Military Certified Residential Specialist, LLC et al v. Fairway Independent Mortgage Corporation

Filing 15

MEMORANDUM. Signed by Judge Sue L. Robinson on 4/26/2017. (nmfn)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE

MILITARY CERTIFIED RESIDENTIAL
SPECIALIST, LLC and MILRES, LLC
Plaintiffs,
v.
FAIRWAY INDEPENDENT
MORTGAGE CORPORATION
Defendant.

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) Civ. No. 16-166-SLR
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MEMORANDUM
At Wilmington thisJ!g~day of April, 2017, having reviewed the papers submitted
in connection with defendant's motion to dismiss (D.I. 9), the court issues its decision as
follows:
1. Background. Military Certified Residential Specialist, LLC ("MCRS") and
MilRES, LLC ("MR") (collectively, "plaintiffs") are Delaware limited liability companies
with a principal place of business in Wilmington, Delaware. (D.I. 1 at 11117-8) Plaintiffs
provide "educational programs and classes ... through which real estate agents can
gain knowledge and expertise to assist active duty personnel, veterans, and other
former military personnel and their families with real estate services, and obtain a
certification as a specialist in this area." (D. I. 1 at 111) Howard G. West ("West") is
owner of both MCRS and MR. (D.I. 1 at 11117-8) Fairway Independent Mortgage
Corporation ("defendant") is a mortgage lending company organized under the laws of
the State of Texas with a principal place of business in Plano, Texas. (Id. at 11119, 27)
Defendant offers courses "to provide expertise to those working with veterans and
active duty military to assist them with housing issues." (Id. at 1125)

2. On March 17, 2016, plaintiffs filed an action against defendant, alleging that
defendant (1) infringed on a registered trademark in violation of 15 U.S.C. § 1114(1)(a),
(2) violated 15 U.S.C. § 1125(a) for false designation of origin, (3) engaged in unfair
competition in violation of 6 Del. C. § 2531, (4) violated Delaware common law for
trademark infringement and unfair competition, (5) were unjustly enriched in violation of
Delaware common law, and (6) intentionally interfered with a prospective business
advantage. (D.I. 1) Defendant moved to dismiss for failure to state a claim for relief
under Federal Rules of Civil Procedure 12(b)(6). (D.I. 10) The court has jurisdiction
pursuant to 28 U.S.C. §§ 1331, 1332, 1338, and 1367.
3. MilRES. In June 2011, MR began using the mark "MilRES" "in connection
with educational programs." (D. I. 1 at~ 13) The following month, MR applied to the
United States Patent and Trademark Office ("USPTO") for the "MilRES" trademark
("MilRES"). (Id.

at~

14) The mark published for opposition on November 29, 2011 and

was issued on the Principal Register on February 14, 2012. (Id. at~ 15) "MilRES" is
registered in international class 041 for "[e]ducational services, namely, conducting
training courses in the fields of providing services to military, veterans and their families
and distribution of training materials in connection therewith." USPTO Reg. No.
4,098,984. The "MilRES" "mark consists of standard characters without claim to any
particular font, style, size, or color." 1 Id.

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Plaintiffs allege that MR has "established a drawing mark," which appears to
incorporate the "MilRES" and "MILITARY RESIDENTIAL SPECIALIST" word marks .
..

~

..

NlilRE5
*********
MILITARY RESIDENTIAL SPECIALIST

(D.I. 1 at~ 13) Plaintiffs allege that "[d]efendant's use of plaintiffs' unregistered marks
and associated trade dress ... ha[s] caused and will continue to cause confusion as to
the source of defendant's goods and services." (D.I. 1 at~ 63)

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4. Military Residential Specialist. MR began using the mark "MILITARY
RESIDENTIAL SPECIALIST" in June 2011, "in connection with educational programs
and classes ... through which real estate agents can gain knowledge and expertise to
assist active duty personnel, veterans, and other[s] ... with real estate services." (D.I.
1 at

,-m 1, 16)

