Mister Softee, Inc. v. Amanollahi

• Decision Date: 30 September 2016
• Docket Number: Civ. No. 2:14-CV-01687(KM)(JBC)
• Parties: MISTER SOFTEE, INC., MISTER SOFTEE SALES AND MANUFACTURING, LLC, and SPABO ICE CREAM CORP., Plaintiffs, v. REZA AMANOLLAHI, Defendant.
• Court: U.S. District Court — District of New Jersey

MISTER SOFTEE, INC., MISTER SOFTEE SALES AND MANUFACTURING, LLC,and SPABO ICE CREAM CORP., Plaintiffs, v. REZA AMANOLLAHI, Defendant.

Civ. No. 2:14-CV-01687(KM)(JBC)

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW JERSEY

September 30, 2016

OPINION

MCNULTY, U.S.D.J.:

Before the Court are two motions by the Plaintiffs, Mister Softee, Inc. ("MSI"), Mister Softee Sales and Manufacturing, LLC ("MSSM"), and Spabo Ice Cream Corp. ("Spabo"). (I will generally ignore the distinction and refer to the plaintiffs collectively as "Mister Softee.") Mister Softee moves pursuant to Fed. R. Civ. P. 56 for summary judgment against Defendant Reza Amanollahi ("Amano")¹ (No. 108), and for release of an injunction bond obligation (No. 128). An Order and Opinion by this Court dated July 1, 2014, (Nos. 29-30), granted a preliminary injunction to enjoin Amano from infringing Mister Softee's federally registered trademarks and from violating non-compete provisions in twenty-two Mister Softee Dealer Franchise Agreements (the "Franchise Agreements").² See Mister Softee, Inc. v. Amanollahi, 2:14-CV-01687 KM MCA, 2014 WL 3110000 (D.N.J. July 1, 2014) (hereinafter, "Amanollahi I"). A condition of the July 1, 2014 Order was Mister Softee's filing of a $50,000 bondto secure Amano in the event he was found to have been wrongfully enjoined. (See No. 31). Mister Softee now seeks to have that bond released.

Mister Softee's motion for summary judgment asks this Court to permanently enjoin Amano from using Mister Softee's federally registered trademarks and from violating the non-compete provisions. Mister Softee also moves for summary judgment on claims not previously determined at the preliminary injunction stage. Plaintiffs seek a ruling that they are entitled as a matter of law to: (1) lost future royalties under the Franchise Agreements; (2) amounts due under two promissory notes on ice cream truck sales (the "Truck Notes"); (3) recovery under a theory of unjust enrichment of amounts MSSM spent to repair Amano's ice cream trucks; and (4) attorney's fees under the terms of the Franchise Agreements and Truck Notes as well as under the Lanham Act, 15 U.S.C. § 1117. Moreover, the Plaintiffs seek summary judgment in their favor on Amano's counterclaims for (1) rescission of all 22 Franchise Agreements under the New York Franchise Act, N.Y. Gen. Bus. Law § 680 (the "NYFA"), and (2) breach of contract under the 22 Franchise Agreements.

For reasons set forth below and in my Opinion accompanying the July 1, 2014 Order, the Court is persuaded that Plaintiffs have met their burden of showing that a permanent injunction is proper as to both infringement of Mister Softee's trademarks and enforcement of the (now expired) non-compete provisions. Plaintiff's motion for summary judgment on this issue will therefore be granted. Because I am satisfied that Amano was not wrongfully enjoined, Mister Softee's motion for release of the injunction bond will also be granted.

Additionally, summary judgment will be granted in favor of Mister Softee for recovery of the balance due under the Truck Notes, entitlement to Attorney's fees, and on Amano's counterclaims. Summary judgment will be denied as to Mister Softee's entitlement to future royalties and recovery under a theory of unjust enrichment.

I. BACKGROUND

I assume the parties' familiarity with the facts in this case, most of which have not changed since I issued my July 1, 2014 Order and Opinion. For clarity, those facts are summarized below, along with new facts put forth in connection with the instant motion.

A. The Parties

MSI is a New Jersey Corporation and the franchisor of Mister Softee mobile ice cream trucks. Those trucks are set up to sell ice cream and other food products and novelties. (Pl. Br. 4-5; Compl. ¶ 9).³ MSSM is a New Jerseylimited liability company that constructs and sells Mister Softee trucks for use by licensees and franchisees of MSI. (Pl. Br. 4). Spabo is a New York corporation and a sub-franchisor of MSI. Spabo has the exclusive right to sell Mister Softee franchises in certain regions of the New York City boroughs of Manhattan and the Bronx. (Id.)

