Sunlight Saunas, Inc. v. Sundance Sauna, Inc.

• Decision Date: 17 April 2006
• Docket Number: No. CIV.A. 04-2597-KHV.,CIV.A. 04-2597-KHV.
• Citation: 427 F.Supp.2d 1032
• Parties: SUNLIGHT SAUNAS, INC., Plaintiff, v. SUNDANCE SAUNA, INC. and Brighton Sauna, Inc. Defendants.
• Court: U.S. District Court — District of Kansas

Page 1032

427 F.Supp.2d 1032

SUNLIGHT SAUNAS, INC., Plaintiff, v. SUNDANCE SAUNA, INC. and Brighton Sauna, Inc. Defendants.

No. CIV.A. 04-2597-KHV.

United States District Court, D. Kansas.

April 17, 2006.

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Kenneth P. Kula, Peter E. Strand, Sarita

Pendurthi, Scott E. Dupree, Shook, Hardy & Bacon L.L.P., Kansas City, MO, for Plaintiff.

David W. Hauber, Lee M. Baty, Baty, Holm & Numrich, PC, Jerome T. Wolf, Rebecca S. Stroder, Sonnenschein, Nath & Rosenthal, LLP, Kansas City, MO, Robert A. Mintz, Wallace, Saunders, Austin, Brown & Enochs, Chtd., Overland Park, KS, for Defendants.

MEMORANDUM AND ORDER

VRATIL, District Judge.

Sunlight Saunas, Inc. brings suit against Sundance Sauna, Inc. and Brighton Sauna, Inc., alleging tortious interference with contract, tortious interference with prospective business relationship, trademark infringement, false advertising, false description, cybersquatting, injury to business reputation, unfair competition, business defamation, civil conspiracy, antitrust activity and other tortious or deceptive trade practices arising under the Lanham Act, 15 U.S.C. § 1051 et seq., the Sherman Act, 15 U.S.C. § 1 et seq., and the state laws of California and Kansas. This matter comes before the Court on Defendants' Motion For Summary Judgment (Doc. # 188) and Defendant Brighton's Motion For Summary Judgment (Doc. # 194), both filed January 20, 2006. For reasons set forth below, the Court finds that defendants' joint motion should be sustained in part and that Brighton's motion should be overruled.

Legal Standards

Summary judgment is appropriate if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law. See Fed.R.Civ.P. 56(c); accord Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986); Vitkus v. Beatrice Co., 11 F.3d 1535, 1538-39 (10th Cir. 1993). A factual dispute is "material" only if it "might affect the outcome of the suit under the governing law." Anderson, 477 U.S. at 248, 106 S.Ct. 2505. A "genuine" factual dispute requires more than a mere scintilla of evidence. Id. at 252, 106 S.Ct. 2505.

The moving party bears the initial burden of showing the absence of any genuine issue of material fact. Celotex Corp. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); Hicks v. City of Watonga, 942 F.2d 737, 743 (10th Cir. 1991). Once the moving party meets its burden, the burden shifts to the non-moving party to demonstrate that genuine issues remain for trial "as to those dispositive matters for which it carries the burden of proof." Applied Genetics Int'l, Inc. v. First Affiliated Sec., Inc., 912 F.2d 1238, 1241 (10th Cir. 1990); see also Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586-87, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986); Bacchus Indus., Inc. v. Arvin Indus., Inc., 939 F.2d 887, 891 (10th Cir. 1991). The nonmoving party may not rest on its pleadings but must set forth specific facts. Applied Genetics. 912 F.2d at 1241.

"[W]e must view the record in a light most favorable to the parties opposing the motion for summary judgment." Deepwater Invs., Ltd. v. Jackson Hole Ski Corp., 938 F.2d 1105, 1110 (10th Cir. 1991). Summary judgment may be granted if the nonmoving party's evidence is merely colorable or is not significantly probative. Anderson, 477 U.S. at 250-51, 106 S.Ct. 2505. "In a response' to a motion for summary judgment, a party cannot rely on ignorance of facts, on speculation, or on suspicion, and may not escape summary judgment in the mere hope that something will turn up at trial." Conaway v. Smith, 853 F.2d 789, 794 (10th Cir. 1988). Essentially, the inquiry is "whether the evidence presents a sufficient disagreement to require submission to the jury or whether it is so one-sided that one party must prevail as a matter of law." Anderson, 477 U.S. at 251-52, 106 S.Ct. 2505.

