Great Eastern Resort v. Virtual Resort Solutions

• Decision Date: 14 March 2002
• Docket Number: No. CIV.A.5:01CV00039.,CIV.A.5:01CV00039.
• Parties: GREAT EASTERN RESORT CORPORATION Plaintiff, v. VIRTUAL RESORT SOLUTIONS, L.L.C and Keith Arnold Defendants.
• Court: U.S. District Court — Western District of Virginia

Page 469

189 F.Supp.2d 469

GREAT EASTERN RESORT CORPORATION Plaintiff, v. VIRTUAL RESORT SOLUTIONS, L.L.C and Keith Arnold Defendants.

No. CIV.A.5:01CV00039.

United States District Court, W.D. Virginia, Harrisonburg Division.

March 14, 2002.

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LeAnn M. Buntrock, Dana R. Cormier, Thomas E. Ullrich, Wharton, Aldhizer & Weaver, PLC, Harrisonburg, VA, for Plaintiff.

Neal L. Walters, Scott & Kroner, P.C., Charlottesville, VA, for Defendants.

MEMORANDUM OPINION

MICHAEL, Senior District Judge.

The Plaintiff, Great Eastern Resort Corporation ("Great Eastern"), filed suit against the defendants, Keith Arnold ("Arnold") and Virtual Resort Solutions ("VRS"), on May 8, 2001, invoking federal jurisdiction pursuant to 28 U.S.C. §§ 1331, 1338(b), and 1367.¹ On November 29, 2001, the court heard arguments from counsel on the plaintiff's motion for a preliminary injunction. Prior to the hearing date, the court received the parties' memoranda and supporting affidavits. Both parties, as directed by the court, filed additional post-hearing memoranda. Having thoroughly considered the issue, the court finds that a preliminary injunction is appropriate in this case, and thus, grants the plaintiff's motion.

I.

Since 1984, Great Eastern has developed and sold timeshare units and offered recreational facilities under the names "Massanutten" and "Massanutten Resorts." Massanutten Ski Resort, which Great Eastern's property now encompasses, has been in operation since approximately 1969. The resort is located in Rockingham County, Virginia in the Shenandoah Valley. During the course of its ownership, Great Eastern has spent a substantial sum marketing the resort and its facilities throughout the world.

In 1995, Arnold formed Massanutten Tour Company ("MTC") and began offering tours and services to resort and area guests. Arnold registered the company with the State Corporation Commission and later registered the domain names massanutten.com, emassanutten.com, massanuttenvacations.com, and massanuttenresort.com. Subsequently, Great Eastern registered a website under the domain name massresort.com to promote Massanutten Resort. In 1996, Arnold entered into an exclusive contractual relationship with Great Eastern to provide bus tour services for Massanutten Resort. Great Eastern promoted this exclusive relationship in material provided to resort guests and with a hyperlink between the MTC and Massanutten Resort websites. In 1997, after the relationship between Great Eastern and Arnold/MTC had begun to deteriorate, Great Eastern terminated the exclusive relationship but continued to use MTC's services on an as needed basis until 2000.

In 2000 Arnold formed VRS to advertise timeshare units for sale in Massanutten Resort. VRS took over the massanutten.com website and related domain names from MTC. The website offers information about accommodations, timeshares, sports, crafts, kids' activities, virtual tours, site maps, childcare and other amenities related to Massanutten Resort. While Great Eastern's website, massresort.com, states that it is "[t]he Official Website of Massanutten Resort," the defendants' website announces that it is "[y]our online resource for Massanutten Resort info." The defendants website also displays the slogan, "Quite possibly Virginia's finest four season resort" and uses the heading "Massanutten Resort" on each page of the site.

The plaintiff claims that the defendants' aforementioned domain names and use of the terms "Massanutten" and "Massanutten Resort" on the VRS website violate the Lanham Act, 15 U.S.C. § 1125, the Anticybersquatting Consumer Protection Act (ACPA), 15 U.S.C. § 1125(a)(1)(B)(i), and supplemental state law claims of unfair competition and tortious interference with business expectancy. The plaintiff seeks a preliminary injunction enjoining defendants from using the terms "Massanutten" and "Massanutten Resort" on their website, "massanutten.com," and from using the various domain names that access that website.

II.

A. Standard for Awarding Preliminary Injunctions

The Fourth Circuit has recognized that "preliminary injunctions are extraordinary remedies involving the exercise of very far-reaching power to be granted only sparingly and in limited circumstances." MicroStrategy Inc. v. Motorola, Inc., 245 F.3d 335, 339 (4th Cir.2001) (quoting Direx Israel, Ltd. v. Break-through Med. Corp., 952 F.2d 802, 816 (4th Cir.1991) (internal quotation marks omitted)). A party seeking preliminary injunctive relief faces the significant burden of clearly establishing entitlement to the relief sought. See Hughes Network Systems v. InterDigital Communications Corp., 17 F.3d 691, 693 (4th Cir.1994). Injunctive relief granted early in the course of litigation should indeed be the exception rather than the rule. As the Fourth Circuit has expressed, the hazard of granting a preliminary injunction is that it "requires that a district court, acting on an incomplete record, order a party to act, or refrain from acting in a certain way. `[T]he danger of a mistake' in this setting `is substantial.'" Hughes, 17 F.3d at 693 (quoting Federal Leasing, Inc. v. Underwriters at Lloyd's, 650 F.2d 495, 499 (4th Cir.1981)).

