Randt Recycling Technologies, Inc. et al v. Lee's Oil Service, LLC et al
Filing
86
ORDER granting in part 74 Motion for Summary Judgment (Written Opinion). Signed by Senior Judge David S. Doty on 6/3/2013. (PJM)
UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
Civil No. 11-2226(DSD/LIB)
Lube-Tech Liquid Recycling,
Inc. (f/k/a Randt Recycling
Technologies, Inc.), a
Minnesota corporation, and
Lubrication Technologies, Inc.,
a Minnesota corporation,
Plaintiffs.
ORDER
v.
Lee’s Oil Service, LLC, a
Minnesota Limited Liability
Company, Lee E. Randt, Darren
L. Randt, Jessica A. Randt,
Ronald Kern and Elaine Randt,
Defendants.
Francis J. Rondoni, Esq. and Chestnut Cambronne, PA, 17
Washington Avenue North, Suite 300, Minneapolis, MN
55401, counsel for plaintiffs.
Gregory R. Anderson, Esq., and Anderson, Larson, Hanson
& Saunders, PLLP, P.O. Box 130, Willmar, MN 56201,
counsel for defendants.
This matter is before the court upon the motion for summary
judgment by defendants.
Based on a review of the file, record and
proceedings herein, and for the following reasons, the court grants
the motion in part.
BACKGROUND
This business dispute arises out of the sale of Randt Oil
Company (Randt Oil) by defendant Lee Randt.
On June 29, 2005, Lee
Randt sold Randt Oil to Christian Bame, principal of plaintiff
Lubrication
Technologies,
Inc.
(Lube-Tech).
The
agreement
contemplated that Lee Randt would relinquish rights to certain real
property; contract rights with suppliers and customers; used oil
inventory;
tools,
machinery
and
equipment;
certain
tanks
and
fixtures; any interest in trade names; vehicles; customer lists;
saleable goodwill; and government licenses.1
Rondoni Decl. Ex. C,
§ 1.
On July 5, 2005, Lube-Tech hired Lee Randt’s son, defendant
Darren Randt, for the position of Operations Manager.
Dep. 65:3-7.
In conjunction with this position, Darren Randt
signed an employment and noncompetition agreement.2
59:7.
D. Randt
Id. at 58:11-
Darren Randt’s wife, defendant Jessica Randt was also hired
by Lube-Tech, and she performed the day-to-day operations of the
company.
See J. Randt Dep. 25:5-9, 50:7-11.
In spring 2011, Lee Randt and his wife, defendant Elaine
Randt, purchased two oil trucks and formed defendant Lee’s Oil
Service, LLC (Lee’s Oil).
Lee’s Oil is an oil recovery business
1
Upon purchasing the company, Bame changed the name of Randt
Oil to Randt Recycling Technologies, Inc. (Randt Recycling). Bame
Dep. 19:9-20:2.
Subsequent to initiating litigation, Randt
Recycling changed its name to Lube-Tech Liquid Recycling, Inc. For
ease of reading and to avoid confusion, the court also refers to
this entity as Lube-Tech.
2
Although Darren Randt admits to signing a noncompetition
agreement, the terms are unknown, as it is not part of the record.
D. Randt Dep. 58:11-59:7.
2
that is “no different” than Randt Oil.
L. Randt Dep. 114:12-14,
114:24-115:16. Unlike Randt Oil, however, Elaine Randt is the sole
owner of Lee’s Oil.
Id. at 115:7-9.
On May 16, 2011, Darren Randt resigned from Lube-Tech and
began working for Lee’s Oil.
D. Randt Dep. 120:9-16.
Jessica
Randt followed suit, and left Lube-Tech and began working for Lee’s
Oil in July 2011.
J. Randt Dep. 69:3-14.
Prior to leaving Lube-
Tech, however, Jessica Randt downloaded a customer list and pricing
index.
Id. at 118:22-119:2; see also Rondoni Decl. Ex. I (screen-
shot of computer login dates).
Also in July 2011, defendant Ronald Kern, a driver for LubeTech, resigned and began driving for Lee’s Oil. Kern Dep. 25:6-12.
Upon joining Lee’s Oil, Kern continued to service many of the same
customers.
Id. at 81:17-20.
Several customers explain that Kern
informed them that Lube-Tech “was no longer in business” and would
not be able to service their account.
See Houle Decl. ¶ 3, Farnum
Decl. ¶¶ 4-15.
On August 30, 2011, Lube-Tech filed an amended complaint
alleging violations of the Computer Fraud and Abuse Act (CFAA), the
Lanham Act, the Uniform Deceptive Trade Practices Act and the
Uniform Trade Secrets Act.
