Summary
In Bad Ass Coffee, carrying out the court's order to remove products from shelves and take down signs in stores was much simpler than what Ivera had to do: contact nationwide distributors to recall medical devices identified by lot number and to assure performance by independent third parties.
Summary of this case from Catheter Connections, Inc. v. Ivera Med. Corp.Opinion
Case No.: 2:99-cv-00150
February 24, 2000.
FINDINGS AND ORDER ON MOTION FOR PRELIMINARY INJUNCTION
This matter is before the court on plaintiff Bad Ass Coffee Company of Hawaii's (BACH's) December 9, 1999, motion for preliminary injunction. Plaintiff seeks to enjoin defendants Bad Ass Coffee Limited Partnership (BACLP) and Robert Alan Jones from (1) engaging in unauthorized use of the Bad Ass Coffee Company trademark and related marks, (2) interfering with plaintiff's efforts to obtain suppliers for its licensed products, and (3) purporting to authorize others to use the Bad Ass Coffee Company names and marks.
On December 9, 1999, this court entered a temporary restraining order, to remain in full force and effect by consent of the parties until the court rules on plaintiff's motion for a preliminary injunction. The terms of the restraining order, as originally entered, prohibit defendants from participating in the aforementioned three activities. On December 10, 1999, the terms of the temporary restraining order were modified to allow defendants to "continue to sell existing inventories from their three retail locations. . . ."
The parties filed memoranda on the matter, and on December 29, 1999, January 18, 2000 and February 3, 2000, the court held preliminary injunction hearings. Testimony was presented, exhibits were entered into evidence and arguments were heard, after which the matter was taken under advisement. At the preliminary injunction hearing, BACH was represented by Richard D. Burbidge and Jefferson W. Gross of Burbidge and Mitchell, BACLP was represented by Randall Gaither, and Mr. Jones represented himself.
Having fully considered the testimony and submissions supplied by the parties, the Court now issues its following findings of fact and order.
FINDINGS OF FACT
1. BACH is a privately held corporation organized and licensed in Utah engaged in the business, among other things, of franchising and licensing retail coffee outlets and supplying such outlets with coffee and other products and supplies. Michael Bilanzich is president of the corporation. Bilanzich was also a shareholder and president of Royal Aloha Coffee, Tea, Spice Co., Inc. (Royal Aloha), a predecessor corporation which was engaged in similar business activities. That corporation is now in bankruptcy.
2. In or around December, 1995, Royal Aloha applied to the United States Patent and Trademark Office for registration of the trade name "Bad Ass Coffee Company" and related marks. Both before and after this application, Royal Aloha entered into a number of license agreements with certain persons both in and out of the state of Hawaii. Among other things, these license agreements generally authorized licensees to use the "Bad Ass Coffee Company" trade name and marks in connection with retail outlets owned or controlled by such licensees.
3. On or around November 30, 1997, Royal Aloha assigned to BACH its rights in the trade name "Bad Ass Coffee Company" and related names and marks.
4. BACLP is a Nevada limited partnership. Robert Alan Jones is president of the general partner of BACLP.
5. Prior to commencement of the instant action, Bilanzich and Jones and certain entities they controlled were involved in litigation brought in Nevada state district court. Effective July 1, 1998, the parties to that litigation entered a Confidential Settlement Agreement and Mutual Release, which provided, in part:
The RAJ parties [entities associated with Robert Alan Jones] . . . hereby fully and finally waive, release and discharge the Bilanzich parties, their heirs, executors, administrators, assigns . . . from all manner of actions, causes of action, suits, claims, covenants, contracts, agreements, promises, . . . rights, . . . obligations, . . . expenses and liabilities of any nature whatsoever, at law or in equity, whether known or unknown, foreseen or unforeseen, including, without limitation: . . . any and all past or present assets, tangible, or intangible. . . .
(Emphasis added.) The settlement agreement was signed by Bilanzich, Jones and Dennis W. Lovell. Lovell was president of Royal Aloha prior to Bilanzich.
