Days Inn Worldwide, Inc. v. Bfc Management, Inc., Civil Action No. 02-02143 (SDW).

• Decision Date: 04 March 2008
• Docket Number: Civil Action No. 02-02143 (SDW).
• Citation: 544 F.Supp.2d 401
• Parties: DAYS INN WORLDWIDE, INC., Plaintiff, v. BFC MANAGEMENT, INC., a West Virginia Corporation; James Cobb, an individual; and Robert Frazier, an individual, Defendants.
• Court: U.S. District Court — District of New Jersey

Page 401

544 F.Supp.2d 401

DAYS INN WORLDWIDE, INC., Plaintiff, v. BFC MANAGEMENT, INC., a West Virginia Corporation; James Cobb, an individual; and Robert Frazier, an individual, Defendants.

Civil Action No. 02-02143 (SDW).

United States District Court, D. New Jersey.

March 4, 2008.

COPYRIGHT MATERIAL OMITTED

Day Pitney, LLP, Morristown, NJ, for Plaintiff.

John J. Petriello, Levy, Ehrlich & Petriello, PC, Newark, NJ, for Defendants.

OPINION

WIGENTON, District Judge.

Before the Court are briefs filed by plaintiff Days Inn Worldwide, Inc. ("Plaintiff), co-defendants BFC Management, Inc. ("BFC") and Robert Frazier ("Frazier") (collectively "Co-defendants") and cross-claimant James Cobb ("Cobb") regarding the final issues in this matter, namely, Plaintiffs claims for Lanham Act and liquidated damages from BFC, as well as Cobb's cross-claim ("Cross-Claim") for indemnification from Co-defendants and attorneys' fees from Frazier. Based on the parties' discussions and understandings with the Court during oral argument on August 9, 2007, the Court will decide these remaining issues as if raised by motion for summary judgment pursuant to Federal Rule of Civil Procedure 56(c).¹

The Court, having considered the parties' submissions, decides this matter without further oral argument pursuant to Federal Rule of Civil Procedure 78. For the reasons discussed below, the Court grants summary judgment to Plaintiff, and grants in part and denies in part summary judgment for Cobb.

1. Jurisdiction

The Court is vested with jurisdiction over this matter pursuant to 15 U.S.C. § 1121 and 28 U.S.C. §§ 1331, 1332, 1338 and 1367.

II. Background

The parties are referred to the Amended Final Pretrial Order filed by Judge Arleo on July 13, 2007 for the underlying facts giving rise to Plaintiffs Lanham Act claims against Co-defendants and Cobb.² On July 24, 2007, Cobb settled all claims with Plaintiff in the amount of $150,000 pursuant to a settlement agreement ("Settlement Agreement") executed between them. Cobb subsequently filed a crossclaim for indemnification and contribution against Co-defendants. Cobb asserts that pursuant to the Stock Purchase Agreement ("SPA") dated December 1998, Cobb transferred all of his interest in BFC to Frazier in consideration for indemnification from Frazier for "any and all debts, liabilities, claims and obligations of the Corporation now existing or which may hereafter arise." (SPA ¶ 2.) Accordingly, Cobb claims that he is entitled to indemnification and contribution from Co-defendants for his settlement with Plaintiff, as well as attorneys' fees incurred in litigating this matter. (Cobb's Reply Br. at 1.)

III. Legal Standard

Summary judgment shall be granted "if the pleadings, depositions, answers to interrogatories and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). A factual dispute is genuine if a reasonable jury could return a verdict for the nonmoving party and material if, under the substantive law, it would affect the outcome of the suit. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). The moving party must show that if the evidentiary material of record were reduced to admissible evidence in court, it would be insufficient to permit the nonmoving party to carry its burden of proof. Celotex Corp. v. Catrett, 477 U.S. 317, 318, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986).

Once the moving party meets the initial burden, the burden then shifts to the nonmoving party who must set forth specific facts showing a genuine issue for trial and may not rest upon the mere allegations or denials of its pleadings. Shields v. Zuccarini, 254 F.3d 476, 481 (3d Cir.2001). The court may not weigh the evidence and determine the truth of the matter, but rather, determine whether genuine issues of material fact exist. Anderson, 477 U.S. at 249, 106 S.Ct. 2505. In doing so, the court must construe the facts and inferences in the light most favorable to the nonmoving party. Masson v. New Yorker Magazine, Inc., 501 U.S. 496, 520, 111 S.Ct. 2419, 115 L.Ed.2d 447 (1991).

IV. Discussion

As noted, the Court and the parties agree that no genuine issues of fact exist with regard to the remaining issues in this matter. (See generally Tr., Aug. 9, 2007.) Thus, it is appropriate for the Court to address the following issues on summary judgment: 1) BFC's alleged violations of the Lanham Act and Plaintiffs claim to Lanham Act damages; 2) the validity of the liquidated damages stipulation between Plaintiff and BFC under the License Agreement; and, 3) Cobb's claim of indemnification and contribution from Codefendants for his settlement with Plaintiff, as well as attorneys' fees.

