Country Fare LLC v. Lucerne Farms

Filing 48

ORDER granting Plaintiff's 3 Motion for Preliminary Injunction. See the attached Memorandum of Decision. Signed by Judge Vanessa L. Bryant on 6/7/11. (Fernandez, Melissa)

COUNTRY FARE LLC,
PLAINTIFF,
v.
LUCERNE FARMS,
DEFENDANT

UNITED STATES DISTRICT COURT
DISTRICT OF CONNECTICUT
:
: CIVIL ACTION NO. 3:11cv722 (VLB)
:
: June 7, 2011
:
:
:
:

MEMORANDUM OF DECISION GRANTINGTHE [DOC. #3] PLAINTIFF’S MOTION
FOR PRELIMINARY INJUNCTION

The Plaintiff, Country Fare LLC (hereinafter “Country Fare”) seeks an order
pursuant to Rule 65(a) preliminarily enjoining the Defendant, Lucerne Farms
(“Lucerne”) from interfering with Country Fare’s use of the “Mainely Mulch” mark,
and importation, sale and distribution of products under the “Mainely Mulch”
mark [Doc. #3]. In particular Country Fare requests the Court to direct Lucerne to
provide written consent, pursuant to 19 C.F.R. § 133.22(c)(3), to U.S. Customs and
Border Protection Officials to the release and importation of products bearing the
Mainely Mulch mark, produced and distributed by Semican International Inc.
(“Semican”) and Country Fare respectively. This action was prompted by
detainment of a Semican/Country Fare shipment of mulch product by custom
officials due to Lucerne’s enforcement of its currently registered trademark to
Mainely Mulch which Country Fare in turn claims was fraudulently obtained. The
Court granted Country Fare’s request for a Temporary Restraining Order on May
5, 2011, finding that the Plaintiff was likely to suffer immediate irreparable injury,
loss and damage, in the form of loss of reputation, good will, and business

opportunities for which it could not be compensated monetarily, and the
Defendant had committed the acts and harm alleged in the Plaintiff’s Verified
Complaint such that the equities and hardships weighed in the Plaintiff’s favor,
rendering it likely that the Plaintiff would prevail on the merits and that the public
interest would not be disserved given the disputed basis upon which the
trademark had been registered [Doc. #14]. The Defendant was therefore enjoined
and restrained from interfering with the Plaintiff’s use of the Mainely Mulch mark
and importation, sale and distribution of products under the Mainely Mulch mark.
The order instructed the Defendant to provide written consent and notice
consistent with a letter template attached to the Order. The parties jointly moved
to amend the order on May 6, 2011 to alter the language of the consent letters,
and the Court thereafter granted the parties’ request for amendment [Docs. ## 17,
19]. The parties appeared before the Court pursuant to an Order to Show Cause
on May 11, 2011.
During the hearing both parties presented exhibits and live witness
testimony. At the conclusion of the hearing, the Defendant sought to admit the
testimonial declaration of Kevin R. Haley, trademark counsel to Lucerne,
asserting for the first time that Haley was unable to attend the Show Cause
proceeding. The Plaintiff objected to the exhibit on the basis that it did not have
an opportunity to cross-examine Haley. The parties consented to a schedule for
examining Haley by interrogatory and the Court extended the temporary
restraining order for good cause pursuant to Federal Rule of Civil Procedure
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65(b)(2).

Facts

The Court finds the following facts to have been proved by clear and
convincing evidence. Country Fare conceived a proprietary mulch composition
consisting of a carefully proportioned mix of hay and straw. [Testimony of Jeff
Auerbach and Frederick Stecher, Doc. #25]. Country Fare later discovered that
Lucerne manufactured an animal feed from grain using a heat process that
Country Fare believed could be used to enhance its proprietary mulch
composition. [Id.]. Country Fare discussed with Lucerne its proprietary mulch
concept and asked if Lucerne could manufacture it’s mulch using Lucern’s heat
processing equipment. [Id.]. Lucerne had made a substantial investment in its
heating process equipment and it was underutilized when it was approached by
Country Fare. [Testimony of H. Allen White].
Country Fare and Lucerne entered into an agreement on December 20,
1999 (hereinafter the “Agreement”) under which Lucerne agreed to manufacture,
package and ship mulch pursuant to Country Fare’s specifications. [Plaintiff Exh.
1-B,D, Doc. # 3, Attach 1]. The mulch was manufactured using Country Fare’s
proprietary composition and packaged in bags both designed and supplied by
Country Fare, Country fare paid approximately $2,300.00 for the plates used to
make the bag design and Country Fare owned the plates and did not provide

