Two Men Intern. Inc. v. Two Men Kalamazoo, Inc.

• Decision Date: 27 September 1996
• Docket Number: No. 5:94-CV-162.,5:94-CV-162.
• Citation: 949 F.Supp. 500
• Parties: TWO MEN AND A TRUCK/INTERNATIONAL INC., a Michigan corporation f/k/a Two Men and a Truck/USA, Inc., Plaintiff, v. TWO MEN AND A TRUCK/KALAMAZOO, INC., a Michigan corporation; T & M Express, Inc., an Indiana corporation; Two Men and a Truck/Northern Indiana, Inc., an Indiana corporation; Mark D. Mayes, an individual; and Keum Lee Mayes, an individual, Defendants.
• Court: U.S. District Court — Western District of Michigan

949 F.Supp. 500

TWO MEN AND A TRUCK/INTERNATIONAL INC., a Michigan corporation f/k/a Two Men and a Truck/USA, Inc., Plaintiff, v. TWO MEN AND A TRUCK/KALAMAZOO, INC., a Michigan corporation; T & M Express, Inc., an Indiana corporation; Two Men and a Truck/Northern Indiana, Inc., an Indiana corporation; Mark D. Mayes, an individual; and Keum Lee Mayes, an individual, Defendants.

No. 5:94-CV-162.

United States District Court, W.D. Michigan, Southern Division.

September 27, 1996.

COPYRIGHT MATERIAL OMITTED

Steven M. Raymond, May, Simpson & Strote, Bloomfield Hills, MI, for Two Men and a Truck/International, Inc.

Matthew W. Schlegel, Kupelian, Ormond & Magy, Southfield, MI, for Two Men and a Truck/Kalamazoo, Inc.

Matthew W. Schlegel, Kupelian, Ormond & Magy, Southfield, MI, R. Todd Redmond, Kalamazoo, MI, Don C. Huprich, Huprich & Associates, P.C., Tucker, GA, for T and M Express, Inc., Two Men and a Truck/Northern Indiana, Mark D. Mayes, Keum Lee Mayes.

OPINION

QUIST, District Judge.

Before this Court is plaintiff's motion for partial summary judgment on Counts I, II, IV, V, VI, and VII of the Complaint filed by Two Men and a Truck/International, Inc. ("plaintiff") against Two Men and a Truck/Kalamazoo, Inc., T and M Express, Inc., Two Men and Truck/Northern Indiana, Mark D. Mayes, and Keum Lee Mayes ("defendants"), and on all counterclaims brought by defendants against plaintiff.

Introduction

Plaintiff is a franchisor of moving service businesses throughout the United States. Defendants were franchisees of plaintiff. As a result of defendants failure to pay royalties and advertising fees and their failure to file monthly sales reports for two of defendants' franchise locations as required pursuant to the Franchise Agreements, plaintiff terminated the franchise relationships. However, defendants continued to operate the franchises and use plaintiff's name and mark. Plaintiff brought an action for unfair competition and trademark infringement, for breach of several agreements that the defendants executed in connection with the franchises, and for business libel. Plaintiff seeks damages and injunctive relief.

In their Answer, defendants admit that they did not pay the royalties and advertising fees in dispute and that they did not file the monthly sales reports as alleged by plaintiff. However, defendants claim that their failure to pay the fees and file the reports is excused because of various claims asserted in their counterclaims.

On July 24, 1995, this Court granted Plaintiff's Motion for Preliminary Injunction against the defendants enjoining defendants from continued use of plaintiff's names, trade names, and trademarks. Plaintiff filed a motion for partial summary judgment on Counts I, II, IV, VI and VII of the Complaint and on all of defendants' counterclaims, which is the subject of this Opinion.

Discussion

A. Legal Standard

Summary judgment is appropriate if there is no genuine issue as to any material fact and the moving party is entitled to a judgment as a matter of law. Fed.R.Civ.P. 56. The rule requires that the disputed facts be material. Material facts are facts which are defined by substantive law and are necessary to apply the law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986). A dispute over trivial facts which are not necessary in order to apply the substantive law does not prevent the granting of a motion for summary judgment. Id. at 248, 106 S.Ct. at 2510. The rule also requires the dispute to be genuine. A dispute is genuine if a reasonable jury could return judgment for the non-moving party. Id. This standard requires the non-moving party to present more than a scintilla of evidence to defeat the motion. Id. at 251, 106 S.Ct. at 2511 (citing Improvement Co. v. Munson, 14 Wall. 442, 448, 20 L.Ed. 867 (1872)). The summary judgment standard mirrors the standard for a directed verdict. Id. at 250, 106 S.Ct. at 2511. The only difference between the two is procedural. Id. Summary judgment is made based on documentary evidence before trial, and directed verdict is made based on evidence submitted at trial. Id.

