Healix Infusion Therapy Inc. v. Helix Health Llc

• Decision Date: 30 September 2010
• Docket Number: Civil Action No. H–09–2072.
• Citation: Healix Infusion Therapy Inc. v. Helix Health Llc, 747 F.Supp.2d 730 (S.D. Tex. 2010)
• Parties: HEALIX INFUSION THERAPY, INC., Plaintiff,v.HELIX HEALTH, LLC, and Steven Murphy, Defendants.
• Court: U.S. District Court — Southern District of Texas

747 F.Supp.2d 730

HEALIX INFUSION THERAPY, INC., Plaintiff,

v.HELIX HEALTH, LLC, and Steven Murphy, Defendants.

Civil Action No. H–09–2072.

United States District Court, S.D. Texas, Houston Division.

Sept. 30, 2010.

Scott Weiss, Corporate Counsel, Sugar Land, TX, for Plaintiff.Bryan Haynes, Scheef & Stone, L.L.P., Dallas, TX, for Defendants.

FINDINGS OF FACT AND CONCLUSIONS OF LAW

NANCY F. ATLAS, District Judge.

PlaintiffHealix Infusion Therapy, Inc.(“HIT”) filed this breach of contract action against DefendantsHelix Health, L.L.C. and Steven Murphy(collectively “Defendants”) alleging that Defendants breached a settlement agreement with HIT.The Court has subject matter jurisdiction pursuant to 28 U.S.C. §§ 1331,1332,1338and1367, and Defendants have consented to enforcement of the settlement agreement in the Southern District of Texas.¹

This case was tried to the Court on September 23 and 24, 2010.²Each party presented exhibits and live witnesses.Having considered the evidence introduced by the parties, all matters of record in this case, the arguments of counsel and applicable authorities, the Court makes the following findings of fact and conclusions of law.³

I.BACKGROUND

This litigation arises out of a prior case resolved by a settlement agreement between the parties.HIT provides “drug compounding, infusion therapy and practice management services to physicians.”⁴HIT filed suit in January, 2008 against DefendantsStephen Murphy, a medical doctor specializing in internal medicine and genetics, and his business entity Helix Health, L.L.C., for cybersquatting and trademark infringement (the “Underlying Litigation”).In that case, HIT's cybersquatting claim was adjudicated on summary judgment in favor of Defendants, and HIT's trademark infringement claim was dismissed without prejudice for lack of personal jurisdiction.On May 1, 2009, while the Underlying Litigation was on appeal to the Fifth Circuit, the parties entered into a settlement agreement (the “Settlement Agreement”).⁵

The basic terms of the Settlement Agreement were: (1) HIT paid Defendants $7,500.00; (2) HIT withdrew its appeal of the Underlying Litigation; (3) HIT agreed not to bring suit against Defendants for prior acts of trademark infringement; and (4)Defendants agreed (a) to abandon their trademark application for “HELIX HEALTH” within three days; (b) to provide HIT with a list of domain names previously used to market “Helix Health”; (c) to transfer ownership of the aforementioned domain names to HIT within thirty days (by May 31, 2009); (d) to cease using “Helix Health” within thirty days; and (e) to change Defendants' corporate name within six months (by November 1, 2009).Defendants were, however, permitted to use the following corporate identifiers: “Helix Health of Connecticut”, “Helix Health of Delaware”, and “Helix Health of New York”.⁶

HIT commenced the suit at bar on July 2, 2009, alleging that Defendants have continued to use the identifier “Helix” in violation of the Settlement Agreement.HIT asserted claims for breach of the Settlement Agreement and for trademark infringement under the Lanham Act,15 U.S.C. §§ 1114,1125.HIT seeks specific performance of the Settlement Agreement, damages, a permanent injunction, and attorney's fees.Defendants, alleging that HIT intercepted emails intended for Dr. Murphy following the domain transfer, assert counterclaims for breach of the Settlement Agreement, invasion of privacy, violations of the Federal Wiretap Act, 18 U.S.C. § 2520, and violations of the Federal Stored Communications Act, 18 U.S.C. § 2707.

On January 19, 2010, Defendants agreed to a preliminary injunction [Doc. # 43] enjoining them from using the prohibited marks in any manner outside the terms of the Settlement Agreement.In March 2010, HIT moved for summary judgment on its breach of contract and trademark infringement claims, as well as Defendants' counterclaims.Defendants moved for partial summary judgment on HIT's claims.On August 12, 2010, 737 F.Supp.2d 648, 2010 WL 3218881(S.D.Tex.2010), the Court denied HIT's motion for summary judgment, while granting in part and denying in part Defendants' motion [Doc. # 71].

