MISTER SOFTEE, INC. et al v. AMANOLLAHI

Filing 129

OPINION. Signed by Judge Kevin McNulty on 9/30/16. (jr)

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY

MISTER SOFTEE, INC., MISTER SOFTEE
SALES AND MANUFACTURING, LLC, and
SPABO ICE CREAM CORP.,
Plaintiffs,

Civ. No. 2: 14-CV01687(KM)(JBC)

OPINION

V.

REZA AMANOLLAHI,
Defendant.

MCNULTY, U.S.D.J.:
Before the Court are two motions by the Plaintiffs, Mister Softee, Inc.
(“MSI”), Mister Softee Sales and Manufacturing, LLC (“MSSM”), and Spabo Ice
Cream Corp. (“Spabo”). (I will generally ignore the distinction and refer to the
plaintiffs collectively as “Mister Softee.”) Mister Softee moves pursuant to Fed.
R. Civ. P. 56 for summary judgment against Defendant Reza Amanollahi
(“Amano”)’ (No. 108), and for release of an injunction bond obligation (No. 128).
An Order and Opinion by this Court dated July 1, 2014, (Nos. 29—30), granted
a preliminary injunction to enjoin Amano from infringing Mister Softee’s
federally registered trademarks and from violating non-compete provisions in
twenty-two Mister Softee Dealer Franchise Agreements (the “Franchise
2
Agreements”). See Mister Softee, Inc. v. Amanollahi, 2: 14-CV-0 1687 KM MCA,
2014 WL 3110000 (D.N.J. July 1, 2014) (hereinafter, “Amanollahi I’). A
condition of the July 1, 2014 Order was Mister Softee’s filing of a $50,000 bond
For the reasons stated in my July 1, 2014 Opinion, and consistent with both
parties’ briefmg, the Court will refer to the Defendant as “Amano.”
2
The preliminary injunction was ordered for a period of two years, expiring July
1,2016.

to secure Amano in the event he was found to have been wrongfully enjoined.
(See No. 31). Mister Softee now seeks to have that bond released.
Mister Softee’s motion for summary judgment asks this Court to
permanently enjoin Amano from using Mister Softee’s federally registered
trademarks and from violating the non-compete provisions. Mister Softee also
moves for summary judgment on claims not previously determined at the
preliminary injunction stage. Plaintiffs seek a ruling that they are entitled as a
matter of law to: (1) lost future royalties under the Franchise Agreements; (2)
amounts due under two promissory notes on ice cream truck sales (the “Truck
Notes”); (3) recovery under a theory of unjust enrichment of amounts MSSM
spent to repair Amano’s ice cream trucks; and (4) attorney’s fees under the
terms of the Franchise Agreements and Truck Notes as well as under the
Lanham Act, 15 U.S.C.

§ 1117. Moreover, the Plaintiffs seek summary

judgment in their favor on Amano’s counterclaims for (1) rescission of all 22
Franchise Agreements under the New York Franchise Act, N.Y. Gen. Bus. Law

§ 680 (the “NYFA”), and (2) breach of contract under the 22 Franchise
Agreements.
For reasons set forth below and in my Opinion accompanying the July 1,
2014 Order, the Court is persuaded that Plaintiffs have met their burden of
showing that a permanent injunction is proper as to both infringement of
Mister Softee’s trademarks and enforcement of the (now expired) non-compete
provisions. Plaintiff’s motion for summary judgment on this issue will therefore
be granted. Because I am satisfied that Amano was not wrongfully enjoined,
Mister Softee’s motion for release of the injunction bond will also be granted.
Additionally, summary judgment will be granted in favor of Mister Softee
for recovery of the balance due under the Truck Notes, entitlement to
Attorney’s fees, and on Amano’s counterclaims. Summary judgment will be
denied as to Mister Softee’s entitlement to future royalties and recovery under a
theory of unjust enrichment.
2

I. BACKGROUND
I assume the parties’ familiarity with the facts in this case, most of which
have not changed since I issued my July 1, 2014 Order and Opinion. For
clarity, those facts are summarized below, along with new facts put forth in
connection with the instant motion.

A. The Parties
MSI is a New Jersey Corporation and the franchisor of Mister Softee
mobile ice cream trucks. Those trucks are set up to sell ice cream and other
food products and novelties. (P1. Br. 4—5; Compl.

¶

9).3 MSSM is a New Jersey

For purposes of this opinion, citations to the record will hereinafter be
abbreviated as follows:

3

Complaint (ECF No. 1)

=

Compl.

