Marblelife Inc. v. Stone Res. Inc.
| Decision Date | 23 December 2010 |
| Docket Number | Civil Action No. 10–2480. |
| Citation | 759 F.Supp.2d 552 |
| Parties | MARBLELIFE, INC., Plaintiff,v.STONE RESOURCES, INC., Defendant. |
| Court | U.S. District Court — Eastern District of Pennsylvania |
OPINION TEXT STARTS HERE
James T. Smith, Rebecca D. Ward, Blank Rome Comisky & McCauley LLP, Philadelphia, PA, Scott K. Koelker, Vincent J. Hess, Locke Lord Bissell & Liddell LLP, Dallas, TX, for Plaintiff.Paul J. Winterhalter, Corinne M. Samler, Paul J. Winterhalter P.C., Philadelphia, PA, Mario L. Herman, Law Offices of Mario L. Herman, Washington, DC, for Defendant.
Presently before the Court is Plaintiff's Motion For Preliminary Injunction (Doc.6) and Defendant's Response in Opposition thereto (Doc. 24). For the reasons set forth below and upon consideration of the parties' submissions and oral argument held before this Court on December 7–10, 2010, this Court will grant Plaintiff's Motion For Preliminary Injunction.
The instant action arises out of allegations of breach of contract, trademark infringement, false designation of origin, and dilution of trademark brought by Plaintiff MarbleLife, Inc. (“MarbleLife”) against Defendant Stone Resources, Inc. (“Stone Resources”). Plaintiff requests that this Court enter an order enjoining Defendant from violating its contractual, statutory, and/or common law obligations pending resolution of a separate arbitration proceeding in Dallas, Texas. Plaintiff also requests reasonable attorneys fees, expenses and costs and other and further relief as the Court may deem just and equitable.
Plaintiff MarbleLife, a Texas corporation with its principal place of business in Sanford, Florida, is engaged in the business of restoring and repairing granite and other types of inorganic and organic surfaces. (Compl. ¶ 1.) Defendant Stone Resources is a Pennsylvania corporation with its principal place of business in Media, Pennsylvania. (Compl. ¶ 2.) For nearly twenty (20) years, MarbleLife has developed a unique business system for repairing and caring for marble, granite and other surfaces. (Compl. ¶¶ 5–6.) This business system also includes proprietary techniques for marketing, advertising, operating and training. MarbleLife sells franchises of its unique business system under which it grants to franchisees across the United States the rights to use its methods, trademarks, and related services and products. (Compl. ¶ 9.)
On or around April 3, 2000, Plaintiff (as franchiser) and Defendant (as franchisee) entered into a Franchise Agreement (“the Agreement”). (Compl. ¶ 10.) Under the Agreement, Plaintiff granted Defendant the right and license to operate a franchise in a specified territory (“the Territory”). (Compl. ¶ 11.) In addition, Defendant was granted the right and license to use MarbleLife's registered trademark.1 (Compl. ¶ 12.) Pursuant to the Agreement, Defendant adopted the trade name, “MarbleLife of Delaware Valley.” (Compl. ¶ 13.) The Agreement also granted Defendant the right and license to use MarbleLife's unique business system (including a system manual, employee training, and an advertising platform). (Compl. ¶ 14.) The Agreement had an initial term of ten (10) years (which was not extended), and imposed certain requirements upon Defendant following its expiration, including the following: (1) an agreement not to compete during the term of the Agreement and for a period of two years following expiration; (2) a requirement to cease using the trademark and/or any System Rights; and (3) a limitation on the use of Plaintiff's “confidential information” only for “the purposes of fulfilling Franchisee's obligations under this Agreement.” (Compl. ¶¶ 16–20.)
In the event of termination, the Agreement also included additional consequences of expiration, including the following: (1) the immediate termination of all rights granted to Defendant; (2) the transfer of business, customers, facilities, services, employees, and telephone numbers to Plaintiff; and (3) the return or disposal of certain specified information (i.e., all advertising and promotional materials containing the MarbleLife trademark; all information relating to MarbleLife; all manuals and supplements; and all sales or marketing data relating to MarbleLife). (Compl. ¶ 21.)
In addition, Defendant agreed to indemnify Plaintiff against all costs, expenses, liabilities, and losses related to any violation of the Agreement. (Compl. ¶ 22.) Defendant further agreed that any violation of the noncompete provision and the confidentiality provisions would cause MarbleLife to “suffer irreparable harm” and that MarbleLife could seek “damages or injunctive relief against Franchisee in a court of competent jurisdiction” to address said harm (Compl. ¶ 23.) The Agreement further provides that if MarbleLife prevails in any such litigation, “Franchisee shall reimburse MarbleLife for all costs, attorneys' fees and other expenses incurred by MarbleLife in connection therewith.” (Compl. ¶¶ 23–24.) Further, in the event that injunctive relief is unavailable, the Agreement permits Plaintiff to seek “as liquidated damages a sum of money equal to the largest weekly fee paid by Franchisee to MarbleLife during the term of this Agreement times 104.” (Compl. ¶ 25.) The parties also agreed that any dispute arising under the Agreement would be subject to arbitration, except for “any temporary, interim or provisional equitable remedies” the parties may seek. (Compl. ¶ 26.) Finally, the parties agreed that the Agreement would be governed by Texas law. (Compl. ¶ 27.)
