Salba Corp., N.A. et al v. X Factor Holdings, LLC et al
Filing
133
ORDER DENYING MOTION FOR PRELIMINARY INJUNCTION: Plaintiffs' 45 Motion for Temporary Restraining Order/Preliminary Injunction filed 12/13/2013, is fully resolved. By Judge Robert E. Blackburn on 9/10/2014. (alowe)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Judge Robert E. Blackburn
Civil Action No. 12-cv-01306-REB-KLM
SALBA CORP., N.A., a Canadian corporation,
SALBA SMART NATURALS PRODUCTS, a Colorado limited liabilty company,
WILLIAM A. RALSTON, and
RICHARD L. RALSTON,
Plaintiffs,
v.
X FACTOR HOLDINGS, LLC, an inactive Florida limited liability company, and
ANCIENT NATURALS, LLC, a Florida limited liability company,
MITCHELL A. PROPSTER, a resident of the State of Florida,
CORE NATURALS, LLC, a Florida limited liability company, and
NATURAL GUIDANCE, LLC, a Florida limited liability company,
Defendants and Counter-Claimants.
ORDER DENYING MOTION FOR PRELIMINARY INJUNCTION
Blackburn, J.
This matter is before me on the Plaintiffs’ Motion for Temporary Restraining
Order / Preliminary Injunction [#45]1 filed December 13, 2013. To the extent the
plaintiffs seek the entry of a preliminary injunction, I deny the motion.
On January 6, 2014, I conducted a hearing on the motion. Because the motion
was heard on an expedited basis, I found that the evidence in the record may not
present a comprehensive and complete picture of the relevant evidence. Therefore,
I limited my analysis to the motion for a temporary restraining order. Prior to the
January 6, 2014, hearing, the defendants filed a response [#56], the plaintiffs filed a
1
“[#45]” is an example of the convention I use to identify the docket number assigned to a
specific paper by the court’s case management and electronic case filing system (CM/ECF). I use this
convention throughout this order.
reply [#57]. After the hearing, I entered an order [#63] denying the motion to the
extent the plaintiffs sought a temporary restraining order. Following the hearing and
my order [#63], both the plaintiffs and the defendants submitted additional evidence and
briefing relevant to the motion [#72, #79, #80, #81, #82, #83, and #124]. In addition, the
briefing and exhibits submitted by the parties concerning the Defendants’ Motion and
memorandum To Enforce Settlement Agreement [#52] filed December 23, 2013, is
relevant.
I. JURISDICTION
I have jurisdiction over this case under 28 U.S.C. § 1331 (federal question), §
1338(a) (trademark and copyright), § 1338(b) (unfair competition claim joined with
copyright or trademark claim), § 1367 (supplemental), and 15 U.S.C. § 1121
(trademark).
II. STANDARD OF REVIEW
A party seeking a temporary restraining order or preliminary injunction must
show: (1) that the movant has a substantial likelihood of eventual success on the merits;
(2) that the movant will suffer imminent and irreparable injury unless the injunction
issues; (3) that the threatened injury to the movant outweighs whatever damage the
proposed injunction may cause the opposing party; and (4) that the injunction, if issued,
would not be adverse to the public interest. Lundgrin v. Claytor, 619 F.2d 61, 63 (10th
Cir. 1980); Heideman v. S. Salt Lake City, 348 F.3d 1182, 1189 (10th Cir. 2003)
(irreparable injury must be imminent).
When the moving party has established that the three harm factors tip decidedly
in the movant’s favor, the probability of success requirement is somewhat relaxed, and
the movant need only show questions going to the merits so serious, substantial,
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difficult, and doubtful as to make them a fair ground for litigation. Nova Health Systems
v. Edmondson 460 F.3d 1295, 1298 n. 6 (10th Cir. 2006). On the other hand, some
types of temporary restraining orders or preliminary injunctions are disfavored and,
therefore, require the plaintiff to satisfy a heightened burden of showing that the four
primary factors
weigh heavily and compellingly in movant’s favor before such an injunction
may be issued. The heightened burden applies to preliminary injunctions
that (1) disturb the status quo, (2) are mandatory as opposed to
prohibitory, or (3) provide the movant substantially all the relief he may
recover after a full trial on the merits.
Kikumura v. Hurley, 242 F.3d 950, 955 (10th Cir. 2001) (internal quotation and citation
omitted). For the purpose of resolving the motion for preliminary injunction addressed in
this order, I conclude that neither the relaxed nor the heightened burden of proof is
applicable.
