Leisure Sys., Inc. v. Roundup LLC

• Decision Date: 31 October 2012
• Docket Number: CASE NO.: 1:11-cv-384
• Parties: LEISURE SYSTEMS, INC., Plaintiff, v. ROUNDUP LLC, et al., Defendant.
• Court: U.S. District Court — Southern District of Ohio

LEISURE SYSTEMS, INC., Plaintiff, v. ROUNDUP LLC, et al., Defendant.

CASE NO.: 1:11-cv-384

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF OHIO WESTERN DIVISION

Dated: October 31, 2012

Judge Michael R. Barrett

OPINION AND ORDER

This matter is before the Court on Plaintiff's Motion for Partial Summary Judgment on Plaintiff's Claims (Doc. 36), Plaintiff's Motion for Summary Judgment on Defendants' Counterclaims (Doc. 41), and Defendants' Motion for Summary Judgment (Doc. 39).¹ All of these motions have been fully briefed and are now ripe for review.

I. BACKGROUND

The following facts are not disputed by the parties:

Plaintiff Leisure Systems, Inc. ("LSI") is an exclusive licensee of the name, character, symbol, design, likeness and visual representation of the Yogi Bear and related trademarks and service marks (the "Subject Marks") in connection with the construction, operation, and franchising of all Yogi Bear-identified campgrounds, including YOGI BEAR'S JELLYSTONE PARK CAMP-RESORTS in North America.(Doc. No. 6, ¶ 3). The Subject Marks are registered with the United States Patent and Trademark Office. (Doc. 37, ¶¶ 3-4, Exs. A-G).²

As franchisor, LSI licenses to its franchisees the right to use the Subject Marks and related materials. Defendants Roundup, LLC, Yogi Michigan LLC and Lakeside, Incorporated are among those entities that became LSI franchises. (Doc. 6, ¶ 11 and Ex. 1; Doc. 40, Exs. 1-3).³ Roundup is a campground located in Mantua, Ohio. (Doc. 40, ¶ 4 and Ex. 1). Yogi Michigan is a campground located in Grand Haven, Michigan. (Doc. 40, ¶ 4 and Ex. 2). Lakeside is a campground located in Monticello, Indiana. (Doc. 40, ¶ 4 and Ex. 3). The franchisees are managed by a "Morgan" operation in New York. (Doc. 36, Ex. 1, pp. 2-3;⁴ Doc. 40, ¶¶ 6-13). Robert Moser runs Morgan RV Resorts, and he has an ownership interest in all three franchises. (Doc. 40, ¶¶ 2, 12). Robert Morgan is a business associate of Mr. Moser who runs Morgan Management, LLC. (Doc. 40, ¶¶ 6-11). LSI had a separate Franchise Agreement with each of those franchisees. (Doc. 6, ¶¶ 11-12; Doc. 40, ¶ 3 and Exs. 1-3). The Franchise Agreements with Roundup and Yogi Michigan are governed by Ohio law, whereas the Franchise Agreement with Lakeside is governed by Indiana law. (Doc. 40, Exs. 1-3 at Art. XIII(k)).

The Franchise Agreements required Roundup, Yogi Michigan and Lakeside to, among other things, (a) pay bi-weekly royalty and service fees; (b) pay bi-weekly marketing, advertising and promotional fees; (c) provide bi-weekly royalty reports; and (d) provide annual financial statements for the parks to LSI. (See generally Doc. 40,Exs. 1-3). LSI may terminate the Franchise Agreements under certain conditions when a franchisee fails to perform its contractual obligations. (Doc. 40, Exs. 1-3 at Art. XI(b)). Of relevance here is the provision that permits LSI to terminate the Franchise Agreements for failure to pay any amount due under such agreements. (Doc. 40, Exs. 1-3 at Art. XI(b)(iii)). That provision provides, in pertinent part:

(b) Termination by LSI: In addition to the provisions for termination provide elsewhere herein . . . this Agreement may be terminated at LSI's option; . . .

(iii) If FRANCHISEE shall fail to pay when due any amount which may become due to LSI pursuant to this Agreement or if FRANCHISEE shall fail to pay when due any other amount which may become due to LSI for merchandise, equipment or otherwise, and such failure or failures continue for a period of five (5) days or more following written notice by LSI to FRANCHISEE . . . .

(Doc. 40, Exs. 1-3 at Art. XI(b)(iii)).

The Franchise Agreements of Roundup and Yogi Michigan also provide for the award of liquidated damages in the event of termination to be calculated pursuant to the formula set forth therein. (Doc. 40, Exs 1-2 at Art. XI(c)). The Lakeside Franchise Agreement does not contain a liquidated damages provision. (See generally Doc. 40, Ex. 3).

Under all three Franchise Agreements, notices or demands are "deemed to have been delivered by hand, one (1) business day after transmission by telegraph or other electronic system or three (3) business days after placement in the United States Mail by Registered or Certified Mail, postage prepaid and addressed" as indicated in the Franchise Agreement, or to "such other address as the party to which such notice is directed may have designated by notice in writing given pursuant to this paragraph." (Doc. 40, Exs. 1-3 at Art. XIII(d)). For Roundup, the address listed in the FranchiseAgreement is 6290 Plastermill Road, Victor, NY 14564. (Doc. 40, Ex. 1 at Art. XIII(d)). For Yogi Michigan, there is not a specific notice address listed in the Consent to Transfer or corresponding Addendum that transferred the franchise to Yogi Michigan; instead, the last listed notice address for the franchise operation is listed in the January 1, 1994 Franchise Agreement between LSI and Yogi Michigan's predecessor franchise operator wherein the notice address is 10900 US 31N, Grand Haven, MI 49417. (See Doc. 40, Ex. 2). Finally, for Lakeside, the notice address listed in the Franchise Agreement is 306 Indiana Beach Drive, Monticello, Indiana 47960. (Doc. 40, Ex. 3 at Art. XIII(d)).

