Judge Freezes Eatery’s Plan to Ax Contractor

MANHATTAN (CN) - New York's famous Serendipity restaurant cannot back out of its contract with a Nevada-based trademark corporation, under the terms of an injunction ordered by a federal judge.

Serendipity 3, which has dished out scoops to Upper West Side residents and tourists for more than 50 years, entered into a 10-year contract with R Squared in September 2005, granting the company exclusive license over its trademarks and copyrights.

The chain is "famed for its array of opulent ice cream dishes," according to the court. "Pursuant to their arrangement, R Squared owns and operates three Serendipity restaurants located in Las Vegas, NV, Boca Raton, FL, and Washington, DC," U.S. District Judge Kevin Castel wrote.

R Squared, in turn, agreed to pay Serendipity royalties for the restaurants outside of New York, and accepted full permission to open and operate new branches and sublicense with third parties, the order states.

But Serendipity complained in a June 25, 2009, letter, that R Squared breached the terms of the agreement by listing menu items or offering branded merchandise without approval. The restaurant sent subsequent letters alleging late royalty payments, followed up with notice that it would terminate the contract.

R Squared said that it had taken steps to correct all alleged breaches of the contract.

Castel appeared to support that explanation in an order last week granting an injunction preventing Serendipity from terminating the contract.

"R Squared has demonstrated that there are sufficiently serious questions going to the merits of whether defendant has satisfied the notice and cure requirements of the parties' agreement such as to make those questions fair ground for litigation," he wrote.

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