Bruce-Terminix Co. v. The Terminix Int'l Co. Ltd. P'ship

Decision Date17 April 2023
Docket Number1:20-CV-962
CourtU.S. District Court — Middle District of North Carolina

Catherine C. Eagles, District Judge.

At summary judgment, the Court found that the defendant Terminix International Company Limited Partnership (Terminix) breached a License Agreement which gave the plaintiff Bruce-Terminix exclusive rights to use the Terminix name, brand, and system in a defined territory. The matter is before the Court now on Bruce's motion for a permanent injunction. The motion will be granted in part, to the extent consistent with the Court's Summary Judgment Order.

I. Findings of Fact

The Court adopts by reference the undisputed facts as stated in its Summary Judgment Order. Doc. 108 at 1-7. In summary Bruce is a pest control company that has an exclusive license from Terminix to use the Terminix name, brand, and system in 17 counties in North Carolina. See Doc. 1-1 at 4-5, 9, 20; Doc. 86 at ¶¶ 3-4. The License Agreement allows for injunctive relief, Doc. 1-1 at 17 § XX/C, and is governed by the laws of Tennessee. Id. at 17 § XX/A.

Under the License Agreement, Terminix agreed that it “will not itself establish, nor will it license another to establish, within [Bruce's service area], a location from which to operate a Terminix System,” id. at 9 § VII/A, and that it “will not license another to establish, nor will [Terminix] itself establish, within [Bruce's service area], a location from which to operate a business similar to the Terminix System, under a name other than TERMINIX.” Id. at 9 § VII/B.

In 2018 and 2019, Terminix's parent company, now Terminix Global Holdings, Inc. (TGH), Doc. 89-1 at ¶ 13, acquired two entities involved in pest control in Bruce's exclusive territory: Copesan and Gregory Pest Solutions. Id. at ¶¶ 3-5, 8; see Doc. 90-5. At summary judgment, the Court found that these acquisitions were not a breach of the License Agreement because Terminix did not acquire these companies. Doc. 108 at 8.

Before it was acquired by TGH, Gregory provided pest control services to customers throughout the southeastern United States. Doc. 89-1 at ¶ 4. Gregory no longer exists outside of the Carolinas; elsewhere, it has become part of the Terminix brand. See Doc. 88-19 at 13-14. While Gregory does not own or lease a physical location within Bruce's exclusive territory, Doc. 89-1 at ¶ 11, Gregory employs technicians who provide services to customers within Bruce's exclusive territory. Doc. 88-2 at 6-9; see Doc. 89-1 at ¶ 4.

Terminix handles Gregory's recruiting needs and screens applicants for employment. Doc. 88-19 at 19-20. Gregory has used the Terminix name in job postings at least twice within Bruce's exclusive territory. Doc. 86 at ¶¶ 23-24; see Doc. 86-6; Doc. 98-1 at ¶¶ 4-8.

Once hired, Gregory employees have access to Aspire, which is Terminix's confidential training program, see Doc. 88-19 at 11, 26, Doc. 88-16 at 27, Doc. 86 at ¶¶ 6-9, and to Terminix Nation which is the “intranet site for Terminix” and contains sales, marketing, and other training materials. Doc. 88-16 at 16-17, 35-36. Gregory also has access to the benefits of “Terminix fleet deals and services.” Doc. 88-19 at 12. Gregory uses Terminix's four-step tick treatment method, the Tick Defend System, with “Gregory-branded marketing materials.” Doc. 88-16 at 32-35, 37-38; compare Doc. 88-10 at 15 (Terminix's Tick Defend System), with Doc. 88-11 at 3 (Gregory's Tick Defend System). All of these materials, methods, and information are part of the Terminix System.

Copesan is a management company that contracts with local pest control providers to provide pest control services to Copesan's customers. Doc. 89-1 at ¶ 8. Copesan used the Terminix name to solicit a contract in competition with Bruce, Doc. 86 at ¶¶ 27-28, Doc. 86-11 at 2-3, Doc. 90-9 at 11-13, which Gregory would perform. See Doc. 88-18 at 14.

The License Agreement prohibits Terminix from licensing another entity to establish a location from which to operate a Terminix System. Terminix breached the License Agreement by authorizing Gregory to use the Terminix name, brand, and system within the service area, effectively licensing TGH to establish a location within Bruce's exclusive territory from which to operate a competing Terminix System. Doc. 108 at 8-9.

In October 2022, TGH merged with a global pest control business called Rentokil. Doc. 89-1 at ¶ 1; see Doc. 58-4 at 2. Rentokil now owns five pest control businesses that compete with Bruce in the service area, Doc. 89-1 at ¶¶ 6, 20, and is integrating with Terminix “to form the world's leading pest control company.” Doc. 86-14 at 2.

The License Agreement does not prohibit Terminix or TGH from merging or integrating with Rentokil. Doc. 108 at 11. “The License Agreement only prohibits Terminix from authorizing the use of the Terminix name, brand, or system to any Rentokil subsidiary that provides pest control services within Bruce's exclusive territory.” Id. There has been no evidence that Terminix has granted this permission to Rentokil.

