Gem State Roofing, Inc. v. United Components, Inc.
| Decision Date | 07 June 2021 |
| Docket Number | Docket No. 47484 |
| Citation | 168 Idaho 820,488 P.3d 488 |
| Court | Idaho Supreme Court |
| Parties | GEM STATE ROOFING, INCORPORATED, Plaintiff-Appellant-Cross Respondent, v. UNITED COMPONENTS, INCORPORATED, dba Gem State Roofing, Defendant-Respondent-Cross Appellant. |
McFarland Ritter PLLC, Meridian, for appellant Gem State Roofing. Ryan T. McFarland argued.
Pickens Law, P.A., Boise, for respondent, United Components Incorporated, dba Gem State Roofing. Terri Pickens Manweiler argued.
This is an appeal from a judgment entered after a bench trial. Beginning in the 1980s and 1990s, two Idaho businesses did roofing work under substantially similar names. One, Gem State Roofing, Inc., performed work primarily in Blaine County. It will be referred to as Gem State-Blaine. The other was a corporation operating under the name Gem State Roofing and Asphalt Maintenance, which also did business as Gem State Roofing. The latter was based in Boise, Idaho, and performed work in a significantly larger area. In 2011, Gem State Roofing and Asphalt Maintenance was succeeded in interest by United Components, Inc. (This corporation will be referred to as UCI.) Notwithstanding its change of name, it continued to do business as Gem State Roofing.
In 2005, prior to UCI's name change, the two businesses with similar names entered into a Trademark Settlement Agreement (TSA). The agreement contained terms prohibiting UCI from advertising, soliciting, or performing business in Blaine County, with exceptions for warranty or maintenance work, work performed for previous customers, or public entity work obtained by bid. In addition, UCI agreed that if it received a request for work it was contractually unable to fulfil because of the TSA, it would refer the work to Gem State-Blaine.
In 2018, Gem State-Blaine filed a lawsuit against UCI, alleging that it had breached the TSA when it advertised, solicited, bid on, and performed roofing work in Blaine County, and had failed to refer requests for work as required under the TSA. Gem State-Blaine brought claims for (1) breach of contract, (2) breach of the covenant of good faith and fair dealing implied in the TSA, (3) trademark infringement of a common-law trademark under 15 U.S.C. section 1125, (4) unjust enrichment, (5) a preliminary injunction, and (6) a permanent injunction. Gem State-Blaine also requested money damages, attorney fees, and costs.
After discovery and cross-motions for summary judgment, a bench trial was conducted on the remaining issues and claims. Ultimately, the district court concluded that, despite UCI's breach of the TSA and the implied covenant of good faith and fair dealing, Gem State-Blaine had failed to prove damages or that it was entitled to a permanent injunction. The district court further found that Gem State-Blaine had no protectable common-law trademark. Finally, the district court concluded that there was no prevailing party and declined to award attorney fees and costs. Gem State-Blaine timely appealed. UCI timely cross-appealed the district court's denial of its request for attorney fees and costs.
In the early 1980s, Jeffrey Flynn (Flynn) started a roofing company in Nampa, Idaho, and named it "Gem State Roofing." In 1987, he moved to Boise and continued his business, but also began to offer asphalt maintenance. In 1995, Flynn and his then-wife Michelle Flynn (Michelle) incorporated Flynn, Inc., by filing Articles of Incorporation with the Idaho Secretary of State.1 Flynn and Michelle served as directors of the corporation.
Two years later, in 1997, Rick Silvia (Silvia) filed a Certificate of Assumed Business Name with the Idaho Secretary of State, indicating he was doing business under the name "Gem State Roofing." Silvia had been performing roofing work in Blaine County since approximately 1991, but it was not until 1997 that he began calling his business "Gem State Roofing."
In 1998, Flynn filed Articles of Amendment to change the name of his corporation—Flynn, Inc.—to "Gem State Roofing and Asphalt Maintenance, Inc." (Gem State-Boise). In 1999, acting as secretary for the corporation, Michelle filed a Certificate of Assumed Business Name with the Idaho Secretary of State claiming the name "Gem State Roofing."
In 2000, Silvia filed Articles of Incorporation registering Gem State Roofing, Inc. ("Gem State-Blaine") with the Idaho Secretary of State. Two years later, in 2002, the State of Idaho issued a Certificate of Registration Trademark Service Mark for "Gem State Roofing" to Gem State-Blaine, stating that its first use had been in November 1997, and set the expiration of the trademark for May 2012.2
In 2004, the State of Idaho issued a Certificate of Registration Trademark Service Mark to Gem State-Boise, stating that the mark's first use had been in 1985, and set the expiration date in December 2014.3 The trademark was renewed in 2014.