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Lucerne access to the plates. [Testimony of Jeff Auerbach and Frederick
Stecher, Doc. # 25]. The name Country Fare was prominently printed on the front
and back of the bag, while Lucerne was identified on the back in smaller print as
the manufacturer. [Plaintiff Exh. 1-B, E, Doc. # 3, Attach 1].
All inquiries and complaints concerning the product were directed to
Country Fare, including in at least one instance, a complaint that was made to
Lucerne, which was in turn redirected to Country Fare. [Testimony of Jeff
Auerbach, Doc. # 25; Plaintiff Exh. 1-L, Doc. # 3, Attach 2]. In redirecting a
customer’s inquiry, Lucerne noted to the customer “Maine Mulch is a Country
Fare product and therefore we are prohibited to do anything in the way of
advertising, selling, etc. all must be done through Country Fare . . . .” [Plaintiff
Exh. 1-L, Doc. # 3, Attach 2].
The Plaintiff provided convincing testimony that Country Fare conceived of
the name for the product and that it was named “Mainely Mulch,”in recognition of
the fact that the product was manufactured in the state of Maine where Lucerne
was located. [Testimony of Jeff Auerbach and Frederick Stecher, Doc. # 25].
Although Lucerne claims to have conceived of the name, including the fact that
Country Fare used the name on the plates it owned and contributed exclusively,
virtually all of the evidence is to the contrary to this assertion. [Testimony of Jeff
Auerbach, Frederick Stecher, and H. Allen White, Docs. ##25-26]. The parties’
Agreement identifies and describes Lucerne as the “manufacturer/supplier” of
the bagged mulch product, while“Mainely Mulch” is described in turn as “Country
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Fare’s product.” [Plaintiff Exh. 1-D, Doc. # 3, Attach 1]. It also states that
Lucerne makes “Mainely Mulch” “exclusively for” Country Fare. [Id]. After selling
“Mainely Mulch” for several years, Country Fare added the letters “TM” after the
name “Mainely Munch” on the ground cover package by agreement of the parties
to protect the mark. [Testimony of Frederick Stecher, Doc. # 25; Plaintiff’s Exh. 1E, Doc. #3, Attach. 1].
The business relationship between the parties became strained and
ultimately broke down. Lucerne was disenchanted with Country Fare because it
did not make timely payments, did not supply packaging timely and did not meet
Lucerne’s volume expectations. [Testimony of H. Allen White, Doc. #26;
Defendant’s Exh. H, Doc. #22, Attach 9]. Prior to the termination of the parties’
relationship, Lucerne expressed its dissatisfaction with Country Fare, but
subsequently had a debilitating fire and Country Fare in turn cited quality control
issues and objected to Lucerne’s planned production of its own ground cover
labeled “Mainely Mulch.” After the fire, Lucerne began manufacturing mulch
under the name “Lucerne Farms Premium Ground Cover” which it advertised as
being manufactured under the same high standards as “Mainely Munch.”
[Plaintiff’s Exhs. M and N, Doc. #3, Attach. 2].
Unbeknownst to Country Fare, Lucerne anticipating a breakdown in the
parties’ business relationship, filed an application to register the “Mainely
Munch” mark in its name. [Testimony of Jeff Auerbach, Frederick Stecher, and H.
Allen White, Docs. ##25-26; Testimonial Declarations of Kevin Haley Doc. # 22,
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Attach. 11 and Doc. #28; Defendant’s Exhs. B-E, Doc. 22 Attach 3-6; Plaintiff’s
Exh. 1-F through K]. Lucerne’s trademark registration application incorporated
the package supplied and previously used in commerce by Country Fare, but with
the prominent references to Country Fare deleted and a representation that the
modified package was in fact “Lucerne Farms Premium Ground Cover,” which it
advertised as being superior to “Mainely Mulch,” and was being used by Lucerne
in commerce when in fact it had not been. [Testimony of Jeff Auerbach,
Frederick Stecher, and H. Allen White, Docs. ##25-26; Testimonial Declarations of
Kevin Haley Doc. # 22, Attach. 11 and Doc. #28; Defendant’s Exhs. B-E, Doc. 22
Attach 3-6; Plaintiff’s Exh. 1-F through K]. The application was granted and the
mark “Mainely Mulch” was registered in the name of Lucerne in July of 2004. [Id.].
Following the expiration of the parties’ Agreement, Country Fare
contracted with Semican, a Canadian company to manufacture mulch in the
“Mainely Munch” bags previously supplied to Lucerne. [Testimony of Jeff
Auerbach, Doc. #25]. On April 4, 2011, Lucerne recorded its trademark
registration with U.S. Customs and Border Protection which resulted in the
detainment of a truck load of Country Fare Mainely Mulch product at the
Canadian border. [Id., Plaintiff’s Exh. 1-T, Doc. #3, Attach. 2]. Country Fare
thereafter filed this action and requested a temporary restraining order [Doc. #1].