The Agreement was set to expire on or around April 3, 2010, absent Defendant's exercise of a right of renewal. (Compl. ¶ 30.) Defendant failed to renew its franchise despite several attempts by Plaintiff to encourage Defendant to do so. (Compl. ¶¶ 31–39.) Accordingly, the Agreement expired, and as a result, Plaintiff ceased receiving royalty payments. (Compl. ¶¶ 40–42.)
According to Plaintiff, Defendant has violated its post-termination obligations and has, instead, become a direct competitor of MarbleLife. (Compl. ¶¶ 43–44.) In fact, Plaintiff alleges that Defendant allowed the Agreement to expire for the express purpose of competing with Plaintiff. (Compl. ¶ 46.) In response to Defendants actions, on April 14, 2010, Plaintiff sent Defendant a notice confirming the expiration of the Agreement and reminding Defendant of its post termination obligations. Said notice also instructed Defendant to cease all use of the MarbleLife trademark and/or System by no later than April 19, 2010. (Compl. ¶ 47.) In contravention of Section 2.5 of the Agreement, Defendant ignored Plaintiff's notice and continued to use both Plaintiff's mark and System. (Compl. ¶ 48.) Specifically, Defendant continued to conduct business under the name, “MarbleLife of Delaware Valley,” and as late as May 13, 2010, continued to offer products containing Plaintiff's mark. (Compl. ¶ 50.) Also, Defendant has continued operating in the Territory, offering the same services as Plaintiff in direct competition with Plaintiff. (Compl. ¶ 53.) In addition, Defendant continues to benefit from Plaintiff's exclusive advertising arrangement. (Compl. ¶ 55.)
On April 30, 2010, Defendant admitted to its continued use of the MarbleLife mark and said it would “commence the de-identification process immediately,” however, Defendant has failed to confirm that it has stopped using the mark. (Compl. ¶ 74.) Since April 30, 2010, an advertisement for Stone Resources has appeared in an online version of Distinctive Living, featuring the MarbleLife name and mark, as well as a phone number that Defendant used while a MarbleLife franchisee. (Compl. ¶ 74.) Irrespective of Defendant's use of the mark, Plaintiff believes that Defendant is continuing its business in direct competition with MarbleLife in the Territory, using the MarbleLife business system and other proprietary information. (Compl. ¶ 76.)
Accordingly, Plaintiff seeks immediate, emergency relief to enjoin Defendant from its continuing violations. Plaintiff contends that emergency injunctive relief is critical for the following reasons: (1) such relief is currently unavailable in the pending arbitration proceeding; (2) such relief is necessary to protect Plaintiff's interests in the Territory from unfair competition by its former franchisee; (3) Plaintiff's efforts to secure a replacement franchisee for the Territory have been hindered by Defendant's delay in committing to whether it would renew the franchise and Defendant's unauthorized use of the mark in the Territory; (4) Defendant's unauthorized use of the mark has caused confusion among retailers; and (5) Plaintiff's efforts in establishing a new franchisee in the Territory likely will be futile if customers know that a former MarbleLife franchisee is still operating within the Territory.
Based on the foregoing allegations, Plaintiff asserts the following six counts: breach of the Franchise Agreement (Count I); federal trademark infringement (Count II); federal false designation of origin (Count III); federal dilution of trademark (Count IV); Texas and/or Pennsylvania common law trademark infringement (Count V); and request for preliminary injunction (Count VI).
On April 9, 2010 Defendant initiated an arbitration proceeding in Dallas, Texas. Ironically, Defendant made its demand for arbitration identifying itself as “MarbleLife of Delaware Valley.” (Compl. ¶ 79.) Plaintiff filed the instant action on May 21, 2010. That same day Plaintiff filed a Motion for Preliminary Injunction. The Court held a hearing on the application for preliminary injunction on December 7, 2010. Said hearing concluded on December 10, 2010.
“[T]he grant of injunctive relief is an ‘extraordinary remedy which should be granted only in limited circumstances.’ ” AT & T v. Winback & Conserve Program, Inc., 42 F.3d 1421, 1426–27 (3d Cir.1994); see also Instant Air Freight Co. v. C.F. Air...
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