Kearns & Associates Company et al v. Carter et al

Filing 111

RULING: Pltfs 80 Motion for Summary Judgment as to the defts Seventh Counterclaim and the defts First and Second Counterclaim and Crossclaims for Tortious Interference with Business Relations, is granted. The remaining aspects of the pltfs motion are denied. Signed by Magistrate Judge Stephen C. Riedlinger on 8/1/2012. (JDL)

UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF LOUISIANA

KEARNS & ASSOCIATES COMPANY
d/b/a STEAM & PROCESS REPAIRS,
ET AL

CIVIL ACTION
NUMBER 10-439-SCR

VERSUS
RICKY S. CARTER, ET AL
RULING ON MOTION FOR SUMMARY JUDGMENT
Before

the

court

is

the

Plaintiffs’

Motion

for

Summary

Judgment filed by plaintiffs Kearns & Associates Company d/b/a
Steam & Process Repairs (“Steam”) and S & P Specialties Company,
L.L.C., (“S & P”) (collectively, “plaintiffs”).
number 80.

Record document

The motion is opposed.1
Background

Plaintiffs moved for summary judgment on the claims alleged
against defendants Ricky S. Carter and Ricky Carter & Associates,
Inc. (collectively, “defendants”) in Counts 1-5 of the Plaintiff’s
Original Complaint (hereafter, “Complaint”).2

Plaintiffs also

1

Record document number 98. Plaintiffs also filed a reply
memorandum. Record document number 107.
2

In Count 6 of the Complaint the plaintiffs alleged a claim
for damages and attorney’s fees under the Louisiana Unfair Trade
Practices and Consumer Protection Act. LSA-R.S. 51:1401, et seq.
Plaintiffs maintained this claim in the pretrial order filed June
26, 2012, however, the plaintiffs’ summary judgment motion did not
address this claim.
Therefore, this ruling does not cover the
LUTPA claim. See, Record document number 1, Plaintiff’s Original
(continued...)

moved for summary judgment on all counterclaims and crossclaims
alleged by the defendants.3
Plaintiffs supported their motion with numerous exhibits.4
They have all been reviewed.

It is unnecessary to list them again

or

ruling.

summarize

them

in

this

Plaintiffs

also

filed

a

statement of undisputed material facts.5
Defendants filed a Memorandum in Opposition to Motion for
Summary Judgment and exhibits, along with a Statement of Material
Facts at Issue.6

Defendants’ exhibits have all been reviewed.

Again, it is unnecessary to list or summarize them in this ruling.7
Analysis
Plaintiffs’

Motion

for

Summary

Judgment

is

resolved

as

2

(...continued)
Complaint, Count 6, ¶¶ 46-50; record document number 77, Pretrial
Order, p. 5.
3

See record document number 24, Answer, Counterclaims, and
Crossclaims.
4

Record document number 86. Plaintiffs’ Exhibits A through
R are listed on pages four and five of the Plaintiffs’ Memorandum
in Support of Its Motion for Summary Judgment.
5

Record document number 81.

6

Record document number 99.

7

It is also unnecessary to restate the legal standard
governing summary judgment and the principles of contract
interpretation. This law has already been set forth in the Ruling
on Motions for Partial Summary Judgment issued on November 2, 2011.
Record document number 50. The applicable law as to other disputed
claims which are the subject of this summary judgment motion is
cited in the appropriate section below.
2

follows.
There is a genuine dispute for trial as to the following
claims and counterclaims:
1. Plaintiffs moved for summary judgment in their favor as to
the claims that Carter’s actions breached his Employment Contract
and constituted grounds for termination under the “material cause”
section of the contract, breached the S & P Operating Agreement,
and breached his fiduciary obligations8 to S & P and Steam.9
Plaintiffs also moved for summary judgment as to the defendants’
related Ninth Counterclaim in which the defendants alleged that the
plaintiffs wrongfully terminated the Employment Agreement without
cause.10
The

parties’

arguments

carefully reviewed.

and

the

evidence

have

all

been

The facts material to these claims are in

dispute, and where certain facts are undisputed a reasonable trier
of

fact,

i.e.

