Arborjet, Inc. v. Rainbow Treecare Scientific Advancements, Inc.

Filing 34

Judge Nathaniel M. Gorton: ORDER entered. MEMORANDUM AND ORDER: "For the foregoing reasons, the Court concludes that the plaintiff is entitled to injunctive relief as more fully described in the preliminary injunction attached hereto and plaintiff's motion for preliminary injunction (Docket No. 1 ) is therefore ALLOWED. So ordered."(Moore, Kellyann)

United States District Court
District of Massachusetts
ARBORJET, INC,
Plaintiff,
v.
RAINBOW TREECARE SCIENTIFIC
ADVANCEMENTS, INC.,
Defendant.

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Civil Action No.
14-14129-NMG

MEMORANDUM & ORDER
GORTON, J.
This case arises from an allegation of a breach of a sales
agency agreement between plaintiff Arborjet, Inc. (“Arborjet”)
and defendant Rainbow Treecare Scientific Advancements, Inc.
(“Rainbow”).

Arborjet is a designer and manufacturer of insect

and pest control products for direct injection into trees.
Rainbow manufactures and sells pesticides for the protection of
trees as well and also distributes pesticides manufactured by
other companies.

It is a direct competitor of Arborjet.

Pending before the Court is the plaintiff’s motion for a
preliminary injunction (Docket No. 1) to enjoin Rainbow from
marketing, distributing or selling the product ArborMectin.
the reasons that follow, plaintiff’s motion will be allowed.

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For

I.

Background
Arborjet is a Massachusetts corporation based in Woburn

that has been in the business of manufacturing and selling
pesticides for the treatment and protection of trees for 15
years.

In 2008, after five years of research and development,

Arborjet began selling its emamectin benzoate product known as
TREE-age.

TREE-age, when injected into trees using Arborjet’s

proprietary injection system, protects trees from the emerald
ash borer and other destructive pests.

TREE-age is one of

Arbojet’s most successful products.
Defendant Rainbow is a Minnesota corporation that has been
in the tree pesticide business for 35 years.

Rainbow not only

manufactures and sells pesticides and other treatments for the
protection of trees, it also distributes pesticides manufactured
by other companies.
In 2006, Arborjet and Rainbow commenced their business
relationship when Arborjet produced a generic product for
Rainbow to distribute.

In the summer of 2008, Rainbow solicited

Arborjet to become its distributor of the full line of
Arborjet’s products, including TREE-age.
During negotiations regarding Rainbow’s request, plaintiff
allegedly expressed concern that if it allowed Rainbow to
distribute its products, Rainbow would use that distributorship
to expand its own market and copy Arborjet’s most popular
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products to sell directly to Arborjet’s customers.

Rainbow

allegedly assured Arborjet that it had no such intention.
A.

The Sales Agency Agreement

On August 1, 2008, Arborjet and Rainbow entered into a
Sales Agency Agreement (“Agreement”), wherein Rainbow agreed to
devote its best efforts to the promotion and sale of Arborjet’s
products.
Section Three of the Agreement consists of a
confidentiality and nondisclosure agreement.

Within the same

section, Rainbow further agreed that
in view of the confidential information regarding
Arborjet’s business affairs, plans, and necessities,
[Rainbow] will not engage in affairs intended to
replicate the Arborjet’s products or processes.
Arborjet alleges that the express purpose of that
provision, as discussed by the parties, was to protect Arborjet
during the distributorship from any copying of its products or
leveraging of relationships with Arborjet’s customers by
Rainbow.

Plaintiff claims that the provision has been violated

regardless of whether Rainbow misappropriated any of its
confidential information.
The Agreement also contains a non-competition provision in
Section Six, which states:
[Rainbow] will not engage, directly or indirectly,...
in manufacturing, buying, selling, or dealing in
systemic
injections
systems
that
replicate
the
Arborjet system of using a plug which seals the
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formulation in the xylem and a needle which injects
behind the plug for a period of 2 years after the
termination of this agreement...
Plaintiff does not allege that Rainbow breached Section Six
but the parties dispute the relevance of that provision to
plaintiff’s breach of contract claim.
B.