Factual Background

The following facts are uncontroverted, deemed admitted or, where disputed, viewed in the light most favorable to plaintiff, the non-movant.¹

The Parties

In January of 2000, Jason Jeffers started Sunlight Saunas. In September of 2001, he incorporated Sunlight and relocated its principal place of business from St. Louis, Missouri to Santa Cruz, California. While in California, Jeffers met Matt Thomas, a sauna salesman, and they decided to work together at Sunlight. Thomas resigned in June of 2002, and Jeffers brought in as investors his sister Connie and her fiancé Aaron Zack. Beginning in June of 2002, Zack was Sunlight's chief executive officer and Jeffers was chief marketing officer. In July of 2002, Sunlight moved its principal place of business to Cincinnati, Ohio. In March of 2004, it relocated to Lenexa, Kansas. Connie, later Connie Zack, has been director of sales since 2003. Jeffers left Sunlight on January 10, 2005.²

When Thomas left Sunlight in June of 2002, he incorporated Sundance Sauna, Inc. in California. Its principal of business is, in San Diego. Sundance hired Cobalt Multimedia, Inc., a Washington corporation owned by Preston Hall, to develop, host and maintain a website (www.sundancesauna. com) to sell saunas over the internet. Sundance has employed Thomas, Dan Murdock, April Laughlin, Dave Cole and Akara Moser.³ Hall is a shareholder of Sundance. Thomas has sole operational and supervisory authority with respect to Sundance advertising, marketing, promotion and sales.

From May through October of 2004, Thomas sought investors and business partners, including manufacturers, to start up a second company, Brighton Saunas, Inc. Brighton incorporated in Nevada on July 1, 2004, and maintains its principal place of business in La Jolla, California.⁴ From July of 2004 to February of 2005, Brighton developed saunas and sauna products and conducted product testing. Brighton started operations in February or March of 2005, and its website became active in February of 2005. Before February of 2005, owners and employees of Brighton used their e-mail addresses and accounts with Sundance and Cobalt Multimedia to conduct business for Brighton. Since its incorporation, however, Brighton has been listed in the telephone directory and has had an answering service.

Thomas is president of Brighton, and Darcie Thomas is secretary.⁵ Brighton has employed Thomas, Murdock, Laughlin and Moser — all of whom work for Sundance as well — and Ken Lund and Darcie Thomas. When Brighton started, it and Sundance were "companies in the same office" with "basically the same employees." Laughlin Depo at 30:8-19, Exhibit 35 to Plaintiff's Memorandum In Opposition (Doc. # 200). As at Sundance, Thomas has sole operational and supervisory authority with respect to Brighton advertising, marketing, promotion and sales. Hall is a shareholder of Brighton. Brighton hired his company, Cobalt Multimedia, to develop, host and maintain its Internet website (www.brightonsauna.com), and Hall registered Brighton's domain name in April of 2004.⁶

Sunlight Products

Sunlight sells personal saunas and other products over the Internet and through trade shows, showrooms and distributors throughout the United States and abroad. The sauna business is highly competitive and seasonal, and its products compete with those of Sundance and Brighton. Consumers base their sauna-purchasing decisions on price, appearance, product safety, quality of construction, heater efficiency and effectiveness and existence of a warranty.

Sunlight has affixed the mark "SUNLIGHT SAUNAS" to its saunas and other products. From 2000 through February of 2001, Sunlight sold Healthmate saunas manufactured by PLH Products. In August of 2000, Jeffers launched a website (www.sunlightsaunas.com) to promote Healthmate products. Jeffers relied on the internet for 95 to 98 per cent of sales. In March of 2001, Jeffers quit selling Healthmate saunas because website sales encroached on the territories of other Healthmate dealers and he did not want to take down his website.

From March through August of 2001, Sunlight distributed saunas for Saunas by Airwall, Inc.

Around August of 2001, Sunlight began selling saunas manufactured by Soft Heat, Inc. Soft Heat also manufactures saunas for Sundance and for a time, plaintiff, Sundance and Sauna by Airwall all sold saunas manufactured by Soft Heat. Sunlight stopped promoting Soft Heat saunas on its website in July of 2003, but it continued to sell remaining inventory for about six months. Jeffers testified that Sunlight changed manufacturers for the following reasons:

we were simply not receiving the customer service that we were requesting from the factory . . . and . . . it was becoming very, very hard for us to compete with Airwall and Sundance because essentially we were all selling the same product over the Internet, just minor— minor changes and so it was — it really became a bloodbath. . . . And so in order for us to, you know, increase our revenues and increase our profit, it just made more business sense for us to separate ourselves from Soft Heat and go with another factory so that we could be distinguishable.

Jeffers Depo at 29:9-23, Defendants' Memorandum (Doc. # 193). Zack agreed that Sunlight changed for numerous reasons: "Number one, pricing; number two, the quality of the product; three, ethical decisions that we didn't feel were in line with our core of values of Sunlight Saunas." A. Zack 6/29/05 Depo at 18:1-9, Exhibit 1 to Plaintiff's Memorandum In Opposition (Doc. # 200).

In July of 2003, Sunlight began selling saunas manufactured by American Infrared Sauna, Inc. ("AIS"). Sunlight sold MS saunas under two names: the Ra Class, which contains cedar wood, and the Phoenix Class, which contains basswood. Sunlight offered a...