inferences.
to

be

the

jury

in

this

case,

could

draw

competing

The resolution of factual disputes and the inferences

drawn

from

undisputed

facts

require

credibility

8

The law applicable to the parties’ fiduciary duties is set
forth in their memoranda and paragraph 9.1 of the Operating
Agreement. Record document number 86, pp. 12-13; record document
number 98, pp. 23-25. See also, Bryan D. Scofield, Inc. v. Susan
A. Daigle, Ltd., 08-798(La.App. 3 Cir. 12/10/08), 999 So.2d 311,
314.
9

These claims are alleged in Counts 2 through 4 of the
plaintiffs’ Complaint. Record document number 1, ¶¶ 30-45.
10

Record document number 24, Answer,
Crossclaims, p. 24, Ninth Counterclaim.
3

Counterclaims,

and

determinations, which cannot be done when ruling on a summary
judgment motion.

Therefore, viewing the evidence as a whole and

drawing all reasonable inferences, as the court must do at this
point, in the light most favorable to the defendants, summary
judgment cannot be granted as to these claims.
2. In Count I of their Complaint, the plaintiffs alleged
violations

of

the

Lanham

Act.

15

U.S.C.

§

1051,

et

seq.

Plaintiffs alleged that they have common law trademark rights in
the Novalar mark because they have continuously used the mark in
interstate

commerce

since

February

2003.

Plaintiffs

alleged

further that the defendants infringed on these rights by improperly
registering and using the mark, and as a result caused them
monetary damages.

In addition to monetary damages, the plaintiffs

also sought a declaration that S & P is the rightful owner of the
Novalar mark.11
Defendants also asserted a counterclaim related to ownership
of the Novalar mark.

In the First Counterclaim defendants alleged

that defendant Carter owns the Novalar trademark and formulas and
is entitled to a judgment declaring his ownership.12
Thus, in this summary judgment motion the plaintiffs seek a
judgment in their favor on the threshold issue in a trademark
infringement case - ownership of a legally protectible mark.

11

Record document number 1, ¶¶ 19-29.

12

Record document number 24, ¶ 97.
4

Plaintiffs argued that the law and evidence establish that they are
entitled to an order declaring S & P to be the owner of the Novalar
mark.

Since ownership of the mark is also the subject of the

defendants’ First Counterclaim, the plaintiffs’ also seek dismissal
of this counterclaim.
In this case, the following law governs the issue of the
ownership of the Novalar mark.
Trademark infringement claims are governed by the Trademark
Act of 1946 (Lanham Act), 15 U.S.C. §§ 1051 et seq.

There are two

elements to a successful infringement claim under the Lanham Act.
The

plaintiff

must

first

establish

ownership

in

a

legally

protectible mark, and second, show infringement by demonstrating a
likelihood of confusion. Amazing Spaces Inc. v. Metro Mini Storage,
608 F.3d 225, 235-236 (5th Cir. 2010). Under the Lanham Act, proof
of registration of a mark with the United States Patent and
Trademark Office is prima facie evidence of the registrant’s
exclusive right to use the registered mark in commerce on or in
connection

with

registration.

the

goods

or

services

Id.; 15 U.S.C. § 1057(b).

specified

in

the

If a registrant has used

its mark in connection with the specified services for five
continuous

years

after

the

registration

date

appropriate affidavit, the mark is incontestable.
1065.

and

filed

an

15 U.S.C. §

Exxon Corp. v. Oxxford Clothes, Inc., 109 F.3d 1070, 1078

(5th Cir. 1997); American Rice, Inc. v. Producers Rice Mill, Inc.,

5

518 F.3d 321, 330, n. 25 (5th Cir. 2008).
incontestable

mark

constitutes

conclusive

Ownership of an
evidence

of

the

registrant’s right to exclusive use of the mark in commerce for the
services

specified

in

the

registration,

subject

only

to

the

defenses enumerated in 15 U.S.C. § 1115(b).13 Id.