6. On or around June 30, 1998, BACH and BACLP entered several agreements which were to govern their relationships from that time forward. Those agreements included a Master Distribution Agreement, Hawaii (MDAH), an Asset Purchase and Sales Agreement (APSA), and a Territorial Development Agreement Hawaii (TDAH). Throughout the documents BACH is referred to as "the company" or "the seller" and BACLP is referred to as "the Distributor" or "the purchaser."
7. The MDAH provided, in pertinent part, the following:
1.01 Rights. . . . [T]he company grants to the Distributor during the term of this Agreement the exclusive right to:
(a) Distribute through approved suppliers . . . all coffee, merchandise, and other products approved by the Company bearing the Bad Ass Coffee trademark, trade name, and/or logos to Bad Ass Coffee Co. Franchisees and Licensees in this Territory and on a wholesale basis to retail outlets such as hotels, stores, and restaurants which are not specifically designated as Bad Ass Coffee Company Franchisees and Licensees, so long as such wholesale distribution is not in conflict with Franchise and/or License Agreements on an individual or collective basis, respectively, within the territory.
(b) License of Trademark and Logos Conditional upon compliance with the provisions of Section 10 and other material terms and conditions of this Agreement, the Company grants the Distributor a "License" to use and reproduce the Bad Ass Coffee CompanyTM trademarks and logos on the products and in advertisements and other promotional materials in the Territory during the terms of this Agreement. Such License is granted for the purpose of assisting the Distributor in promoting the sale and use of the Products in the Territory under this Agreement. Such License shall expire immediately upon the expiration or termination of this Agreement.
10.01 Use of Trademarks. Distributor is permitted by the Company to use the Company's Trademark and Distributor agrees to use the Trademarks in marketing the Products to the extent permitted by this Agreement in the Territory. However, such Trademarks and their derivatives shall[,] subject to the license created by this Agreement[,] remain the property of the Company and Distributor's rights to use such names or trademarks shall terminate upon expiration or termination of this Agreement.
10.02 Limitations on Use. Distributor acknowledges that its license and right to use the Trademarks is derived solely from this Agreement and the Trademark license provided herein, and is limited to the conduct of its business pursuant to and in compliance with this Agreement and reasonable specifications, standards and procedures prescribed by the Company.
12.01. . . . Upon the expiration or termination of this Agreement for any reason other than as set forth above, Distributor will: . . .
(b) Immediately cease and desist from using or displaying the name Bad Ass Coffee or other name or Mark except with respect to the franchises or licenses owned and operated by Distributor or its affiliates.
(c) Immediately cease and desist from using or displaying any of the Marks and forms of advertising indicative of the Business, products or operations except with respect to the franchises/licenses owned and operated by Distributor in accordance with the signed Agreements. . . .
12.02 So long as Distributor is not in default under the terms and conditions of its individual location Agreements, Distributor may continue as Licensee/Franchisee of Company for its individual locations pursuant to the terms and conditions of the respective Agreements.
(Emphasis added.)
8. At the time of execution of the MDAH, there were no existing franchises or licenses owned and operated by defendants in accordance with any franchise agreement, license agreement, location agreement or any other form of written agreement other than the MDAH, APSA and TDAH.
9. The APSA provided, in pertinent part, the following:
SECTION 1. ASSETS
. . . .
1.1.4 Trademarks. The exclusive license contained in the Master Distribution Agreement and rights thereunder subject to Seller's on-going rights including ownership to trademarks, service marks, trade names, and applications therefore for the state of Hawaii and registrations thereof, and all product names and designations relating to the Hawaii Business. . . .
. . . .
1.1.10 Bad Ass Coffee CompanyTM Name. Fifteen year license, with an additional fifteen (15) year option, for use and supervision of the Bad Ass Coffee Company name in Hawaii according to the terms of the "Master Distribution Agreement.". . . .
. . . .
