' premiere bakeries, winning many awards for its speciality cake designs. In January, 2000, Regal introduced a line of designer speciality cookies, and without any specific awareness of competing with Monaco Baking Company (Monaco) of Santa Fe Springs, Calif. Regal had never met Samuel Montoya until he applied for a job with them and was hired in March, 2000.

"What we really think makes this case an abuse of process," explained Levin, "is that Monaco's cookie designs are mostly copied from publicly available sources in the bakery industry. Most of the cookies are then sold to third party vendors who, in turn, sell the cookies under their own private label. Nor did they institute even the most minimal of steps to protect their alleged cookie design secrets by, for example, having their employees sign confidentiality agreements."

"That Monaco Baking Company would be so relentless in going after Mr. Montoya to the extent that they would file a sham lawsuit is beyond appalling," said Leung, "it's shameless. And, it's unconscionable that they are trying to prevent our family and the Montoya family from earning a living. The situation is unfortunate, but we have faith in the legal system and are confident that justice will be served."

Regal filed their Answer and Counterclaims on September 15, 2000, alleging unfair competition, false advertising and abuse of process, and demanding a jury trial. In that document, under the heading "Defendants Wrongful Activities" (pages 26-27), Regal alleges under information and belief that:

"Counter-Defendants employ a substantial number of illegal aliens in its business operations, probably the majority of their employees, which gives the Counter-Defendants an unfair business advantage over legitimate competitors, like Counter-Plaintiff." Page 27, lines 1-6.

Counter-Defendants maintains two sets of records with which to track employee time to avoid paying employees at the legally mandated overtime rates. The Counter-Defendants have and may continue to have their employees punch out after working 40 hours in any week and then keep track of the over time on separate records and either pay the employee "under the table" or under a different social security number to avoid paying overtime rates. This alleged practice gives the Counter-Defendants an unfair business advantage over legitimate competitors, like Counter-Plaintiff." Page 27, lines 7-18.
A temporary restraining order (TRO) was obtained by Monaco when the complaint was filed. On September 25, 2000, the parties agreed to a modified TRO which will remain in force until January 8, 2001. Regal can now take and fill cookie orders, and if there is a design disagreement, the parties can opt to resolve it themselves or ask the Court for an expedited hearing. Per the agreement, Regal will not actively solicit any of Monaco's customers, but can take unsolicited orders from anyone. Regal's counter-claims include the allegedly wrongful TRO, based on a misrepresentation of law facts, A preliminary injunction hearing is set for January 8, 2001 before Judge Marshall.

Regal Cake Gallery's primary location is at 1068 South Fairfax Avenue, Los Angeles, with a second operation located at 20812 Ventura Boulevard, Woodland Hills, CA. For more information, visit Regal's Web site at: www.regalcakegallery.com.

NOTE TO EDITORS: Seven Lives, Inc., d.b.a. Monaco Baking Company, is located at 12814 Lakeland Road, Santa Fe Springs, CA. and is owned by Jeffery Jacobson and Phillip Moreau, Counter-defendant is represented by Michelman & Robinson, LLP of Encino, Calif.; telephone 818/783-5530.