On September 8, 2010, the parties stipulated [Doc. # 82] that HIT abandoned with prejudice its claim for trademark infringement and Defendants dismissed with prejudice their counterclaims for breach of contract, invasion of privacy, and violations of the Federal Stored Communications Act, 18 U.S.C. § 2707.The only remaining claims became HIT's cause of action for breach of contract and Defendants' counterclaim for violations of the Federal Wiretap Act, cited as18 U.S.C. § 2520.⁷The case proceeded to trial.⁸

II.BREACH OF CONTRACTA.Legal Principles

The construction and enforcement of the provisions of a settlement agreement are governed by Texas contract law.Eastern Energy, Inc. v. Unico Oil & Gas, Inc.,861 F.2d 1379, 1380(5th Cir.1988);Lockette v. Greyhound Lines, Inc.,817 F.2d 1182, 1185(5th Cir.1987)(holding that in diversity cases, state law controls validity and interpretation of settlement agreements).The elements of a breach of contract are (1) the existence of a valid contract, (2) performance or tendered performance by the plaintiff, (3) breach of the contract by the defendant, and (4) damages sustained by the plaintiff as a result of the breach.Valero Mktg. & Supply Co. v. Kalama Int'l,51 S.W.3d 345, 351(Tex.App.-Houston[1st Dist.]2001, no pet.).

When a trademark infringement plaintiff has entered into a settlement agreement releasing its claim, what it bargained for was “the peaceable enjoyment of its trademark, without conduct that would infringe on that trademark.”Qaddura v. Indo–European Foods, Inc.,141 S.W.3d 882, 891–92(Tex.App.-Dallas2004, pet. denied).When that agreement is breached, plaintiff suffers injury to the goodwill of its mark sufficient to succeed under a breach of contract action.Am. Rice, Inc. v. Producers Rice Mill, Inc.,No. H–05–3227, 2006 WL 1984592, at *8(S.D.Tex.July, 14 2006), vacated in part on other grounds518 F.3d 321(5th Cir.2008)(citingBlue Cross and Blue Shield Ass'n v. Am. Express Co.,No. 99 C 6679, 2005 WL 1838340 at *5–6(N.D.Ill.2005);Alfred Dunhill, Ltd. v. Dunhill Compact Classics, Inc.,11 U.S.P.Q.2d 1078, 1080(C.D.Cal.1988)).

B.Analysis

There is no dispute and the Court finds that the Settlement Agreement, dated May 1, 2009, constitutes a valid contract.The Court further finds that Plaintiff, HIT, performed under that contract.The Settlement Agreement required HIT (1) to pay Defendants $7,500.00 in settlement funds,⁹(2) to withdraw its appeal of the Underlying Litigation,¹⁰ and (3) not to bring suit against Defendants for acts of trademark infringement prior to May 1, 2009.¹¹HIT complied with these provisions.HIT paid Defendants $7,500.00 on April 13, 2009.¹²HIT dismissed its appeal of the Underlying Litigation.¹³There is nothing in the record to suggest HIT brought suit against Defendants for trademark infringement for Defendants' conduct prior to the Settlement Agreement.Thus, the Court finds that HIT performed under the Settlement Agreement.

The Court further finds that Defendants breached the Settlement Agreement.Paragraph 2 of the Settlement Agreement (the “Cessation of Use clause”) required Defendants to cease using certain trademarks or names by specified deadlines.In particular, Defendants promised to cease using “Helix” and “Healix” within thirty (30) days, that is, by May 31, 2009.¹⁴After that date, Defendants were permitted to use only “Helix Health of Connecticut,”“Helix Health of Delaware,” and “Helix Health of New York.”¹⁵The Cessation of Use clause also required Defendants to change the corporate name “Helix Health L.L.C.” within six (6) months, by November 1, 2009.¹⁶

The Court finds that Defendants did not comply with the Cessation of Use clause in the Settlement Agreement.The record contains numerous examples of Defendants' use of “Helix” and “Healix” after May 31, 2009.As of November 19, 2009, a “LinkedIn” profile for “Steve Murphy” listed him as the “Managing Partner/Founder at Helix Health.”¹⁷As of December 20, 2009, “Medpedia,” a Wikipedia-like website for the medical profession, listed Steven Murphy, MD as the “Managing Partner” of “Helix Health PLLC.”¹⁸As of December 21, 2009, the New York State Doctor Profile for Steven Murphy listed his offices as “Helix Health and Medicine” in “New York, NY” and “Helix Health” in “Greenwich, CT.”¹⁹

The Court issued an agreed preliminary injunction on January 1, 2010[Doc. # 43].Nevertheless, Defendants continued to use the prohibited marks.As of August 6, 2010, Dr. Murphy was still posting to a blog with the username “helixhealth.”²⁰

The record also reflects that Defendants failed to prevent others from impermissibly associating Defendants with Plaintiff's trademark as required by the Settlement Agreement.For example, on September 29, 2009, Coriell Institute, a non-profit biomedical research institution, issued a press release indicating it had established a partnership with, inter alia,“Helix Health.”²¹A brochure for an October 1–2, 2009 medical conference at Ohio State University listed as a participant “Steve Murphy, MD, President Healix Health and The Gene Sherpas, Stamford CT.”²²As of December 13, 2009, a website for a DNA testing corporation, “genelex,” advertised a partnership with “Helix Health.”²³On April 9, 2010 and May 27, 2010, Steven Murphy received emails at “steven. murphy@ helixhealth. org.”²⁴In March 2010, Andrew Camel, who had interned with Defendants, listed on a blog advertising his web-design services, a “Helix Health” email address where he could be reached.²⁵As of August 9, 2010, the Greenwich Physicians Association continued to list Dr. Steven Murphy as being located at “Helix Health LLC.”²⁶Where Dr. Murphy contends these uses were without his knowledge or...