The following month, MR applied to the USPTO for the trademark

"MILITARY RESIDENTIAL SPECIALIST." (Id. at ,-i 16) The USPTO denied registration
on the Principal Register because it "merely describes the purpose and/or provider of
applicant's services," and MR requested registration on the Supplemental Register.
See Response to Office Action, USPTO Serial No. 85363288 (Apr. 24, 2012). On July
3, 2012, the USPTO issued the mark "MILITARY RESIDENTIAL SPECIALIST" on the
Supplemental Register in international class 041 for "[e]ducational services, namely
conducting training courses in the field of providing services to the military, veterans and
their families and distribution of training material in connection therewith." USPTO Reg.
No. 4, 169,442. The "mark consists of standard characters without claim to any
particular font, style, size, or color." Id.

5. Military Certified Residential Specialist. MCRS began using the mark
"MILITARY CERTIFIED RESIDENTIAL SPECIALIST" in January 2013. (D.I. 1 at ,-i 17)
MCRS subsequently filed a trademark application with the USPTO on April 11, 2013.
(Id.) After a rejection for descriptiveness reasons, MCRS accepted registration on the
Supplemental Register. See Response to Office Action, USPTO Serial No. 85901499
(Mar. 18, 2015). On May 19, 2015, the USPTO issued the mark "MILITARY
CERTIFIED RESIDENTIAL SPECIALIST" on the Supplemental Register in international
class 041 for "[e]ducational services, namely providing training of real estate agents for
certification in the field of real estate services for veterans and active duty service
members." USPTO Reg. No. 4,741,044. The "mark consists of standard characters
without claim to any particular font, style, size, or color." Id.

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6. Plaintiffs' Use. Plaintiffs' three "marks appear prominently on [their] website,
web pages, advertisements, and course materials .... " (D.I. 1 at iT 21) Plaintiffs contend
that they "invested a great deal of resources in researching, designing, developing, and
marketing" their program. (Id. at iT 2) Plaintiffs created and distributed a field manual
and other training materials. (Id.) Plaintiffs also claim to "have continuously advertised,
marketed, and distributed the program through the United States under these
trademarks or names." (Id. at iT 20)
7. Fairway. On or around February 17-18, 2012, MR led a workshop in
Greenville, Delaware. (Id. at iT 23) Defendant's representative, Ms. Louise Thaxton
("Thaxton"), attended the workshop. (Id.) Thaxton was "given written materials bearing
the "MilRES" and "MILITARY RESIDENTIAL SPECIALIST" marks and logo." (Id. at iT
24) In April 2013, defendant began using the mark "CERTIFIED MILITARY
RESIDENTIAL SPECIALIST" with its residential mortgage programs. (D.I. 10 at 6 n.3)
According to plaintiffs, in May 2014, defendant began "using the name 'Certified Military
Residential Specialist,' a logo nearly identical to [MR], and a website 2 []that offered a
course to provide expertise to those working with veterans and active duty military to
assist them with housing issues, and using training materials that mimicked those
developed by [plaintiffs]." 3 (D.I. 1 at iT 25) In July 2014, plaintiffs sent defendant a
cease and desist letter. (Id. at iT 26) "[S]ettlement discussions ... did not resolve the
dispute between the parties." (Id. at iT 31) Plaintiffs filed suit in March 2016. (D.I. 1)

8. Standard of Review. A motion filed under Federal Rule of Civil Procedure
12(b)(6) tests the sufficiency of a complaint's factual allegations. Bell At/. Corp. v.

2

http://certifiedmilitaryresidentialspecialist.com.

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Plaintiffs allege that defendant also has used the mark "Military Residential Specialist."
(D.I. 1 at iT 34) The included flyer for defendant's "2016 Boot Camp" offers those in
attendance the ability to "Become certified as a 'Military Residential Specialist."' (D.I. 1,
ex.Cat 2)

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Twombly, 550 U.S. 544, 555 (2007); Kost v. Kozakiewicz, 1 F.3d 176, 183 (3d Cir.

