JL POWELL CLOTHING LLC v. POWELL et al
Filing
80
ORDER ON PARTIES COMPETING MOTIONS FOR PRELIMINARY INJUNCTION AND ON DEFENDANTSMOTION TO SUPPLEMENT THE RECORD granting in part and denying in part 3 Motion for Preliminary Injunction; granting 59 Motion for Leave to File; granting in part and denying in part 66 Motion for Preliminary Injunction; By JUDGE NANCY TORRESEN. (dfr)
UNITED STATES DISTRICT COURT
DISTRICT OF MAINE
JL POWELL CLOTHING LLC and
JL POWELL LLC,
)
)
)
Plaintiffs,
)
v.
)
)
JOSHUA L. POWELL,
) Civil No. 2:13-CV-00160-NT
Individually and doing business as
)
THE FIELD, doing business as
)
FIELD OUTFITTING, doing business )
as FIELD OUTFITTING COMPANY, )
)
Defendant. )
ORDER ON PARTIES’ COMPETING MOTIONS
FOR PRELIMINARY INJUNCTION AND ON DEFENDANT’S
MOTION TO SUPPLEMENT THE RECORD
This case comes before the Court on the parties’ competing motions for
preliminary injunction pursuant to Federal Rule of Civil Procedure 65. (ECF Nos. 3
and 66). Also before the Court is the Defendant’s motion to supplement the record.
(ECF No. 59). For the reasons that follow, the Court GRANTS the Defendant’s
motion to supplement the record and GRANTS IN PART and DENIES IN PART
both parties’ motions for injunctive relief.
FACTUAL BACKGROUND1
This case requires the Court to sort the rights and duties of former business
partners who parted ways and who now compete with one another in the same line
of business. In 2006, Joshua L. Powell (“Powell” or the “Defendant”) began selling
high-end men’s sportswear and accessories through the J.L. Powell catalog. Powell
was the catalog’s sole model, and most catalog issues contained a personal message
from Powell signed by Powell. In 2007, Powell began seeking out investors for his
company, JL Powell Inc. (“JLP”). In 2010, a group of investors formed Blue
Highways III LLC (“Blue Highways”) to invest in and acquire JLP.
The acquisition was accomplished in two steps. First, Blue Highways
contributed $2.5 million to a new entity, JL Powell LLC, a Delaware limited
liability company, of which it was the sole member. Second, JLP contributed all of
its assets to JL Powell LLC pursuant to two agreements – a Contribution
Agreement, Pls.’ Ex. 42,2 (the “Contribution Agreement”), and a Bill of Sale and
Assignment Agreement, Pls.’ Ex. 44, (the “Bill of Sale”). In exchange for JLP’s
contribution of assets, JLP received a 43% interest in JL Powell LLC. Contribution
Agreement § 3.2.
The assets JLP conveyed included intellectual property, defined to include,
among other things, “trade names, trade marks, service marks, [and] logos.” Bill of
The names in this case are confusingly similar. The Court will refer to the Plaintiffs by their
full names: JL Powell Clothing LLC and JL Powell LLC. The Defendant, Joshua L. Powell, will be
referred to as “Powell” or the “Defendant.” Powell’s former company, JL Powell Inc. will be referred
to as JLP. The catalog – once distributed by JLP and now distributed by JL Powell Clothing LLC –
will be referred to as “J.L. Powell.”
2
The Plaintiffs’ exhibits were admitted in hard copy into evidence at the June 13, 2013
hearing on the Plaintiffs’ motion for preliminary injunction. See Ct. Ex. List (ECF No. 53).
1
2
Sale § 1 and Contribution Agreement § 4.10(a). The Bill of Sale allows JL Powell
LLC to assign its rights, interests, and obligations under that agreement without
JLP’s consent if the transfer is made to an “Affiliate” or “to any successor to all or
substantially all of its business (whether by sale of ownership interests or assets,
merger, consolidation or otherwise).” Bill of Sale § 6.
In addition to the transfer of JLP’s property to JL Powell LLC under the Bill
of Sale, Powell personally conveyed the right to use his name and endorsement to
JL Powell LLC, and agreed not to use or convey the right to use his name and
endorsement in any business competitive with JL Powell LLC:
In connection with this Agreement and the transfer and assignment by
JLP of all JLP Intellectual Property to [JL Powell LLC], Joshua L.
Powell, (the “Founder”) hereby grants to [JL Powell LLC] throughout
the world the sole and exclusive right, license, and permission to use
his name and endorsement to exploit, turn to account, advertise, and
otherwise profit from [JL Powell LLC’s] goods and services bearing
such name, image, and/or endorsement. The grant made hereunder
shall be exclusive to [JL Powell LLC], and the Founder agrees that he
shall not, on behalf of himself or any other person or entity, grant any
similar right of any kind in connection with any business competitive
in any respect with [JL Powell LLC] or any of its affiliates and/or
subsidiaries. The Founder further agrees that he will not use his name
or permit any other person or entity to use his name, and otherwise
will not assert any right to use his name, including but not limited to
any right to use his name under the doctrine of fair use, in connection
with any business competitive in any respect to [JL Powell LLC] or any
of its affiliates and/or subsidiaries.
Contribution Agreement § 7.1(b). In contrast to the Bill of Sale, the Contribution
Agreement prohibits JL Powell LLC from assigning its rights, interest, and
obligations under that agreement without JLP’s written consent.
Contribution
Agreement § 12.8. The Contribution Agreement was signed by “J. L. Powell” both in
3
his capacity as President of JLP and also in his personal capacity “[s]olely for
purposes of Section 7.1(b).” Contribution Agreement Signature Page.
Following the acquisition, Powell agreed to stay on as JL Powell LLC’s CEO
and signed an employment agreement. Def.’s Answer, Ex. A (ECF No. 63-1) (the
“March 10, 2010 Employment Agreement”). The March 10, 2010 Employment
Agreement contained a section dealing with intellectual property and a section
governing Powell’s agreement not to compete during the term of his employment
and for one year following any termination. It also had an integration clause which
provided that that agreement “along with the C Unit Agreement and the Operating
Agreement collectively embody the entire agreement of the parties with respect to
the matters addressed herein and supersede any other prior oral or written
agreements, arrangements or understandings between the Executive and the
Company.”3 March 10, 2010 Employment Agreement ¶ 7. On November 1, 2011,
Powell entered into a second employment agreement with JL Powell LLC, also
containing covenants involving intellectual property and non-competition and an
integration clause. Def.’s Answer, Ex. B (ECF No. 63-2) (the “Amended
Employment Agreement”).
In May of 2010, JL Powell LLC filed applications with the United States
Patent and Trademark Office (“U.S.P.T.O.”) to register the marks “J.L. Powell” and
“The Sporting Life.” Powell signed a consent and authorization to the registration of
3
Neither the C Unit Agreement nor the Operating Agreement have been filed with the Court.
4
the “J.L. Powell” mark. Pls.’ Ex. 46. The marks were registered on January 11,
2011, and April 5, 2011, respectively. Pls.’ Exs. 45, 47.
Several times following the acquisition, JL Powell LLC needed additional
capital, and turned to Blue Highways. In October of 2010, July of 2011, and August
of 2012, Blue Highways loaned JL Powell LLC a total of $1.4 million, secured by JL
Powell LLC’s assets. Pls.’ Exs. 60-66. JL Powell LLC defaulted on these loans. In
January of 2013, Blue Highways accepted all of JL Powell LLC’s assets in full
satisfaction of its debts, and then Blue Highways contributed all of the assets to JL
Powell Clothing LLC, another Delaware limited liability company of which Blue
Highways was the sole member. Pls.’ Exs. 68-69.
Meanwhile, on April 2, 2012, JL Powell LLC’s board terminated Powell’s
employment, and Powell and JL Powell LLC executed a separation agreement and
release. Willard Decl. Ex. 11 (ECF No. 3-12) (the “Separation Agreement”). The
first catalog published following Powell’s separation from JL Powell, LLC, the
Summer 2012 catalog, featured a personal message signed by “J.L. Powell,” but the
Winter 2012 catalog did not. The Fall 2013 catalog, however, featured a message
with the “J.L. Powell” signature beneath it.