Lube-Tech also alleged common law
fraud, trade secret misappropriation, breach of contract, tortious
interference with business relationships and contract, civil theft,
breach of fiduciary duty and usurpation of corporate business
3
opportunities.
Defendants
answered
and
asserted
state-law
counterclaims for unpaid wages, fraud and intentional interference
with prospective economic advantage.
On
September
8,
2011,
the
court
issued
a
preliminary
injunction, enjoining defendants from disclosing any proprietary
information belonging to Lube-Tech, engaging in business with
certain oil suppliers or making false statements about Lube-Tech.
The preliminary injunction remains in place, and defendants move
for summary judgement.
DISCUSSION
I.
Standard of Review
The court “shall grant summary judgment if the movant shows
that there is no genuine dispute as to any material fact and the
movant is entitled to judgment as a matter of law.”
P. 56(a).
Fed. R. Civ.
A fact is material only when its resolution affects the
outcome of the case.
242, 248 (1986).
Anderson v. Liberty Lobby, Inc., 477 U.S.
A dispute is genuine if the evidence is such that
it could cause a reasonable jury to return a verdict for either
party.
See id. at 252.
The court views all evidence and inferences in a light most
favorable to the nonmoving party.
See id. at 255.
The nonmoving
party, however, may not rest upon mere denials or allegations in
the pleadings but must set forth specific facts sufficient to raise
4
a genuine issue for trial.
See Celotex v. Catrett, 477 U.S. 317,
324 (1986). Moreover, if a plaintiff cannot support each essential
element of his claim, the court must grant summary judgment because
a
complete
failure
of
proof
regarding
an
necessarily renders all other facts immaterial.
II.
essential
element
Id. at 322-23.
CFAA
Lube-Tech first argues a violation of the CFAA. Specifically,
Lube-Tech argues that Jessica Randt downloaded a customer list and
pricing index during the last month of her employment and that she
did so for the improper purpose of benefitting Lee’s Oil.
Under
the
CFAA,
a
person
who
“intentionally
accesses
a
computer without authorization or exceeds authorized access, and
thereby obtains ... information from any protected computer” is
subject to imprisonment and a fine.
(c).
18 U.S.C. § 1030(a)(2)(C),
A protected computer is any computer used in or affecting
interstate commerce.
Id. § 1030(e)(2)(B).
Although the CFAA is
primarily a criminal statute, the act also provides a civil remedy.
Id. § 1030(g).
The CFAA does not define “without authorization,”
but provides that “exceeds authorized access” means “to access a
computer with authorization and to use such access to obtain or
alter information in the computer that the accesser is not entitled
so to obtain or alter.”
Id. § 1030(e)(6).
“The Eighth Circuit has not determined whether the CFAA
imposes civil liability on employees who access information with
5
permission but with an improper purpose.”
Walsh Bishop Assocs.,
Inc. v. O’Brien, No. 11-2673, 2012 WL 669069, at *2 (D. Minn. Feb.
28, 2012) (citation omitted).
determined
that
a
In Walsh Bishop, however, the court
violation
of
the
CFAA
requires
more
than
misappropriation of information, and instead explained that the
relevant inquiry was “whether defendants accessed information that
they were forbidden to access.”
Id. at *3; see Sebrite Agency,
Inc. v. Platt, 884 F. Supp. 2d 912, 917-18 (D. Minn. 2012) (“The
Court continues to believe that the narrower interpretation of the
CFAA is more consistent with statutory text, legislative history,
and the rule of lenity.” (citation omitted)).
Here, there is no allegation that Jessica Randt obtained
information that she was forbidden from accessing, and in fact, one
of her principal responsibilities was to implement a software
program to catalog Lube-Tech’s customer list. Peterson Dep. 47:1215; J. Randt Dep. 57:14-20.
Moreover, Lube-Tech does not allege
that it had any security measures or a computer-use policy in
place.
Peterson Dep. 91:12-16.
As a result, there is no evidence
that any defendant obtained information that they were forbidden
from accessing.
Therefore, summary judgment as to the CFAA claim
is warranted.
III.
Lanham Act
Lube-Tech
next
alleges
a
violation
of
the
Lanham
Act.
Specifically, Lube-Tech argues that the logo and manifest used by
6
Lee’s Oil are nearly identical to Lube-Tech’s and that they were
designed to create consumer confusion.3
The court separately
analyzes the Lanham Act claim as to each purported mark.
A.