1993). A complaint must contain "a short and plain statement of the claim showing that
the pleader is entitled to relief, in order to give the defendant fair notice of what the ...
claim is and the grounds upon which it rests." Twombly, 550 U.S. at 545 (internal
quotation marks omitted) (interpreting Fed. R. Civ. P. 8(a)). Consistent with the
Supreme Court's rulings in Twombly and Ashcroft v. Iqbal, 556 U.S. 662 (2009), the
Third Circuit requires a three-part analysis when reviewing a Rule 12(b)(6) motion.
Connelly v. Lane Const. Corp., 809 F.3d 780, 787 (3d. Cir. 2016). In the first step, the

court "must tak[e] note of the elements a plaintiff must plead to state a claim." Next, the
court "should identify allegations that, because they are no more than conclusions, are
not entitled to the assumption of truth." Lastly, "[w]hen there are well-pleaded factual
allegations, a court should assume their veracity and then determine whether they
plausibly give rise to an entitlement for relief." Id. (citations omitted).
9. Under Twombly and Iqbal, the complaint must sufficiently show that the
pleader has a plausible claim. McDermott v. Clondalkin Grp., 2016 WL 2893844, at *3
(3d Cir. May 18, 2016). Although "an exposition of [the] legal argument" is
unnecessary, Skinner v. Switzer, 562 U.S. 521 (2011 ), a complaint should provide
reasonable notice under the circumstances. Id. at 530. A filed pleading must be "to the
best of the person's knowledge, information, and belief, formed after an inquiry
reasonable under the circumstances," such that "the factual contents have evidentiary
support, or if so identified, will likely have evidentiary support after a reasonable
opportunity for further investigation or discovery." Anderson v. Bd. of Sch. Directors of
Millcreek Twp. Sch. Dist., 574 F. App'x 169, 174 (3d Cir. 2014) (quoting Fed. R. Civ. P.

11 (b)). So long as plaintiffs do not use "boilerplate and conclusory allegations" and
"accompany their legal theory with factual allegations that make their theoretically viable
claim plausible," the Third Circuit has held "pleading upon information and belief [to be]

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permissible where it can be shown that the requisite factual information is peculiarly
within the defendant's knowledge or control." McDermott, 2016 WL 2893844, at *4
(quotation marks, citation, and emphasis omitted).
10. As part of the analysis, a court must accept all well-pleaded factual
allegations in the complaint as true, and view them in the light most favorable to the
plaintiff. See Erickson v. Pardus, 551 U.S. 89, 94 (2007); Christopher v. Harbury, 536
U.S. 403, 406 (2002); Phillips v. Cnty. of Allegheny, 515 F.3d 224, 231 (3d Cir. 2008).
In this regard, a court may consider the pleadings, public record, orders, exhibits
attached to the complaint, and documents incorporated into the complaint by reference.
Tellabs, Inc. v. Makar Issues & Rights, Ltd., 551 U.S. 308, 322 (2007); Oshiver v. Levin,
Fishbein, Sedran & Berman, 38 F.3d 1380, 1384-85 n.2 (3d Cir. 1994). The court's

analysis is a context-specific task requiring the court "to draw on its judicial experience
and common sense." Iqbal, 556 U.S. at 663-64.
11. Lanham Act Claims. Plaintiffs allege trademark infringement under 15
U.S.C. § 1114(1)(a) and false designation of origin under 15 U.S.C. § 1125(a)(1)(A).
(D.I. 1 at~~ 42-52) Third Circuit courts "measure federal trademark infringement, 15
U.S.C. § 1114, and federal unfair competition, 15 U.S.C. § 1125(a)(1)(A), by identical
standards." A&H Sportswear, Inc. v. Victoria's Secret Stores, Inc., 237 F.3d 198, 210
(3d Cir. 2000). Under these standards, a plaintiff must demonstrate that: (1) the mark is
valid and legally protectable; (2) plaintiff owns the mark; and (3) the defendant's use of
its mark to identify goods or services is likely to create confusion concerning the origin
of the goods or services. Checkpoint Sys. v. Check Point Software Tech., 269 F.3d
270, 279 (3d Cir. 2001 ). "If the mark at issue [i]s federally registered and ha[s] become
incontestable, ... validity, legal protectability, and ownership are proved." Ford Motor
Co. v. Summit Motor Prod., Inc., 930 F.2d 277, 291 (3d Cir. 1991) (citation omitted). A
mark is incontestable if it has been "in continuous use for five years subsequent to the

