Rainbow Play Systems v. Groundscape Technologies
| Decision Date | 12 April 2005 |
| Docket Number | No. CIV. 03-3411MJDJGL.,CIV. 03-3411MJDJGL. |
| Citation | 364 F.Supp.2d 1026 |
| Parties | RAINBOW PLAY SYSTEMS, INC., Plaintiff, v. GROUNDSCAPE TECHNOLOGIES, LLC, Defendant. |
| Court | U.S. District Court — District of Minnesota |
Joanne H. Turner, Mackall, Crounse & Moore, PLC, Counsel for Plaintiff.
Robert W. Kettering, Jr., Arthur, Chapman, Kettering, Smetak & Pikala, P.A., Counsel for Defendant.
MEMORANDUM OF LAW & ORDER
Before this Court is the motion of Defendant GroundScape Technologies, LLC ("GroundScape") for summary judgment pursuant to Federal Rule of Civil Procedure 56. Plaintiff Rainbow Play Systems, Inc. ("Rainbow") manufactures wooden play systems, and Defendant GroundScape manufactures "rubber ground surfacing," a rubber mulch-like material used under play systems for safety. The Complaint alleges trademark infringement, trade dress infringement, and unfair business practices. GroundScape now moves for summary judgment on all of Rainbow's claims. Oral argument was heard on February 16, 2005. For the reasons outlined below, Defendant's motion is granted in its entirety.
Rainbow is one of approximately 300 manufacturers of wooden backyard play systems in the United States. Such play systems retail for between $3,000 and $20,000 and are sold to playgrounds, to schools, and for residential areas. For the first five years of Rainbow's existence (until 1990), it sold systems directly to consumers at home shows, flea markets, and county fairs. By 1994, Rainbow had established 80 dealers nationwide. Rainbow converted 15 of those dealers into distributors who receive a price reduction in exchange for purchasing truckload quantities for resale to dealers in smaller lots. Currently, Rainbow has 27 such distributors servicing some 250 retail dealers. Rainbow recruited half of those distributors, and it asserts that the process of identifying and validating retail dealers is the most difficult aspect of its business.
GroundScape's initial distribution strategy for its rubber ground surfacing was similar to Rainbow's: directly selling to regional dealers and occasionally selling to individual customers. In 2001, GroundScape explored different distribution models. The first model, which included approaching manufacturers Play Nation and Backyard Adventure, failed because neither manufacturer could instruct its independent dealers to sell GroundScape's product.
The second model, dubbed its "Master Distributor program," began when a Rainbow distributor, Michael Keiss of Swings & Things, Inc., ("S & T"), contacted GroundScape to inquire about distributing GroundScape's products. When GroundScape learned that S & T was also a distributor for Rainbow play systems, GroundScape saw Rainbow's distributors as a "natural fit" for distributing its product.
After GroundScape and S & T had begun working together, Keiss discussed their business relationship with several other independent Rainbow distributors, who then authorized Keiss to give their names to GroundScape. GroundScape contacted six of those independent distributors and invited them to a February 2002 meeting in Cleveland. GroundScape did not ask Rainbow if it would like to distribute GroundScape's product, and that decision was based on Keiss' assessment (confirmed by the six other dealers) that Rainbow would not endorse a non-Rainbow product. GroundScape also states that it did not ask Rainbow's permission to contact Rainbow's dealers because those dealers were independent contractors outside of Rainbow's control. All six independent Rainbow distributors who attended the February 2002 meeting eventually signed contracts to become GroundScape master distributors.
At the February 2002 presentation, two PowerPoint slides entitled "Sales Partnership" and "The Market" contained references to Rainbow. This meeting marked the only time that GroundScape ever used or displayed a Rainbow trademark. In the "Sales Partnership" slide, a subheading entitled "Evaluate Distribution Channels" included the bullet points "Professional/Reputable," "Established Distribution," "Industry Leader," "Nationwide Presence," and "Identify Company Leaders." Below that, GroundScape displayed Rainbow's "Rainbow"-plus-design trademark. In the slide entitled "The Market," GroundScape wrote that "[n]o other company, aside from GroundScape Technologies is positioned to manufacture, market and distribute this product on a national level." The next bullet point read: "Partnership with dealers of the reputable Rainbow brand will benefit all and exclusivity offered allows dealers to reap a variety of benefits." Rainbow has not presented any evidence showing that these statements confused or misled any attendees as to the relationship, or lack thereof, between Rainbow and GroundScape.