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Discussion
Standard for Preliminary Injunctions
Historically, the standard for a preliminary injunction required a showing of
“(a) irreparable harm and (b) either (1) likelihood of success on the merits or (2)
sufficiently serious questions going to the merits to make them a fair ground for
litigation and a balance of hardships tipping decidedly toward the party
requesting the preliminary relief.” Citigroup Global Markets, v. VCG Special
Opportunities, 598 F.3d 30, 35 (2d Cir. 2010).
Recent decisions however, reflect that the Second Circuit has changed the
standard that it applies to preliminary injunctions. Specifically, in Salinger v.
Colting, 607 F.3d 68, 74-75 (2d Cir. 2010), the Second Circuit held that the
standard for preliminary injunctions was “inconsistent with the ‘test historically
employed by courts of equity’ and ha[d] therefore, been abrogated by the
Supreme Court’s decision in eBay, Inc. V. MercExchange, L.L.C., 547 U.S. 388
(2006).” As explained by the Southern District of New York:
In Salinger, the court held that a preliminary injunction should issue
upon a showing of the plaintiff’s likelihood of success on the merits
only where the plaintiff has only shown that: (1) he is likely to suffer
irreparable injury in the absence of an injunction; (2) remedies at
law, such as monetary damages, are inadequate to compensate for
that injury; (3) the balance of hardships tips in his favor; and (4) the
public interest would not be dis-served, by the issuance of a
preliminary injunction.

Rex Medical v. Angiotech Pharmaceuticals, Inc., 754 F. Supp. 2d 616, 629
(S.D.N.Y., 2010).
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While the Second Circuit, in Salinger, stated that its holding applied to
“preliminary injunctions in the context of copyright cases” the court also
observed that it saw “no reason that eBay would not apply with equal force to an
injunction in any type of case.” Salinger, 607 F.3d at 78 n. 7 (emphasis in
original). As a result, the Southern District of New York has observed that the
Supreme Court’s decision in eBay, requires “the use of the Supreme Court’s fourfactor test in every case.” Rex Medical 754 F. Supp. 2d at 620; see also New York
City Triathlon, LLC v. NYC Triathlon Club, Inc., 704 F. Supp. 2d 305, 328 (S.D.N.Y.
2010). The Court finds it unnecessary to conclude whether the Second Circuit’s
opinion in Salinger, extends to trademark-related disputes as is the subject in
this case, as the Court finds that the Plaintiff meets its burden under either the
earlier or more exacting standard articulated in Salinger.

Analysis
Irreparable Injury or Harm and Inadequacy of Remedies at Law

Upon assessment of the parties’ filings and evidence presented at the
Show Cause hearing, the Court finds that the Plaintiff has meet its burden and
demonstrated a likelihood of irreparable harm, in the form of loss of goodwill and
loss of business opportunities due to interruption of the Plaintiff’s delivery of
Mainely Mulch, its primary product accounting for the vast majority of its annual
sales during its key delivery season. In particular, Jeff Auerbach, the President of
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Country Fare testified at the Show Cause hearing that the Mainely Mulch product
accounted for 90% of its annual sales and that Country Fare would likely fail as a
business without continued sales of the product, especially as the interruption of
distribution of Mainely Mulch products pursuant to the enforcement of the
Defendant’s registered trademark is occurring at a key time of demand for its
mulch products and that failure to meet outstanding orders will result in damage
to the company’s goodwill with and erosion of its existing customers and
frustrate its efforts to secure new customers. After the Show Cause hearing,
Plaintiff submitted upon the Court’s request additional memorandum and
declaration regarding the calculation of the bond in which it clarified that Mainely
Mulch historically represented 90% of Country Fare’s gross sales, but in the
periods from July 1, 2010 to December 31, 2010 and January 1, 2011 to May 19,
2011 sales of Mainely Mulch only accounted for 82% and 69% of gross sales
respectively. [Testimonial Declaration of Jeffrey Auerbach Doc. #38].
The Second Circuit has clearly identified such harm as irreparable in
nature:
[I]n Reuters Ltd. v. United Press Int’l, 903 F.2d 904 (2d Cir. 1990), the
Second Circuit concluded that United Press had shown irreparable
harm because, if Reuters were allowed to terminate the parties’
agreement, United Press would be unable to continue supplying its
product (provided to it by Reuters) to its customers. In that case,
Reuters had contracted with United Press to provide it with foreign
news photographs which United Press would later distribute to its
customers. In concluding that United Press had shown irreparable
harm sufficient to warrant the issuance of an injunction, the court
focused on the harm to United Press’ reputation and the loss of
goodwill, and noted that such an injury is “nearly impossible to
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value.” In cases where a preliminary injunction has issued to
prevent a product source from suspending delivery to a distributor,
the irreparable harm has often consisted of the loss of customers
and the competitive disadvantage that resulted from a distributor’s
inability to supply its customers with the terminated product.
Rex Medical, 754 F. Supp. 2d at 621-22 (citing Reuters Ltd. v. United Press Int’l,
903 F.2d 904 (2d Cir. 1990). Further, the Second Circuit has noted an absence of
irreparable harm in instances where the loss of goodwill was doubtful and the
harm was easily calculable:

Generally, where we have found no irreparable harm, the alleged
loss of goodwill was doubtful, and lost profits stemming from the
inability to sell the terminated product could be compensated with
money damages determined on the basis of past sales of that
product and current and expected future market conditions. In
contrast, where we have found irreparable harm, the very viability of
the plaintiff’s business or substantial losses of sales beyond those
of the terminated product have been threatened.

Tom Doherty Assocs., v. Saban Entm’t Inc., 60 F.3d 27 (2d Cir. 1995) (internal
citations omitted).
It is well recognized that the inability of a party to supply its products to
customers as a result of a dispute will often result in a loss of goodwill sufficient
to establish irreparable harm. Rex Medical, 754 F. Supp. 2d at 621-22; John B.
Hull, Inc. v. Waterbury Petroleum Prods., Inc., 588 F.2d 24, 29 (2d Cir. 1978)
(finding irreparable harm when “plaintiff is deprived totally of the opportunity to
sell an entire line of merchandise and may incur injury to its goodwill and
reputation as a ‘dependable distributor’”); Interphoto Corp. v Minolta Corp., 295
10

F. Supp. 711, 723-724 (S.D.N.Y. 1969)(“it would be impossible to estimate or
compute damages for the loss of goodwill [plaintitff] will suffer as a result of
being unable to provide its retail customers with products”). Country Fare has
presented evidence and testimony that its reputation and goodwill with its
customers will be irreparably damaged to the extent it cannot deliver its Mainely
Mulch products during its critical spring gardening season. Mainely Mulch is a
quintessential seasonal product and the inability to supply its customers during
its peak season will lead to significant losses of goodwill. In addition, Country
Fare’s goodwill and reputation is further jeopardized as a result of the confusion
in the marketplace that could be caused by Lucerne’s ability to sell its version of
Mainely Mulch in virtually identical packaging to that in which Country Fare sold
mulch for many years.
The Defendant contends that “Country Fare points only to the potential
disgruntlement of existing customers as its potential injury not the loss of a
major piece of new business” and that such harm can be repaired through
compensatory relief. In support the Defendant identifies Dittman & Greer, Inc. v.
Chromalox, Inc., 2009 WL 3254481, at *1 (D. Conn. Oct. 6, 2009). In that case, this
Court applied the standard identified in Saban, and concluded that :
Here, D & G presented evidence that Chromalox sales constituted
more than a third of its business, measured in terms of sales and
gross profits. D &G also asserted that approximately seventy
percent of its customers bought Chromalox products and losing the
product line would necessitate lay-offs for a third of its employees.
However, D & G would likely continue in the event that the contract
with Chromalox is allowed to terminate. The many other product
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lines that D & G markets as well as the ability to now market
products that compete with Chromalox indicate that irreparable harm
has not been established.

Dittman & Greer, Inc. V. Chromalox, Inc., 2009 WL 3254481, at *1 (D. Conn. Oct. 6,
2009). The Court necessarily disagrees with the Defendant’s application of
Dittman, as testimony and evidence reflects that the facts of this case are
distinguishable. The harm to Country Fare is not easily calculable, while in
contrast, harm to Chromalox consisted of a calculable loss of the plaintiff’s
business and the company was notably able to continue due to its many other
product lines. In the instant case however, evidence reflects that Country Fare is
highly dependent upon sales of the Mainely Mulch product and that Country Fare
is unlikely to survive if the injunctive relief is not provided. Moreover, the Court
in Dittman did not specifically address whether the plaintiff would suffer a loss in
goodwill. Here, the reputational harm to Country Fare and loss of goodwill with
its customers is the Plaintiff’s principal claim. The loss of goodwill occasioned
by the failure to deliver a seasonal product such as mulch cannot be easily
calculated. Accordingly monetary damages upon final resolution of the dispute
cannot fully compensate Country Fare for its lost business, reputation and
goodwill. Given the seasonal nature of the product at issue, customers of
Country Fare would likely purchase mulch from another vendor rather than risk
non-delivery and the narrow window for window of sales opportunities in the
future. O.D.F. Optronics Ltd. v. Remington Arms Co., Inc., 2008 WL 4410130, at *6