Around April of 2013, Powell launched a new sportswear and accessories
catalog
named
“The
Field”
and
a
corresponding
e-commerce
website,
thefieldoutfitting.com. On the front cover of the first and second issues of The Field,
under the catalog’s title, it says “In the Salt: Dispatch – J. Powell.” Pls.’ Exs. 48-50.
On the inside front cover of the catalog is a photograph of Powell and a message to
5
the customer from Powell signed “Josh Powell.” Pls.’ Exs. 48, 50. The Plaintiffs
claim that thefieldoutfitting.com contains the terms “JL Powell” and “the sporting
life” as meta-tags.4 Pls.’ Ex. 56.
One of The Field’s suppliers, Rancourt & Co. (“Rancourt”), based in Lewiston,
Maine, posted on its website an interview with Michael Rancourt, President of
Rancourt, which was filmed by The Field. Alongside the link to the interview was
the following text: “The Field is a new catalog and ecommerce outfitter specializing
in high end goods for the sporting life. We are happy to be part of this new venture
from Josh Powell, the man behind the JL Powell company.” Pls.’ Ex. 54. The Field’s
blog, Thefielddaily.com, also posted the interview and a link to Rancourt’s website.
Pls.’ Ex. 53, at 5.
PROCEDURAL HISTORY
On April 25, 2013, JL Powell Clothing LLC filed a complaint and motion for
temporary restraining order and preliminary injunction against Powell individually
and d/b/a The Field Outfitting Company, and Brownells, Inc., also d/b/a The Field
Outfitting Company, (ECF Nos. 1 & 3). The complaint alleged trademark
infringement and breach of contract claims and sought specific enforcement of
Section 7.1(b) of the Contribution Agreement. The motion for temporary restraining
order and preliminary injunction seeks to enjoin Powell from any further use of his
name and endorsement in connection with The Field. On May 2, 2013, the parties
A meta-tag is: “An HTML tag that contains descriptive information about a webpage and
does not appear when the webpage is displayed in a browser.” The American Heritage Dictionary
1106 (5th ed. 2011).
4
6
reached a standstill agreement that eliminated the need for a temporary
restraining order. (ECF. No. 16.)
On May 10, 2013, the Defendant filed a motion to dismiss or transfer venue
arguing that the Court lacked personal jurisdiction over Powell, and claiming that
JL Powell Clothing LLC lacked standing to enforce the contracts at issue and that
the complaint failed to state a claim for which relief could be granted. (ECF No. 33).
On May 31, 2013, JL Powell Clothing LLC filed an amended complaint that added
JL Powell LLC as a plaintiff and dismissed Brownells, Inc. as a defendant. (ECF
No. 39). The Plaintiffs’ six-count amended complaint asserts three trademark
infringement claims: dilution of a famous mark under the Federal Trademark
Dilution Act, 15 U.S.C. § 1125(c) (Count I), likelihood of confusion under Section
43(a) of the Lanham Act, 15 U.S.C. § 1125(a) (Count II), and trademark
infringement under Section 32(1) of the Lanham Act, 15 U.S.C. § 1114(1) (Count
III); two state trademark infringement claims: unfair competition under the Maine
Uniform Deceptive Trade Practices Act, 10 M.R.S.A. §§ 1211-1216 (Count IV), and
trademark dilution under the Maine Anti-Dilution Statute, 10 M.R.S.A. § 1530
(Count V); and one claim involving breach of the Contribution Agreement and
requesting specific performance (Count VI). The Plaintiffs also seek an order
enjoining Powell and his new company from using Powell’s name and endorsement
or the marks “J.L. Powell” and “The Sporting Life.”5
The Court has before it four different iterations of the Plaintiffs’ request for injunctive relief.
See Compl. at 22-24 (ECF No. 1); Mot. for TRO and Prelim. Inj. at 19-20 (ECF No. 3); Am. Compl. at
20-21 (ECF No. 39); and Pls.’ Reply Mem. in Supp. of Mot. for Prelim. Inj. at 7 (hereinafter “Pls.’
5
7
On June 10, 2013, the Defendant filed a second motion to dismiss or transfer
the amended complaint (ECF No. 49), which prompted the Plaintiffs to file a motion
to permit JL Powell LLC to join the pending motion for preliminary injunction.
(ECF No. 54). In separate orders, the Court denied the Defendant’s second motion
to dismiss (ECF No. 58) and granted the Plaintiffs’ motion to permit JL Powell LLC
to join the motion for preliminary injunction (ECF No. 57).
The Court held an evidentiary hearing on the Plaintiff’s motion for
preliminary injunction on June 13, 2013. Following the hearing, the Defendant
moved to supplement the record. (ECF No. 59). Attached to the Defendant’s motion
was a letter from counsel for the Defendant to JL Powell LLC notifying JL Powell
LLC that the Defendant was providing written notice of his termination of Section
7.1(b) of the Contribution Agreement. (ECF No. 59-1) (“Notice of Termination”).
On August 30, 2013, the Defendant filed an answer along with six
counterclaims, (ECF No. 63), and filed his own motion for preliminary injunction
asking the Court to enjoin the Plaintiffs from using his name or endorsement. (ECF.
No. 66).6 In a separate order also filed today, the Court granted the Plaintiffs’
motion to dismiss Count II of the Counterclaims (breach of the covenant of good
faith and fair dealing), but denied the motion to dismiss as to Count I (breach of
contract), Count III (declaratory judgment), Count IV (false association and unfair
competition under the Lanham Act), Count V (misappropriation of right of publicity
Reply”) (ECF No. 46). Since the Plaintiffs’ Reply contains the most recent request for relief, the
Court considers that iteration.
6
To avoid confusion, the Court will continue to refer to Powell as the Defendant rather than
switch back and forth between Defendant and Counterclaim-Plaintiff.
8
under Michigan law), and Count VI (false light in the public eye under Michigan
law). Order on Mot. to Dismiss Countercls. (ECF No.79).
LEGAL STANDARD
Federal Rule of Civil Procedure 65 governs preliminary injunctions. ‘“A
plaintiff seeking a preliminary injunction must establish that he is likely to succeed
on the merits, that he is likely to suffer irreparable harm in the absence of
preliminary relief, that the balance of equities tips in his favor, and that an
injunction is in the public interest.”’ Voice of the Arab World, Inc. v. MDTV Med.
News Now, Inc., 645 F.3d 26, 32 (1st Cir. 2011) (quoting Winter v. Natural Res. Def.
Council, Inc., 555 U.S. 7, 20 (2008)).
‘“An injunction should issue only where the intervention of a court of equity is
essential in order effectually to protect property rights against injuries otherwise
irremediable.”’ Id. (quoting Weinberger v. Romero–Barceló, 456 U.S. 305, 312 (1982)
(internal quotation marks omitted)). But ‘“if the moving party cannot demonstrate
that he is likely to succeed in his quest, the remaining factors become matters of
idle curiosity.”’ Esso Standard Oil Co. (Puerto Rico) v. Monroig-Zayas, 445 F.3d 13,
18 (1st Cir. 2006) (quoting New Comm Wireless Servs., Inc. v. SprintCom, Inc., 287
F.3d 1, 9 (1st Cir. 2002)).“The party seeking the preliminary injunction bears the
burden of establishing that these four factors weigh in its favor.” Id. at 18.
DISCUSSION
This case has developed in stages in the eight months since it commenced,
and the parties have added to, shifted, and refined their arguments throughout. The
9
facts have also developed: on July 11, 2013, the Defendant sent the Notice of
Termination to JL Powell LLC, and, sometime in the summer of 2013, the Plaintiffs
released the Fall 2013 J.L. Powell catalog, using a “J.L. Powell” signature that the
Defendant claims is violative of his rights and thus material to his claim for
preliminary injunction. The Court has carefully considered whether any of these
developments—factual or argumentative—has prejudiced the other side, and
determined that they have not, but that each side has had ample opportunity to
respond to the other in this moving target of a case. The Court therefore: (1)
GRANTS the Defendant’s motion to supplement the record, and (2) endeavors here
to adjudicate the parties’ motions for preliminary injunction using the complete
universe of information and arguments now before it.