1.1.12 Hawaii Licenses Five (5) location licenses for Bad Ass Coffee Company stores in Hawaii not now operating, with the understanding that these licenses having been previously issued to former principals of Sellers, and the Parties will request that the Department of the Securities for the state of Hawaii exempt these licenses from the franchise offering requirements of the state. . . .
. . . .
1.1.14 Operating Hawaii locations The going concern businesses for the three (3) below listed locations in Hawaii the transfer to be evidenced but the Bills of Sales attached as Schedule 4.1.3 to this Agreement.
a. Restaurant Row. . . . .
b. Bad Ass Coffee Company Ice Cream Store. Kailua-Kona, HI. . . . .
c. The Original Bad Ass Coffee Company Store. Kainaliu, Kona, HI. . . . .
(Emphasis added.)
10. The TDAH provided, in pertinent part, the following:
12.01 Ownership of Marks. Distributor acknowledges that Distributor has no proprietary interest whatsoever in the Bad Ass Coffee CompanyTM name, trademark, logos or derivatives thereof ("Marks") other than that created by the License contained in its Master Distribution Agreement, and that Distributor's right to use the Marks is derived solely from the license created by that Agreement and is limited to the conduct of its business pursuant to and in compliance with that Agreement coupled with the instant Agreement and all applicable specifications, standards and operating procedures prescribed by the Company. Any unauthorized use of the Marks by Distributor shall constitute an infringement of the rights of the Company in and to the Marks. 13.01 . ..
(c) A default under Distributor's authorized Distribution Agreement, which allows termination of that Agreement, shall also be a default under this Territory Development Agreement. If Distributor fails to cure any such default, the Company may terminate this Agreement effective sixty (60) days after written notice of termination.
. . . .
14.03 Upon the expiration or termination of this Agreement, other than as set forth above, Distributor will:
. . .
(b) Immediately cease and desist from using or displaying the name Bad Ass Coffee or other name or Mark except with respect to the franchises or licenses owned and operated by Distributor or its affiliates for which there is a signed Franchise Agreement, and except where otherwise under the license created by a Master Distribution Agreement;
(c) Immediately cease and desist from using or displaying any of the Marks and forms of advertising indicative of the franchised business, products or operations except with respect to the franchises/licenses owned and operated by Distributor in accordance with a signed Franchise Agreement;
(Emphasis added.)
11. After BACH and BACLP entered into the MDAH, APSA, and TDAH, BACLP operated retail locations in Hawaii using the trademark "Bad Ass Coffee Company" and related marks and supplied Bad Ass Coffee Company products to other persons who had licenses in Hawaii from Royal Aloha to sell Bad Ass Coffee Company trademark products.
12. Effective February 20, 1999, BACH terminated the MDAH, based upon BACLP's failure to make royalty payments according to the terms of the MDAH.
13. On March 9, 1999, BACH filed the instant law suit against BACLP and Jones. Concurrent therewith, BACH initiated arbitration proceedings, seeking a determination that its termination of the MDAH was proper.
14. Also on March 9, 1999, BACH gave BACLP and Jones written notice of default with respect to the TDAH and APSA. BACLP did not cure the default within the 60 days allowed in the TDAH.
15. On April 30, 1999 Royal Aloha filed a petition for Chapter 7 bankruptcy.
16. On September 3, 1999, an arbitrator issued an award in favor of BACH and against BACLP, determining that BACLP had materially breached the MDAH and that BACH's termination of the MDAH was proper. On September 13, 1999, BACH gave written demand to BACLP and Jones to cease and desist use of the Bad Ass Coffee Company trademark and related marks in Hawaii.
17. On September 15, BACLP and Jones sent a letter to licensees in Hawaii stating:
Our partnership owns the trademark in Hawaii. . . . . We will continue to provide you with quality coffee. . . . You may continue to send in your orders as usual and they will be filled in the ordinary course.
18. On November 4, 1999, this court granted plaintiff's motion to confirm the arbitration award.
19. On November 5, 1999, Jones sent a fax to all Bad Ass Coffee Company Hawaii licensees stating as follows:
Effective today, November 5, 1999, there will be no further orders processed on behalf of Bad Ass Coffee Company. Thank you for your patronage. If you are interested in our merchandise inventory closeout, please send a fax and we will send you an inventory list.