Alleged Breach of Agreement

Arborjet alleges that Rainbow violated Section Three of the
Agreement by “engaging in affairs intended to replicate” its
products.
Plaintiff contends that Rainbow began developing and
testing ArborMectin, defendant’s own emamectin benzoate product
that was intended to replicate TREE-age, as early as 2011.
Rainbow’s website describes partnering with several institutions
and companies to conduct research studies regarding
ArborMectin’s effectiveness on certain tree-destroying pests.
Arborjet alleges that one or more of those studies took place
while Rainbow was a distributor for Arborjet and subject to the
terms of the Agreement.
As a distributor of Arborjet’s products, Rainbow had
regular and close contact with Arborjet’s scientists, employees
and customers and thus had access to large amounts of
confidential information regarding Arborjet’s technology,
business and customers.

Plaintiff does not allege that Rainbow

wrongfully misappropriated Arborjet’s confidential information
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but contends that such proof is immaterial to its breach of
contract claim.
Rainbow voluntarily terminated the Agreement with Arborjet
in February, 2013 and publicly disclosed that it was going to
distribute ArborMectin in August, 2014.

In October, 2014,

Rainbow sent a blast marketing email to customers with the
subject line “Improved TREE-age! NEW ArborMectin Speed VIDEO.”
The body of the email stated that
Rainbow is excited to offer ArborMectinTM, an improved
4% emamectin benzoate (TREE-age®) tree injection
formulation....Treat
trees
30-70%
faster
using
TM
ArborMectin versus TREE-age®.
The email included a link to a video available on Rainbow’s
website purporting to demonstrate the relative speeds of the two
products.

That website also characterizes the product as a

replacement for TREE-age and indicates that ArborMectin is
“backed by science”, “proven to be effective” and treats trees
“consistently faster than TREE-age.”
C.

Procedural History

Plaintiff Arborjet filed the instant lawsuit and motion for
preliminary injunction on November 3, 2014.

The complaint

asserts claims for 1) breach of contract, 2) breach of implied
covenant of good faith and fair dealing, 3) false advertising
and false designation of origin in violation of the Lanham Act,
15 U.S.C. § 1125(a), 4) false advertising in violation of M.G.L.

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c. 266, § 91, et seq. and 5) common law unfair competition.
Rainbow timely removed the case to this Court and a hearing on
the pending motion was held shortly thereafter.
II.

Plaintiff’s Motion for a Preliminary Injunction
A.

Legal Standard

In order to obtain a preliminary injunction, the moving
party must establish
(1) a substantial likelihood of success on the merits,
(2) a significant risk of irreparable harm if the
injunction is withheld, (3) a favorable balance of
hardships and (4) a fit (or lack of friction) between
the injunction and the public interest.
Nieves-Marquez v. Puerto Rico, 353 F.3d 108, 120 (1st Cir. 2003)
(citation omitted).

Out of these factors, the likelihood of

success on the merits “normally weighs heaviest on the
decisional scales.” Coquico, Inc. v. Rodriguez-Miranda, 562 F.3d
62, 66 (1st Cir. 2009).
The Court may accept as true “well-pleaded allegations [in
the complaint] and uncontroverted affidavits.” Rohm & Haas Elec.
Materials, LLC v. Elec. Circuits, 759 F. Supp. 2d 110, 114, n.2
(D. Mass. 2010) (quoting Elrod v. Burns, 427 U.S. 347, 350, n.1
(1976).

The Court may also rely on otherwise inadmissible

evidence, including hearsay, in deciding a motion for
preliminary injunction. See Asseo v. Pan American Grain Co.,
Inc., 805 F.2d 23, 26 (1st Cir. 1986).

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B.

Application
1.

Likelihood of Success

Arborjet contends that it is likely to succeed on the
merits of its claims because Rainbow’s conduct directly violated
the Agreement as well as the Lanham Act and related state laws.
Those arguments are contested by Rainbow.
a.

Breach of Contract and Covenant of Good
Faith and Fair Dealing

To prove a claim for breach of contract, a plaintiff must
show 1) that the parties reached a valid and binding agreement,
2) that the defendant breached the terms of that agreement and
3) that the plaintiff’s damages are a proximate cause of that
breach. Michelson v. Digital Fin. Servs., 167 F.3d 715, 720 (1st
Cir. 1999).

Every contract also “implies good faith and fair

dealing between the parties to it.” Anthony’s Pier Four, Inc. v.
HBC Assoc., 411 Mass. 451, 471 (1991).

The implied covenant

ensures that “the parties remain faithful to the intended and
agreed expectations of the parties in their performance.” Uno
Rests., Inc. v. Boston Kenmore Realty Corp., 441 Mass 376, 385
(2004).
Arborjet asserts that it is highly likely to succeed on the
merits of its contract claims because the plain language of
Section 3 of the Agreement is unambiguous.