III. BACKGROUND
This case concerns disputes about the use by the defendants of trademarks
and other materials related to the Salba trademark used by the plaintiffs. In the
past, both the plaintiffs and the defendants have used the Salba name and
associated artwork in the sale of chia seeds and related products. In the original
complaint [#1], the plaintiffs asserted claims for (1) trademark counterfeiting and
infringement; (2) federal unfair competition and false advertising; (3) deceptive trade
practices; (4) cyber-squatting; and (5) common law trademark infringement and
unfair competition. These claims were brought against defendants X Factor
Holdings, LLC and Ancient Naturals, LLC. The parties reached a settlement and, in
early March 2013, executed a settlement agreement.
Now, the plaintiffs contend that defendants X Factor Holdings, LLC and
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Ancient Naturals, LLC have violated the settlement agreement by continuing to use
the Salba trademarks owned by the defendants and by using packaging that is
illicitly similar to packaging used by the plaintiffs to sell products under the Salba
name. As named defendants, X Factor Holdings, LLC and Ancient Naturals, LLC
signed the settlement agreement. In addition, the settlement agreement was signed
by Mitchell Propster, an individual closely related to these two defendant entities,
and two other entities tied to Mr. Propster, Core Naturals, LLC and Natural
Guidance, LLC. Mr. Propster, Core Naturals, LLC, and Natural Guidance, LLC were
not named as defendants in the original complaint [#1].
By my order [#61], I granted the motion [#44] filed by the plaintiffs seeking
permission to file an amended complaint. In the amended complaint, the plaintiffs
assert new claims based on the alleged violation of the settlement agreement, and
the plaintiffs name Mr. Propster, Core Naturals, LLC and Natural Guidance, LLC as
additional defendants.
The plaintiffs now contend that X Factor Holdings, LLC, Ancient Naturals,
LLC, Mr. Propster, Core Naturals, LLC, and Natural Guidance, LLC have violated
the settlement agreement. The plaintiffs seek a preliminary injunction prohibiting Mr.
Propster and the four LLC entities from violating the settlement agreement.
IV. FACTS 2
The plaintiffs own and use the name Salba to sell seeds known as Salvia
Hispanica L, commonly known as chia seeds. The plaintiffs claim their Salba chia
seed product is uniquely valuable because they sell under the Salba name two
2
The facts described below have been established by a preponderance of the evidence,
based on the evidence currently in the record. The findings of fact below are preliminary and are
made solely for the purpose of determining the motion for preliminary injunction.
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strains of chia seeds that are registered varieties of those seeds. These two
registered varieties, the plaintiffs claim, have unique nutritional value because they
provide nutritional consistency, unlike other chia seeds. The defendants also sell
chia seeds, but they do not sell the two registered varieties of chia seeds sold by the
plaintiffs.
Exhibit 1, admitted in evidence at the January 6, 2014, hearing, is the
Settlement Agreement and Release (Settlement Agreement) reached by the parties
when they agreed to settle this case. The Settlement Agreement can be found also
at [#45-9], pp. 2 - 67.
The Settlement Agreement includes exhibits with letter designations. Exhibit
B to the Settlement Agreement is a Trademark Assignment and Copyright License.
In the Trademark Assignment and Copyright License, the defendants agreed to
transfer the “SALBA Works” to plaintiff Salba Smart Natural Products, LLC.
Trademark Assignment and Copyright License [#45-9], CM/ECF pages 27 - 39. The
“SALBA Works” are defined as
materials containing the word SALBA or any derivative or form thereof,
including, without limitation, all copyrights associated with documents,
illustrations, labels, photographs, representations or other forms of use
of the word SALBA including website content hosted as of the date that
the Settlement Agreement is signed at the salba.com, salbausa.com,
salbastore.com, salbarx.com or salbamiracle.com domains to which
Transferor claims or may claim any copyright under United States
federal law, state law, common law, or the law of any foreign country
(the “SALBA Works”).
Trademark Assignment and Copyright License [#45-9], p. 27. Under this definition,
the key feature that defines the SALBA Works is the use of the word Salba or a
derivative form of that word.
In addition, the defendants granted a copyright license to plaintiff Salba Smart
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Natural Products, LLC. The copyright license provides for
an irrevocable, unrestricted, worldwide, perpetual, royalty free, fully
assignable, fully transferable right and license to use, modify,
reproduce, distribute, display, perform, publish, sell, prepare derivative
works of, and otherwise utilize and exploit (“Use”) the SALBA Works.
Id., ¶ 2.A. In addition, the copyright license provides:
If for any reason the foregoing grant of license is deemed insufficient to
grant Transferee an unrestricted, worldwide, perpetual, royalty free,
exclusive, fully assignable right and license to the SALBA Works, then
Transferor agrees to and hereby does covenant to Transferee not to
enforce any rights in or to the SALBA Works against Transferee . . . .
Id.