Franchise Agreement, Reino Cert., Ex. D (ECF No. 108-4-6) FA
Truck Note, Reino Cert., Ex. E (ECF No. 108-6) at Exs. B = TN
Defendant’s Brief in Opposition to Plaintiffs Motion for Preliminary Injunction
(ECF No. 17) = Def. PT Br.
Plaintiffs Reply Memorandum of Law in Support of Their Motion for Preliminary
Injunction (ECF No. 18) = P1. P1 Reply
Amended Answer (ECF. No. 79)

Am. Answer

Plaintiffs Memorandum of Law in Support of Their Motion for Summary
Judgment (ECF No. 108-1) = P1. Br.
Certification of James F. Conway, Jr. In Support of Plaintiffs’ Motion for
Summary Judgment (ECF No. 108-2) = Conway Cert.
Certification of Frank A. Reino in Support of Plaintiffs’ Motion for Summary
Judgment (ECF No. 108-3) = Reino Cert.
Defendant’s Memorandum of Law in Opposition to Plaintiffs’ Motion for
Summary Judgment (ECF No. 118) = Def. Br.
Certification of Steen T. Keppler in Opposition to Plaintiffs Motion for Summary
Judgment (ECF No. 119) = Keppler Cert.
Certification of Reza Amanollahi in Opposition to Plaintiffs Motion for Summary
Judgment (ECF No. 121) = Amano Cert.
Plaintiffs Reply Memorandum of Law in Support of Their Motion for Summary
Judgment (ECF No. 123) = P1. Reply
Plaintiffs’ Statement of Undisputed Material Facts (ECF No. 125)
3

=

P1. SUF

limited liability company that constructs and sells Mister Softee trucks for use
by licensees and franchisees of MSI. (P1. Br. 4). Spabo is a New York
corporation and a sub-franchisor of MSI. Spabo has the exclusive right to sell
Mister Softee franchises in certain regions of the New York City boroughs of
Manhattan and the Bronx. (Id.)
MSI owns the trademarks for “Mister Softee,” related logos, and (as any
area resident can attest) a musical jingle, all registered on the Principal
Register of the United States Patent and Trademark Office (Registration Nos.
2128918, 0667335, 0663456, and 2218017). (Id. at 5). Mister Softee also owns
a federal trademark registration for the overall design of the Mister Softee ice
cream truck (No. 2906357). Spabo licenses the right to use MSI’s trademarks
to its franchisees under the Franchise Agreements. (Id). The Franchise
Agreements require franchisees to paint their Mister Softee trucks in a
particular blue and white color scheme, with decals of MSI’s trademarked
logos. (Id. at 8). The Franchise Agreements also govern other aspects of the
relationship between franchisees and either MSI or one of its sub-franchisors—
in this case, Spabo. (Id. at 5).
The defendant, Mr. Amano, is a New Jersey resident and a franchisee of
Mister Softee. (Compi.

¶J

5, 19; P1. Br. at 8). On June 20, 2007, Amano entered

into eight Franchise Agreements with Spabo. (P1. Br. 8; Compi.

¶

19). On

January 1, 2012, he entered into fourteen more Franchise Agreements with
Spabo, bringing the total to twenty-two. (Id.). All Franchise Agreements are
substantially similar. (see FAs). The Franchise Agreements directed Amano to
abide by several operating conditions, including that he park his trucks only at
337 Manida Street, Bronx, New York (“Manida Street Depot”) (P1. Br. 9; Compi.

¶

20).

Defendant’s Counterstatement of Material Facts in Opposition to Plaintiffs’
Motion for Summary Judgment (ECF No. 127) = Def. Counter.
4

Amano also entered into two Truck and Equipment Sale Agreements with
MSSM. Amano, as purchaser of the trucks, signed two Truck Notes attendant
to those agreements, dated June 1, 2009. The Truck Notes obligated Amano to
make instalment payments until the purchase price of the trucks were paid in
full. (P1. Br. 8; seeTNs).
B. The Franchise Agreement and Truck Note Provisions
The following provisions of the Franchise Agreements are relevant:
•

Section 3.1 sets the term of the Franchise Agreements at ten years,
“unless earlier terminated in accordance with [the Franchise
Agreement].”

•

Section 4.2 directs that Amano shall pay annual royalties to Spabo
equal to: (1) the greater of $1.70 per gallon of soft-serve ice cream or
frozen dessert mix purchased or $3,400.00 and (2) $0.38 per dozen of
hard ice cream and frozen dessert novelties purchased.

•

Section 5 provides that MSI and/or Spabo will provide training to
Amano ( 5.1); loan an operations manual to Amano ( 5.2); provide
periodic assistance to Amano as Spabo deems appropriate ( 5.3);
consult with Amano on initial and continuing inventory ( 5.4); and
provide Amano with continuing consultation and advice as Spabo deems
advisable ( 5.5).

•

Section 6.15 requires Amano to park and store his Mister Softee trucks
at a Mister Softee-sanctioned depot or storage yard. There is no dispute
that Amano was assigned to the Manida Street Depot. (see P1. Br. at 9).

