Wells Enters., Inc. v. Olympic Ice Cream

• Decision Date: 22 October 2012
• Docket Number: No. C11–4109–DEO.,C11–4109–DEO.
• Parties: WELLS ENTERPRISES, INC., Plaintiff, v. OLYMPIC ICE CREAM, d/b/a Marino Italian Ices, Defendant.
• Court: U.S. District Court — Northern District of Iowa

903 F.Supp.2d 740

WELLS ENTERPRISES, INC., Plaintiff,

v.OLYMPIC ICE CREAM, d/b/a Marino Italian Ices, Defendant.

No. C11–4109–DEO.

United States District Court,

N.D. Iowa,

Western Division.

Oct. 22, 2012.

Christine Lebron–Dykeman, Jeffrey D. Harty, McKee, Voorhees & Sease, PLC, Des Moines, IA, for Plaintiff.

Douglas A. Fulton, Brick, Gentry, PC, West Des Moines, IA, for Defendant.

ORDER

LEONARD T. STRAND, United States Magistrate Judge.

This matter is before the court on two motions: (1) defendant's September 12, 2012, motion (Doc. No. 28) to stay this case in favor of arbitration and (2) plaintiff's September 26, 2012, motion (Doc. No. 30) to stay the arbitration proceedings filed by defendant. The court conducted a telephonic hearing on both motions on October 10, 2012. Plaintiff appeared through attorney Christine Lebron–Dykeman and defendant appeared through attorneys Douglas Fulton and Richard Schurin. Both motions are fully submitted.

BACKGROUND

A. Procedural History

On December 16, 2011, plaintiff Wells Enterprises, Inc. (“Wells”) filed a complaint (Doc. No. 2) against Olympic Ice Cream (“Olympic”).¹ Wells alleges trademark infringement in violation of 15 U.S.C. § 1114, false designation of origin in violation of 15 U.S.C. § 1125(a), common law trademark infringement and unfair competition. In general, Wells alleges that the name and trade dress utilized by Olympic with regard to its “FROZEN FRUIT” bar improperly infringes on Wells' established rights concerning its “FROZFRUIT” bar.

Olympic responded to Wells' complaint by filing a motion to dismiss (Doc. No. 7) for lack of personal jurisdiction and improper venue. The Honorable Donald E. O'Brien denied the motion by order (Doc. No. 16) filed June 29, 2012, 2012 WL 2562768. On September 5, 2012, Olympic and a sister company, Marina Ice Cream Corp. (“Marina”) commenced an arbitration proceeding against Wells. One week later, Olympic filed its present motion to stay this case in favor of arbitration. Wells resisted that motion and filed its separate motion seeking a stay of the arbitration.

B. The Prior Business Relationship

Wells is a corporation organized under Iowa law with its principal place of business in Iowa. Olympic is a New York corporation with its principal place of business in New York. Olympic alleges that it and Marina are “closely related entities” because “Frank Barone and Michael Barone have ownership interests in both companies.”

On August 18, 2004, Wells purchased two New York corporations, Fruit–Ices Corp. (hereinafter “Fruit–Ice”) and Chill Ices, Ltd. (hereinafter “Chill Ice”), from Michael Barone, Frank Barone, and David Edelstein. The Purchase Agreement providedWells “ ‘right, title and interest’ in and to various trademarks, including” a trademark to the FROZFRUIT product. On January 1, 2005, Wells entered into a two-year distributorship agreement with Marina (the “2005 Agreement”). The agreement was signed by Michael Barone as Marina's Vice President. Frank Barone acts as Marina's President and Human Resources Manager.

The 2005 Agreement provided that Marina would distribute Wells' products, including FROZFRUIT. The agreement contained Marina's acknowledgement that Wells owned “ ‘all right, title and interest in and to the Wells' Trademarks, know-how and all other proprietary information ...’ ” and, upon termination of the agreement, Marina would discontinue use of “ ‘Wells' Trademarks and Wells' Property....’ ”

On January 1, 2008, Wells and Marina entered into another distributorship agreement (the “2008 Agreement”) which also stated that Wells maintained ownership of its Trademarks. The second agreement provided that any goodwill created by Marina's distribution “ ‘shall be deemed to have been made by and inure to the benefit of Wells,’ ” and, upon the “termination or expiration” of the agreement, Marina “shall immediately discontinue the use of the Wells' Trademarks and the Wells' Property....' ”

The 2008 Agreement expired by its own terms on December 31, 2010, at which time Marina stopped distributing Wells' products. Soon thereafter, Olympic began selling its FROZEN FRUIT bar, which Wells alleges has “nearly identical trade dress to that of Wells' FROZFRUIT bar.” Olympic distributes its products, including the FROZEN FRUIT bar, through Marina.