20. On November 19, 1999, the bankruptcy trustee's lawyer in the bankruptcy proceedings of Royal Aloha, sent a letter to Jones and all Bad Ass Coffee Company licensees, explaining that executory contracts between them and Royal Aloha had been rejected by the bankruptcy trustee.
21. Notwithstanding the termination of the MDAH and the TDAH, BACLP continued to use the Bad Ass Coffee trademark in Hawaii. On November 23, 1999, BACH again gave BACLP written notice to cease and desist from "sale of any goods bearing the Bad Ass Coffee Company trademark."
22. Following the bankruptcy trustee's letter, on November 24, 1999, BACH sent letters to all Hawaii licensees purporting to have preexisting rights from Royal Aloha or otherwise claiming to have rights to use the Bad Ass Coffee names and marks (excluding BACLP and Jones). In particular, BACH granted these persons the temporary right to use the Bad Ass Coffee Company trademark until December 31, 1999, provided that they purchase products from BACH. BACH also offered these persons the opportunity to become Bad Ass Coffee Company franchisees in Hawaii.
23. In a letter dated November 29, 1999, Jones communicated to BACH his conception that regardless of the termination of the MDAH, BACLP still owned retail outlets and retained "the right to use the Bad Ass Coffee CompanyTM name, and the trademark in Hawaii.
24. Certain acts of defendants (outlined in findings of fact 25-27) have caused confusion and are likely to cause more confusion among licensees and suppliers as to the ownership of rights to use the Bad Ass Coffee Company names and marks in Hawaii.
25. On December 3, 1999, Jones and BACLP sent a letter to Tommy Greenwell of Greenwell Farms, Inc. (Greenwell Farms), a supplier of coffee with whom BACH had entered negotiations to supply retail outlets in Hawaii, threatening to sue Greenwell Farms if it became involved in supplying goods to BACH. In the letter, Jones, on behalf of BACLP, stated "[C]ontrary to any representations made to you by Bad Ass Coffee Company of Hawaii, Inc. (BACH), Michael Bilanzich, or Bilanzich's staff, their Utah operation has no right to use or distribute coffee or goods under the Bad Ass Coffee CompanyTM trademark in the state of Hawaii."
26. Greenwell Farms has remained unwilling to supply Bad Ass Coffee Company retail locations with coffee due to BACLP and Jones' letter and threat of litigation.
27. Also on December 3, 1999, BACLP sent a letter to Hawaii licensees stating,
I hereby authorize you until all disputes are settled between myself and Michael Bilanzich and his company to continue to use the Bad Ass Coffee Company trademark and logo on all goods and products sold or exchanged by you in your business.
28. As of the time of the preliminary injunction hearing, BACLP and Jones have continued selling Bad Ass Coffee Company coffee and products from retail locations in Hawaii.
Preliminary Injunction Analysis
To issue a preliminary injunction, the court must conclude that the movant has demonstrated four elements: (1) the moving party will suffer irreparable injury unless the injunction issues; (2) the threatened injury to the moving party outweighs any damage to the opposing party; (3) the injunction, if issued, will not be adverse to the public interest; and (4) a substantial likelihood exists that the movant will prevail on the merits (or if the first three elements are met, a modified and lesser demonstration as to the fourth element). See, Federal Lands Legal Consortium v. United States, 195 F.3d 1190, 1194 (10th Cir. 1999); Bauchman v. West High School, 900 F. Supp. 248 (D. Utah 1995), affirmed by 132 F.3d 542 (10th Cir. 1997). The Tenth Circuit has adopted a modified requirement as to the likelihood of success. If the other three elements are satisfied, the movant may satisfy the element of success on the merits "by showing that questions going to the merits are so serious, substantial, difficult, and doubtful as to make the issue ripe for litigation and deserving of more deliberate investigation." 195 F.3d at 1194-95.