It states that while

the Agreement was in effect, Rainbow was contractually barred

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from engaging in “affairs intended to replicate” Arborjet’s
products.

The scope of that provision is not limited to

Rainbow’s misappropriation of Arborjet’s proprietary
confidential information.

Plaintiff avers that the defendant

violated the agreement by developing ArborMectin as an
alternative to or an improvement of TREE-age, which was intended
to replicate plaintiff’s product while it was still bound by the
terms of the Agreement.
Plaintiff also contends that defendant breached the implied
covenant of good faith and fair dealing because it was fully
aware at the time the Agreement was negotiated that the purpose
of Section 3 was to prevent Rainbow from copying Arborjet’s
products.
Rainbow responds that the non-competition provision in
Section Six informs the proper interpretation of the Agreement’s
non-disclosure provision in Section Three.

Section Six

prohibits Rainbow from “replicating” a specific injection system
which ArborMectin does not employ.

Defendant suggests that such

a limitation applies to Section Three because Arborjet cannot
use the non-disclosure provision to create a broader noncompetition obligation than the one included in the Agreement’s
express non-competition provision.

Rainbow contends that the

law does not allow undefined, non-compete provisions to restrict
ordinary competition, citing Rohm & Hass Elec. Materials, LLC v.
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Elec. Circuits Supplies, Inc., 579 F. Supp. 110, 124 (D. Mass.
2010).
The Court disagrees that Section Six of the Agreement
limits the scope of Section Three.

Section Six, after all,

governs the extent of non-competition after the termination of
the Agreement.

Section Three, on the other hand, governs the

actions of Rainbow during the pendency of the Agreement.
Rainbow asserts that it did not breach the Agreement
because it did not attempt “to replicate” Arborjet’s product.
Relying on a dictionary definition of the word “replicate,”
defendant argues that it did not “replicate” TREE-age because
ArborMectin is not a “copy” or “duplicate” of plaintiff’s
product.

Rainbow emphasizes that the products have important

differences even though they share the same active ingredient,
noting that ArborMectin is less toxic and has lower viscosity
than TREE-age.
Defendant’s argument is unavailing for two reasons.

First,

the fact that Rainbow’s final product, ArborMectin, has
differences from TREE-age is immaterial.

By signing the

Agreement, Rainbow promised not to engage in activities
“intended to replicate” Arborjet’s products.

Plaintiff has

demonstrated a likelihood that it will be able to prove that
defendant engaged in research and development to create a
product very similar to TREE-age.
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In fact, Rainbow’s product

has since been marketed as an “improved TREE-age.”

Second, the

Court finds it unreasonable to restrict the scope of the
contract as prohibiting only an exact replica of TREE-age in
light of Arborjet’s particular, expressed concern about direct
competition with its own products.

Under the contractual

interpretation advanced by the defendant, even the most trivial
change to TREE-age would negate its contractual obligation.
Accordingly, the Court concludes that plaintiff has a
substantial likelihood of succeeding on the merits of its claims
of breach of contract and of the implied covenant of good faith
and fair dealing.
b.

Lanham Act, 15 U.S.C. § 1125(a)

Plaintiff contends that it is highly likely to succeed on
the merits of its Lanham Act and related state law claims
because 1) Rainbow’s advertisements of ArborMectin are false and
misleading and 2) defendant infringed on plaintiff’s trademark.
i.

Misleading Advertising

To prevail on its Lanham Act claim based on false
advertising, 15 U.S.C. § 1125(a)(1)(B), Arborjet must prove that
1)
the
defendant
made
a
false
or
misleading
description of fact or representation of fact in a
commercial advertisement about his own or another's
product; (2) the misrepresentation is material, in
that it is likely to influence the purchasing
decision; (3) the misrepresentation actually deceives
or has the tendency to deceive a substantial segment
of its audience; (4) the defendant placed the false or
misleading statement in interstate commerce; and (5)
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the plaintiff has been or is likely to be injured as a
result of the misrepresentation, either by direct
diversion of sales or by a lessening of goodwill
associated with its products.
Cashmere & Camel Hair Mfrs. Inst. v. Saks Fifth Ave., 284 F.3d
302, 310-11 (1st Cir. 2002).
False advertising claims are divided into “establishment
claims,” which represent that studies prove a product superior,
and “non-establishment claims,” which are general claims of
superiority. Gillette Co. v. Norelco Consumer Products Co., 946
F. Supp. 115, 121 (D. Mass. 1996).