In implementing its distribution plan, GroundScape told its new master distributors they should sell outside the Rainbow network and should not solely sell to dealers they already knew through their affiliation with Rainbow. At the February 2002 meeting, GroundScape provided its new distributors with a universal list of all potential GroundScape retailers within their respective territories. GroundScape's master distributor agreement required each master distributor to establish new and separate sales and distribution companies for the GroundScape product, and those new companies could not have "Rainbow" in their names. Further, the new GroundScape distribution companies were required to establish a new phone number, sales personnel, and management. The GroundScape distributor agreement required each distributor to display GroundScape mulch beneath a minimum of two play structures in each store. No evidence shows that this display requirement caused any consumer to be confused as to the relationship, or lack thereof, between GroundScape and Rainbow.
Rainbow asserts that GroundScape's misrepresentations included a March 2002 letter to Rainbow dealers in Texas, in which GroundScape wrote that its rubber mulch was being sold "exclusively through the Rainbow dealer network." In an April 2002 letter to various Rainbow dealers, GroundScape's Vice President of Sales and Marketing wrote that it "chose the Rainbow network because they are the premier residential play set dealers in the country and master merchandisers of product," and he related the quality of GroundScape's goods to the quality that customers see in Rainbow's products. In a July 2002 letter to seven distributors, GroundScape's President wrote that GroundScape has "partnered with the best possible people and organization to effectively execute the national distribution of our product lines," and that "the distributor network (seven Rainbow Mega Dealers) is the single most important business component of our company, as you represent our only established distribution channels into the marketplace." Again, Rainbow has not presented any evidence that any recipients of this correspondence were confused, deceived, or otherwise believed that GroundScape was somehow affiliated with Rainbow.
It is undisputed that GroundScape's website listed, as dealers, persons and entities that did not carry GroundScape's product, but GroundScape states that this mistake was due to the representations of some of its overzealous distributors. As a remedy, GroundScape removed from the website the names of all dealers who asked to be removed, and it called every new dealer to confirm that the dealer was, in fact, authorized to sell GroundScape products. Again, Rainbow has not presented any evidence that any person or entity was deceived or otherwise confused by this temporary website posting.
GroundScape undisputedly posted a photograph of a Rainbow play system on its website — though it digitally altered Rainbow's trademarked tri-colored tarp to an all-yellow design, and it digitally removed the "Rainbow" plus design mark. Rainbow has not provided any evidence that any person was deceived or confused by this posting or alteration of the play system.
GroundScape discontinued its master distributor program in 2003, after its distributors were unable to perform their contractual requirements. GroundScape currently sells its products directly to residential and commercial dealers while simultaneously providing them with warehousing and installation services.
Throughout the existence of GroundScape's master distributor program, the percentage of GroundScape's dealers who were also Rainbow dealers never exceeded 11.3%, and GroundScape's annual sales from mutual independent dealers never exceeded 35.6%. And throughout the relevant period, GroundScape has only sold goods to 32 of Rainbow's 250 dealers.
GroundScape did not realize a profit in any year from 2001 through 2004. Rather, it has suffered over $2.5 million dollars in net losses.
When considering motions for summary judgment, a court must determine "whether the record, when viewed in the light most favorable to the non-moving party, shows that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Palesch v. Mo. Comm'n on Human Rights, 233 F.3d 560, 565 (8th Cir.2000); see Fed.R.Civ.P. 56(c). The party seeking summary judgment bears the burden of showing that there is no disputed issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986).
For these purposes, "[t]he non-moving party is entitled to the benefit of all reasonable inferences to be drawn from the underlying facts in the record," though "[t]he non-moving party may not merely rest upon allegations or denials in its pleadings, but must set forth specific facts by affidavits or otherwise showing that there is a genuine issue for trial." Palesch, 233 F.3d at 565-66 (citations omitted).
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