The primary purpose of a preliminary injunction is to preserve the status quo until trial on the merits, to allow the court to render a meaningful decision. Resolution Trust Corp v. Cruce, 972 F.2d 1195, 1198 (10th Cir. 1992). Where a motion for preliminary injunction seeks to upset the status quo, a higher standard is invoked, requiring the movant to show that "on balance, the four factors weigh heavily and compellingly in his favor." SCFC ILC, Inc. v. Visa, USA, 936 F.2d 1096 (10th Cir. 1991). To the extent BACH seeks to disrupt the status quo by enjoining defendants from selling Bad Ass Coffee Company coffee and products from their retail stores, this court applies the higher standard to its analysis of the preliminary injunction. In any event, this court finds and rules that a preliminary injunction should issue under either standard.
The court notes that while defendants' use of the Bad Ass Coffee names and marks in Hawaii is indeed part of the present status quo, defendants' license to use those names and marks apparently derived solely from the MDAH, which has now been terminated. Thus, defendants' continuing use of the names and marks, while part of the status quo, is apparently unauthorized and in violation of the plain terms of its contractual agreements with plaintiff, as is discussed in further detail below.
Irreparable Injury
Courts have routinely held that trademark infringement results in irreparable injury. Specifically, courts have held that allowing a franchisee/licensee to continue to use a mark after the franchise or license agreement is terminated would likely cause confusion and thus irreparable harm. That is the case here. In addition, independent of any presumption of irreparable injury, plaintiff has sufficiently demonstrated that in this particular case, irreparable harm will result if an injunction does not issue. For example, BACH has demonstrated that under present circumstances, because of the acts and conduct of BACLP and Jones, BACH is prevented from supplying quality coffee to retail locations. If unrestrained, BACLP and Jones will cause irreparable damage to the value of the mark and to BACH, as well as to Bad Ass Coffee licensees in Hawaii. In addition, BACLP and Jones' are causing confusion by their representations that they hold rights to distribute using the mark, and if unrestrained, such unsupported and apparently false claims will cause irreparable damage.
Balance of Harms
This court also concludes that the balance of harms weighs in favor of granting the injunction. BACLP and Jones have demonstrated no basis for a claim that they have a license for Hawaii that survived termination of the MDAH and TDAH. Accordingly, any hardship they may face as a result of the termination of the above said documents is derived from the terms of contracts entered into by defendants after substantial prior discussion and negotiation. Moreover, such harm is slight in comparison with the harm plaintiff will suffer if the injunction does not issue. Although BACLP will be enjoined from using the Bad Ass Coffee name in connection with its retail outlets, it will not, by the terms of the injunction, be restricted from using the retail outlets for other purposes which are not restricted by agreements it has entered into. Defendants will be enjoined from interfering with BACH's lawful attempts to negotiate contracts with suppliers. Also, because of the continued likelihood of confusion, defendants will not be permitted to make assertions to persons and entities described in the orders hereinafter set forth that they have presently existing rights to use, or that they can authorize others to use, the Bad Ass Coffee names and marks in Hawaii. On balance, this court determines that if an injunction does not issue BACH stands to suffer more serious and irreparable injury.
Public Interest
Public interest supports the protection of trademark rights and the enforcement of contracts. Defendants have created confusion among Hawaii licensees and suppliers regarding the ownership of such rights. The public interest weighs in favor of putting such confusion to rest and allowing the apparent rightful holder of rights to carry out its business unhindered by assertions of conflicting rights.
Probability of Success on the Merits
Because the first three elements are established, the court need only conclude that plaintiff has demonstrated that "questions going to the merits are so serious, substantial, difficult, and doubtful as to make the issue ripe for litigation and deserving of more deliberate investigation." 195 F.3d at 1194-95. Such questions are here presented.