The heart of this case, as it has developed, is: (A) whether Section 7.1(b) of
the Contribution Agreement is valid and enforceable; (B) whether, if Section 7.1(b)
is valid and enforceable, the Defendant is likely to have breached it; (C) whether, if
the Defendant breached 7.1(b), preliminary injunctive relief in favor of the Plaintiffs
is appropriate; (D) whether JL Powell Clothing LLC violated any of the Defendant’s
rights; and (E) whether, if so, the Defendant should be granted preliminary
injunctive relief. Also at issue, and dealt with separately under Section (F), is
whether the Defendant’s use of the trademark “The Sporting Life” calls for
preliminary injunctive relief in the Plaintiffs’ favor.
A. Validity and Enforceability of Section 7.1(b)
10
The Defendant argues that Section 7.1(b): (1) is a license or a contract for
personal services that is terminable at will and that was terminated by the July 11,
2013 Notice of Termination;7 (2) is void because sale of the exclusive right to use
one’s name commercially violates the Thirteenth Amendment; (3) was abandoned by
JL Powell LLC; (4) was superseded by the employment and separation agreements
that JL Powell LLC entered into with the Defendant;8 (5) became void through JL
Powell LLC’s breach of the Contribution Agreement; and/or (6) is unenforceable
because JL Powell LLC is an empty shell. The Court finds all of these arguments
unpersuasive.
1. Whether Section 7.1(b) Has Been Terminated
The Defendant purported to terminate the rights and covenants granted
under Section 7.1(b) of the Contribution Agreement with the July 11, 2013 Notice of
Termination. The Defendant cites two related bodies of law, those dealing with
licenses and those dealing with personal services contracts, to support his
contention that he had the right to terminate at will the rights and covenants he
granted to JL Powell LLC in Section 7.1(b).
a. License
The Defendant asserts that the right to use his name and endorsement
granted in Section 7.1(b), is terminable at will because it is a license of indefinite
The Court decided against the Defendant on this issue in its order on the Defendant’s motion
to dismiss, but the Defendant expanded his arguments on this issue in his motion for preliminary
injunction.
8
The Defendant made this argument in his motion to dismiss the Amended Complaint, but,
because it relied on documents outside the four corners of the complaint, the Court deferred
consideration to the preliminary injunction analysis.
7
11
duration, and because he extended this license to JL Powell LLC without receiving
any consideration. See Dial-A-Mattress Operating Corp. v. Mattress Madness, Inc.,
847 F. Supp. 18, 19-20 (E.D.N.Y. 1994); Dial-A-Mattress Operating Corp. v. Mattress
Madness, Inc., 841 F. Supp. 1339, 1345 (E.D.N.Y. 1994) (owner of “Dial-A-Mattress”
service mark had right to terminate at will alleged license to use this mark, for
which licensee had paid no consideration), Butkus v. Downtown Athletic Club of
Orlando, Inc., No. CV 07-2507, 2008 WL 2557427, *6 (C.D. Cal. 2008) (professional
football player retained sole right to commercially exploit his own name,
notwithstanding prior gratuitous permission, now revoked, to use his name as part
of collegiate linebacker award), Trace Minerals Research, L.C. v. Mineral Res. Int’l,
Inc., 505 F. Supp. 2d 1233, 1241 (D. Utah 2007) (owner of trademark “ConcenTrace”
had right to terminate at will royalty-based license of the trademark for unspecified
duration).
Trace Minerals cites Dial-A-Mattress for the proposition that “[a] license
containing no time frame is generally terminable at will.” Trace Minerals, 505 F.
Supp. 2d at 1241. Dial-A-Mattress, in turn, founds this principle on Section 96 of
Corbin on Contracts. 1 Arthur L. Corbin, Corbin on Contracts § 96 at 413 (1963).
But page 413 of Corbin on Contracts does not state that a license containing no time
frame is generally terminable at will. In fact, it does not discuss “licenses” at all, but
rather, “contracts between a producer and his distributing agent.” Id. With regard
to distributorship agreements, Corbin opines that such contracts may be terminable
at will if they do not specify any particular time for termination, except in situations
12
where it would be inequitable to abruptly terminate the agreement, and under such
circumstances the contract may be terminated only upon reasonable notice. Id.
Where distributorship agreements are concerned, the parties contemplate
that both the producer and the distributing agent will receive an ongoing benefit
from the arrangement, and it is only when one side or the other no longer receives
the expected benefit, or the benefit is no longer attractive enough to sustain the
obligation, that that side may decide to terminate the agreement. This more or less
describes the situations in both Butkus and Trace Minerals. Butkus became
dissatisfied with the conduct of the company administering the Butkus Award and
revoked his permission to use his name. Butkus, 2008 WL 2557427 at *3. In Trace
Minerals, the plaintiff agreed to license its trademark to the defendant in exchange
for a 1% sales royalty, capped at $7,500. Trace Minerals, 505 F. Supp. 2d at 124041. At some point, this apparently was no longer satisfactory to the plaintiff,
whereupon it terminated the license. Id.
By contrast, the parties in this case did not contemplate any ongoing benefit
to the Defendant, either reputational or monetary, arising out of the rights and
covenants he conveyed to JL Powell LLC in Section 7.1(b) of the Contribution
Agreement. Rather, the Defendant received the total benefit of his bargain up-front
in the form of a 43% stake in the newly-capitalized JL Powell LLC.9 Since
performance was fully rendered by Blue Highways as of the execution of the
The Defendant’s claim that he received no consideration in exchange for the rights and
covenants he conveyed under Section 7.1(b) is meritless.
9
13
Contribution Agreement, neither Butkus nor Trace Minerals is applicable.10 Cf. 1
Corbin on Contracts § 96 at 418 (an employment agreement may be terminable at
will where there is “no executed consideration.”).
b. Personal Services Contract
The Defendant also contends that the Court was in error in holding that
Section 7.1(b) is not a personal services contract. See Order on Mot. to Dismiss 24
(ECF No. 58). The Defendant claims that an “endorsement agreement”—his term
for Section 7.1(b)—is a “personal services contract.” See Agassi v. Planet Hollywood
Int’l, Inc., 269 B.R. 543 (D. Del. 2001). He then reiterates his assertion that a
contract for personal services with no stated duration is terminable at will, and that
he terminated Section 7.1(b) in July of 2013. See Del. Fin. Mgmt. Corp. v. Vickers,
No. Civ. A. 96C-10-032, 1999 WL 458633, *6-7 (Del. Super. Ct. June 9, 1999).
The Court has already noted that Vickers is distinguishable from this case.
Order on Mot. to Dismiss 24. There is likewise no hint that the contracts involved in
Agassi were in any respect comparable to Blue Highways’ 2010 acquisition of the
Defendant’s company or to the rights and covenants conveyed by the Defendant in
Section 7.1(b) as part of that transaction. The contracts in Agassi involved celebrity
The facts of Dial-A-Mattress are even less favorable to the Defendant. The plaintiff had a
long-standing federally-registered service name in “Dial-A-Mattress” but the defendant had
incorporated his business under the name “Dial-A-Mattress Inc.” Dial-A-Mattress, 841 F. Supp. at
1344. The plaintiff purchased this corporate name from the defendant to strengthen its “Dial-AMattress” rights, but after the sale the defendant continued to use “Dial-A-Mattress” in his business
advertisements. Id. at 1345. The plaintiff sued, and the defendant claimed to have a license to use
this service name from the plaintiff, either through oral contract or by implication through the
plaintiff’s prior acquiescence to his continued use of the service name. Dial-A-Mattress, 847 F. Supp.
at 19-20, n.1. The defendant did not claim to have paid anything to the plaintiff for his use of the
“Dial-A-Mattress” service name. Dial-A-Mattress, 841 F. Supp. at 1345. Under these circumstances,
the district court, which did not think much of the defendant’s claim to a license to begin with, found
that any such license was terminable at will by the plaintiff. Dial-A-Mattress, 847 F. Supp. at 19-20.
