Budget Blinds, Inc. v. White

• Decision Date: 28 July 2008
• Docket Number: No. 06-2733.,No. 06-2610.,06-2610.,06-2733.
• Parties: BUDGET BLINDS, INC., Appellant v. Valerie WHITE; Budget Blinds of NJ, Inc.; Val U Blinds, Inc. Budget Blinds, Inc. v. Valerie White; Budget Blinds of NJ, Inc.; Val U Blinds, Inc., Appellants.
• Court: U.S. Court of Appeals — Third Circuit

536 F.3d 244

BUDGET BLINDS, INC., Appellant v. Valerie WHITE; Budget Blinds of NJ, Inc.; Val U Blinds, Inc.

Budget Blinds, Inc. v. Valerie White; Budget Blinds of NJ, Inc.; Val U Blinds, Inc., Appellants.

No. 06-2610.

No. 06-2733.

United States Court of Appeals, Third Circuit.

Argued April 9, 2008.

Filed July 28, 2008.

[536 F.3d 246]

Howard A. Matalon, Esq., Stryker, Tams & Dill, LLP, Newark, NJ, Jeremiah J. Morgan, Esq. (argued), Bryan Cave LLP, Kansas City, MS, for Budget Blinds, Inc.

Ronald J. Nelson, Esq. (argued), Warren, NJ, for Valerie White, et al.

Before: SMITH, HARDIMAN, and COWEN, Circuit Judges.

OPINION OF THE COURT

SMITH, Circuit Judge.

In this appeal, we consider whether a federal district court properly relied on Federal Rule of Civil Procedure 60(b)(6) to vacate a default judgment entered by another district court. We conclude that it did not, and we will remand so that it may consider whether to set aside the default judgment under Federal Rule of Civil Procedure 60(b)(4).

I.

Budget Blinds, Inc. ("BBI") is a California corporation that franchises mobile window covering businesses throughout the United States. According to an affidavit that BBI's Chief Operating Officer filed with the District Court for the Central District of California, BBI was founded in 1992 and had about 800 territories and 570 licensees nationwide as of October 17, 2005, the date of the affidavit. BBI owns and licenses two trademarks that it has registered with the Principal Register of the United States Patent and Trademark Office: (1) the name "Budget Blinds" (registered on December 21, 1993); and (2) a service mark consisting of the words "Budget Blinds" in a specific font and configuration (registered on February 18, 2003).

Valerie White owns a New Jersey corporation called "Val U Blinds, Inc." that focuses on the design and installation of window blinds. According to an affidavit that White filed with the District Court for the District of New Jersey, she operates this business from a home office in her basement and garage, and her sales are limited to areas of New Jersey. The affidavit further states that she conducted business from 1988 to June 1, 2004 as "Budget Blinds" or "Budget Blinds of NJ," and that she registered her business as a New Jersey domestic corporation in September 1997 under the name "Budget Blinds of NJ, Inc." She changed her business's name to "Val U Blinds" pursuant to the Settlement Agreement that we describe below.

In a letter to Valerie White dated November 25, 2003, BBI's Legal Manager stated that White's use of the name "Budget Blinds" was a violation of BBI's "federal, state, and common law trademark rights" and was likely to cause public confusion about the origin of White's goods. White's attorney Ronald J. Nelson responded in a letter dated December 1, 2003 that White had used the name "Budget Blinds" since 1988, prior to BBI's first use of the name. Nelson's letter added that White had established "Budget Blinds" as a common law trademark in the New Jersey counties served by her business and that BBI's franchisees in this area were infringing her rights by using the name. In a letter to Nelson dated February 12, 2004, BBI's counsel questioned the existence of a common law trademark and stated that "BBI is prepared to bring a lawsuit in California pursuant to the Lanham Act to enjoin your client's infringing activities" if the parties could not reach a mutually-agreeable resolution.