Sometime in the years before 2005, Silvia and Flynn realized that their roofing companies were performing similar services under the same name.4 The two companies entered into the TSA to address these concerns "by agreeing not to do business or advertise in the other's primary market." In particular, the companies agreed that their names were confusingly similar and that they provided similar services. As part of the TSA, Flynn and Silvia agreed they would not advertise or solicit business in each other's primary market. Several exceptions applied, permitting warranty and maintenance work or repeat customer business, as well as work for public entities that was acquired by a qualified bid. The TSA was signed by Silvia and Michelle Flynn as presidents of Gem State-Blaine and Gem State-Boise, respectively.
Throughout 2010, Flynn and Michelle's marriage deteriorated, eventually leading to their divorce. At the same time, Gem State-Boise had incurred significant income tax liability. Flynn testified that in order to resolve the tax liability, the IRS directed him to dissolve Gem State-Boise and start a new company with a new name. In 2011, Flynn filed Articles of Incorporation with the Idaho Secretary of State creating United Components, Incorporated. UCI continued to operate using its predecessor's business equipment and did not inform its clients of the change.
In 2012, the predecessor corporation was administratively dissolved. Michelle Flynn had no ownership interest in UCI.
Beginning in 2010, UCI bid on and performed roofing services for projects in Blaine County. Most significantly, in 2018, UCI bid on and received a subcontract with McAlvain Construction to perform over $200,000 in roofing work on the Wood River Animal Shelter in Hailey, Idaho. As of October 2018, UCI had been paid a total of $279,540 on that project alone.
On July 20, 2018, Gem State-Blaine filed suit against UCI in Ada County. Gem State-Blaine brought claims for (1) breach of contract, (2) breach of the covenant of good faith and fair dealing implied in the TSA, (3) trademark infringement of a common-law trademark under 15 U.S.C. section 1125, (4) unjust enrichment, (5) a preliminary injunction, and (6) a permanent injunction. Gem State-Blaine also requested money damages, as well as attorney fees and costs under Idaho Code section 12-121 and the terms of the TSA.
UCI filed its answer. Among the affirmative defenses asserted, UCI contended that because UCI was not a party to the TSA, it could not have breached it. Further, UCI alleged that Gem State-Blaine's trademark could not have been infringed because it expired in 2012.
Discovery in this case was particularly contentious and is at the heart of several issues raised on appeal. It also overlapped with the parties’ cross-motions for summary judgment. To avoid confusion, the events relating to discovery will be explained separately from the events relating to summary judgment.
In September 2018, discovery commenced when Gem State-Blaine delivered several written discovery requests to UCI. In response to the request for copies of any correspondence or communication between UCI and potential or actual customers in Blaine County, UCI produced 117 pages of documents in October and November 2018.
In November and December 2018, Gem State-Blaine served eleven third-party subpoenas duces tecum upon several of UCI's potential and existing customers in Blaine County, requesting that they produce any correspondence with UCI. In response, the third parties produced hundreds of pages of documents, including emails and contracts that had not been produced by UCI.
Gem State-Blaine filed a motion to compel on January 28, 2019, arguing that the third parties’ responses indicated that UCI had not fully produced its communications with Blaine County customers in its response to discovery. Gem State-Blaine requested attorney fees and costs associated with the additional subpoenas, as well as sanctions for UCI's lack of responsiveness.
In early March, UCI produced its third supplemental response to Gem State-Blaine's first discovery requests, which consisted of more than a thousand pages of documents. Gem State-Blaine stated in a later hearing that "virtually all of [these electronic communications] related to the large contract in the case, the [McAlvain]/Wood River Animal Shelter contract."
A hearing on Gem-State Blaine's motion to compel was held on March 19, 2019. The thrust of Gem State-Blaine's argument was that UCI had withheld requested discovery, while UCI countered that the email correspondence Gem State-Blaine requested had been routinely deleted and so it could not be produced. Following argument, the district court granted Gem State-Blaine's motion to compel and ordered "the defense to fully and faithfully respond to any and all discovery requests." However, the district court deferred its ruling on Gem State-Blaine's request for sanctions. An order to...
To continue reading
Request your trial