12

(S.D.N.Y. Sept. 26, 2008)(“Irreparable Harm is found where, “but for the grant of
equitable relief, there is a substantial chance that upon final resolution of the
action the parties cannot be returned to the positions they previously
occupied”)(quoting Brenntag Int’l Chemicals, Inc. v. Bank of India, 175 F.3d 245,
249 (2d Cir. 1989)). The Court therefore finds that the Plaintiff has satisfied the
“irreparable harm” prong of the analysis that traditionally applies to motions for
preliminary injunction and both the irreparable harm and inadequacy of available
remedies at law prongs of the analysis identified in Salinger.

Likelihood of Success on the Merits

The Plaintiff contends that it has established a likelihood of success on the
merits based on evidence that the Defendant obtained the Mainely Mulch mark
through fraud by purposefully presenting sample specimens that obliterated
references to Country Fare misrepresenting its prior use, and by seeking the
trademark despite knowledge that Country Fare was the true holder of the
trademark as reflected by the terms of a ten year vendor agreement entered into
by Country Fare and Lucerne in 1999, and behavior indicating that Country Fare
stood behind the brand and was regarded as responsible for the quality of the
products.
In turn, Lucerne contends that Country Fare “has not carried its burden of
demonstrating it has a likelihood of both success on the merits of its claims of
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ownership of the Mainely Mulch mark and cancellation of Lucerne’s 2004
registration fo the mark” and Lucerne further asserts that it is responsible for the
unique features of Mainely Mulch and that the distribution agreement reflects that
Lucerne controlled Country Fare as distributor and obtained registration of the
mark on the basis of good faith belief in the ownership of the mark as opposed to
fraud.
To raise a successful defense of fraud under 15 U.S.C. § 1115(b)(1) the
allegedly fraudulent statements must show a deliberate attempt to
mislead the Patent and Trademark Office and may not be the product
of an error or inadvertence. The fraud must be proven by clear and
convincing evidence. Courts and the Trademark Board have held that
this disfavored defense must be proven to the “hilt” by the party
alleging the fraud.
E. Gluck Corp. v. Rothenhaus, 585 F. Supp. 2d 505, 513 (S.D.N.Y., 2008) (internal
citations and quotation marks omitted).
Although a high burden applies to the Plaintiff’s claim that Defendant
committed fraud on the Trademark Office, the Court finds that the Plaintiff has
clearly met its burden of persuasion of its likelihood of presenting clear and
convincing evidence that the Defendant secured a trademark to the “Mainely
Mulch” mark through fraud, as reflected by testimonial evidence and supporting
exhibits, evincing that the Plaintiff had clear rightful ownership to the “Mainely
Mulch” trademark and that the Defendant made material misrepresentations in its
application to the Trademark Office for that mark despite its knowledge of the
Plaintiffs rightful ownership of the mark.
In arriving at this conclusion, the Court first notes that the evidence clearly
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indicates that the Plaintiff had ownership of the mark. First, the 1999 agreement
includes clear references to Mainely Mulch as a Country Fare product as it states
in its third whereas clause that: “Lucerne will continue manufacturing/packaging
of Country Fare’s product called ‘Mainely Mulch’ and all substantially similar
products exclusively for Country Fare LLC. . .” [Plaintiff’s Exh. 1-D]. See Premier
Dental Products v. Darby Dental Supply, 794 F.2d 850, 854 (3d Cir. 1986) (noting
that “ownership of a trademark as between a manufacturer and an exclusive
distributor is largely determined by the parties’ agreement.”).
Further, the relationship between Country Fare and Lucerne indicates that
Country Fare had superior ownership of the mark.