13

Defenses under § 1115(b) are as follows:
(1) That the registration or the incontestable right to
use the mark was obtained fraudulently; or
(2) That the mark has been abandoned by the registrant;
or
(3) That the registered mark is being used by or with the
permission of the registrant or a person in privity with
the registrant, so as to misrepresent the source of the
goods or services on or in connection with which the mark
is used; or
(4) That the use of the name, term, or device charged to
be an infringement is a use, otherwise than as a mark, of
the party’s individual name in his own business, or of
the individual name of anyone in privity with such party,
or of a term or device which is descriptive of and used
fairly and in good faith only to describe the goods or
services of such party, or their geographic origin; or
(5) That the mark whose use by a party is charged as an
infringement was adopted without knowledge of the
registrant's prior use and has been continuously used by
such party or those in privity with him from a date prior
to (A) the date of constructive use of the mark
established pursuant to section 1057(c) of this title,
(B) the registration of the mark under this chapter if
the application for registration is filed before the
effective date of the Trademark Law Revision Act of 1988,
or (c) publication of the registered mark under
subsection (c) of section 1062 of this title: Provided,
however, That this defense or defect shall apply only for
the area in which such continuous prior use is proved; or
(6) That the mark whose use is charged as an infringement
was registered and used prior to the registration under
this chapter or publication under subsection (c) of
section 1062 of this title of the registered mark of the
registrant, and not abandoned: Provided, however, That
this defense or defect shall apply only for the area in
(continued...)
6

Under 15 U.S.C. § 1055, “use” can be established through the
related companies doctrine which requires the applicant to show
that it controlled the first use of the mark.

It states as

follows:
Where a registered mark or a mark sought to be registered
is or may be used legitimately by related companies, such
use shall inure to the benefit of the registrant or
applicant for registration, and such use shall not affect
the validity of such mark or of its registration,
provided such mark is not used in such manner as to
deceive the public. If first use of a mark by a person is
controlled
by
the
registrant
or
applicant
for
registration of the mark with respect to the nature and
quality of the goods or services such first use shall
inure to the benefit of the registrant or applicant, as
the case may be.
A “related company” is defined under the Act as “any person
whose use of a mark is controlled by the owner of the mark with
respect to the nature and quality of the goods or services on or in
connection with which the mark is used.” 15 U.S.C. § 1127. The
statute requires control over only the “use of a mark ... with
respect to the nature and quality of the goods or services,” which
may

include

not

only

corporate

control

but

also

licensing

agreements and other types of oversight. Id., Turner v. HMH Pub.

13

(...continued)
which the mark was used prior to such registration or
such publication of the registrant's mark; or
(7) That the mark has been or is being used to violate
the antitrust laws of the United States; or
(8) That the mark is functional; or
(9) That equitable principles, including laches,
estoppel, and acquiescence, are applicable.
7

Co., 380 F.2d 224, 229 (5th Cir. 1967).14
A careful review of the evidence in light of the law cited
above demonstrates that the plaintiffs have not satisfied their
summary judgment burden, and that there is a genuine dispute for
trial on the issue of ownership of the Novalar mark.

In denying

summary judgment, it is sufficient to state that viewing the
evidence as a whole in the light most favorable to the defendants
and without making credibility determinations, a reasonable jury
could infer that Carter established his “use” under the Lanham Act
through the related companies doctrine.
3.

Defendants’

alleged

in

their

Second

and

Fourth

Counterclaims that Steam breached the Buy-Sell Agreement by failing
to appoint an appraiser and purchase Carter’s membership interest
in S & P, and that Carter is entitled to one-third of the profits
of S & P from December 31, 2009 until his membership interest is
bought by Steam. Plaintiffs argued that summary judgment should be
granted as to these counterclaims. According to the plaintiffs, an
appraiser has now been appointed, and after his termination Carter
took profit distributions he was not entitled to, therefore, they
do not owe any amount to Carter for his membership interest.

14

Section 1055 authorizes a trademark owner to license its
mark, but only where the licensees of the service mark are related
companies, i.e. where the owner of the service mark controls the
licensees as to the nature and quality of the goods or services in
connection with which the mark is used.
Exxon Corp., 109 F.3d at
1079, n. 12.
8

It is undisputed that the plaintiffs now have an appraiser and
that the court has made a finding that the Buy-Sell Agreement
requires Steam to purchase defendant Carter’s membership interests
in S & P at 50% of its Book Value.

Nevertheless, summary judgment

is not appropriate as to these counterclaims prior to trial on the
merits of the plaintiff’s principal claims that the defendants
breached the employment and operating agreements.