A plaintiff satisfies its

burden of proving that an establishment claim is false or
misleading under the Lanham Act by showing that the tests or
studies are “not sufficiently reliable to permit one to
conclude...that [they] established the claim made.” Spalding
Sports Worldwide, Inc. v. Wilson Sporting Goods Co., 198 F.Supp.
2d 59, 67 (D. Mass. 2002).

For non-establishment claims, the

plaintiff must meet the higher burden of proving actual falsity
of the challenged claim. Gillette, 946 F. Supp. at 121-22.
Plaintiff contends that the defendant’s representations
that ArborMectin is “backed by science”, “proven effective” and
“treats trees 30-70% faster than TREE-age” are establishment
claims that violate the Lanham Act.

It asserts that the

research trials relied upon to support Rainbow’s claims were
unreliable because none of them was subject to peer review and

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the studies tested only five or six trees whereas studies of
TREE-age tested between 60 and 100 trees.

Arborjet alleges that

the marketing of ArborMectin as “improved TREE-age” based on
inferior studies is therefore misleading and causes customer
confusion because 1) the study results do not prove that
ArborMectin is an improvement over TREE-age and 2) the statement
implies that one company controls both products.
Rainbow denies that the establishment claims in its
advertising are false or misleading because they are supported
by EPA approval and various scientific research field trials.
Rainbow also disputes plaintiff’s arguments regarding the
reliability of its own studies because Arborjet has offered mere
speculation rather than industry or regulatory standards
regarding peer review or sample size to establish product
effectiveness.

The Court is persuaded that the plaintiff has

not demonstrated the unreliability of the studies used to
support Rainbow’s establishment claims.
With respect to the representation that ArborMectin is an
“improved TREE-age,” the Court agrees with the defendant that it
is a non-establishment claim because it is a general claim of
superiority.

Plaintiff has not met the higher burden of showing

actual falsity of the claim because ArborMectin has lower
toxicity and viscosity than TREE-age and such differences may be
regarded as improvements.

Accordingly, plaintiff has not
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demonstrated that it is likely to succeed on its Lanham Act
claim based on false or misleading advertising because it has
not met its burden for its establishment and non-establishment
claims.
The Court has, however, expressed its concern that the
“improved TREE-age” representation is likely to mislead
customers.

Rainbow submitted a letter following the November,

2014 hearing, which has been docketed, indicating that it will
no longer make advertising or marketing statements that
ArborMectin is “improved TREE-age.”

The Court treats that

submission as a binding stipulation that need not be further
addressed herein.
ii.

M.G.L. c. 266, § 91

Plaintiff contends that the false and misleading
advertisements proffered by the defendant also violate state
law.

A Massachusetts statute allows a person who is injured by

untrue or misleading advertisements to petition to enjoin the
person violating the statute from continuing to engage in
misleading advertising. M.G.L. c. 266, § 91.

This claim “rises

or falls with the federal claim.” American Medical Sys., Inc. v.
Biolitec, Inc., 774 F. Supp. 2d 375, 393 (D. Mass. 2011).
Because the Court has concluded that Arborjet has not
demonstrated that it is likely to succeed on the merits of its
Lanham Act claim based on false advertising, it reaches the same
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conclusion with respect to the likelihood of success on the
merits of the parallel state law claim.
iii. Trademark Infringement
To prevail on a claim under the Lanham Act based on “false
designation of origin,” 15 U.S.C. § 1125(a)(1)(A), plaintiff
must prove
1) the ownership of a distinctive market entitled to
trademark protection, 2) the use of that name in
interstate commerce, and 3) its use by another in a
manner likely to cause confusion as to the origin of
the source of the goods or services.
Nat'l Nonwovens, Inc. v. Consumer Products Enterprises, Inc.,
397 F. Supp. 2d 245, 257 (D. Mass. 2005).
The First Circuit Court of Appeals considers eight factors
to assess the likelihood of customer confusion: 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) evidence of actual confusion, 7) the
defendant’s intent in adopting its mark and 8) the strength of
the plaintiff’s mark. Keds Corp. v. Renee Int'l Trading Corp.,
888 F.2d 215, 222 (1st Cir. 1989).
Plaintiff contends that the defendant’s website repeatedly
uses Arborjet’s registered trademarks without including the ®
symbol or any other attribution to the owner and that such use
is likely to cause confusion in the customer base about the
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origin of TREE-age.

While Rainbow acknowledges that the TREE-

age and ArborMectin are similar products, it asserts that all
the other factors considered in the assessment of confusion
weigh in its favor.