As a general rule, where a manufacturer and exclusive distributor
contest the ownership of a trademark and no agreement controls, it is
the manufacturer who presumptively owns the mark. . . . However,
where as here, the “goods pass through [the distributor’s] hands in the
course of trade and [the distributor] gives them the benefit of [its]
reputation or [its] name and business style” this presumption may be
rebutted. In order to determine superior ownership a court should
consider the following factors: (1) which party invented and first affixed
the mark on to the product, (2) which party’s name appeared with the
trademark; (3) which party maintained the quality and uniformity of the
product; and (4) with which party the public identified the product and
to whom purchases made complaints.
Tactica International v. Atlantic Horizon International, 154 F. Supp. 2d 586, 600
(S.D.N.Y., 2001)(citing Sengoku Works Ltd. V. RMC Int’l Ltd., 96 F.3d 1217, 1220
(9th Cir. 1996) and IMAF, S.P.A. v. J.C. Penney Co., Inc. 806 F. Supp. 449, 454
(S.D.N.Y. 1992)); See also Premier Dental 794 F.2d at 854 (noting that “[i]f the
public believes that the exclusive distributor is responsible for the product, so
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that the trademark has come, by public understanding, to indicate that the goods
bearing the trade-mark come from the plaintiff although not made by it[,] or if the
distributor has obtained a valuable reputation for himself and his wares by his
care in selection of his precautions as to transit and storage, or because his local
character is such that the article acquires value by his testimony to its
genuineness, that is proof that he possesses the goodwill associated with the
product.) (internal citations and quotation marks omitted).
In this case, the Plaintiff provided testimonial evidence from Auerbach and
Frederick Stecher, Country Fare’s General manager, establishing that Country
Fare conceptualized all aspects of Mainely Mulch including its composition,
name, design, labeling and marketing. More specifically, the testimony reflected
that the Plaintiff created and affixed the mark to the product as Country Fare paid
over $2,000 for the “plates” used for the logo and design imprinted on the bags in
which the Mainely Mulch product was sold beginning in 2002. Further, Country
Fare’s name appeared in conjunction with the mark on the product, and Country
Fare printed a “TM”on the packaging expressly in order to protect its right to the
trademark. Testimony further reflected that Country Fare was responsible for
maintaining the quality of the product and was held accountable to the public for
the quality of the product even by the Defendant which forwarded complaints and
concerns regarding the quality of the product to Country Fare disavowing that it
was accountable for product quality. The Plaintiff therefore squarely meets the
test identified in Tactica International and had a superior ownership to the mark
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that would have been clear to Lucerne at the time of its trademark filing.
Additionally, while the 1999 Agreement imposed sales quotas on Country
Fare, this quota does not establish the Defendant’s ownership of the mark as
witness testimony reflected that the quota was designed to address Lucerne’s
need to utilize the manufacturing capacity of machinery owned and greatly
underutilized by Lucerne prior to entering the distribution contract with Country
Fare. Lastly, the Defendant’s submission of a “Heads of Agreement” on
December 17, 2009 [Defendant’s Exhibit 1-F] does not alter the Court’s
interpretation of the parties’ relationship as the document is unsigned and
therefore there is no indication that Country Fare ever agreed to its proposed
terms. On the contrary, to the extent it was proferred by Lucerne and rejected by
Country Fare, it has the opposite effect.
The Court in turn concludes that the Plaintiff is likely to succeed on the
merits because Country Fare’s rightful claim to the trademark would have been
apparent and clear to Lucerne at the time it filed its application with the
Trademark Office, particularly as Country Fare’s ownership of the mark was
clearly delineated in the parties’ 1999 agreement, established through the nature
of the parties’ respective relationships with the product, and reflected by the
designs that appeared on the bag itself which identified Mainely Mulch as a
Country Fare product. The Court therefore concludes that Country Fare has
proved by clear and convincing evidence that Lucerne’s submissions to the
Trademark Office were not made in good faith and were not a result of an honest
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misunderstanding particularly as Lucerne provided specimen’s that actively
concealed any and all identifying information relating to the Plaintiff even though
Lucerne asserted that the specimens reflected a mark that Lucerne had used in
commerce for five consecutive years prior to the filing.
The Court’s finding that the Plaintiff is likely to succeed on the merits is not
disturbed by the Defendant’s filing of the Declaration of Kevin Haley nor by
Haley’s responses to supplemental interrogatories as his responses note that his
representations to the Trademark office were dependent upon representations
made to him by George James, the President of Lucerne and that Haley was not
aware nor privy to firsthand information such as the contract governing the
parties’ agreement as to the product, the Plaintiff’s payment for and ownership of
the plates necessary for the printing of the Mainely Mulch bags used in
commerce, the bag’s reference that the product was “DEVELOPED AND
EXCLUSIVE [sic] DISTRIBUTED BY” Country Fare LLC, and the extent to which
either Lucerne or Country Fare maintained the quality of the product, and which
party handled complaints relating to the product. The Court notes that hearsay is
admissible in a hearing on a preliminary injunction and thus the strict standards
for affidavits under the Federal Rules of Evidence and in support of summary
judgement under Fed. R. Civ. P 56(c)(4) requiring that an affidavit be made on
personal knowledge are not expressly applicable to affidavits in support of
preliminary injunctions. Mullins v. City of New York, 634 F. Supp. 2d 373, 384
(S.D.N.Y. 2009). Courts have wide discretion to assess the affidavit’s credibility
18