A. Lanham Act Violations

Plaintiff alleges that BFC infringed on the Days Inn trademarks and service marks (the "Days Marks") from November 6, 2001 through at least January 22, 2002 in violation of sections 32³ and 43⁴ of the Lanham Act ("Act"). (Pl.'s Letter, Aug. 23, 2007.)

To prevail on a trademark infringement claim under section 32,⁵ a plaintiff must prove that the marks in question are valid and legally protectable, owned by plaintiff, and that defendant's use of them is likely to create confusion concerning the origin of the product or service. General Motors Corp., Chevrolet Motor Div. v. New A.C. Chevrolet, Inc., 91 F.Supp.2d 733, 741 (D.N.J.2000) (citing Opticians Ass'n of Am. v. Indep. Opticians of Am., 920 F.2d 187, 192 (3d Cir. 1990)). With regard to an unfair competition claim under section 43,⁶ a plaintiff need only prove that its marks are distinctive and protectable and that the defendant's use of those marks would likely cause confusion among the relevant public. See id. at 742 (citing Birthright v. Birthright, Inc., 827 F.Supp. 1114, 1134 (D.N.J. 1993)). Because "`trademark infringement [under section 32] is a narrower concept, any finding that it has occurred will, by necessity, support an additional finding that the defendant is also guilty of unfair competition [under section 43(a)].'" Id. (citation omitted).

It is undisputed that the Days Marks are valid, legally protectable and owned by Plaintiff. (See Am. Final Pretrial Order ¶¶.) Therefore, the Court need only decide whether BFC's use of the Days Marks is likely to create confusion concerning the origin of the product or service.

The Third Circuit has held that great likelihood of confusion exists when unrelated entities use the exact same trademark simultaneously. U.S. Jaycees v. Philadelphia Jaycees, 639 F.2d 134, 142 (3d Cir. 1981); Opticians, 920 F.2d at 195 ("[Likelihood of confusion is inevitable, when ... the identical mark is used concurrently by unrelated entities."); S & R Corp. v. Jiffy Lube Int'l, Inc., 968 F.2d 371, 376 (3d Cir.1992) ("[Concurrent use is highly likely to cause consumer confusion....").

In this matter, a Post-Termination Obligations Checklist and accompanying photographs, which were taken on January 22, 2002 by a representative of Plaintiff, show that BFC continued to use the Days Marks after the termination of the License Agreement on November 6, 2001. (See Olsen's Decl. Ex. A.) As such, the Court finds that BFC's unauthorized use of the Days Marks from November 6, 2001 through at least January 22, 2002 likely created confusion to the public.⁷ Therefore, the Court grants Plaintiff summary judgment on its claims under sections 32 and 43 of the Lanham Act.

B. Lanham Act Damages

Plaintiff seeks the following damages with respect to its Lanham Act claims: (1) damages from Co-defendants⁸ based on the profits earned at the infringing facility ("Facility")⁹ during the period of infringement, or, alternatively, compensatory damages based upon the recurring fees that Plaintiff would have received during that period; (2) treble damages due to Co-defendants' alleged intentional and deliberate use of the Days Marks after termination; and, (3) attorneys' fees. (Pl.'s Letter dated Aug. 23, 2007.)

Plaintiff calculates its actual damages to be $16,579.92, which is the gross room revenue during the period of infringement, and requests the Court to treble the infringement damages to $49,739.76. In assessing damages, the Court may award three times the amount of actual damages, including attorneys' fees, where it finds intentional infringement. See 15 U.S.C. § 1117(b); see also Microsoft Corp. v. CMOS Techs., 872 F.Supp. 1329, 1329-41 (D.N.J.1994) (holding that treble damages are only to be imposed if the defendant's infringement was intentional, knowing, or willfully blind). Despite the termination of the License Agreement on November 6, 2001, BFC continued to provide in the Facility cups, toiletries, and other items displaying the Days Marks. (See Olsen's Decl. Ex. A.) Moreover, BFC continued to operate with exterior signage displaying the Days Marks through at least January 22, 2002. (See Olsen's Decl. Ex. A.) As such, the Court finds that BFC possessed the requisite intent so as to entitle Plaintiff to treble damages in the amount of $49,739.76, including reasonable attorneys' fees, pursuant to 15 U.S.C. § 1117(b).

C. Liquidated Damages

In addition to infringement damages, Plaintiff seeks liquidated damages in the amount of $204,000 pursuant to section 12.1 of the License Agreement.¹⁰ According to Co-defendants, "A large discrepancy exists between the amount sought by [Plaintiff] pursuant to the liquidated damaged] clause and the actual damages alleged by [Plaintiff]." (Defs.' Supplemental Br. at 3.) Given this alleged discrepancy, Co-defendants contend that the liquidated damages clause is unreasonable and unenforceable.

Whether a liquidated damages clause is enforceable is a question of law for the court and "[t]he burden of proof is upon the party challenging the liquidated damages clause." Naporano Assocs., L.P. v. B & P Builders, 309...