The Confidential Settlement Agreement and Mutual Release signed by Bilanzich and Jones on or about July 1, 1998, together with the MDAH, APSA, and TDAH executed on or about June 30, 1998, appears to have consolidated all past and present aspects of the relationship between BACH on the one hand, and BACLP and Jones on the other concerning the right to distribute Bad Ass Coffee products and the right to use the Bad Ass Coffee names and marks in connection with the distribution and sale of coffee in Hawaii. In addition, the MDAH, APSA, and TDAH apparently encompassed and defined the rights and obligations of the two sides of the present action in their entirety and constitute the sole basis and sole authority for the existence of any Bad Ass Coffee Company licenses BACLP or Jones may assert or claim. Thus, even though defendants assert and continue to claim a right to use the names and marks apart from the aforesaid agreements, such assertions and claims are apparently invalid and of no force or effect as between the parties. Defendants have failed to carry the burden of proof to demonstrate the existence or present viability of such rights.
Defendants also argue that a license to operate the three retail locations in Hawaii was acquired outright through the APSA and bills of sale for such locations. However, the termination clauses of the MDAH and TDAH preclude defendants' use of the Bad Ass Coffee names and marks at individual locations, unless those locations are governed by signed agreements other than the MDAH, APSA and TDAH. For example, section 14.03(c) of the TDAH (which has been terminated), provides that upon termination, BACLP will:
"Immediately cease and desist from using or displaying the name Bad Ass Coffee or other name or Mark except with respect to the franchises or licenses owned and operated by Distributor or its affiliates for which there is a signed Franchise Agreement; "
(Emphasis added.) Neither BACLP nor Jones has produced for the court a "signed Franchise Agreement" of presently effective license or other right other than as contained in the now terminated agreements. Defendants have failed to carry the burden of proof to demonstrate the existence of such rights or agreements. To the contrary, it appears that upon the termination of the MDAH and TDAH, BACLP and Jones possessed no valid license, franchise or right for the use of the Bad Ass Coffee Company name or related names and marks and that in any event, any such claimed license, franchise or right is invalid and of no present existing force or effect.
In sum, the court concludes that each of the elements weighs heavily and compellingly in favor of granting the injunction. Accordingly, it is hereby
ORDERED, that BACLP, its principals and agents, including without limitation, Jones, shall cease and desist from using or displaying the Bad Ass Coffee Company trade name, mark and related names and marks in Hawaii, including use of the names and marks in connection with distribution of coffee to any person or entity and in connection with selling goods and products from the retail outlets which are described and set forth at paragraph 1.1.14 in the APSA. In particular, defendants shall cease and desist from selling goods and products labeled with the Bad Ass Coffee name or mark from retail outlets in Hawaii; it is
FURTHER ORDERED, that BACLP, its principals and agents, including without limitation, Jones, shall cease and desist from interfering with BACH's attempts to negotiate contracts with suppliers of goods, products and services in Hawaii in connection with distribution of Bad Ass Coffee products in which the Bad Ass Coffee trademark or trade name is utilized. Specifically, BACLP and Jones shall cease and desist from asserting to such suppliers any right to use the Bad Ass Coffee Company names or marks in Hawaii. Furthermore, BACLP and Jones shall cease and desist from threatening to bring lawsuits against such suppliers based upon the assertion of rights to use the names or marks in Hawaii; it is
FURTHER ORDERED, that BACLP, its principals and agents, including without limitation, Jones, shall cease and desist from purporting to authorize others to use the Bad Ass Coffee names and marks in Hawaii. In addition, BACLP and Jones shall cease and desist from asserting to any Hawaii licensees purporting to have preexisting rights from Royal Aloha or otherwise claiming to have rights to use the Bad Ass Coffee names and marks that BACLP and Jones have any presently existing rights to use the Bad Ass Coffee names and marks in Hawaii; it is
FURTHER ORDERED, that plaintiff shall have ten (10) days from the date on which notice of this order is received to post a commercial or similar bond in the amount of $25,000 and that if such a bond is not filed within ten days of notice of this order, the injunction shall be dissolved; it is
FURTHER ORDERED, that if such a bond is filed, this injunction shall remain in force and effect until such time as a final determination on the merits is obtained or upon further order of this court.