10
14
athletes agreeing to promote a chain of sports-themed restaurants. Agassi, 269 B.R.
at 545. The celebrities were allowed to avoid continuation of these contracts after
Planet Hollywood, which owned the restaurants, filed for Chapter 11 bankruptcy.
Id. at 547. At a minimum, the contracts in Agassi appear to have contemplated
some ongoing performance by both sides. See id. at 545 (referring to the contracts as
“executory endorsement contracts.”)
By contrast, the contract in this case was fully performed in March of 2010.
The parties agreed to form a new company, JL Powell LLC, to which Blue Highways
contributed $2.5 million and to which the Defendant contributed his company’s
assets, the exclusive right to commercial use of his name and endorsement, and a
covenant not to use his name and endorsement in any competing business. Both
sides received shares in the new company in exchange for their contributions. This
does not contemplate any ongoing performance by either side, and is thus not a
“personal services contract” as that term is understood in Vickers or Agassi.
2. Whether Section 7.1(b) Is Invalid Under the Thirteenth
Amendment
The Defendant claims that Section 7.1(b) is void because sale of the exclusive
right to use one’s name commercially violates the Thirteenth Amendment. This
finds no support in the law. The cases cited by the Defendant regarding the
impermissibility of compelling the performance of personal services contracts all
dealt with contracts in which services were actually to be performed. See Gov’t
Guar. Fund of Republic of Fin. v. Hyatt Corp., 95 F.3d 291, 303 (3d Cir. 1996)
(discussing hotel management contracts); Read v. Wilmington Senior Ctr., Inc., No.
15
C. A. No. 12586, 1992 WL 296870 *1 (Del. Ch., Sept. 16, 1992) (refusing to order
individuals to take part in a musical performance on grounds that it would compel
involuntary servitude); People v. Lavender, 48 N.Y.2d 334, 338, 398 N.E.2d 530
(N.Y. 1979) (invalidating on Thirteenth Amendment grounds a state statute that
criminalized failure to complete home improvement contracts).
By contrast, the Defendant objects to Section 7.1(b), not because it actually
requires him to perform any services, but because the Plaintiffs’ use of his name
and endorsement creates the false appearance that he continues to be a
spokesperson for the J.L. Powell catalog. This argument does not implicate the
Thirteenth Amendment’s prohibition against involuntary servitude.
3. Whether JL Powell LLC Abandoned Section 7.1(b)
The Defendant also contends that the Plaintiffs abandoned the rights granted
in Section 7.1(b) “when they ceased to use messages from Mr. Powell, images of Mr.
Powell, and his signature in the J.L. Powell catalog.” Counterpl.’s Mot. for Prelim.
Inj. 16. (ECF No. 66). Under Delaware law, “’a contract remains in force until and
unless it has been terminated according to its terms or by actions of the parties.’
Abandonment, however, may constitute one of those actions.” Haft v. Dart Grp.
Corp., 841 F. Supp. 549, 572 (D. Del. 1993) (failing to show up at work and hiring a
replacement for oneself may constitute abandonment of employment) (quoting
Artesian Water Co. v. State Dept. of Highways & Transp., 330 A.2d 441, 443 (Del.
16
1974).11 The Defendant has failed to cite any meaningful authority that supports
the proposition that the Plaintiffs’ purported failure to exercise its right to use the
Defendant’s name and endorsement for at most a year and a half can be construed
as a voluntary relinquishment of these rights with no intention of reclaiming them.
See id. (“Abandonment is defined as ‘the voluntary relinquishment of all right, title,
claim and possession, with the intention of not reclaiming it.’” (quoting Black’s Law
Dictionary 13 (4th ed. 1957)). This is especially so where the Plaintiffs recommenced
using the Defendant’s name and endorsement in the Fall 2013 catalog.
4. Whether Section 7.1(b) Was Superseded by the Employment
and Separation Agreements
The Defendant argues that the Plaintiffs may not enforce the Contribution
Agreement because it was superseded by the Defendant’s Employment and
Separation
Agreements.
The
Defendant’s
November
1,
2011
Employment
Agreement provides:
Entire Agreement. This Agreement along with the Proprietary
Information Agreement and the Operating Agreement12 collectively
embody the entire agreement of the parties with respect to the matters
addressed herein and supersede any other prior oral or written
agreements, arrangements or understandings between [Powell] and
the Company.
Amended Employment Agreement at 9. The Employment Agreement’s purpose is to
“amend and restate” the employment agreement that Powell entered into with JL
Powell LLC on March 10, 2010. Amended Employment Agreement at 1. The
The Contribution Agreement is governed by and construed in accordance with Delaware law.
Contribution Agreement §12.7.
12
Neither the Proprietary Information Agreement nor the Operating Agreement have been
filed with the Court.
11
17
Amended Employment Agreement governs Powell’s term of employment, his
compensation, and grounds for termination. It protects JL Powell LLC’s intellectual
property, and it contains a non-competition and non-disparagement provision.
Powell’s Separation Agreement with JL Powell LLC also has an integration
clause.13 The Separation Agreement marks the end of Powell’s employment.
The Court is not persuaded that the employment or separation agreements
supersede the Contribution Agreement, which governed the 2010 sale of JLP’s
assets to JL Powell LLC. The Contribution Agreement and Bill of Sale—JL Powell
LLC’s founding documents—are fundamentally separate and distinct from the
employment and separation agreements. The Court is unpersuaded that the
Contribution Agreement was superseded by these agreements.
The Defendant’s argument also fails to account for the March 10, 2010
Employment Agreement which was executed simultaneously with the Contribution
Agreement and Bill of Sale. The March 10, 2010 Employment Agreement contained
an integration clause identical to the Amended Employment Agreement. By the
Defendant’s logic, the March 10, 2010 Employment Agreement would have
13
Entire Agreement. This agreement contains the entire understanding and agreement
between the parties with respect to its subject matter, and supersedes all prior oral
or written understandings and agreements relating thereto, except that (a) the terms
and provisions of the Restrictive Covenants in the [Employment Agreement] (and
defined terms found elsewhere in the EA that are used to interpret, understand,
implement and enforce the terms and provisions of the Restrictive Covenants of the
[Employment Agreement]), and (b) any agreements, provisions or promises by the
Executive regarding confidentiality, non-disclosure of information or property, noncompetition or non-solicitation shall survive and remain in force and effect.
Separation Agreement at 8.
18
superseded section 7.1(b) of the March 10, 2010 Contribution Agreement. This
cannot be what the parties intended.
5. Whether Section 7.1(b) Was Rendered Void Through JL Powell
LLC’s Breach of the Contribution Agreement
The Defendant claims that his obligations under Section 7.1(b) were rendered
void when JL Powell LLC wrongfully attempted to assign these rights to JL Powell
Clothing LLC without his consent or the consent of his company, JLP.
Section 12.8 of the Contribution Agreement governs assignment. It provides:
Neither this Agreement nor any of the rights, interests or obligations
hereunder shall be assigned by any of the parties hereto (whether by
operation of law or otherwise) without the prior consent of JLP and [JL
Powell LLC]. Subject to the preceding sentence, this Agreement will be
binding upon, inure to the benefit of and be enforceable by the parties
and their respective successors and permitted assigns.
Contribution Agreement § 12.8. This provision prohibits JL Powell LLC from
assigning its rights under the agreement without obtaining JLP’s prior written
consent. The Court finds it likely that, having failed to obtain JLP’s written consent
to this assignment, the assignment is voidable by JLP. See Paul v. Chromalytics
Corp., 343 A.2d 622, 626 (Del. Super. 1975) (“[t]he obligor, of course, may gain, from
a valid and unwaived non-assignability provision, the prerogative to resist or even
nullify the assignment.”)14 Without a valid assignment, JL Powell Clothing LLC
does not have the right to enforce Section 7.1(b).15
The parties have not clarified their positions regarding: (1) whether JL Powell LLC’s
assignment to JL Powell Clothing LLC is actually void, (2) whether it is merely possible for JLP to
nullify the assignment, or (3) whether the assignment is valid and JLP merely has the right to
damages arising out breach of the non-assignability provision. The law in Delaware on these issues
appears to be unsettled. See SLMSoft.Com, Inc. v. Cross Country Bank, No. Civ.A. 00C09163JRJ,
2003 WL 1769770, *9 (Del. Super., April 2, 2003) (“[a]bsent any other provision that expressly makes
14
19
The Defendant claims that this assignment was a material breach of the
Contribution Agreement which: (1) allows the Defendant to terminate Section 7.1(b)
of the contract; and (2) makes any subsequent use by the Plaintiffs of the
Defendant’s name and endorsement unauthorized and subject to injunctive relief.
