Mr. Elec. Corp. v. Khalil
| Decision Date | 06 February 2013 |
| Docket Number | No. 06-2414-CM,06-2414-CM |
| Parties | MR. ELECTRIC CORP., Plaintiff, v. REIAD KHALIL, an individual, and ALBER ELECTRIC CO., INC., Defendants. |
| Court | U.S. District Court — District of Kansas |
This is a trademark infringement, unfair competition, and breach of contract action relating to a Mr. Electric franchise agreement entered into between Mr. Electric and Khalil on February 15, 2005. Mr. Electric alleges that Khalil infringed upon Mr. Electric's federally registered trademarks and engaged in unfair competition, in violation of both the Lanham Act and Kansas common law. In his counterclaims, Khalil alleges that Mr. Electric breached the franchise agreement in violation of Kansas common law.
This matter is before the court on cross motions for summary judgment filed by plaintiff Mr. Electric Corp. ("Mr. Electric") and defendant Reiad Khalil ("Khalil"). Plaintiff filed a partial motion for summary judgment (Doc. 279) as to the following counts: 1) count one—federal service mark infringement, under section 32 of the Lanham Act, 15 U.S.C. § 1114; 2) count two—federal unfair competition, under section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a); and (3) count five— common law trademark and service mark infringement and unfair competition under Kansas law. Defendant's motion for summary judgment (Doc. 282) requests summary judgment in defendant's favor on all of plaintiff's claims and on defendant's breach of contract counterclaims.
Mr. Electric is a nationwide franchisor of an electrical repair maintenance and installation service franchise system, with more than 130 franchise locations throughout the country operating under the name and mark MR. ELECTRIC®. Mr. Electric is the owner of three different trademarks at issue in this case, and all of the trademarks are in full force and effect. These trademarks include the MR. ELECTRIC® mark, the MR. ELECTRIC EXPERT ELECTRICAL SERVICE® mark, and the Mr. Electric Lightbulb/Lightning Bulb Design Mark. Mr. Electric, its predecessor in interest, and their respective franchisees have used each of these marks for over sixteen years in connection with electrical repair, maintenance, and installation services. One of Mr. Electric's franchisees currently operates under the MR. ELECTRIC® name and mark in the Kansas City metropolitan area in Clay County, Missouri.
Plaintiff and defendant were parties to a Mr. Electric Franchise Agreement ("Agreement") dated February 15, 2005. Pursuant to the Agreement, defendant was licensed to use Mr. Electric's proprietary marks, and was granted the exclusive right to operate as Mr. Electric's authorized franchisee servicing certain zip codes in Johnson County, Kansas. The Agreement required defendant to remit to plaintiff royalties and other fees, to provide plaintiff with certain financial reports, and to maintain certain forms and levels of insurance. The Agreement was a valid contract. The Agreement stated that defendant had only a revocable license to use the marks during the franchise term and that defendant was required to cease use of the marks or any other confusingly similar designs, including telephone numbers listed under the MR. ELECTRIC® name, upon termination of the franchise.
The parties terminated the franchise relationship in April of 2006. Mr. Electric's Assistant General Counsel wrote a letter to Khalil dated May 4, 2006, alerting him to his agreement to complywith all provisions of the Agreement, including the post-termination obligations. On April 1, 2006, defendant purchased and became president of Alber Electric Co., Inc. ("Alber Electric"), a business providing electrical repair, maintenance, and installation services in the Kansas City area, including Johnson County. Defendant was the president and owner of Alber Electric from at least April 1, 2006, to March 31, 2007. Defendant's responsibilities as president of Alber Electric included developing, executing, overseeing, and running operations of Alber Electric's electrical construction and renovation contracts. Defendant was also responsible for "business development and contracts" and for bookkeeping and accounting.
Khalil made use of the above-described Mr. Electric trademarks after his termination as a Mr. Electric franchisee, including for at least as long as September 22, 2006 via his "Mr. Electric of Kansas City" website ("website"), located at >. This use of the Mr. Electric trademarks was without authorization or permission from plaintiff.