B. Four Factors and Balancing Test

A grant of preliminary injunctive relief requires a balancing of the four factors established in Blackwelder Furniture Co. v. Seilig Manufacturing Co., 550 F.2d 189, 195-96 (4th Cir.1977):(1) the likelihood of irreparable harm to the plaintiff if the preliminary injunction is denied; (2) the likelihood of harm to the defendant if the request is granted; (3) the likelihood that the plaintiff will succeed on the merits; and (4) the public interest. The Fourth Circuit recognizes the "balance of hardships" between the plaintiff and defendant as the most important consideration among the four factors as it determines whether the plaintiff must show a substantial likelihood of success on the merits. Hughes, 17 F.3d at 693 (citing Blackwelder, 550 F.2d at 196). "If the plaintiff[] fail[s] to establish that the balance of hardships tips in its favor, an injunction should only be granted if the plaintiff establishes a `substantial likelihood of success' on the merits." Yellow Cab Co. of Charlottesville v. Rocha, No.Civ.A. 3:00CV00013, 2000 WL 1130621, at *3 (W.D.Va. July 5, 2000) (citing Direx Israel, Ltd. v. Breakthrough Med. Corp., 952 F.2d 802, 818 (4th Cir. 1991).

1. Balance of Hardships

The plaintiff argues that a prima facie showing of trademark infringement raises both a presumption of irreparable harm and a likelihood of success. (Pl.'s Mem. Supp. Prelim. Inj. at 10). In fact, the Fourth Circuit has recognized that a district court is "entitled" to presume a likelihood of success on the merits and irreparable harm when the plaintiff makes a prima facie showing of infringement. Service & Training Inc. v. Data General Corp., 963 F.2d 680, 690. However, the defendant argues that the plaintiff's delay in bringing the present action directly contradicts an allegation of irreparable injury. (Defs.' Resp. to Pl.'s Mot. for Prelim. Inj. at 10). The Second Circuit held in Citibank, N.A. v. Citytrust, 756 F.2d 273, 276 (2d Cir.1985) that a "[s]ignificant delay in applying for injunctive relief in a trademark case tends to neutralize any presumption that infringement alone will cause irreparable harm pending trial...." Because a presumption may not be dispositive in light of evidence to the contrary, this court will exercise its entitled discretion to evaluate independently the balance of hardships relative to each party before weighing the Blackwelder factors together.

The plaintiff alleges that the defendants have caused it irreparable harm by "intentional[ly] infring[ing] upon the "Massanutten" and "Massanutten Resort" marks,...diver[ting]...customers to Defendants' website, and ... interfer[ing] with Great Eastern's existing business and prospective business relationships." (Pl.'s Mem. Supp. Prelim. Inj. at 28). The plaintiff argues that the defendants' activities have eroded Great Eastern's goodwill and reputation. Id. Specifically, Great Eastern asserts that the domain name used by the defendants identifies a specific company, "Massanutten," and users are likely to surmise that Great Eastern and the owner of the website are the same entity. (Pl.'s Post Hr'g Mem. Supp. Prelim. Inj. at 41). In fact, the plaintiff maintains that defendant Arnold admitted in testimony that "Massanutten" is the intuitive domain name for Great Eastern's Massanutten Resort. Id. The plaintiff claims that the defendants' continued use of "Massanutten" and "Massanutten Resort" will result in a loss of control, and damage to, the plaintiff's reputation, Id. at 42, and that granting a preliminary injunction will "simply force Defendants to create their own goodwill and marketing presence." (Pl.'s Mem. Supp. Prelim. Inj. at 29). That is, the plaintiff argues that any harm to the defendants' resulting from the imposition of a preliminary injunction would be from the "[d]efendants' own failure to establish customer relationships, goodwill and market presence fairly and equitably." Id.

The defendants respond that enjoining the contested domain names would be the death knell for their business as they would lose all goodwill they had obtained since the business's inception. The defendants have devoted significant resources to developing their website because traffic to the site generates the majority of their income. Assuming their continued ownership and full use of the website, the defendants have entered into a joint venture with another entity and a number of short and long-term contracts with advertisers. Moreover, the defendants argue that they control such a small share of the market (three percent to Plaintiff's ninety-seven percent), that any harm suffered by the plaintiff as a result of the defendants' continued use of the domain names...