After several additional communications, the parties entered a Settlement Agreement on April 14, 2004. Under the Agreement, BBI would pay White and Budget Blinds of NJ, Inc. (referred to as "the Corporation" in the Agreement) $160,000 "for the purchase and transfer of any and all interest, claim, or ownership in or relating to the trade name and service mark `Budget Blinds'" and any confusingly similar names or marks. Section 4 of the Agreement provided that after June 1, 2004, White and the Corporation "shall not operate or do business" under the trade name and service mark "Budget Blinds" "or any other name or in any manner that might tend to give the general public the impression that White [or her business] is in any way associated or affiliated with BBI, or any of the businesses conducted by it or other franchisees or licensees of the Marks." Among other things, Section 4 required White to change her existing corporation's name from "Budget Blinds of New Jersey, Inc." to "BB of NJ, Inc.," to conduct all future business using a new corporation to be established under the name "Val U Blinds, Inc.," and to remove the "Budget Blinds" trade name and mark, as well as confusingly similar names or marks, from her company's advertising, signs, letterheads, stationery, printed matter, and other forms. Most importantly for purposes of this litigation, Section 4(f) of the Agreement also instructed White to take specific steps to disassociate her company's telephone number from the name "Budget Blinds." At the time of the Agreement, the Yellow Pages directories for Burlington, Gloucester, and Camden Counties listed a phone number for White's company next to the name "Budget Blinds."¹ To address this situation, Section 4(f) of the Agreement provided in relevant part:

Promptly after execution of this Agreement, White, the Corporation and Val-U Blinds shall direct Verizon . . . in writing, with a copy to counsel for BBI . . ., (i) that all of the said three advertisements shall not be renewed in the said three county editions, or elsewhere; and (ii) that customers calling directory assistance in any of those three counties (or anywhere else) on or after June 1, 2004, should no longer be given [the phone number for White's company] or any other number related to or affiliated with White, the Corporation, or Val-U Blinds in response to an inquiry for the telephone number of "Budget Blinds." From time-to-time thereafter, upon the reasonable request of BBI, White, the Corporation and Val-U Blinds shall provide similar written directions to other directory publishers (including publishers of Internet-based "directories") identified by BBI.

In addition to these substantive provisions, the Agreement stated that White and her corporations "hereby irrevocably appoint BBI as their respective lawful attorney-in-fact with authority to file any document in the name of and on behalf of White, the Corporation or Val-U Blinds for the purpose of taking any of the actions required by this Section 4 upon the event of a Default." Finally, the Agreement contained a choice-of-law clause: "This Settlement Agreement will be governed by and construed under the laws of the State of California."

White says that she made a good-faith effort to comply with her obligations under the Agreement, including those in Section 4(f) related to her telephone number. The record contains a letter dated May 5, 2004 from White's attorney to Verizon Customer Service directing Verizon "not to renew or republish their existing advertisements in all Yellow Pages (including Burlington, Gloucester, Camden and Middlesex County editions) in which they have used the phrase `Budget Blinds' in whole or in part." The letter also directs Verizon "to instruct Directory Assistance, beginning June 1, 2004, to answer all inquiries for `Budget Blinds' by not providing the telephone numbers of my client. . . ." The record includes similar letters addressed to YellowPages.com and Verizon.com, both of which are dated June 4, 2004.

Nonetheless, Verizon reprinted the listing that provided the phone number for White's company under the name "Budget Blinds" in the updated print editions of its Yellow Pages directories for Burlington, Gloucester, and Camden Counties and the corresponding online directories. In a letter dated February 1, 2005, BBI's counsel informed White's counsel that the continuing existence of these listings was a violation of the Agreement, and that "it appears that the only way to remedy this violation is for your client to assign to BBI or to a franchisee designated by BBI" the telephone number for White's company. In response, White's counsel proposed setting up a recording that would give callers to this telephone number a choice between connecting to White's company or to the local BBI franchisee. BBI rejected this proposal in a letter dated February 23, 2005, reiterating its demand that White assign the number to BBI and stating that it would deem White and her company to be in breach of the Agreement "as long as there is any circumstance under which a person looking in a current telephone book and calling a number listed under the name `Budget Blinds' will reach your clients." In a letter dated March 9, 2005, White's counsel informed BBI that, although White would do everything that she considered "reasonably possible to mitigate fully the effects of the unauthorized re-printing," she would not surrender the phone number itself.

BBI filed a Complaint against White, Val U Blinds, Inc., and Budget Blinds of NJ, Inc.² ("Defendants"), which was docketed on April 7, 2005 in the United States District Court for the Central District of California, Southern Division. The Complaint lists eight causes of action: (1) breach of contract; (2) specific performance; (3) federal trademark infringement; (4) state trademark infringement; (5) federal false designation of origin; (6) federal trademark dilution; (7) state trademark dilution; and (8) violation of the California Unfair Competition Act. As relief, BBI requested an injunction against further violation of the agreement,³ actual and punitive damages, an accounting of defendants' profits, treble damages, costs of suit, attorneys' fees, and pre-judgment interest. The Complaint asserts that venue is proper in the Central District of California "because a substantial part of the events giving rise to Budget Blinds' claims occurred within this District in that the harm to Budget Blinds has occurred in...