C. Wells' Complaint

In its complaint, Wells alleges that the court has personal jurisdiction over Olympic for various reasons, including a contention that “Frank and Michael Barone, owners of [Olympic] have entered into four agreements with Wells, an Iowa company, three of which relate directly to the trademark and trade dress at issue in this judicial district.” Doc. 2 at ¶ 6. In its “General Allegations,” Wells makes numerous references to the various, prior agreements between Wells and Marina, including quotations from the 2005 Agreement and the 2008 Agreement concerning Wells' intellectual property rights. Id. ¶¶ 14–21. Wells contends that Olympic's alleged infringement of its rights “is particularly offensive and willful” because of Frank Barone's and Michael Barone's prior involvement with Wells in their roles as principals of Marina. Id. ¶ 24.

In describing its specific causes of action against Olympic, however, Wells makes no reference to any of its prior agreements with Marina. In Count I, which alleges infringement of Wells' registered “FROZFRUIT” mark, Wells makes no allegations concerning the agreements. Instead, it simply alleges that Olympic's sale of the FROZEN FRUIT product infringes Wells' trademark. Id. ¶¶ 28–33.

In Count II, Wells alleges that its FROZFRUIT trade dress is distinctive and widely-recognized and that Olympic's FROZEN FRUIT trade dress is deceptively similar and is likely to cause confusion. Wells further alleges that Olympic's purpose in copying Wells' trade dress is to capitalize on the goodwill Wells has developed with regard to its own product. Id. ¶¶ 36–40. Wells makes no allegations in Count II concerning any prior agreements between Wells and Marina.

Count III effectively restates the factual allegations of Counts I and II, with Wells contending that Olympic's alleged conduct also gives rise to claims under Iowa common law. Again, Wells makes no referencein Count III to any prior agreements with Marina.

D. The Personal Jurisdiction Arguments

In resisting Olympic's motion to dismiss for lack of personal jurisdiction, Wells relied heavily on the prior relationship between Wells and Marina to demonstrate that Olympic has had the requisite contacts with Iowa. Wells pointed out that “[t]he owners of [Olympic], through their ownership of three other companies—Fruit-Ices Corp., Chill Ices, Ltd., and Marina Ice Cream—have entered into four separate agreements with Wells, an Iowa company, relating directly to the trademark at issue.” Doc. No. 9 at brief page 8. Wells noted that since 2004, in connection with the two distribution agreements, Marina “sold 834,657 cases of the FROZFRUIT product totaling $5,744,403 in sales on behalf of Wells.” Id. Wells further contended that “on at least one occasion Michael Barone has traveled to Iowa to tour Wells' facility” and that “Michael Barone has been involved in telephone conference calls with Wells' employees approximately ten times over the years relating to the Distribution Agreements.” Id. at 8–9.

Wells then argued that after the 2008 Agreement expired, the Barones, “who through their ownership interest in [Marina] knew that [Marina] had acknowledged Wells' ownership in and to its trademarks and explicitly agreed not to adopt or use any confusingly similar marks or logos,” used Olympic “to offer an infringing product on the market.” Id. at 9. Wells concluded that Olympic “should not be able to hide behind corporate structure to avoid personal jurisdiction.” Id. Wells made similar arguments as to the relationship between Olympic, Marina and the Barones to argue that personal jurisdiction over Olympic is also supported by the Calder² “effects” test. Id. at 10–11.

Judge O'Brien agreed. He found that Olympic, “prior to adopting its trademark, had, through its agents, detailed knowledge of Plaintiff's proprietary interest in FROZFRUIT” and that Olympic's “adoption of a trademark similar to [Wells'] clearly constituted an act purposefully directed at this forum.” Doc. No. 16 at 13. He concluded as follows:

In summation, because Defendant had detailed knowledge of Plaintiff's proprietary interest in FROZFRUIT, as well as Plaintiff's status as an Iowa corporation headquartered in Iowa, their conduct was purposefully directed at and intentionally calculated to cause injury to Plaintiff within this district. As such, Defendant had adequate notice that its conduct would make it susceptible to being haled into court in the State of Iowa. Furthermore, because Plaintiff's interest in obtaining a convenient forum and this Court's interest in adjudicating causes of actions against residents of this jurisdiction overrides the Defendant's interest in convenience, the exercise of jurisdiction complies with traditional notions of fair play and substantial justice.

Id. at 14–15.

E. Arbitration

The 2005 Agreement and the 2008 Agreement between Wells and Marina both contain agreements to arbitrate disputes. The relevant language is as follows:

[A]ny claim, dispute or controversy (whether based in contract, tort, intentional or otherwise; constitution; statute; common law; or initial claims, counter-claims, cross-claims and third party claims, arising from or relating to this Agreement of [sic] the relationships which result from this Agreement, including the validity or enforceability of this arbitration clause, any part thereof or the entire agreement (“Claim”) shall be resolved upon the election of either party by binding arbitration pursuant to this arbitration provision. Notwithstanding this provision or any other herein, either party may apply to a Court of competent jurisdiction for emergency injunctive relief, as...