John C. Flood Of Va. Inc v. John C. Flood Inc, Civil Case No. 06-1311(RJL).

• Decision Date: 31 March 2010
• Docket Number: Civil Case No. 06-1311(RJL).
• Parties: JOHN C. FLOOD OF VIRGINIA, INC., et al., Plaintiff/Counter-Defendants,v.JOHN C. FLOOD, INC., et al., Defendants/Counter-Plaintiffs.
• Court: U.S. District Court — District of Columbia

700 F.Supp.2d 90

JOHN C. FLOOD OF VIRGINIA, INC., et al., Plaintiff/Counter-Defendants,v.JOHN C. FLOOD, INC., et al., Defendants/Counter-Plaintiffs.

Civil Case No. 06-1311(RJL).

United States District Court District of Columbia.

March 31, 2010.

Lisa Ann Dunner, Washington, DC, C. David Briley, Erica Stiff-Coopwood, Bone McAllester Norton PLLC, Nashville, TN, for Plaintiff/Counter-Defendants.

Stephen J. Zralek, Bone McAllester Norton PLLC, Nashville, TN.

Benjamin J. Lambiotte, Robert A. W. Boraks, Garvey Schubert Barer, Washington, DC, for Defendants/Counter-Plaintiffs.

MEMORANDUM OPINION

RICHARD J. LEON, District Judge.

This case involves two sister companies in the plumbing business that are, in effect, fighting over their “inheritance.” They both claim exclusive rights to two trademarks-JOHN C. FLOOD and its abbreviated form FLOOD. The plaintiff John C. Flood of Virginia, Inc. (“Virginia Flood”) brought this suit against the defendants John C. Flood, Inc., which does business as John C. Flood of DC, Inc., as well as other individuals and corporate entities (collectively, “1996 Flood”).¹ Virginia Flood alleges four causes of action: (1) trademark infringement in violation of 15 U.S.C. § 1114(1) (Count 1), (2) unfair competition in violation of 15 U.S.C. § 1125(a) (Count 2), (3) common law service mark infringement and unfair competition (Count 3), and (4) declaration of Virginia Flood's priority over all defendants and its right to register the trademarks (Count 4). (Compl. [# 1] at 9-11; Am. Compl. [# 28] at 13-18). 1996 Flood responded by bringing a number of counterclaims against Virginia Flood and other parties (collectively, “Virginia Flood”).² The counterclaims include: (1) false designation of origin, source, or sponsorship in violation of 15 U.S.C. § 1125(a) (Count 1); (2) cancellation of Virginia Flood's registration of the disputed trademarks (Count 2-4); (3) declaration of 1996 Flood's priority over Virginia Flood (Count 5); and (4) common law service mark infringement and unfair competition (Count 6). (Countercl [# 9] at 25-33). Now before the Court is Virginia Flood's Motion for Summary Judgment [# 60] and 1996 Flood's Renewed Motion for Partial Summary Judgment [# 65]. Unlike Virginia Flood, which has moved for judgment on all claims and counterclaims, 1996 Flood moves only for judgment on Virginia Flood's claims and for declaratory judgment as to its counterclaim for priority over Virginia Flood. 1996 Flood leaves its remaining counterclaims for future disposition. Having considered the pleadings and the record in this case, I have concluded that Virginia Flood, as the licensee of the FLOOD marks, is estopped from now claiming ownership of those marks. Accordingly, for the reasons set forth below, Virginia Flood's Motion for Summary Judgment is DENIED and 1996 Flood's Motion for Partial Summary Judgment is GRANTED.

BACKGROUND

In 1984, defendants Mark Crooks and Mel Davis incorporated in Maryland a business by the name of John C. Flood, Inc. (“1984 Flood”). (Countercl. [# 9] ¶ 11). This business provided plumbing, heating, and air conditioning services to customers in Maryland, the District of Columbia, and Virginia. ( Id. ¶¶ 11-12; Davis Dep. [# 63-6] at 81). 1984 Flood traded under the service marks JOHN C. FLOOD and FLOOD (or variations thereof). (Davis Decl. [# 37-2] ¶¶ 3-5, 10-11).

Four years later, to further expand their operations in Virginia, Crooks and Davis incorporated another business under the name John C. Flood of Virginia, Inc. (“Virginia Flood”). ( Id. ¶ 6). Crooks and Davis invited Clinton Haislip and James Seltzer, who then were employees of 1984 Flood, (Seltzer Decl. [# 63-11] ¶ 5), to join Virginia Flood as non-controlling shareholders. (Davis Decl. [# 37-2] ¶ 7). Haislip and Seltzer initially owned 49% of the stock, while Crooks and Davis owned 51%, (Davis Dep. [# 63-6] at 83), but eventually, Crooks and Davis gave Haislip and Seltzer an additional 1% share in the company, making Crooks and Davis equal owners with Haislip and Seltzer, ( id. at 83-84, 94). Because Haislip and Seltzer lacked the technical expertise to run the business by themselves at the outset, Crooks and Davis regularly helped with the technical aspects of the business, maintained the books and records, and appointed a manager to oversee day-to-day operations. ( Id. at 58-60).