The Court addresses the Defendant’s first contention here, and his second
contention in Part D of this opinion, infra.
Under Delaware law, “[a] party is excused from performance under a contract
if the other party is in material breach thereof.” BioLife Solutions, Inc. v. Endocare,
Inc., 838 A.2d 268, 278 (Del. Ch. 2003). In explaining Delaware’s standard for
determining whether a breach of contract is material, the BioLife court cited factors
listed in Section 241 of the Restatement (Second) of Contracts:
(a) the extent to which the injured party will be deprived of the
benefit which he reasonably expected; (b) the extent to which the
injured party can be adequately compensated for the part of that
benefit of which he will be deprived; (c) the extent to which the
party failing to perform or to offer to perform will suffer forfeiture;
(d) the likelihood that the party failing to perform or to offer to
subsequent assignment void, the assignment is valid, but in breach of the . . . agreement.”), and
compare Chromalytics, supra. The parties have also not clarified whether the “right, license, and
permission” granted by Powell under Section 7.1(b) should be treated differently from Powell’s
covenant not to use his name. See Chromalytics, 343 A.2d at 626, n.1 (hinting that, while contract
rights are assignable, contract obligations may not be) and compare with Restatement (Second) of
Contracts Section 322(2)(c) (stating that an obligor still must discharge his duties even in the face of
an improper assignment). But the Court at present need only determine this issue on a “likelihood”
standard, which, absent development by the parties, is satisfied by the law articulated in
Chromalytics.
15
It is important to distinguish the contractual right to use the name and endorsement of
Powell from the intellectual property rights in the trade name “J.L. Powell.” The Bill of Sale
governed the sale of JLP’s intellectual property, which was defined in the Contribution Agreement to
include “trade names, trademarks, service marks, and logos . . . .” Contribution Agreement § 4.10.
The Bill of Sale contained an assignment clause which allowed JL Powell LLC to assign its rights
under the Bill of Sale to any successor to “all or substantially all of its business (whether by sale of
ownership interests or assets, merger, consolidation or otherwise.)” Bill of Sale § 6. Accordingly, it
appears that JL Powell Clothing LLC is the rightful owner of the registered trade name “J.L. Powell”
and the registered trademark, “The Sporting Life.”
20
perform will cure his failure, taking account of all the
circumstances including any reasonable assurances; and (e) the
extent to which the behavior of the party failing to perform or to
offer to perform comports with standards of good faith and fair
dealing.
Biolife, 838 A.2d at 278 (quoting the Restatement (Second) of Contracts § 241
(1981)).
In spite of the personal nature of the rights and covenants contributed by the
Defendant in Section 7.1(b), the Court perceives no basis on which the fact finder
might determine that JL Powell LLC’s assignment of those rights and covenants
deprived the Defendant of the benefit he reasonably expected from the Contribution
Agreement. The central benefit the Defendant obtained from the Contribution
Agreement was a 43% stake in a business with an additional $2.5 million in capital.
This benefit was not impaired by the assignment.
The Court finds it unlikely that this assignment constitutes a material
breach of the Contribution Agreement voiding the contract or excusing the
Defendant from his obligations under Section 7.1(b).
6. Whether JL Powell LLC Is an Empty Shell Without Authority
to Enforce Section 7.1(b)
Finally, the Defendant argues that JL Powell LLC cannot enforce Section
7.1(b) because Blue Highways foreclosed on all of its assets and JL Powell LLC is
now an empty shell. But Bruce Willard, Chair of the Board of both JL Powell LLC
and JL Powell Clothing LLC, testified that JL Powell LLC is a company currently
in good standing and that it has an active bank account from which it pays debts
owed to vendors and rent on a physical facility. Tr. of Prelim. Inj. Hr’g at 175-77
21
(ECF No. 55) (hereafter “Tr. at ___”). It may sue to enforce its contractual rights.
See Del. Code Ann. Tit. 6, § 18-106 (powers of limited liability companies).
B. Breach of Section 7.1(b)
On this record, the Plaintiffs have demonstrated that JL Powell LLC owns
the rights described in Section 7.1(b) and that these rights are valid and
enforceable. The Court now turns to whether the Plaintiffs have demonstrated that
it is likely that Powell breached Section 7.1(b).
Powell does not deny that he used his name and endorsement in connection
with The Field. Rather, he claims: (1) that relevant case law establishes that, even
though he sold his eponymous business, he still has the right to use his name to
identify his current, competing business venture; and (2) that because JL Powell
Clothing was not in existence when the Contribution Agreement was executed, it
cannot be an “affiliate” of JL Powell LLC.
1. An Individual’s Right to Continue Using the Name He Sold
The Defendant points to two cases, Madrigal Audio Lab., Inc. v. Cello, Ltd.,
799 F.2d 814 (2d Cir. 1986), and JA Apparel Corp. v. Abboud, 682 F. Supp. 2d 294
(S.D.N.Y. 2010), to support his contention that an individual who sold his trade
name along with his former business may nevertheless still use his name to identify
his current, competing business venture. In Madrigal, Mark Levinson, a wellknown high-end audio equipment designer, founded Mark Levinson Audio Systems,
Inc. (“MLAS”) to produce audio equipment. MLAS got into serious financial trouble,
and Levinson brought in investors who added capital and management assistance.
22
Levinson was made an advisor and product developer and entered an employment
agreement in which he conveyed to MLAS
“the permanent and exclusive right, title and interest to the trade
name ‘Mark Levinson’, and all variations thereof, in connection with
the sale [and] distribution” of audio equipment and not to use or
permit the use of the Levinson trade name, other than by MLAS, in
connection with the audio business.
Madrigal, 799 F.2d at 817.
Levinson’s relationship with MLAS deteriorated, and he left and formed a
new audio equipment company, Cello, Ltd. (“Cello”). MLAS was forced into
bankruptcy and a new entity, Madrigal, purchased at auction all the assets of
MLAS, including the “Mark Levinson” trade name. There was no mention of
Levinson’s employment contract or Levinson’s agreement not to compete during the
asset sale.
Cello’s first product bore a silver label that said “Cello by Mark Levinson,”
and the company issued a promotional brochure entitled “Cello by Mark Levinson”
that began with a “Note from Mark Levinson” and contained photos of Levinson
throughout. Id at 817. Madrigal brought suit alleging violations of the Lanham Act
and sought and received an injunction against Cello’s use of the Mark Levinson
trade name and mark. Neither Cello nor Levinson appealed the granting of that
injunction.
In connection with the promotion of Cello’s products, Levinson also
personally contacted “high end” audio equipment dealers, spoke with journalists
23
about his connection with Cello and attended a trade show. Id. at 818-19. Madrigal
then sought and received a second injunction – this one
(1) barring Levinson and Cello “from generating any publicity”
regarding Levinson’s relationship with Cello or past relationship with
MLAS, (2) enjoining Levinson from communicating with dealers or
customers on Cello’s behalf, and (3) ordering Cello to inform all persons
who had received Cello publicity brochures advertising Levinson’s
designing of products for Cello that Madrigal owned the Levinson
trade name and trademark.
Id. at 816. Cello appealed and the Second Circuit reversed.
The Second Circuit explained that Levinson had sold MLAS the right to “use”
the Levinson trade name, not the right to use Levinson’s personal name. “Use” was
further defined in the employment agreement as ‘“use . . . (a) as part of a name of a
corporation, partnership, joint venture, proprietorship, firm or business or (b) as the
name, symbol or identification of any product.”’