The Settlement Agreement and Release includes a paragraph titled
“Permanent Cessation of Use,” which is paragraph number three of the Settlement
Agreement. In this paragraph, the defendants agreed to cease using the word
SALBA and any SALBA-formative mark in the various ways specified in the lettered
sub-paragraphs of paragraph three. Most of these sub-paragraphs limit the actions
of the defendants only insofar as the defendants might use the “SALBA Works,”
which are defined primarily by use of the word Salba or any Salba formative marks.
However, sub-paragraph D of paragraph three includes a broader prohibition.
Subparagraph D provides that the defendants shall permanently cease and desist
from
performing any action or using any trademark, symbol, imagery, slogan
or any false designation or origin or false advertising which is likely to
cause confusion or mistake or lead the trade and/or public into
believing that SALBA and the common species of chia, Salvia hispanica
L, are one and the same, or that Plaintiffs are the sponsor of
Defendants/Propster Entities or that Defendants’ or Propster Entities’
products originate with Plaintiffs’ SALBA or are connected or offered
with the approval, consent, authorization or under the supervision of
Plaintiffs.
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Settlement Agreement and Release, ¶ 3(D).
Before the Settlement Agreement, one or more of the defendants sold chia
seeds using the Salba name. After the Settlement Agreement, one or more of the
defendants sold chia seeds under the names Salvia and Chiajoy. The graphics
used on the Salvia and Chiajoy labels produced by the defendants after the
Settlement Agreement are very similar to the graphics used on the labels used by
the plaintiffs prior to September 2012. The similarity of these label graphics is
demonstrated by comparing Exhibits 6 and 15, showing examples of label graphics
used by the plaintiffs prior to September 2012, with Exhibits 7 and 24, showing
examples of label graphics used by the defendants after the Settlement Agreement.
There is no evidence that any of the defendants used the name Salba or any
derivative word on their labels after the Settlement Agreement was executed. At the
January 6, 2014, hearing, Mr. Propster testified that he became aware sometime
before the hearing that the word Salba was used as an intrawebsite key word on
one or more websites operated by his company. That intrawebsite key word has
been removed from the websites controlled by Mr. Propster. With that one small
exception, there is no evidence that the defendants otherwise used the name Salba
or any derivative word in the marketing of their products after the Settlement
Agreement was executed.
In September 2012, the plaintiffs changed the graphics used on many, and
maybe all, of the labels they place on jars and other containers in which they sell
chia seeds. The new label graphics adopted by the plaintiffs are shown in Exhibit
57. The new label graphics used by the plaintiffs differ significantly from the label
graphics used by the defendants after the Settlement Agreement. Evidence
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submitted relevant to the motion for preliminary inunction [#45] and the motion to
enforce settlement agreement [#52] indicates that there is a material dispute of fact
about whether the plaintiffs or any of them continue to market products, especially
chia seeds, using label graphics that are similar to the label graphics used by the
defendants to market chia seeds. This factual dispute is relevant primarily to
paragraph 3(D) of the Settlement Agreement, quoted above, which prohibits the
defendants from using any trademark, symbol, or imagery likely to cause confusion
between the products of the defendants and the SALBA products of the plaintiffs.
The plaintiffs claim also to sell snack chips using labels with an appearance
similar to the labels used by the defendants on bottles of chia seeds. The fact that
these two products are dissimilar and the less striking similarity between the labels
presents, at most, a debatable issue about violation of paragraph 3(D) of the
Settlement Agreement.
V. ANALYSIS
A. Likelihood of Success on the Merits
The plaintiffs base their request for a preliminary injunction solely on the breach
of contract claim asserted in their amended complaint. In this claim, the plaintiffs allege
that the defendants have violated the Settlement Agreement by using forms of the word
Salba in the sales, distribution, and advertising materials used by the defendants and by
using trademarks, symbols, imagery, and slogans similar to those of the plaintiffs in
marketing the Salvia and Chiajoy products sold by the defendants. Given the current
state of the record, I conclude that the plaintiffs have not presented evidence that
demonstrates a substantial likelihood of eventual success on the merits of their breach
of contract claim against the defendants.
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There is no evidence that any of the defendants used the name Salba or any
derivative word on their labels after the Settlement Agreement was executed. Thus,
there is no evidence in the record that any of the defendants are using, or are likely to
use in the future, the “SALBA Works,” as that term is defined in the Settlement
Agreement. Thus, to the extent the plaintiffs base their breach of contract claim on an
alleged use by the defendants of the “SALBA Works,” the plaintiffs have not shown a
substantial likelihood of success on the merits of their breach of contract claim.
Paragraph 3(D) of the Settlement Agreement prohibits the defendants from using
any trademark, symbol, or imagery that is likely to cause confusion or mistake or lead
the public or the trade into believing that the plaintiffs are the sponsor of the products of
the defendants, that the plaintiffs are affiliated with the defendants, or that Salba
products and the common species of chia, Salvia Hispanica L, are one and the same.
