In the midst of a pre-existing play for control over “by Chloe,” the swiftly-growing vegan restaurant chain that she co-founded in 2015, Chloe Coscarelli has filed a trademark infringement lawsuit against private-equity firm Bain Capital LP and a number of the other big-name investors in furtherance of what Coscarelli calls a case about “a circle of greed.” According to the complaint that she filed in a New York federal court on Monday, Coscarelli claims that the defendants, which “include some of the largest private equity firms in the world with over $130 billion in assets under their management, teamed up with ESquared Hospitality and James Haber … to profit off [her] name,” and in the process, “prioritized their own financial self-interest over what was right and lawful.”
Coscarelli sets the stage in the newly-filed 30-page complaint, asserting that “after winning Food Network’s Cupcake Wars and becoming a best-selling cookbook author, [she] founded ‘by Chloe’ – a first-of-its-kind fast-casual vegan restaurant chain” with New York-based ESquared Hospitality after pitching the concept to its CEO James Haber in 2014. Given the well-known nature of and the corresponding value in her name as tied to “existing notoriety in the food industry,” Coscarelli – who says that she “has earned the reputation as America’s favorite vegan chef” – asserts that the brand featured her name by way of an agreement through which she licensed her “full and formal name, nickname or variations of her name, among other likeness rights” to by Chloe’s corporate entity CCSW LLC.
Following the opening of their first outpost in the West Village of New York City, Coscarelli claims that “the success of by Chloe increased,” with the company being valued at $25 million “based on [that] one location, alone,” and has since been likened to the vegan version of McDonalds and the “vegan Shake Shack.” However, in light of such budding success, her “business relationship with … Haber, and his daughter, Samantha Wasser, deteriorated,” Coscarelli alleges. Specifically, she claims that Haber’s “overall greed led to a scheme” to oust her from the company by “repurchasing [her] 50 percent membership interest in CCSW for zero dollars.”
“ESquared Hospitality and Haber then invited private equity investors, like Bain Capital and Kitchen Fund, to join their efforts to milk Chloe’s name, and they accepted.” Coscarelli claims that the investor defendants – which injected more than $30 million in cash into the company – “intended and induced a rapid expansion of ‘by Chloe’ stores,'” in furtherance of a plan to “maximize their internal rate of return by exploiting what the company referred to as its ‘crown jewel asset,’ the trademark featuring Chloe’s name.”
The problem with that, according to Coscarelli? “No one had any authority to misappropriate and infringe [her] name in this manner.” In fact, Coscarelli claims that she “terminated the company’s license to her name back in March 2018,” which means that “the by Chloe company has violated the terms and conditions of the agreements with Chloe and her entity, Chef Chloe.”
An Earlier Lawsuit
In the midst of Haber’s “scheme to ‘milk’ Chloe’s name” without her involvement or authorization, Coscarelli asserts that her corporate entity Chef Chloe LLC and ESquared “were litigating various disputes” related to ownership of the company. For one thing, Coscarelli had filed a trademark infringement, federal unfair competition, and breach of contract suit against ESquared in March 2018, in which she sought a judgment declaring that Chef Chloe LLC still maintained a 50 percent stake in the company and approval rights in connection with her name, and an injunction barring ESquared from using her name in connection with any products/projects beyond the restaurant chain without her authorization. And in a May 2020 decision, an arbitrator sided with Coscarelli.
In addition to finding that ESquared did not have the right to seize Coscarelli’s stake in the company as a result of a previous dispute, the arbitrator held that an operating agreement entered into by Chef Chloe LLC and ESquared “did not strip Chef Chloe of approval rights for future expansion of trademark usage as one of its penalties for termination as a member.” Ultimately, as Dorsey & Whitney’s Melonie Jordan previously wrote, “The arbitrator stated that Chef Chloe must ‘abide by the deal that she made with the company to continue to use her first name as the name of the restaurant, but likewise [ESquared] must abide by the terms of the deal that it struck with Chef Chloe not to expand the use [of] the trademark beyond fast casual restaurants without getting her pre-approval.'”
Fast forward to early this year, and Judge Jesse Furman of the U.S. District Court for the Southern District of New York confirmed the arbitrator’s determination, including that Coscarelli maintains an undiluted 50 percent interest in the by Chloe brand, as well as approval rights for the usage of her name when it comes to “expanding the use [of] the trademark beyond fast casual restaurants,” and awarded Coscarelli over $2.2 million in attorneys’ fees and costs.
“Exploiting” Her Name
Despite the outcome of the binding arbitration, the defendants have “refused to comply … and continued to use [her] name and misleadingly associate the ‘by Chloe’ restaurants with [her],” Coscarelli argues. Additionally, she claims that ESquared and Haber have “continued to prioritize their personal interests, and those of the investor defendants over Chef Chloe LLC’s interests” by “exploit[ing] Chloe’s name to maximize their own financial interest while also denying Chloe the opportunity to benefit from the company she created and that bore her name.”
And still yet, Coscarelli claims that despite having “relatively little debt … less than $25,000 of secured debt and less than $3 million of unsecured debt at the time of filing,” the by Chloe corporate entity and investor defendants filed for Chapter 11 bankruptcy “to maximize [their] financial interests to Chef Chloe LLC’s detriment” and specifically, “to avoid the $2.2 million attorney fee award” owed to Coscarelli in connection with the parties’ arbitration.
With the foregoing in mind, and given that “the investor defendants’ immense financial resources do not place them above the law,” Coscarelli asserts that she “and her affiliated entities bring this complaint for vicarious trademark infringement” – including by way of their use of “By Chloe,” www.bychefchloe.com, www.eatbychloe.com, and social media accounts @bychefchloe and @eatbychloe – “civil conspiracy, and unjust enrichment to hold them accountable for their unlawful misconduct.” In connection with the various causes of action, she is seeking an award of compensatory, treble, and punitive damages; an award of attorney’s fees and costs; and an award of prejudgment interest.
The case comes amid a larger battle over the by Chloe brand between Coscarelli and ESquared, but it also follows from similar name-centric squabbles, such as the currently ongoing case that JLM Couture filed against bridal designer Hayley Paige Gutman over the rights to the Hayley Paige brand name and variations, thereof, in connection with the manufacture and sale of bridal garments and accessories.
The case is Chloe Coscarelli, et al. v. Bain Double Impact Fund LP, et al., 1:21-cv-04159 (SDNY).