Logo
Lube-Tech first argues that Lee’s Oil copied its logo.4
Both
logos include an oil drop, recycling sign and the name of the
respective entity.
See Rondoni Decl. Ex. J (comparison of logos).
“To prove a trademark infringement claim, a plaintiff must
show that it has a valid, protectible mark and that there is a
likelihood of confusion between its mark and the defendant’s mark.”
B&B Hardware, Inc. v. Hargis Indus., Inc., 569 F.3d 383, 389 (8th
Cir. 2009) (citation omitted).
Lube-Tech’s logo is not registered
with the United States Patent and Trademark Office, and thus it
bears the burden to establish that the logo is a protectable mark.
See Frosty Treats, Inc. v. Sony Computer Entm’t Am. Inc., 426 F.3d
1001, 1003 (8th Cir. 2005).
3
Lube-Tech also alleges that use of the name Lee’s Oil, was
“designed to create an implication of continuity from Randt Oil”
and that “this name was precluded by the Asset Purchase Agreement.”
Pls.’ Mem. Opp’n 19. Neither of these allegations, however, gives
rise to a claim under the Lanham Act.
4
The court notes that the mark in question is actually a
service mark. See 15 U.S.C. § 1127 (distinguishing trademark and
service mark). Such a distinction does not, however, alter the
court’s analysis. Mid-State Aftermarket Body Parts, Inc. v. MQVP,
Inc., 466 F.3d 630, 633 (8th Cir. 2006) (noting that distinction
between trademark and service mark “is not particularly relevant
for the purposes of the likelihood of confusion analysis” (citation
and internal quotation marks omitted)).
7
The
court
categorizes
marks
into
four
categories:
“(1) generic, (2) descriptive, (3) suggestive, or (4) arbitrary or
fanciful.”
omitted).
Id. at 1004–05 (citation and internal quotation marks
These categories have specific meanings:
A generic mark refers to the common name or
nature of an article, and is therefore not
entitled to trademark protection. A term is
descriptive if it conveys an immediate idea of
the ingredients, qualities or characteristics
of the goods, and is protectible only if shown
to
have
acquired
a
secondary
meaning.
Suggestive marks, which require imagination,
thought, and perception to reach a conclusion
as to the nature of the goods, and arbitrary
or fanciful marks, are entitled to protection
regardless of whether they have acquired
secondary meaning.
Id. at 1005 (citations and internal quotation marks omitted).
At
best, Lube-Tech’s logo is descriptive, as “the mark is seen on the
goods or services, [and] it immediately conveys information about
their nature.”
Am. Ass’n for Justice v. Am. Trial Lawyers Ass’n,
698 F. Supp. 2d 1129, 1142 (D. Minn. 2010) (citation omitted).
As
a result, to be protectable, Lube-Tech must demonstrate that the
mark has acquired secondary meaning.
See Frosty Treats, 426 F.3d
at
inquiry
1005
(making
secondary
meaning
in
examination
of
descriptive mark).
“Secondary meaning is an association formed in the minds of
consumers
between
the
mark
and
the
source
or
origin
of
the
product.”
Id. at 1005 (citations and internal quotation marks
omitted).
“The consuming public need not identify a source by
8
name, but must recognize the mark and associate it with a single
source.”
Am. Ass’n for Justice, 698 F. Supp. 2d at 1142-43
(citations and internal quotation marks omitted). The best indicia
of secondary meaning is direct evidence, such as “[c]onsumer
surveys and testimony of consumers.”
Aromatique, Inc.
v. Gold
Seal, Inc., 28 F.3d 863, 871 (8th Cir. 1994) (citation omitted).
Circumstantial evidence, however, can also be used to demonstrate
secondary meaning.
Such evidence may include: “the exclusivity,
length and manner of use of the mark; the amount and manner of
advertising; the amount of sales and number of customers; the
plaintiff’s established place in the market; and the existence of
intentional copying.” Frosty Treats, 426 F.3d at 1005-06 (citation
omitted).
The only evidence to support a finding of secondary meaning is
Lube-Tech’s claim of consumer confusion.
Specifically, Lube-Tech
alleges that “numerous customers ... were confused over the fact
that ... [defendants] falsely told them that Randt Recycling was no
longer in business.”
(same).
Houle Decl. ¶ 3; see Farnum Decl. ¶¶ 4-15
There is no evidence, however, that consumer confusion
resulted from the alleged similarity between the marks.
result,
Lube-Tech
has
made
no
showing
of
secondary
As a
meaning.
Therefore, the logo is not entitled to trademark protection, and
summary judgment is warranted.