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date of ... registration and is still in use in commerce." 15 U.S.C. § 1065. "Where a
mark has not been federally registered or has not achieved incontestability, validity
depends on proof of secondary meaning, unless the unregistered or contestable mark is
inherently distinctive." Ford Motor, 930 F.2d at 291. To determine likelihood of
confusion, courts in the Third Circuit employ "the Lapp factors." 4 However, "[i]f products
are directly competing, and the marks are clearly very similar, a district judge should
feel free to consider only the similarity of the marks themselves." A&H Sportswear, 237
F.3d at 214.
12. MilRES. "MilRES" was federally registered on the Principal Register on
February 14, 2012, and plaintiffs have continuously used "MilRES" for a period greater
than five years. 5 (D.I. 1 at

,.m 15, 20)

Therefore, plaintiffs have alleged facts sufficient

to support validity, protectability, and ownership. Ford Motor, 930 F.2d at 291. As to
likelihood of confusion, plaintiffs allege that:
Defendant's prominent use of Certified Military Residential Specialist and
Military Residential Specialist names, logos, descriptions, content, and
website domain name, which are nearly, if not identical to, Plaintiffs'
marks, has caused and will continue to cause confusion, mistake, and
deception of purchasers as to the source of origin of Defendant's good[s]
and services such that they are likely to believe they are Plaintiffs'.
(D.I. 1 at~ 44) As it relates to the "MilRES" mark, plaintiffs allege that defendant's
mark, "CERTIFIED MILITARY RESIDENTIAL SPECIALIST," is "nearly, if not identical
to, plaintiffs' ["MilRES"] mark[]." (Id.) The "MilRES" mark and defendant's mark are not
apparently identical or nearly so and, therefore, plaintiffs' allegation is not entitled to the
assumption of truth. 6 Connelly, 809 F.3d at 787. However, defendant's products and

4

Interpace Corp. v. Lapp, Inc., 721 F.2d 460, 463 (3d Cir. 1983).

5

The complaint was filed on March 17, 2016. (D.I. 1) In the intervening time, plaintiffs'
mark has passed its five year mark and is now incontestable.
6

Plaintiffs aver that "consumers immediately associate the mark of "MilRES" and the
mark 'Military Residential Specialist.' ... [,which] requires that the court look beyond

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services are highly similar to those offered by plaintiffs, and plaintiffs have alleged that
"[n]umerous real estate agents and others have taken [defendant's] class believing it to
be the class offered by plaintiffs," i.e., likelihood of confusion. (D.I. 1 at

,.m 32, 38)

Therefore defendant's motion to dismiss the Lanham Act claims as to the "MilRES"
mark is denied.
13. Marks on the supplemental register. Plaintiffs' "MILITARY RESIDENTIAL
SPECIALIST" and "MILITARY CERTIFIED RESIDENTIAL SPECIALIST" marks (the
"Supplemental Marks") are registered on the Supplemental Register. There is no
dispute that plaintiffs own these marks and that they are federally registered. (D.I. 10 at
1) However, for a mark on the Supplemental Register, "validity depends on proof of
secondary meaning, unless the ... mark is inherently distinctive." Ford Motor, 930 F.2d
at 291. Plaintiffs argued that the Supplemental Marks have acquired secondary
meaning, because plaintiffs "have expended substantial sums and resources to develop
and then advertise and proliferate their marks among the consuming public." (D.I. 13 at
10) Plaintiffs have alleged sufficient facts to support secondary meaning, i.e., in the
minds of the consuming public, the primary significance of the term is not the product
but the producer. (D.I. 1 at 11111, 2, 3, 4, 20, 21, 32, 38, 39) As with the "MilRES" mark,
plaintiffs have alleged a likelihood of confusion. (D.I. 1 at 111132, 38) Therefore,
defendant's motion to dismiss the Lanham Act claims as to the Supplemental Marks is
denied.
14. Delaware trademark dilution. Plaintiffs allege that defendant's acts
"creates a likelihood of injury to plaintiffs' business reputation and/or dilution of the
distinctive quality of their marks" under 6 Del. C. § 3301 et seq. (D.I. 1 at 111153-55)
Neither the "MilRES" mark nor the Supplemental Marks are registered under the statute,