and generally consider affidavits made on information and belief to be insufficient
for a preliminary injunction. 11A Charles Alan Wright et al., Federal Practice and
Procedure § 2949 (2d ed. 1995); Mullins v. City of New York, 634 F. Supp. 2d at
373, 385, 390 n.115 (declining to fully credit “defendants’ hearsay affidavit” and
noting that while the court “may consider hearsay evidence in a preliminary
injunction hearing. Nevertheless, a court may weigh evidence based on whether
such evidence would be admissible under the Federal Rules of Evidence.”).
Since the Declaration of Kevin Haley was made on unidentified and
unsubstantiated information and belief and not on Mr. Haley’s personal
knowledge, the Court finds his declaration unpersuasive.
The Court therefore is not dissuaded from its conclusion that the Plaintiff has
demonstrated a likelihood of success, as the Defendant has not credibly
disrupted evidence that Lucerne, as an entity, had clear knowledge of the
Plaintiff’s right to the mark and therefore made a material misrepresentation
when it instructed its trademark attorney to file for the mark even if Haley himself
was unaware of the falsity. As noted, knowledge of the filing’s falsity is evinced
by the fact that a specimen of the Mainely Mulch package was presented to the
Trademark Office in a manner that strategically omitted all references to Country
Fare that existed on the bag that was actually used in commerce by Country Fare
prior to, and at the time of the Defendant’s application. Further, Lucerne
misrepresented that the altered bag had been used by it in commerce when in
fact it had not been.
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Balance of the Hardships and Consideration of the Public Interest
Additionally, the Court finds that assuming but not deciding that the
standard in Salinger applies, the Plaintiff has met its burden as to that standard’s
final two prongs as the Plaintiff has shown that the balance of hardships tips in
its favor and that the public interest would not be disserved, by the issuance of a
preliminary injunction. The Court has already explained that the Defendant’s
actions, if not enjoined will likely result in irreparable harm to the Plaintiff and
that the Plaintiff is likely to succeed as to the merits of its case. The Defendant in
turn alleges that, assuming that it has rightful claim to the Mainely Mulch
trademark, the Plaintiff’s product will cause harm to the Defendant because the
Plaintiff’s Mainely Mulch product, as currently manufactured, is of inferior quality.
In support of this assertion, the Defendant provides a laboratory report that it
asserts was conducted by Maine Environmental Services Inc. and concludes that
weeds grow out of the Plaintiff’s current Mainely Mulch product, manufactured by
Semican, at a significantly greater extent than mulch manufactured by Lucerne.
The Court finds this argument unavailing as the report does not include a
descriptive protocol for the experiment. The report provides minimal context and
discussion of the extent to which any relevant variables were controlled. The
Court therefore finds that the laboratory study lacks credible, probative value.
Further, even assuming the Plaintiff’s product is of inferior quality, the strong if
not overwhelming evidence that the Plaintiff has rightful ownership to the mark,
and the fact that the Defendant does not seek to sell the mulch product under the
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name “Mainely Mulch” has chosen to sell mulch under the name “Lucerne Farms
Premium Ground Cover” in the immediate future, underscores that the balance of
hardships tips in the Plaintiff’s favor.
Additionally, while the Defendant attempted to estimate Country Fare’s
annual profits through sales of the Mainely Mulch product, the Defendant has
offered very little to no evidence regarding actual damages that it would suffer as
there is no indication that Lucerne had sold in the past or had plans to sell in the
future the Mainely Mulch product in commerce. Additionally, the Court finds that
the balance of hardships tips in the Plaintiff’s favor as the Court can instruct
Country Fare to provide security in an amount that would “pay the costs and
damages sustained by any party found to have been wrongfully enjoined or
restrained.” Fed. R. Civ. P. 65(c).
Lastly, the Court sees no reason why the public interest is disserved by the
issuing of this preliminary injunction, and to the contrary finds that the public
interest is served by such an injunction against the assertion of what at this
preliminary stage clearly and convincingly appears to be wrongful and fraudulent
claims to a right to a trademark.
Preliminary Injunction Bond
Under Fed. R. Civ. P. 65(c), the Court has wide discretion to determine the
appropriate amount of an injunction bond. Doctor’s Assocs., Inc. v. Distajo, 107
F.3d 126, 136 (2d Cir. 1997)(“Rule 65(c) gives the district court wide discretion to
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set the amount of a bond, and even to dispense with the bond requirement ‘where
there has been no proof of likelihood of harm.’”) (citations omitted). The Second
Circuit has noted that “[s]ince a preliminary injunction may be granted on a mere
probability of success on the merits, generally the moving party must
demonstrate confidence in his legal position by posting bond in an amount
sufficient to protect his adversary from loss in the event that future proceedings
prove that the injunction issued wrongfully.” Nokia Corp. v. InterDigital, Inc., No.
10-1358-cv, 2011 WL 1944309, at *3 (2d Cir. May 23, 2011)(citing Edgar v. MITE
Corp., 457 U.S. 624, 649 (1982)).
The Defendant notes that if the Court ultimately determines that it is the
rightful owner of the mark it would be entitled to damages from Country Fare
under 15 U.S.C. § 1117(a) for trademark infringement of (i) profits made by
Country Fare due to wrongful use of the mark, (ii) damages sustained by Lucerne,
and (iii) Lucerne’s costs in connection with this action, plus attorney’s fees in an
exceptional case. [Doc. #33]. The Defendant asserts, based on Auerbach’s
testimony, that Country Fare’s net profit ranged between $203,811.96 and
$254,764.95, however the Defendant’s estimate does not properly account for
Country Fare’s costs in connection with the production of Mainely Mulch. [Doc.
#33]. Auerbach testified that Country Fare had historically made $30,000 to
$40,000 in annual gross profit. However in supplemental briefing before the
Court, Country Fare detailed that its estimated annual net profit for 2011 would be
$1,640.34. This estimate is based on Country Fare’s most recent projection that
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Mainely Mulch would comprise 69% of its gross sales for 2011 and factors in the
increased costs that resulted from its new manufacturing agreement with
Semican as well as its recent price reductions for Mainely Mulch. [Testimonial
Declaration of Jeffrey Auerbach Doc. #38]. While there is no evidence that
Lucerne is currently selling its own version of Mainely Mulch on the market, but
instead selling “Lucerne Farms Premium Ground Cover,” the harm it will suffer
from being wrongfully enjoined is the value that Country Fare will obtain from
using Lucerne’s trademarked Mainely Mulch brand.
Lucerne also argues that it will be further harmed by Country Fare selling
an inferior product under its Mainely Mulch trademark and accordingly should be
provided with additional security. However, as the Court previously explained the
evidence Lucerne relies on for this assertion is not probative as the scientific
study simply reports the results of a “Phytotoxicity/Seedling Trial” with no
explanation or description of the scientific process or methodology utilized.
[Defendants’ Ex. I. Doc. #22, Attach. 10. ]. Lastly, Lucerne contends that it is
entitled to its costs in connection with this action plus attorney’s fees. [Doc. 33].
However, attorney’s fee are not recoverable as damages in an action on an
injunction bond. Nokia, 2011 WL 1944309, at *5; Universal City Studios, Inc. v.
Corley, No. 00Civ.277, 2000 WL 621120, at *5 (S.D.N.Y. May 12, 2000).
Based on the foregoing analysis, Lucerne should be entitled only to a
disgorgement of whatever net profit Country Fare makes from selling Mainely