A moving party who does not have the burden of proof at trial may properly support a motion for summary judgment by showing the court that there is no evidence to support the non-moving party's case. Celotex Corp. v. Catrett, 477 U.S. 317, 324-25, 106 S.Ct. 2548, 2553-54, 91 L.Ed.2d 265 (1986). If the motion is so supported, the party opposing the motion must then demonstrate with "concrete evidence" that there is a genuine issue of material fact for trial. Id.; Frank v. D'Ambrosi, 4 F.3d 1378, 1384 (6th Cir.1993). The court must draw all inferences in a light most favorable to the non-moving party, but the court may grant summary judgment when "the record taken as a whole could not lead a rational trier of fact to find for the non-moving party." Agristor Financial Corp. v. Van Sickle, 967 F.2d 233, 236 (6th Cir.1992) (quoting Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 1356, 89 L.Ed.2d 538 (1986)).

B. Analysis

1. Unfair Competition

In Count I, plaintiff asserts a violation of Section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a).¹ This section provides a federal claim for misrepresentations and false descriptions, and acts deceptive as to the identity of the manufacturer, seller, or service. Beverly W. Pattishall et al., Trademarks and Unfair Competition 168 (1996). In Count II, plaintiff alleges violations of Michigan and Indiana common law regarding unfair competition. The scope of the law in Michigan on unfair competition is similar to federal law. The same factors should be used in the legal analysis. Wynn Oil Co. v. American Way Serv. Corp., 943 F.2d 595, 605 (6th Cir.1991) (finding that the Michigan Supreme Court would evaluate a common law claim of unfair competition using the same factors as applied in federal claims involving unfair competition); Carson v. Here's Johnny Portable Toilets, Inc., 698 F.2d 831, 833 (6th Cir.1983) (noting that the test for equitable relief under both Section 43(a) and Michigan common law is the "likelihood hood of confusion" standard). Therefore, the following analysis will apply to both the federal law and Michigan common law claims. The analysis of unfair competition under Indiana common law will be discussed thereafter.

Under the Lanham Act, the standard for trademark infringement is the "likelihood of confusion" test. As one scholar noted:

The concept of prior use and the resultant development of an identifying significance deserving of protection against a likelihood of confusion are the touchstones upon which Anglo-American trade identity law was built ... Deceptively simple, the test of likelihood of confusion is the essential statement of what trade identity unfair competition is all about under the common law and the federal statute.

Pattishall, supra, at 74. See also Carson v. Here's Johnny Portable Toilets, Inc., 698 F.2d at 833 (stating that the test for equitable relief under both Section 43(a) and Michigan common law is the "likelihood of confusion" standard).

The "likelihood of confusion" test is satisfied if a former franchisee continues to use the franchisor's trademarks after termination or revocation of a franchise agreement. See S & R Corp. v. Jiffy Lube Intern, Inc., 968 F.2d 371, 375 (3d Cir.1992) (holding that concurrent use of legally profitable trademark is highly likely to cause consumer confusion as to defendant's affiliation with the franchise); Frisch's Restaurants, Inc. v. Elby's Big Boy of Steubenville, 670 F.2d 642, 646-47 (6th Cir.1982), cert. denied, 459 U.S. 916, 103 S.Ct. 231, 74 L.Ed.2d 182 (1982) (finding that after proper termination of a franchise agreement continued use by defendants of a trademark constitutes a violation of Section 43(a) of the Lanham Act); Little Caesar Enters., Inc. v. R-J-L Foods, Inc., 796 F.Supp. 1026, 1034-35 (E.D.Mich.1992) (likelihood of confusion existed when former franchisee continued use of Little Caesar Enterprises trademark after termination of rights). In Burger King v. Mason, 710 F.2d 1480 (11th Cir.1983), cert. denied, 465 U.S. 1102, 104 S.Ct. 1599, 80 L.Ed.2d 130 (1984), the Eleventh Circuit stated:

Common sense compels the conclusion that a strong risk of consumer confusion arises when a terminated franchisee continues to use the former franchisor's trademarks. A patron of a restaurant adorned with the Burger King trademarks undoubtedly would believe that BKC endorses the operation of the restaurant. Consumers automatically would associate the trademark user with the registrant and assume that they are affiliated. Any shortcomings of the franchise therefore would be attributed to BKC. Because of this risk, many courts have held that continued trademark use by one whose trademark license has been cancelled satisfies the likelihood of confusion test and constitutes trademark infringement.

Id. at 1492-93 (citations omitted).

Defendants' continued operation of their moving businesses meets the "likelihood of confusion" test under Section 43(a) of the Lanham Act. The record establishes that defendants continued to use the "Two Men and a Truck" name and mark after their rights to use the name and mark were terminated. In its Order for Preliminary Injunction, this Court did not find it necessary to analyze the elements of an unfair competition and trademark infringement claim. The Court found that defendants were estopped from challenging the ownership and validity of the name and mark because "the law is well settled that `continuing to use a franchise mark after the franchisee relationship has been terminated is a violation of the Lanham Act.'" Two Men and a Truck/Int'l, Inc. v. Two Men and a Truck/Kalamazoo, Inc., No. 5:95-CV-162, 1995 WL 549278 at *5 (W.D.Mich. July 24, 1995) (citing Two Men and a Truck, Int'l v. Surestack, Inc., No. 95-1421 (6th Cir. May...