The similarity between the label graphics used by the defendants after the Settlement
Agreement and the label graphics used by the plaintiffs at least until September 2012 is
substantial. That similarity is close enough that it is likely to cause the type of confusion
or mistake addressed in paragraph 3(D) of the Settlement Agreement.
However, the evidence in the record shows there is a significant dispute of fact
about whether or not the plaintiffs continue to use label graphics that are substantially
similar to the label graphics used by the defendants. Given the competing and facially
credible evidence on this point, I cannot conclude that the plaintiffs have demonstrated
a substantial likelihood that they can show that the label graphics currently used by the
plaintiffs and the label graphics currently used by the defendants are so similar that the
defendants have violated paragraph 3(D) of the Settlement Agreement. Thus, to the
extent the plaintiffs base their breach of contract claim on an alleged use by the
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defendants of any trademark, symbol, or imagery that is likely to cause confusion or
mistake or lead the public or the trade into believing that the plaintiffs are the sponsor of
the products of the defendants, the plaintiffs have not shown a substantial likelihood of
success on the merits of their breach of contract claim.
In my order [#63] denying the motion for temporary restraining order, I found that
the plaintiffs had shown a substantial likelihood of success on the merits of their breach
of contract claim based on this alleged violation of paragraph 3(D) of the Settlement
Agreement, but only for the period between execution of the Settlement Agreement and
September 2013. On further review of the evidence, I conclude that the evidence
currently in the record shows that is was in September 2012 that the plaintiffs changed
the graphics used on many, and maybe all, of the labels they place on jars and other
containers in which they sell chia seeds. Further, new evidence submitted by the
parties demonstrates a material factual dispute about whether or not the plaintiffs
continue to use label graphics that are substantially similar to the label graphics used by
the defendants.
B. Irreparable Injury
To establish irreparable injury for the purpose of a preliminary injunction, the
plaintiffs must show that they will suffer irreparable injury and that the irreparable injury
is of such imminence that there is a clear and present need for equitable relief to
prevent the harm. Heideman v. S. Salt Lake City, 348 F.3d 1182, 1189 (10th Cir.
2003). Generally, an injury is considered to be irreparable when it is incapable of being
fully compensated for in damages or where the measure of damages is so speculative
that it would be difficult if not impossible to correctly arrive at the amount of the
damages. “To constitute irreparable harm, an injury must be certain, great, actual and
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not theoretical.” Heideman v. S. Salt Lake City, 348 F.3d 1182, 1189 (10th Cir. 2003)
(quotation and citation omitted). See also Gitlitz v. Bellock, 171 P.3d 1274, 1279
(Colo. App. 2007). Further, irreparable injury cannot be established absent a showing
that harm in the future is threatened. See, e.g., City of Los Angeles v. Lyons, 461
U.S. 95, 111, (1983). A temporary restraining order or preliminary injunction cannot
prevent harm that occurred in the past.
The evidence currently in the record leaves a substantial question about whether
any of the defendants currently are using label graphics in violation of paragraph 3(D) of
the Settlement Agreement or whether they are likely to do so in the future. As a result,
there is significant doubt about whether the plaintiffs are being injured irreparably as a
result of the use of such labels by any of the defendants. Thus, I conclude that the
plaintiffs have not shown that they will suffer irreparable injury absent a preliminary
injunction.
C. Other Factors
Given the failure of the plaintiffs to show a substantial likelihood of success on
the merits or to establish that they will suffer immediate and irreparable injury absent a
preliminary injunction, I decline to address the other relevant factors. The plaintiffs
would not be entitled to a preliminary injunction even if they had shown that the balance
of harms and public interest factors weigh in their favor.
VI. CONCLUSION & ORDERS
Having considered the evidence presented, arguments advanced, and authorities
cited by the parties in their filings cited at the beginning of this order together with the
evidence submitted, arguments advanced, and authorities cited at the January 6, 2014,
hearing, I find and conclude that the plaintiffs have not demonstrated that they are
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entitled to a preliminary injunction.
THEREFORE, IT IS ORDERED as follows:
1. That to the extent the plaintiffs seek a preliminary injunction in the Plaintiffs’
Motion for Temporary Restraining Order / Preliminary Injunction [#45] filed
December 13, 2013, that portion of the motion is DENIED; and
2. That the Plaintiffs’ Motion for Temporary Restraining Order / Preliminary
Injunction [#45] filed December 13, 2013, is fully resolved, and the motion SHALL BE
TERMINATED on the docket of this case.
Dated September 10, 2014, at Denver, Colorado.
BY THE COURT:
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