Alber Electric used the Mr. Electric Lightbulb/Lightning Bolt Design mark in commerce in connection with advertising its business, including in a telephone directory distributed in the Kansas City area. This use was also without plaintiff's permission. Khalil oversaw the purchase and placement of at least three separate telephone directory advertisements for Alber Electric, each featuring the Mr. Electric Lightbulb/Lightning Bolt Design mark, and appearing after termination of defendant's Mr. Electric franchise. Each advertisement ran from at least May 2006 to May 2007. Mr. Electric's outside counsel sent a letter to Alber Electric demanding that the company cease and desist use of the marks and informing Alber Electric of Khalil's post-termination obligations.
Khalil, in conjunction with Alber Electric, continued to use the MR. ELECTRIC® name and marks through at least August 2006 to solicit and perform work on projects in the Johnson County area. This activity included: (a) performing service calls under the marks through use of a service vanfeaturing the Mr. Electric trademarks on the side and back panels of the van; (b) receiving requests for those service calls to the same telephone numbers through which Khalil operated his former Mr. Electric franchise, and notifying customers the businesses were merging; (c) continuing to use the Mr. Electric website to solicit customers; (d) entering into two commercial contracts while still a Mr. Electric franchisee, taking those jobs with him when he purchased Alber Electric, continuing to perform work on these jobs; and accepting payments for these jobs on checks made payable to "Mr. Electric of Kansas City" and depositing these checks into its bank accounts.
Plaintiff brought this case against two defendants—Khalil and Alber Electric. This court held a hearing on October 17, 2006, granting plaintiff's motion for preliminary injunction against both defendants and finding that plaintiff had established a substantial likelihood of success on the merits of its claim. The court entered its order of preliminary injunction on October 23, 2006. After Khalil filed for bankruptcy, the court stayed litigation as to Khalil on June 4, 2007. The court lifted the stay in April 2011 when Magistrate Judge Rushfelt determined that Khalil's bankruptcy case had been terminated.
During Khalil's bankruptcy, the case proceeded as to Alber Electric. Alber Electric consented to entry of judgment by default on all issues related to its liability in this case, but it contested damages. The court adopted Judge Rushfelt's recommendations for entry of judgment by default on November 7, 2007. After holding a hearing on damages, the court awarded damages to plaintiff, including the profits of Albert Electric in the amount of $358,277.40. The court then entered judgment in favor of plaintiff and against Alber Electric. Accordingly, defendant Khalil is the only remaining defendant.
Summary judgment is appropriate if the moving party demonstrates that there is "no genuine issue as to any material fact" and that it is "entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). "If the moving party meets its burden, then it becomes the nonmoving party's burden to show the existence of a genuine issue of material fact." Arnett v. United States, 927 F. Supp. 1464, 1467-68 (D. Kan. 1996) (citing Bacchus Indus., Inc. v. Arvin Indus., Inc., 939 F.2d 887, 891 (10th Cir.1991)). The nonmoving party must then go beyond the pleadings and cite to particular parts of the record, including "depositions, documents, electronically stored information, affidavits or declarations, stipulations . . . admissions, interrogatory answers, or other materials" to designate specific facts showing a genuine issue for trial. Fed. R. Civ. P. 56(c)(1)(A); see also Mares v. ConAgra Poultry Co., 971 F.2d 492, 494 (10th Cir.1992) (quoting Celotex Corp. v. Catrett, 477 U.S. 317, 324 (1986)). "Unsubstantiated allegations carry no probative weight in summary judgment proceedings." Phillips v. Calhoun, 956 F.2d 949, 951 n.3 (10th Cir. 1992) (citations omitted).
In applying this standard, the court views the evidence and all reasonable inferences therefrom in the light most favorable to the nonmoving party. Adler v. Wal-Mart Stores, Inc., 144 F.3d 664, 670 (10th Cir. 1998) (citing Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986)). More than a "disfavored procedural shortcut," summary judgment is an important procedure Celotex, 477 U.S. at 327.
A. Count One: Federal Service Mark Infringement
commerce without consent; and (3) the defendant's use of the marks is likely to cause confusion. Chanel, Inc. v. PU, No. 07-2502-KGS, 2009 WL 722050, at *4 (D. Kan. Mar. 18, 2009). Both parties agree that the first element is met. (Doc. 262 at 3, Stipulated Facts 4-9.) Therefore, only the second and third elements are at issue. Both of these elements require that defendant used the marks. Defendant argues that plaintiff has not shown that he is personally liable for use of the marks, and...
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