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Mulch throughout the duration of the preliminary injunction. The Court therefore
instructs the Plaintiffs to either provide security in the amount of $5,000, which
reflects Country Fare’s historical net profits of $30,000 to $40,000 as well as its
2011 estimated net profits of $1,640.34 for Mainely Mulch, or in the alternative
place into escrow all net profit made from the sell of Mainely Mulch pending the
duration of the preliminary injunction and provide on a quarterly basis a detailed
accounting to Defendant. See Alpha Capital Atiengesellschaft v. Advanced Viral
Research Corp., No. 02 CV 10237, 2003 WL 328302, at *6 (S.D.N.Y. Feb. 11, 2003)
(in an action seeking a preliminary injunction on behalf of holders of stock
warrants against defendant corporation which had refused to deliver shares, the
court ordered that in addition to a bond, which reflected the value of the shares,
that plaintiffs place into escrow pending final resolution of the dispute any
proceeds of warrant stock subsequently sold by Plaintiff). The Court also
instructs Defendant to provide Plaintiff with the required authorization letters to
the United States Customs and Border Protection (“Customs”) with a preliminary
set end date of June 7, 2013. In the event, there is a final resolution of the dispute
prior to June 7, 2013 the parties shall provide Customs with appropriate letters to
that effect. In the event there is not a final resolution by June 7, 2013, the parties
shall extend the authorization for another 6 months and thereafter seek leave
from the Court for any further extensions if warranted.

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Based on its review of the materials submitted, the Court grants the [Doc.
#3] Plaintiff’s Motion for Preliminary Injunction.

IT IS SO ORDERED.
_______/s/________
Hon. Vanessa L. Bryant
United States District Judge
Dated at Hartford, Connecticut: June 7, 2011.

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