The facts and

legal issues relevant to all of these claims are interrelated.
4. Defendants’ Third Counterclaim is a claim that Carter is
entitled to unpaid profit distributions in the amount of a one-half
share of the profits of S & P for 2003 and the first quarter of
2004.

Plaintiffs argued that this claim is prescribed, and in the

alternative that Carter is only entitled to one-third of the
profits.

Plaintiffs, however, have failed to come forward with

facts that demonstrate prescription under the statute they cite,
LSA-R.S. 13:1328.

The record also evidences a genuine dispute as

to the parties’ agreement on distribution of profits for this time
period.
5.

Although

the

defendants’

Fifth,

Sixth,

and

Eighth

Counterclaims and Third Counterclaim and Crossclaim separately
allege certain wrongful actions on the part of the plaintiffs, they
all claim the actions were a breach of the Operating Agreement and
the plaintiffs’ fiduciary duties to Carter and S & P.

Summary

judgment is not appropriate as to these claims for the same reasons

9

that summary judgment cannot be granted as to the plaintiffs’
claims for breach of contract and fiduciary duty.
There is no genuine dispute for trial as to the following
Counterclaims and Counterclaims and Crossclaims:
1. Summary judgment is appropriate at to the defendants’
Seventh Counterclaim.

Defendants’ Seventh Counterclaim alleged

that Carter is entitled to damages in quantum meruit or unjust
enrichment as a result of manual labor he was required to do for
S & P, which was beyond the scope of his Employment Agreement.
Defendants

did

not

oppose

the

plaintiffs’

summary

judgment

arguments on this counterclaim,15 and stated in their response that
they did not intend to pursue this claim.16
judgment

will

be

granted

as

to

the

Therefore, summary
defendants’

Seventh

Counterclaim.
2. Summary judgment is appropriate at to the defendants’ First
and Second Counterclaim and Crossclaims for Tortious Interference
with Business Relations. Defendants’ First and Second Counterclaim
and Crossclaims allege state law claims for tortious interference
with a business relationship.
intentionally

interfered

with

Defendants claimed that Steam
Carter

and

15

Record document number 86, pp. 33-42.

16

Record document number 98, p. 47.
10

S

&

P’s

business

relationships with Ergon and Steam’s salesman.17

Plaintiffs argued

that the defendants have no evidence to support essential elements
of this alleged intentional tort, i.e. no evidence of malice and
damages.18

Defendants did not address these counterclaims and

crossclaims in their opposition memorandum. Defendants’ failure to
come forward with any evidence demonstrating that there is a
genuine dispute for trial on their alleged claims for tortious
interference

with

business

relations,

requires

that

summary

judgment be granted as to these claims.
Conclusion
Accordingly,

the

Motion

for

Summary

Judgment

filed

by

plaintiffs Kearns & Associates Company d/b/a Steam & Process
Repairs (“Steam”), S & P Specialties Company, L.L.C., (“S & P”) as
to the defendants’ Seventh Counterclaim and the defendants’ First
and Second Counterclaim and Crossclaims for Tortious Interference
with Business Relations, is granted.

The remaining aspects of the

17

Record document number 24, ¶¶ 108 and 109. These paragraphs
also included allegations that the actions also constituted breach
of Steam’s fiduciary duty. However, the defendants discussed facts
related to Ergon and Steam’s salesman in connection with their
Third Counterclaim and Crossclaim (paragraph 110), which
specifically alleges Steam’s breach of fiduciary duties.
18

In a claim for tortious interference with business
relations, the law only protects against malicious and wanton
interference. To establish this claim a party must prove actual
malice. Junior Money Bags, Ltd. v. Segal, 970 F.2d 1, 10 (5th Cir.
1992); Dussouy v. Gulf Coast Inv. Corp., 660 F.2d 594, 602 (5th
Cir. 1981); JCD Marketing v. Bass Hotels and Resorts, 2001-1096
(La.App. 4 Cir. 3/6/02), 812 So.2d 834, 841.
11

plaintiffs’ motion are denied.
Baton Rouge, Louisiana, August 1, 2012.

STEPHEN C. RIEDLINGER
UNITED STATES MAGISTRATE JUDGE

12