Id. at 823. Thus, the specific
language of Levinson’s employment agreement made it clear that what he sold was
his trade name. The Second Circuit explained that
even when a personal name has become a trade name it continues to
serve the important function to its bearer of acting as a symbol of that
individual’s personality, reputation and accomplishments as
distinguished from that of the business, corporation or otherwise, with
which he has been associated. Accordingly, though an individual may
sell the right to use his personal name, a court will not bar him from
using that name unless his “intention to convey an exclusive right to
the use of [his] own name” is “clearly shown.” Whether a person who
sells the trade name rights to his personal name is barred from using
his personal name depends on the terms of the sale.
Id. at 822-23 (internal citations omitted) (quoting Guth Chocolate Co. v. Guth, 215
F. 750, 767 (D. Md. 1914)). Looking at the terms of the agreement the court
concluded that Levinson’s sale of his name to MLAS
24
did not preclude Levinson from engaging in the audio business through
a company other than Madrigal or from advertising his affiliation with
such a company. In short he did not sell or forfeit his right to use his
own personal name as long as he did not use it as the trade name of
another business.
Id. at 823.
Similarly, in Abboud, the district court concluded that designer Joseph
Abboud had sold only his “trade names” and not the exclusive use of his personal
name for all commercial purposes. Abboud. 682 F. Supp. 2d at 307. The evidence
strongly suggested that Abboud never meant to convey his personal name. Among
the evidence was a letter written by Abboud to the CEO of the acquiring company
stating:
If, for whatever reasons, the corporation does not want to continue
with my services after five years, I want the option to practice my
skills should I choose to continue working in the future. It goes without
saying that at no time will I have any rights to any of the Joseph
Abboud trademarks. Here is where you must separate Joseph Abboud
personally from the Joseph Abboud trademarks.
Id. at 304-05.
Madrigal and Abboud both teach that the devil is in the details of the parties’
agreements. In Section 7.1(b), in connection with the transfer of all JLP’s trade
names and trademarks, Powell personally granted to JL Powell LLC:
throughout the world the sole and exclusive right, license, and
permission to use his name and endorsement to exploit, turn to
account, advertise, and otherwise profit from [JL Powell LLC’s] goods
and services bearing such name, image,16 and/or endorsement.
Although the Plaintiffs initially sought to enjoin the use of the Defendant’s image, they made
clear in the hearing on their motion for preliminary injunction that they were no longer seeking an
injunction to prevent Powell from using his image or likeness standing alone, but were only
interested in stopping him from using his name and signature.
16
25
Powell also agreed:
that he shall not, on behalf of himself or any other person or entity,
grant any similar right of any kind in connection with any business
competitive in any respect with [JL Powell LLC] or any of its affiliates
and/or subsidiaries.
Powell further agreed:
that he will not use his name or permit any other person or entity to
use his name, and otherwise will not assert any right to use his name,
including but not limited to any right to use his name under the
doctrine of fair use, in connection with any business competitive in any
respect to [JL Powell LLC] or any of its affiliates and/or subsidiaries.
Contribution Agreement § 7.1 (b).
Section 7.1(b) of the Contribution Agreement is broader than the agreements
at issue in Madrigal and Abboud. In Section 7.1(b) Powell grants the exclusive use
of his name and agrees not to use his name or permit any other person or entity to
use his name in connection with any business competitive in any respect to JL
Powell LLC or any of its affiliates and/or subsidiaries. Powell’s grant in Section
7.1(b) goes beyond the conveyance of trademarks or trade names.17 Section 7.1(b)’s
contemplation of the trademark concept of “fair use” itself adds support to the
conclusion that Powell was conveying the use of his personal name in addition to a
trade name. “In technical trademark jargon, the use of words for descriptive
purposes is called a ‘fair use,’ and the law usually permits it even if the words
themselves also constitute a trademark.” WCVB-TV v. Boston Athletic Ass’n, 926
While contained in a subsection entitled “Use of Trademarks,” the Contribution Agreement
also provides in section 12.11 that: “The descriptive headings contained in this Agreement are
included for convenience of reference only and shall not affect in any way the meaning or
interpretation of the Agreement.” Contribution Agreement § 12.11.
17
26
F.2d 42, 46 (1st Cir. 1991). By agreeing not to assert a fair use defense, Powell is
essentially giving up his right to use his name, even for descriptive purposes, in
connection with any business competitive with JL Powell LLC and its affiliates and
subsidiaries.
2. “Future” Affiliates Under Section 7.1(b)
The Defendant claims that JL Powell Clothing LLC is not an affiliate of JL
Powell LLC because it was not in existence at the time of the contract, and the
contract does not contemplate “future” affiliates. This argument is unpersuasive. At
the time the Contribution Agreement was executed, JL Powell LLC had no
subsidiaries, and yet the contract contemplates that Powell will not compete with
any of JL Powell LLC’s subsidiaries. The parties must therefore have intended that
this term include future such entities. Under the Defendant’s interpretation, the
language “affiliates and/or subsidiaries” would be superfluous. Intel Corp. v. Am.
Guar. & Liab. Ins. Co., 51 A.3d 442, 451 n.22 (Del. 2012) (a contract should be
interpreted so as to give meaning to each of its provisions).
3. Breaching Activity
Powell’s name appeared on the front cover of the first two issues of The Field
and his signature appeared on the inside cover of the first two issues of The Field.
In Powell’s signed note in the first two issues of The Field, he explicitly says that he
has been “traveling the world over not only refining my designs and seeking the
finest quality craftsmen possible, but also seeking out the best experiences and
adventures to bring to my loyal customers.” Pls.’ Exs. 48, 50 (emphasis added).
27
Powell is using his name in connection with a business competitive with the
Plaintiffs. It is also likely that Powell permitted Rancourt to use his name in its
blog post about The Field. The Field’s website directed customers to Rancourt’s
website, which contained the blog post. The Court finds that it was likely that
Powell knew about the blog post’s use of his name in connection with The Field and
did not ask Rancourt to take down the references to his name.
Having received consideration for the promises he made in connection with
the Contribution Agreement, Powell cannot now “keep for himself the essential
thing he sold, and also keep the price he got for it.” Guth, 224 F. at 934. For these
reasons, the Court concludes that JL Powell LLC has demonstrated a likelihood of
success on Count VI involving breach of the Contribution Agreement.
C. Whether the Plaintiffs are Entitled to Preliminary Injunctive Relief
Having found a likelihood of success on the merits of the Plaintiffs’ breach of
contract claim, the Court now turns to the other preliminary injunction factors to
determine whether the Plaintiffs have met their burden of establishing “that they
are likely to suffer irreparable harm in the absence of preliminary relief, that the
balance of equities tips in their favor, and that an injunction is in the public
interest.” Voice of the Arab World, 645 F.3d at 32.
28
1.
Irreparable Harm
Section 12.13 of the Contribution Agreement explicitly states:
The parties hereto agree that irreparable damage would occur in the
event any provision of this Agreement was not performed in
accordance with the terms hereof and that the parties shall be entitled
to specific performance of the terms hereof in addition to any other
remedy at law or in equity.
Pls. Ex. 42, at 51. The Defendant has made no argument that this provision of the
Contribution Agreement does not apply. The Court concludes that the Plaintiffs
have demonstrated irreparable harm.
2.
Balancing the Equities
The hardships balance in the Plaintiffs’ favor. The Defendant claims that
“Mr. Powell has already incurred significant expense and disruption to his business
by virtue of Plaintiffs’ Motion which was timed precisely to interrupt Mr. Powell’s
launch of The Field.” Def.’s Opp’n to Pls.’ Mot. for TRO and Prelim Inj. 19-20. But
the Defendant has produced no evidence of significant expense going forward. The
Field distributes new issues periodically. It is unlikely that The Field will distribute
issues one and two again. The Defendant has already distributed the third issue of
The Field without Powell’s name or signature. Pls.’ Ex. 51.
The Defendant also argues that the “Plaintiff is attempting to chill any
attempt Mr. Powell may make to identify himself.” Def.’s Opp’n to Pls.’ Mot. for
TRO and Prelim. Inj. 19. (ECF No. 36). The Defendant overstates the Plaintiffs’
requested relief. The Plaintiffs seek a preliminary injunction preventing Powell
from using his name or endorsement in connection with The Field. Powell may still
29
use his name and signature personally and in businesses that do not compete with
the Plaintiffs.