MSI owns the trademarks for "Mister Softee," related logos, and (as any area resident can attest) a musical jingle, all registered on the Principal Register of the United States Patent and Trademark Office (Registration Nos. 2128918, 0667335, 0663456, and 2218017). (Id. at 5). Mister Softee also owns a federal trademark registration for the overall design of the Mister Softee ice cream truck (No. 2906357). Spabo licenses the right to use MSI's trademarks to its franchisees under the Franchise Agreements. (Id). The Franchise Agreements require franchisees to paint their Mister Softee trucks in a particular blue and white color scheme, with decals of MSI's trademarked logos. (Id. at 8). The Franchise Agreements also govern other aspects of the relationship between franchisees and either MSI or one of its sub-franchisors—in this case, Spabo. (Id. at 5).

The defendant, Mr. Amano, is a New Jersey resident and a franchisee of Mister Softee. (Compl. ¶¶ 5, 19; Pl. Br. at 8). On June 20, 2007, Amano entered into eight Franchise Agreements with Spabo. (Pl. Br. 8; Compl. ¶ 19). On January 1, 2012, he entered into fourteen more Franchise Agreements with Spabo, bringing the total to twenty-two. (Id.). All Franchise Agreements are substantially similar. (see FAs). The Franchise Agreements directed Amano to abide by several operating conditions, including that he park his trucks only at 337 Manida Street, Bronx, New York ("Manida Street Depot") (Pl. Br. 9; Compl. ¶ 20).

Amano also entered into two Truck and Equipment Sale Agreements with MSSM. Amano, as purchaser of the trucks, signed two Truck Notes attendant to those agreements, dated June 1, 2009. The Truck Notes obligated Amano to make instalment payments until the purchase price of the trucks were paid in full. (Pl. Br. 8; see TNs).

B. The Franchise Agreement and Truck Note Provisions

The following provisions of the Franchise Agreements are relevant:

• Section 3.1 sets the term of the Franchise Agreements at ten years, "unless earlier terminated in accordance with [the Franchise Agreement]."

• Section 4.2⁴ directs that Amano shall pay annual royalties to Spabo equal to: (1) the greater of $1.70 per gallon of soft-serve ice cream or frozen dessert mix purchased or $3,400.00 and (2) $0.38 per dozen of hard ice cream and frozen dessert novelties purchased.

• Section 5 provides that MSI and/or Spabo will provide training to Amano (§ 5.1); loan an operations manual to Amano (§ 5.2); provide periodic assistance to Amano as Spabo deems appropriate (§ 5.3); consult with Amano on initial and continuing inventory (§ 5.4); and provide Amano with continuing consultation and advice as Spabo deems advisable (§ 5.5).

• Section 6.15 requires Amano to park and store his Mister Softee trucks at a Mister Softee-sanctioned depot or storage yard. There is no dispute that Amano was assigned to the Manida Street Depot. (see Pl. Br. at 9).

• Section 9 provides that Amano is to deliver all payments due to Spabo on time (though no schedule is specified), with overdue payments acquiring interest at the lesser of 18% annually or the maximum rate permitted by law. Section 9 also provides, in part: "If you are in breach or default of any monetary or nonmonetary material obligation under this Agreement or any related agreement between you and Spabo, MisterSoftee and/or their affiliates, and Spabo and/or Mister Softee engages an attorney to enforce its rights (whether or not formal judicial proceedings are initiated), you shall pay all reasonable attorney's fees, court costs and litigation expenses."

• Section 16.2 (the "non-compete provision") provides that Amano cannot, for a two-year period, "directly or indirectly own, maintain, engage in, be employed by, lend money to, extend credit to, or have any interest in any other business which operates or licenses business featuring primarily the sale or ice cream or other frozen confections with the former Territory or within any System franchisee's territory."

• Section 18.2 provides that Spabo has the right to terminate the Franchise Agreements without an opportunity for cure, effective upon delivery of notice of termination, if Amano commits certain breaches or defaults. Pursuant to Section 18.2.4, the Agreements can be terminated upon breach of any other agreements between Amano and Mister Softee. Pursuant to Section 18.2.11, the Agreements can be terminated if Amano voluntarily abandons his franchises or if he does not park his trucks in the designated depot.

• Section 19 sets forth post-termination obligations of former franchisees, including, inter alia, ceasing use of and returning all trademarked items and other intellectual property; paying Spabo and Mister Softee any fees and monies owed; and complying with the non-compete provisions.

• Section 20 provides that all notices, requests, and reports to be given under the terms of the Franchise Agreements are to be in writing and delivered by hand or mail with a return receipt requested.

• Section 22.3 provides: "As a condition precedent to commencing an action for damages or for violation or breach of this Agreement, you must notify Spabo within thirty (30) days after the occurrence of the violation or breach and failure to timely give notice shall preclude any claim for damages."

The following provisions of the Truck Notes are also relevant:

• Section 11.1 permits MSSM to immediately accelerate all payments and other amounts due under the Truck Note in the event Amano defaultsunder the Truck Notes or, by cross-reference to Section 10 of the Truck Notes, under any Franchise Agreements.

• Section 13 provides that if MSSM uses an attorney to enforce "this obligation" or protect the collateral under the Truck Note, Amano shall pay MSSM the collection costs "and the costs of suit, including attorney's fees and costs in any appeal taken . .

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