the marks themselves." (D.I. 13 at 13) This allegation is not in the complaint, nor are
there any facts alleged that support the argument.
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and, "[p]roof of distinctiveness necessary to satisfy the antidilution statutes typically is
the same proof used to show inherent or acquired distinctiveness for infringement
purposes under the Lanham Act." Barnes Grp. Inc. v. Connell Ltd. P'ship, 793 F. Supp.
1277, 1304 (D. Del. 1992). The "MilRES" mark is incontestable under the Lanham Act,
and plaintiffs have alleged facts sufficient to support secondary meaning for the
Supplemental Marks. Therefore, plaintiffs have pied sufficient facts to go forward with a
trademark dilution claim under Delaware law. Defendant's motion is denied with
respect to Delaware trademark dilution.
15. Delaware unfair competition. Plaintiffs allege that defendant's acts
constitute unfair competition under the Delaware deceptive trade practices act
("DDTPA"), 6 Del. C. § 2532, "because, in the course of its business, it has caused, and
continues to cause, likelihood of confusion or of misunderstanding as to (a) the source,
sponsorship, approval, or certification of the defendant's goods and services by
plaintiffs; or (b) affiliation, connection, or association, or certification of the Defendant's
goods and services by plaintiffs." (D.I. 1 at~ 57) Courts reviewing DDPTA violations
apply the same standards as they apply to trademark infringement claims (i.e., valid and
protectable mark, plaintiff owns mark, and likelihood of confusion). Keurig, Inc. v. Sturm
Foods, Inc., 2012 WL 4049799 (D. Del. 2012), citing Sanofi-Aventis v. Advancis Pharm,
Corp., 453 F.Supp.2d 834, 847 (D.Del.2006). Plaintiffs' pleading under the Lanham Act

is sufficient to support unfair competition under the DDTPA, therefore, defendant's
motion is denied with respect to unfair competition.
16. Delaware common law claims. Plaintiffs allege that defendant's acts
constitute trademark infringement, unfair competition, unjust enrichment, and intentional
interference with prospective business advantage under Delaware common law. (D. I. 1
at~~

60-73) Defendant presents no arguments related to unfair competition. The

common law trademark claims, defendant argues, require secondary meaning or

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inherent distinctiveness. (D.I. 10 at 13) As to unjust enrichment, defendant contends
that plaintiffs did not show trademark ownership or a likelihood of confusion. (Id. at 1415) As above, plaintiffs have pied sufficient facts to support common law trademark
infringement, therefore, the common law trademark and unjust enrichment claims may
proceed.
17. With respect to the intentional interference with prospective business
advantage claim, defendant avers that plaintiffs "fail[] to allege any specific business
opportunity lost because of [its] alleged conduct," because "under Delaware law, a
plaintiff 'must identify a specific party who was prepared to enter into a business
relationship but was dissuaded from doing so by the defendant."' (D.I. 10 at 16, citing
U.S. Bank Nat'/ Ass'n v. Gunn, 23 F. Supp. 3d 426, 436 (D. Del. 2014)) Delaware law
does not require a plaintiff to name parties so long that the court "can reasonably infer
that specific parties were involved .... to support a claim that 'specific prospective
business relations' existed." Agilent Techs., Inc. v. Kirkland, 2009 WL 119865, at *7
(Del. Ch. Jan. 20, 2009). Plaintiffs have alleged that "[n]umerous agents from across
the country have commented to plaintiffs that [defendant's] class has confused real
estate agents, military personnel, and the public, and led them to believe that they were
taking plaintiffs' class, and obtaining a certification from plaintiffs when they were not."
(D.I. 1 at~ 38) Based upon this allegation, the court can reasonably infer that specific
parties were involved. Therefore, defendant's motion to dismiss the interference claim
is denied.
18. Conclusion. For the reasons stated, defendant's motion to dismiss (D.I. 9)
is denied. An order shall issue.

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