Bruce offered credible evidence of some harm to reputation and some customer confusion caused by Terminix's breach. Doc. 86 at ¶ 27; Doc. 90-9 at 11-13. Bruce had no evidence of actual damages, as the testimony of its witness on damages was insufficient under Tennessee law to prove lost profits; it is limited to nominal damages, declaratory relief, and potentially injunctive relief. See Doc. 108 at 12-16.

II. Applicable Law

State substantive law applies to Bruce's request for a permanent injunction. See Lord & Taylor, LLC v. White Flint, L.P., 780 F.3d 211, 215 (4th Cir. 2015) ([State] substantive law applies in this diversity action, and governs [the plaintiff's] claim for a permanent injunction.”); Cap. Tool & Mfg. Co. v. Maschinenfabrik Herkules, 837 F.2d 171, 172 (4th Cir. 1988) (“There is no reason to exclude from Erie state substantive law regarding the issuance of final injunctions.”); McNulty v. Casero, 479 F.Supp.3d 200, 211 (D. Md. 2020) (noting that “federal courts should apply substantive state law principles” to requests for permanent injunctions in diversity cases).

To determine whether North Carolina or Tennessee law applies, the Court applies the choice-of-law rules of the forum state. See Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496-97 (1941); McNulty, 479 F.Supp.3d at 210-11; 19 Charles Alan Wright & Arthur R. Miller, Federal Practice & Procedure § 4506 (3d ed. 2023) ([I]t is settled that as to matters governed by state law under Erie, a federal court must follow the forum state's choice-of-law rules to determine which state's . . . law to apply.”).

Under North Carolina law, the law of the forum applies to procedural matters. Warren Cnty. Dep't of Soc. Servs. ex rel. Glenn v. Garrelts, 278 N.C.App. 140, 143-44, 862 S.E.2d 65, 69 (2021). This is true even when a contract contains a choice-of-law provision. See Tenn. Carolina Transp., Inc. v. Strick Corp., 283 N.C. 423, 431, 196 S.E.2d 711, 716 (1973); Wohlfahrt v. Schneider, 82 N.C.App. 69, 73-74, 345 S.E.2d 448, 450-51 (1986). North Carolina courts consider matters affecting the remedy, such as injunctive relief, to be procedural. See Revels v. Miss Am. Org., 165 N.C.App. 181, 187, 599 S.E.2d. 54, 58 (2004) (noting remedial rights are determined by the law of the forum); Travenol Labs., Inc. v. Turner, 30 N.C.App. 686, 692, 228 S.E.2d 478, 483 (1976) (“While the substantive law being administered here is that of California, the procedural law, including that of injunctive relief, is that of North Carolina.”); Redlee/SCS, Inc. v. Pieper, 153 N.C.App. 421, 427, 571 S.E.2d 8, 13 (2002) (noting injunctive relief is determined by North Carolina law). Thus, North Carolina law governs the request for injunctive relief.[1]

III. Discussion

Under North Carolina law, courts have discretion to “grant, deny, limit, or shape” injunctive relief after “balancing equities, hardships, and the interests of the public and of third persons.” Roberts v. Madison Cnty. Realtors Ass'n, 344 N.C. 394, 399, 474 S.E.2d 783, 787 (1996). The moving party must show: (1) an “irreparable injury;” (2) that “damages are not reasonably obtainable;” and (3) that “the injury is of such continuous and frequent recurrence that no reasonable redress can be had in a court of law.” Asheville Mall, Inc. v. Sam Wyche Sports World, Inc., 97 N.C.App. 133, 135, 387 S.E.2d 70, 71 (1990) (cleaned up); see also Town of Winterville v. King, 60 N.C.App. 730, 734, 299 S.E.2d 838, 841 (1983).

On the one hand, a permanent injunction is an extreme remedy. Wood v. Vickrey, 276 N.C.App. 427, 442, 857 S.E.2d 734, 745 (2021). [C]ompleted acts and past occurrences in the absence of any evidence tending to show an intention on the part of the defendants to commit future violations will not authorize the exercise of the court's injunctive power.” Citizens Addressing Reassignment & Educ., Inc. v. Wake Cnty. Bd. of Educ., 182 N.C.App. 241, 247, 641 S.E.2d 824, 828 (2007) (cleaned up); see also Asheville Mall, 387 S.E.2d at 71. On the other hand, injunctions are routinely granted by North Carolina courts in cases involving breaches of covenant-not-to-compete clauses. See A.E.P. Indus., Inc. v. McClure, 308 N.C. 393, 406-08, 302 S.E.2d 754, 762-63 (1983); Redlee/SCS, Inc., 571 S.E.2d at 13-14; QSP, Inc. v. Hair, 152 N.C.App. 174, 178-79, 566 S.E.2d 851, 854 (2002); Digit. Realty Tr., Inc. v. Sprygada, No. 21-CV-14999, 2022 WL 2398394, at *15-17 ( N.C. Bus. Ct. July 1, 2022).[2]

A. Authorization of the Terminix Name, Brand, and System

Bruce seeks to enjoin Terminix for the...

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