In Levitt Corp. v. Levitt, 593 F.2d 463 (2d Cir. 1979), the Second Circuit
affirmed an injunction against Levitt, the builder of Levittowns in New York and
Pennsylvania, who parted ways with Levitt and Sons (the predecessor to Levitt
Corp.) after granting Levitt and Sons the use of his name and its goodwill. The
court explained:
If the infringing party has had some experience of his own in an
industry, and wishes to establish a business under his own name, it is
considered unfair to preclude him from using his name under all
circumstances and for all times, although the first-comer has
established a reputation and goodwill under the same appellation. . . .
Where, as here, however, the infringing party has previously sold his
business, including use of his name and its goodwill, to the plaintiff,
sweeping injunctive relief is more tolerable. . . . To protect the property
interest of the purchaser, then, the courts will be especially alert to
foreclose attempts by the seller to “keep for himself the essential thing
he sold, and also keep the price he got for it.”
Id. at 468 (citations omitted) (quoting Guth, 224 F. at 934). Guided by this principal,
the Court concludes that the balance of the equities favors the Plaintiffs.
3.
Public Interest
The public has an interest in enforcement of agreements. This factor also
favors the Plaintiffs. Having considered each of the four equitable factors, the Court
concludes that a preliminary injunction arising out of the Defendant’s likely breach
of the Contribution Agreement is appropriate.
D. Whether JL Powell Clothing LLC Violated Any of the Defendant’s
Rights
30
In his role as counterclaimant, Powell asserts that JL Powell Clothing LLC
has no right to use his name or endorsement in its business, but that it nevertheless
used his name in a personal message to customers in the Fall 2013 J.L. Powell
catalog. He asks for an order preliminarily enjoining JL Powell LLC and JL Powell
Clothing LLC from further using his name and endorsement to suggest that the
Defendant is a personal spokesperson, promoter, or endorser of the J.L. Powell
catalog.
The claims under which the Court analyzes this request are Counterclaim
Counts IV, V, and VI. The Court has determined that Count I (breach of contract) is
not likely to succeed, see Section (A)(5), supra, and dismissed Count II (breach of the
covenant of good faith and fair dealing), see Order on Mot. to Dismiss Countercls.
(ECF No. 79). Count III is a claim for declaratory judgment, which is a form of relief
rather than a cause of action and therefore it cannot stand as a basis for granting
injunctive relief.
Under Counts IV, V, and VI, Powell asserts claims against JL Powell
Clothing LLC for false association and unfair competition under 15 U.S.C. §
1125(a),18 and for misappropriation of publicity rights and false light under
Michigan law.19
15 U.S.C. § 1125(a) creates liability for those who “in connection with any goods . . . [use] in
commerce . . . any false designation of origin, false or misleading description of fact, or false or
misleading representation of fact, which . . . is likely to cause confusion, or to cause mistake, or to
deceive as to the affiliation, connection, or association of such person with another person, or as to
the origin, sponsorship, or approval of his or her goods, services, or commercial activities by another
person . . . .”
19
A defendant is liable for misappropriation of publicity rights if he appropriates the plaintiff’s
name or likeness for a predominantly commercial purpose. Battaglieri v. Mackinac Ctr. for Pub.
18
31
The Plaintiffs do not contest the fact that JL Powell Clothing LLC produced
the Fall 2013 J.L. Powell catalog. The Court also agrees with the Defendant that,
because JL Powell Clothing LLC’s assignment of the right to use the Defendant’s
endorsement is likely voidable by JLP, any use by the JL Powell Clothing LLC of
the Defendant’s name and endorsement is unauthorized and subject to injunctive
relief. On the other hand, Powell does not question JL Powell Clothing LLC’s right
to use the J.L. Powell trademark. The likelihood of success on the merits thus
depends on a showing that the Fall 2013 catalog did not simply use the J.L. Powell
trademark but went beyond this into an unpermitted use of Powell’s name and
endorsement.
Page 3 of the Fall 2013 catalog begins with the following words in a large
script-font:
“For me, 50 miles an hour is a perfect speed.”
Def’s Answer, Ex. E (image of Fall 2013 J.L. Powell catalog page). This is followed
by a description of a motorcycle and the joys of riding a motorcycle, combined with
observations on J.L. Powell’s clothing including the “spirit of adventure” which is
“woven into every piece of clothing we design.” Id. This is followed by a facsimile of
Powell’s “J.L. Powell” signature as it had appeared in prior J.L. Powell catalogs.
Policy, 680 N.W.2d 915, 919-20 (Mich. App. 2004). A defendant is liable for placing the plaintiff in a
false light for generating publicity which places the plaintiff in a false light in the public eye. Id. at
919. To be actionable, the publicity need not be defamatory, but the plaintiff must be subjected to
“unreasonable and highly objectionable publicity that attributes to him characteristics, conduct or
beliefs that are false . . . .” Sawabini v. Desenberg, 372 N.W.2d 559, 564 (Mich. App. 1985) (quoting
Restatement (Second) of Torts § 652 E cmt b).
32
The Plaintiffs contend that the use of “we” in the body copy signals that J.L.
Powell the company is speaking, not Powell personally. See Abboud, 682 F. Supp. 2d
at 320 (S.D.N.Y. 2010) (use of term “we” signaled company, not individual, speech).
But nothing in the Fall 2013 J.L. Powell catalog other than that single “we”
indicates that the company is speaking to the reader. The larger quoted words at
the top of the page—“For me, 50 miles an hour is a perfect speed . . .”— creates the
opposite impression: that Powell personally is conveying a message to the catalog
reader.
The Plaintiffs also assert that, in the context of the entire catalog, it becomes
clear that the large script-font language quoted at the top of the page is excerpted
from a book by motorcyclist and author Ted Simon. This is not apparent to the
Court, especially where the language in quotes is not actually attributed to Mr.
Simon and is thematically related to the text below it. The only signature that
appears on page 3 of the catalog is “J.L. Powell,” and this appears to be Powell’s
actual signature. Powell’s signature is not part of the “J.L. Powell” registered
trademark owned by the Plaintiffs, which consists of a “standard characters without
claim to any particular font, style, size or color.” Pls.’ Ex. 45.20 The signature does
not consist of “standard characters.” Section 7.1(b) of the Contribution Agreement
likewise indicates that the parties thought of Powell’s signature as something
Compare, e.g., the federally-registered service mark for “John Hancock,” serial number
85843229, available on the United States Patent and Trademark Office Trademark Electronic
Search System, tess2.uspto.gov. The registration for this service mark has a picture of the “John
Hancock” signature, and states that “this mark consists of a substantial facsimile of the signature of
‘John Hancock’ (1737-1793), patriot of the American Revolution, as said signature appears on the
Declaration of Independence.”
20
33
separate from the “J.L. Powell” trademark. Placement of Powell’s signature on this
page of the J.L. Powell catalog promotes the impression in the reader’s mind that
Powell himself is the author of the words preceding it and supports Powell’s claims
of false association and unfair competition, misappropriation of publicity rights, and
false light. On balance, the Court believes that it is likely that Powell will succeed
on Counts IV, V, and VI of his counterclaim.
E. Whether Powell Is Entitled to Preliminary Injunctive Relief
Having found that Powell is likely to succeed on the merits of his
Counterclaim Counts IV, V, and VI against JL Powell Clothing LLC, the Court
considers whether Powell has met his burden of establishing “that [he is] likely to
suffer irreparable harm in the absence of preliminary relief, that the balance of
equities tips in [his] favor, and that an injunction is in the public interest.” Voice of
the Arab World, 645 F.3d at 32.
The Court agrees with the Defendant that JL Powell Clothing LLC’s use of
the Defendant’s actual signature creates a false impression that he continues to
work for and personally endorse his former company, and that this false impression
irreparably harms him and his new company, The Field. Furthermore, the Court
believes that granting preliminary injunctive relief “will advance the public interest
because it will remove a false endorsement from the market and prevent customers
from mistakenly believing that Mr. Powell is personally endorsing and participating
in the design of” JL Powell Clothing LLC’s products. Counterpl.’s Mot. for Prelim.