9
B.
Manifest
Lube-Tech next argues that Lee’s Oil copied its manifest. The
court analyzes such a claim under the theory of trade dress
infringement.
See Insty*Bit, Inc. v. Poly-Tech Indus., Inc., 95
F.3d 663, 667 (8th Cir. 1996) (“The trade dress of a product is the
total image of a product, the overall impression created, not the
individual
omitted)).
features.”
(citations
and
internal
quotation
marks
To establish a claim for trade dress infringement,
Lube-Tech must demonstrate that its trade dress is: “(1) inherently
distinctive or acquired distinctiveness through secondary meaning;
(2)
nonfunctional;
and
(3)
its
imitation
would
result
in
a
likelihood of confusion in consumers’ minds as to the source of the
product.”
Gateway, Inc. v. Companion Prods., Inc., 384 F.3d 503,
507 (8th Cir. 2004) (citation omitted).
As an initial matter, the court notes that “[t]o recover for
trade-dress infringement under § 43(a) of the Lanham Act, a party
must first identify what particular elements or attributes comprise
the protectable trade dress.”
Tumblebus Inc. v. Cranmer, 399 F.3d
754, 768 (6th Cir. 2005) (citation omitted).
In other words, “it
will not do to solely identify in litigation a combination as ‘the
trade dress.’
Rather, the discrete elements which make up that
combination should be separated out and identified in a list.”
Abercrombie & Fitch Stores, Inc. v. Am. Eagle Outfitters, Inc., 280
F.3d 619, 634 (6th Cir. 2002) (citation and internal quotation
10
marks omitted).
Here, Lube-Tech identifies no discrete elements
that comprise the trade dress, and this alone warrants dismissal.
Moreover, Lube-Tech cannot demonstrate that the manifest is
nonfunctional.
A feature is functional “if it is essential to the
use or purpose of the article or if it affects the costs or quality
of the article.”
TrafFix Devices, Inc. v. Mktg. Displays, Inc.,
532 U.S. 23, 33 (2001) (citations and internal quotation marks
omitted).
In other words, “a functional feature is one the
exclusive use of [which] would put competitors at a significant
non-reputation-related
original)
(citation
disadvantage.”
and
internal
Id.
quotation
(alterations
marks
in
omitted).
Allowing Lube-Tech to trademark its manifest, which lists, among
other things, customer name, contact information and gallons of oil
received, see Rondoni Decl. Ex. J, would put competitors at a nonreputation-related disadvantage.
As a result, the manifest is not
subject to trade dress protection, and summary judgment on the
Lanham Act claim is warranted.
IV.
Remaining State Law Claims
The court has already dismissed the CFAA and Lanham Act
claims, the only claims for which original jurisdiction existed.
The court must now consider whether to exercise supplemental
jurisdiction over the remaining state-law claims.
See 28 U.S.C.
§ 1367(c)(3); Johnson v. City of Shorewood, Minn., 360 F.3d 810,
819 (8th Cir. 2004).
“[I]n the usual case in which all federal-law
11
claims are eliminated before trial, the balance of factors to be
considered under the pendent jurisdiction doctrine - judicial
economy, convenience, fairness, and comity - will point toward
declining to exercise jurisdiction over the remaining state-law
claims.”
Dodson v. Univ. of Ark. for Med. Scis., 601 F.3d 750, 756
(8th Cir. 2010) (per curiam) (quoting Carnegie-Mellon Univ. v.
Cohill, 484 U.S. 343, 350 n.7 (1988)).
Based on consideration of
the pendent jurisdiction factors, the court does not exercise its
discretion to take supplemental jurisdiction over the state-law
claims. Therefore, the court dismisses Lube-Tech’s remaining state
law claims without prejudice.
CONCLUSION
Accordingly, based on the above, IT IS HEREBY ORDERED that:
1.
Defendants’ motion for summary judgment [ECF No. 74] is
granted in part, consistent with this order;
2.
Plaintiffs’ Computer Fraud and Abuse Act and Lanham Act
claims are dismissed with prejudice;
3.
Plaintiffs’
state-law
claims
are
dismissed
without
prejudice;
4.
Defendants’ state-law counterclaims are dismissed without
prejudice; and
12
5.
The Clerk of Court is directed to return plaintiffs’
$5,000.00 bond [ECF No. 23] posted on August 16, 2011.
LET JUDGMENT BE ENTERED ACCORDINGLY.
Dated:
June 3, 2013
s/David S. Doty
David S. Doty, Judge
United States District Court
13
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