It notes, for example, that the marks

“TREE-age” and “ArborMectin” are clearly dissimilar, that
licensed professionals who purchase TREE-age are sophisticated
purchasers and that there is no evidence of actual confusion.
The Court agrees that those factors weigh against a finding
of a likelihood of confusion.

Although defendant should be more

careful with its attribution of proprietary marks in its
communications, plaintiff is unlikely to succeed on its claim
for violation of the Lanham Act based on false designation of
origin.
2.

Irreparable harm

Irreparable harm is “a substantial injury that is not
accurately measureable or adequately compensable by money
damages.” Ross-Simons of Warwick v. Baccarat, Inc., 102 F.3d 12,
19 (1st Cir. 1996).

A plaintiff alleging irreparable injury

must show more than a “tenuous or overly speculative forecast of
anticipated harm.” Id.

Examples of irreparable injuries include

loss of incalculable revenue and harm to goodwill or reputation.
Id. at 19-20.

In the preliminary injunction context, the First

Circuit Court of Appeals measures irreparable harm

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on a sliding scale, working in conjunction with a
moving party’s likelihood of success on the merits,
such that the strength of the showing necessary on
irreparable harm depends in part on the degree of
likelihood of success shown.
Braintree Labs, 622 F.3d at 42-43 (internal quotation marks and
citations omitted).

The Court has already determined that the

plaintiff has a substantial likelihood of succeeding on the
merits of its contract claim.

Arborjet therefore has a lower

threshold to overcome to establish irreparable harm.
Plaintiff asserts that there is a significant risk of
irreparable harm if the Court does not grant the preliminary
injunction because its reputation and relationships with its
customers will be damaged.

The Court agrees.

Rainbow’s

entrance into the market in competition with TREE-age in
violation of the Agreement undoubtedly affects Arborjet’s
customer relationships.

Although plaintiff can be compensated

for lost profits by monetary damages, the effect on its goodwill
and reputation are particularly hard to quantify. See Kroeger v.
The Stop & Shop Companies, Inc., 13 Mass.App.Ct. 310, 322
(1982).
The Court recognizes that defendant has agreed to refrain
from making representations that ArborMectin is an “improved
TREE-age” in its marketing materials, which will lessen the harm
on Arbojet’s goodwill.

Nevertheless, plaintiff has made a

sufficient showing that it will likely suffer irreparable harm
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to its reputation and customer relationships if defendant is not
enjoined from marketing and selling Arbormectin during the
pendency of this litigation.
3.

Remaining factors

Plaintiff contends that the balance of equities tips
heavily in its favor.

That is because it has purportedly

invested five years in researching and developing TREE-age,
which has become its best-selling product, whereas Rainbow has a
relatively minimal investment in its product and has only
recently begun to sell ArborMectin.

Defendant disagrees and

asserts that the harm to Rainbow is definite and significant
because it projects $2.5 million in sales of ArborMectin in
2015.

The Court concludes that the balance of equities tips

somewhat in plaintiff’s favor, but not decisively.
Finally, Arborjet contends that its requested relief
comports with the public interest in ensuring that businesses
adhere to their contractual obligations and do not engage in
false and misleading advertising.

Rainbow responds that an

injunction would be contrary to public interest because
competition is encouraged in the marketplace.

It avers that

this lawsuit is a thinly-veiled attempt by plaintiff to
reinstate the larger profits it enjoyed prior to its patent
expiration.

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Although competition is generally encouraged in the
marketplace, here the parties voluntarily and knowingly
contracted to limit their competition.

Because the Court has

determined that plaintiff will likely succeed on the merits of
its breach of contract claim, it is in the public interest to
enforce such contractual obligations.
C.

Security under Fed. R. Civ. P. 65(c)

A movant for a preliminary injunction must give
security in an amount that the court considers proper
to pay the costs and damages sustained by any party
found to have been wrongfully enjoined or restrained.
Fed. R. Civ. P. 65(c).
Rainbow’s counsel informed the Court at the November, 2014
hearing that Rainbow has sold $375,000 of ArborMectin “in the
last few months.”
product in 2015.

It projects $2.5 million in sales of the
In light of those prospective sales, the Court

will require the posting of a security bond in the amount of
$500,000.

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ORDER
For the foregoing reasons, the Court concludes that the
plaintiff is entitled to injunctive relief as more fully
described in the preliminary injunction attached hereto and
plaintiff’s motion for preliminary injunction (Docket No. 1) is
therefore ALLOWED.

So ordered.
/s/ Nathaniel M. Gorton
Nathaniel M. Gorton
United States District Judge
Dated December 3, 2014

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