Inj. 20. While JL Powell LLC likely has the right to use the Defendant’s
34
endorsement, the same cannot be said for JL Powell Clothing LLC. Presumably the
Plaintiff changed its corporate form from JL Powell LLC to JL Powell Clothing LLC
for good reasons. It cannot now have its cake and eat it too. JL Powell Clothing LLC
is the entity operating the business and publishing the catalog. It cannot exceed the
limits of its legal rights by claiming the unassigned rights of its predecessor as its
own. The balance of equities tips in favor of granting injunctive relief.
F. Whether the Defendant Infringed the “The Sporting Life” Trademark
The Plaintiffs also request injunctive relief for alleged infringement of the
“J.L. Powell” and “The Sporting Life” trademarks. Because the Plaintiffs have
already established their right to enjoin the Defendant from using his name, any
injunctive relief for infringing the “J.L. Powell” trademark would be redundant. But
JL Powell Clothing LLC also owns the mark, “The Sporting Life.”21 The Plaintiffs
argue that the Defendant’s use of that mark constitutes federal trademark
infringement and request an order enjoining the Defendant from using “The
Sporting Life.”22
Section 32(1) of the Lanham Act governs claims for infringement of registered
marks. It provides:
Any person who shall, without the consent of the registrant—
(a) use in commerce any reproduction, counterfeit, copy, or
colorable imitation of a registered mark in connection with the
sale, offering for sale, distribution, or advertising of any goods or
services on or in connection with which such use is likely to
cause confusion, or to cause mistake, or to deceive . . .
21
22
See footnote 15, supra, and Pls. Ex. 47 (federal trademark registration of “The Sporting Life”).
See Am. Compl. at ¶¶ 69, 73-74 and Pls.’ Reply at 7.
35
shall be liable in a civil action by the registrant for the remedies
hereinafter provided.
15 U.S.C. § 1114(1)(a). 23
The First Circuit has repeatedly held that:
“Trademark law seeks to prevent one seller from using the same ‘mark’
as – or one similar to – that used by another in such a way that he
confuses the public about who really produced the goods . . . .”
Equine Technologies, Inc. v. Equitechnology, Inc. 68 F.3d 542, 544 (1st Cir. 1995)
(quoting DeCosta v. Viacom Int’l, Inc., 981 F.2d 602, 605 (1st Cir. 1992)). To
establish trademark infringement, a plaintiff must show “that the allegedly
infringing conduct carries with it a likelihood of confounding an appreciable number
of reasonably prudent purchasers exercising ordinary care.” Int’l Ass’n of Machinists
and Aerospace Workers, AFL-CIO v. Winship Green Nursing Ctr., 103 F.3d 196, 201
(1st Cir. 1996). The First Circuit uses an eight factor test to determine whether
there is a likelihood of confusion. These factors, sometimes referred to as the
“Pignons factors,” are:
(1) the similarity of the marks, (2) the similarity of the goods, (3) the
relationship between the parties’ channels of trade, (4) the relationship
between the parties’ advertising, (5) the classes of prospective
purchasers, (6) the evidence of actual confusion, (7) the defendant’s
intent in adopting the mark and (8) the strength of the plaintiff’s
mark.
The Amended Complaint contains claims sounding in federal trademark law under both
Section 32(1) and Section 43 of the Lanham Act, which covers claims for unregistered marks, unfair
competition, and dilution. 15 U.S.C. §§ 1125(a)(1)(A) & (c). Plaintiffs also assert causes of action
under the Maine Deceptive Trade Practices Act, 10 M.R.S.A. § 1121 et seq. and the Maine AntiDilution Statute, 10 M.R.S.A. § 1530.
23
36
Swarovski Aktiengesellschaft v. Building No. 19, Inc., 704 F.3d 44, 49 n.2 (1st Cir.
2013) (citing Pignons S.A. Mecanique de Precision v. Polaroid Corp., 657 F.2d 482,
487-91 (1st Cir. 1981)).
At the hearing on the motion for preliminary injunction, Bruce Willard
identified a document, which he described as a screen shot taken from
thefieldoutfitting.com. Willard testified that the screen would not generally be
visible to consumers but would be visible to someone clicking on the properties of
the name. Tr. at 154-157. The document contains what appear to be strings of code
and words, including the following:
Pls.’ Ex. 56 (emphasis added).
Very generally speaking, meta-tags are part of a website’s HTML code that
describe the website to a search engine. A website’s HTML code is not something
that appears on the face of the website. Meta-tags can be important in trademark
cases because a website’s meta-tags tell a search engine when that website should
be included in the search engine’s results. So if a person searches for “the sporting
life” on an internet search engine, websites with the meta-tag “the sporting life” will
appear in the results generated by the search engine. A company can include its
competitor’s trademark or trade name in its meta-tags in such a way that when a
potential customer enters that competitor’s trademark or trade name into their
37
search engine, expecting to get the competitor’s website, their results will not only
include the misusing company’s website, but may list the misusing company’s
website first. See generally J. Thomas McCarthy, McCarthy on Trademarks and
Unfair Competition § 25:69 (4th ed. 2013).
In Venture Tape Corp. v. McGills Glass Warehouse, 540 F.3d 56 (1st Cir.
2008), McGills Glass Warehouse (“McGills”), one of Venture Tape Corp.’s
(“Venture Tape”) competitors in the stained glass industry, used Venture Tape’s
registered trademarks for its products “Venture Tape” and “Venture Foil” as metatags for McGills’ website. The district court granted Venture Tape summary
judgment on its Lanham Act unfair competition and trademark infringement
claims. The First Circuit affirmed the district court even though there was no
evidence that customers were actually lured to Venture Tape’s website as a result of
McGills’ use of Venture Tape’s trademarks in its website’s meta-tags. The First
Circuit explained that the Lanham Act requires only a likelihood of customer
confusion, so the absence of evidence of actual confusion in the record was not fatal
to Venture Tape, particularly because all of the Pignons factors were otherwise
satisfied. Id. at 61-62. The district court found that as a result of McGills’ use of the
meta-tags, “internet search engines located McGills’ website and prominently listed
a link to it when internet users performed keyword searches including the terms
‘Venture Tape’ and/or ‘Venture Foil.’ Often, the link to McGills’ website would
appear before the link to Venture Tape’s website . . . .” Venture Tape Corp. v.
McGills Glass Warehouse, No. 03-CV-11045-MEL, at *3 (D. Mass. April 10, 2006).
38
The Plaintiffs have produced evidence that The Field’s website included “the
sporting life” and “JL Powell” in its meta-tags, Pls.’ Ex. 56, but the Plaintiffs have
produced no evidence that a search for “JL Powell” and/or “the sporting life” on a
search engine will generate The Field’s website among the results, much less that
The Field website would appear above J.L. Powell’s website. Had the Plaintiffs
produced any evidence that the Defendant’s use of “The Sporting Life” generated
search results for thefieldoutfitting.com in proximity to results for J.L. Powell’s
website, injunctive relief might be appropriate.
But based on the evidentiary showing made to date, the Plaintiffs have not
established that they are likely to succeed on their unfair competition and
trademark infringement claims for the Defendant’s use of the registered trademark
“The Sporting Life” and are therefore not entitled to preliminary relief on the
Defendant’s use of that trademark.
CONCLUSION
For the above-stated reasons, the Plaintiffs’ motion for preliminary injunction
is GRANTED IN PART and DENIED IN PART. The Defendant is hereby
PRELIMINARILY ENJOINED from using his name or endorsement in
connection with his business venture The Field, and is directed to instruct other
persons or entities using his name or endorsement in connection with the Field to
cease any such use. The Defendant’s motion to supplement the record is
GRANTED, and the Defendant’s motion for injunctive relief is GRANTED IN
PART and DENIED IN PART. Plaintiff JL Powell Clothing LLC is hereby
39
PRELIMINARILY ENJOINED from using the Defendant’s signature in
connection with its business.
SO ORDERED.
Dated this 30th day of January, 2014.
/s/ Nancy Torresen
United States District Judge
40
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