Landry’s Seafood Restaurants Inc. is suing the operators of the landmark Rusty Pelican restaurant in Newport Beach, claiming they are using the Rusty Pelican trademark in violation of the 1998 sale of the chain to Landry’s.
The suit seeks to put a stop to the use of its Rusty Pelican name, plus reimbursement for repairs to one restaurant and compensation for the underperformance of another in the Midwest.
Two years ago, San Clemente-based Bubba Gump Shrimp Co., formerly Rusty Pelican Restaurants Inc., sold Houston-based Landry’s five restaurants and exclusive rights to the Rusty Pelican trademark, the suit alleges. The OC-based chain continues to operate restaurants in Newport Beach and Glendale.
“They were originally supposed to stop using the Rusty Pelican name at the Newport Beach store,” said Landry’s Attorney Andrew Hunter of Jeffer, Mangels, Butler & Marmaro LLP in Los Angeles. “But they signed a license agreement to use the name at the Glendale store until Dec. 31, 1999.”
Bubba Gump Shrimp Co. president Scott Barnett, who now operates 11 restaurants under his new concept, could not be reached for comment.
Landry’s, which operates 154 stores under five concepts including Joe’s Crab Shack in Newport Beach, filed a lawsuit in Orange County Superior Court on June 6 seeking the profits from the Gump-operated Rusty Pelican stores and damages. Also, Landry’s claims the OC-based chain owes it $682,123 for both the repairs it had to make to the kitchen of the Sacramento restaurant and lower-than-expected sales at the Wickliffe, Ohio location.
Landry’s, a publicly held company with sales of $439 million last year, plans to file an injunction to stop Gump from using its trademark if a settlement is not reached soon, Hunter said.
Vigilance Pays
Tom W. Bell, associate professor at Chapman University’s law school, said Landry’s may have a right to profits earned under its trademark, but because the firm has not defended its rights for nearly two years its claim to the name has lost some punch. Also, Landry’s use of the Rusty Pelican name is limited to a single store in Arizona, which,like the other four it bought,will be converted eventually to the Joe’s Crab Shack concept.
“Normally, if you have a claim you rush out and get a preliminary injunction because you don’t want to see (the trademark infringement) go on,” he added. “But this case suggests (Land-ry’s) might be using the lawsuit as leverage.”
Indeed, Landry’s attorney said his client is waiting for a response from executives at the Bubba Gump Shrimp Co. before it files an injunction.
“If they don’t respond and if the lawsuit is not resolved, we will take the appropriate action,” Hunter said.
The original deal had included the Newport Beach store, but it was later withdrawn because the landlord would not agree to extend its lease for the site.
Steve Scheinthal, Landry’s vice president of administration, said his company has been negotiating with Bubba Gump to resolve the dispute, but when talks broke down the lawsuit was filed.
The Newport Beach store’s landlord allegedly has other plans for the building and wants to eventually move the Rusty Pelican store out, Scheinthal said. The Business Journal could not reach the landlord for comment.
“If the landlord doesn’t shut them down we are going to shut them down,” he said.
The sale included a provision that should annual sales be below $430,000 at the Ohio, location Bubba Gump would be obligated to make up the difference to Landry’s. “We did not want to buy that store and they guaranteed it would be profitable,” Scheinthal said.
The restaurant, named The Dock, has come in $277,402 short of that guaranteed amount over two years, the suit says.
Also, the suit said, Landry’s spent $404,721 to replace the kitchen floor and pilings it sat on at the Rusty Duck it bought in Sacramento, after discovering they were rotted out.
Growing Chains
Gordon Miles, chairman of Bubba Gump, told the Business Journal in April that it had sold off more than a dozen Rusty Pelicans over the past three years to fund the growth of its Bubba Gump chain, co-developed by Paramount Pictures, the studio that produced the blockbuster movie “Forrest Gump.”
Bubba Gump, whose stores’ annual sales average about $6 million, nearly doubled its revenue last year to $43.2 million with the opening of four new stores. Projected 2000 sales are $55 million to $58 million. Also, Bubba Gump, which plans 30 stores in five years, recently signed its first international franchise in Cancun, Mexico.
There are three Bubba Gump outlets in Hawaii, and one each in San Francisco, Monterey, New Orleans, Chicago, Colorado, Charleston, S.C., and Miami. There are no OC stores, but a 7,500-square-foot Long Beach location at Queensway Bay is scheduled to open this year.