On May 18, 2009, Robert E. Schutter, Jr., President/Chief Operating Officer of LSI, sent an email to Rick McCurley, the then-Chief Financial Officer of Morgan RV Resorts, inquiring about a purported relocation and where to send correspondence to Mr. McCurley and Mr. Moser. (Doc. 40, ¶¶ 17-18 and Ex. 4). Using email address rick.mccurley@morganmanagement.com, Mr. McCurley responded to Mr. Schutter, indicating that he wanted all future correspondence for Mr. Moser and him to be sent to Morgan RV Resorts, 63 Putnam Street, Saratoga Springs, New York 12866. (Doc. 40, ¶¶ 17-18 and Ex. 4).

More than one year later, on September 24, 2010, LSI sent certified letters that were received by Roundup and Yogi Michigan, which notified those franchisees of defaults on their obligations under the Franchise Agreements and of the need to cure those defaults or face termination of the Franchise Agreements. (Doc. 37, ¶ 9 and Exs. O-P). The certified letters for the respective franchises were addressed to Robert C. Morgan c/o Morgan Management, LLC at 63 Putnam St., Suite 201, Saratoga Springs,NY 12866. (Doc. 37, ¶ 9 and Exs. O- P). LSI received signature confirmations for both letters. (Doc. 37, Exs. O-P). No certified letter was sent regarding Lakeside at this time. (See generally Doc. 37).

On December 16, 2010, Mr. Schutter emailed Ron Mnieckowski, at email address ron.mnieckowski@morganmanagement.com, regarding past due accounts for Roundup, Yogi Michigan and Lakeside, noting that only a small partial payment had been remitted to the outstanding accounts. (Doc. 45, Ex. 1, pp. 11-13).⁵ Mr. Schutter requested on behalf of LSI that all accounts be brought current by December 23, 2010, otherwise the matter would be assigned to legal counsel for further action. (See Doc. 45, Ex.1, p. 11). On December 17, 2010, Mr. Mnieckowski responded to Mr. Schutter that he would "escalate the matter." (See Doc. 45, Ex. 1, p. 13). The signature block on Mr. Mnieckowski's response listed him as Chief Financial Officer for Morgan RV Resorts with an address of 63 Putnam St., Suite 201, Saratoga Springs, NY 12866. (Doc. 45, Ex. 1, p. 13).

On January 10, 2011, LSI sent letters via UPS overnight delivery to Roundup, Yogi Michigan and Lakeside. (Doc. 37, ¶ 10 and Exs. Q-S). The letter for each franchise was addressed to Robert C. Morgan c/o Morgan Management, LLC at 1170 Pittsford-Victor Road, Suite 100, Pittsford, NY 14534. (Doc. 37, Exs. Q-S). No certifications of receipt have been provided to the Court for those letters. (See generally Doc. 37). In the letters, LSI represented: "Repeated requests to have your account brought current have been only partial successful. Our last written request of December 16, 2010 to Mr. Ron Mnieckowski, your Chief Financial Officer, was only partiallyfulfilled. Therefore, [LSI] is compelled to proceed with the following course of action." (Doc. 37, ¶ 10 and Exs. Q-S). LSI further stated in the letter to Yogi Michigan that its account was in default and that it was granted pursuant to Article XI(b)(iii) of the Franchise Agreement "a period of no more than thirty (30) days from the date you receive this notice in which to cure said defaults" before the matter would be assigned to legal counsel which may result in termination. (Doc. 37, Ex. Q). It stated in the letter to Roundup that Roundup's accounts were in default and that it failed to remit bi-weekly reports, and it indicated that pursuant to Article XI(b)(iii) of the Franchise Agreement, it had a period of "no more than fifteen (15) days from the date you receive this notice in which to cure said defaults" before the matter would be assigned to legal counsel which may result in termination. (Doc. 37, Ex. R). As for Lakeside, LSI stated in the letter that Lakeside's accounts were in default, and that pursuant to Article XI(b)(iii) of the Franchise Agreement it had a period of "no more than fifteen (15) days from the date you receive this notice in which to cure said defaults" before the matter would be assigned to legal counsel which may result in termination. (Doc. 37, Ex. S). Mr. Moser testified he did not receive any of these letters because they were not sent to 63 Putnam Street, Saratoga Springs, New York. (Doc. 40, ¶ 23; Doc. 48, Ex. A, pp. 2-3).⁶

On February 24, 2011, LSI, through counsel, sent letters via certified mail terminating the Franchise Agreements, requesting past due amounts and liquidated damages payable by March 11, 2011, and demanding that the franchisees cease using LSI's marks and remove and return all identifying materials pursuant to the Franchise Agreements by March 24, 2011. (Doc. 38, Exs. A-C). The letters were addressed toeach of the Defendants at what purportedly was the campground location⁷ and...