There is no dispute that Virginia Flood had permission-that is, a license-to use the marks JOHN C. FLOOD and FLOOD without the modifier “of Virginia.” The parties disagree, however, about the nature and scope of that license. In his declaration, Seltzer testified that Crooks and Davis made a verbal agreement to allow Virginia Flood to use the marks on, among other things, its service trucks, contracts, invoices, and telephone book advertisements. (Seltzer Decl. [# 63-11] ¶ 6). In exchange, Virginia Flood paid Crooks and Davis a weekly sum. ( Id.). Davis testified, however, that Virginia Flood was allowed to use the marks JOHN C. FLOOD or FLOOD only until it replaced the service trucks that already bore the marks and until it replaced old advertising spots with new ones. (Davis Dep. [# 63-6] at 57, 60-61). In any event, neither party disputes that Virginia Flood, whether or not it had authority to do so, has used the disputed marks continuously since it was formed in 1989. ( See id. at 91; Seltzer Decl. [# 63-11] ¶ 7).

In June 1991, 1984 Flood and its principals, Crooks and Davis, filed for bankruptcy reorganization under Chapter 11 of the Bankruptcy Code. (Countercl. [# 9] ¶ 15). Sometime after filing for bankruptcy Crooks and Davis discontinued their involvement in Virginia Flood. (Davis Dep. [# 63-6] at 26-27). They resigned as officers of the company in July 1991. (Haislip Decl. [# 41-1] ¶ 7). Nearly two years later, in March 1993, the bankruptcy court appointed a trustee over 1984 Flood, and in September of that year, the bankruptcy court converted the case to Chapter 7 liquidation. (Countercl. [# 9] ¶ 15). Until the trustee was appointed, Crooks and Davis continued to operate 1984 Flood and to trade under the marks JOHN C. FLOOD and FLOOD. (Davis Decl. [# 37-2] ¶ 11). Once the trustee took control of 1984 Flood, however, Crooks and Davis shut down operations, turned the keys over to the trustee, and disconnected all the phones. (Davis Dep. [# 63-6] at 104-06). At that point, 1984 Flood no longer generated any revenue. ( Id. at 105-06). Crooks and Davis also stopped monitoring Virginia Flood, ( id. at 99), and relinquished its books, ( id. at 96). In 1995, the trustee sold the 50% interest in Virginia Flood owned by Crooks and Davis to Haislip and Seltzer. (Countercl. [# 9] ¶ 17; Rinn Decl. [# 37-3] at 234-35; Defs.' Resp. and Counterstatement to Virginia Flood Parties' Statement of Undisputed Material Facts [# 73] ¶ 30).

Even though Crooks and Davis no longer operated 1984 Flood after the trustee assumed control of the company, they nevertheless carried on their plumbing, heating, and air conditioning business. (Davis Decl. [# 37-2] ¶ 12). Together with Robert and Joanna Smiley, Davis's son-in-law and daughter, both Crooks and Davis did business through various corporations known as J.C.F., Inc., J.C. Flood, John C. Flood of DC, Inc., and John C. Flood of MD, Inc. (collectively, “new Flood entities”). ( Id.). These entities used the marks JOHN C. FLOOD and FLOOD, as well as other assets belonging to 1984 Flood. ( Id.; Rinn Decl. [# 37-3] ¶¶ 5-6). To preserve those assets, the trustee commenced an adversary proceeding in the bankruptcy court in May 1995. (Rinn Decl. [# 37-3] ¶¶ 5-6). The trustee sought to enjoin the new Flood entities from misappropriating the assets of 1984 Flood, including its service marks. ( Id. ¶ 6). The trustee also requested that the bankruptcy court appoint a receiver to take control of 1984 Flood's assets and to preserve them for the creditors of the bankruptcy estate. ( Id.). In June 1995, the bankruptcy court entered a consent order for a preliminary injunction against the new Flood entities and for the temporary appointment of a receiver with the authority to take charge of the new Flood entities and their assets, including the JOHN C. FLOOD and FLOOD trade names. ( Id. ¶ 10). The bankruptcy court renewed the receiver's authority in August 1995, ( id. ¶ 12), and the following month, the court entered a consent order making the receivership and the injunction permanent, ( id. ¶ 16).

In October 1995, the trustee proposed that the assets and stock of the new Flood entities held in receivership, along with the trade names JOHN C. FLOOD, INC. and FLOOD, INC., be sold to Crooks, Davis, and the Smileys. ( Id. ¶ 18). Haislip and Seltzer, as creditors of the bankruptcy estate, filed an objection to the proposed sale on the ground that Crooks, Davis, and the Smileys had unlawfully diverted and concealed estate assets to the detriment of creditors. ( Id. ¶ 20). Haislip and Seltzer also offered a bid of their own to purchase only the trade names and telephone numbers of 1984 Flood. ( Id. ¶ 21 & Attachment B-12 ¶¶ 9-10). In response to Haislip's and Seltzer's objections, both Crooks and Davis withdrew, leaving only the Smileys, who chose to increase their bid. ( Id. ¶ 22). After evaluating the competing bids, as well as Haislip's and Selter's objections, the bankruptcy court approved the sale of the assets and stock of the new Flood entities, as well as the trade names of John C. Flood, Inc. and Flood, Inc., to the Smileys. ( Id. ¶ 22 & Attachment B-13). Several months later, in February 1996, the Smileys incorporated a business in Maryland under the name John C. Flood, Inc. (“1996 Flood”). (Pl.'s Mot. for Summ. J., Ex. B [# 63-2] ). Later the same month, the trustee executed a bill of sale conveying the stock of the new Flood entities and the trade names of John C. Flood, Inc. and Flood, Inc. to the Smileys pursuant to the proposal approved by the bankruptcy court. ( Id., Ex. A [# 63-1] ).

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