•

Section 9 provides that Amano is to deliver all payments due to Spabo
on time (though no schedule is specified), with overdue payments
acquiring interest at the lesser of 18% annually or the maximum rate
permitted by law. Section 9 also provides, in part: “If you are in breach or
default of any monetary or nonmonetary material obligation under this
Agreement or any related agreement between you and Spabo, Mister

Mister Softee’s briefing mistakenly attributes this provision to Section 6.1. It
appears at Section 4.2 in all 22 agreements.

5

Softee and/or their affiliates, and Spabo and/or Mister Softee engages an
attorney to enforce its rights (whether or not formal judicial proceedings
are initiated), you shall pay all reasonable attorney’s fees, court costs
and litigation expenses.”
•

Section 16.2 (the “non-compete provision”) provides that Amano
cannot, for a two-year period, “directly or indirectly own, maintain,
engage in, be employed by, lend money to, extend credit to, or have any
interest in any other business which operates or licenses business
featuring primarily the sale or ice cream or other frozen confections with
the former Territory or within any System franchisee’s territory.”

•

Section 18.2 provides that Spabo has the right to terminate the
Franchise Agreements without an opportunity for cure, effective upon
delivery of notice of termination, if Amano commits certain breaches or
defaults. Pursuant to Section 18.2.4, the Agreements can be terminated
upon breach of any other agreements between Amano and Mister Softee.
Pursuant to Section 18.2.11, the Agreements can be terminated if Amano
voluntarily abandons his franchises or if he does not park his trucks in
the designated depot.

•

Section 19 sets forth post-termination obligations of former franchisees,
including, inter alia, ceasing use of and returning all trademarked items
and other intellectual property; paying Spabo and Mister Softee any fees
and monies owed; and complying with the non-compete provisions.

•

Section 20 provides that all notices, requests, and reports to be given
under the terms of the Franchise Agreements are to be in writing and
delivered by hand or mail with a return receipt requested.

•

Section 22.3 provides: “As a condition precedent to commencing an
action for damages or for violation or breach of this Agreement, you must
notify Spabo within thirty (30) days after the occurrence of the violation
or breach and failure to timely give notice shall preclude any claim for
damages.”

The following provisions of the Truck Notes are also relevant:
•

Section 11.1 permits MSSM to immediately accelerate all payments and
other amounts due under the Truck Note in the event Amano defaults

6

under the Truck Notes or, by cross-reference to Section 10 of the Truck
Notes, under any Franchise Agreements.
•

Section 13 provides that if MSSM uses an attorney to enforce “this
obligation” or protect the collateral under the Truck Note, Amano shall
pay MSSM the collection costs “and the costs of suit, including attorney’s
fees and costs in any appeal taken
.

.

.

.“

C. Proposed Transfer, Termination, and Plaintiffs’ Claims
Amano alleges that in 2009, he sold his franchises to four other
individuals: Thomas Fotinakopoulos, Anthony Tsaros, Michael Vasiardis, and
Tommy Dalageorgos (the “four transferees”), and has not personally engaged in
the retail sale of ice cream since that time. (Def. Br. 2—3; Amano Cert.

¶J

5—6,

13). The four transferees operated out of an ice cream truck depot owned by
another former Mister Softee franchisee, which is located in Long Island City
(the “Tsirkos depot”). At some point after the sale of the franchises, Amano
5
became the manager of the Tsirkos depot. (Def. PT Br. 1—3; Amano Cert.

¶J

9—

10). Later, in 2012, Amano managed a commissary at Spabo’s Manida Street
Depot. (Amano Cert.

¶

16).

The parties do not dispute that Mister Softee was aware of and approved
Amano’s sales to the four transferees, nor do they dispute that following the
sales, Amano remained responsible for collecting royalties and forwarding them
to Spabo. (See, e.g., Def. Br. 8 n.7). The parties’ explanations as to why Amano
retains this responsibility differ slightly, however.
Amano alleges this responsibility was the upshot of de facto agreements
with Mister Softee Vice President James F. Conway. The twenty-two franchises,
says Amano, were created solely for the benefit of the four transferees. Conway,
however, pressured Amano to remain the franchisee in title on the eight 2007
As noted in my preliminary injunction opinion, Mr. Tsirkos, too, stopped paying
Mr. Softee royalties, stopped parking his trucks at the designated depot, and was
enjoined from doing business pursuant to the non-compete provision. See Mister
Softee, Inc. v. Tsirkos, No. 14-CIV-1975, 2014 WL 2535114, at *7 (S.D.N.Y. June 5,
2014).
7

Franchise Agreements and also to become the franchisee in title on the
fourteen 2012 Franchise Agreements. (Def. Br. 3; Amano Cert.

¶J 11—12).

Amano also alleges that Conway required him to remain the responsible party
in title on the Truck Notes (Def. Br. 4; see Keppler Cert., Ex. B 30:15—3 1:17).
According to Amano, his name remains on each and every one of the relevant
contracts as the result of Conway’s coercion. (Def. Br. 4; Def. Counter.
16,

¶11

1819).6
The Plaintiffs, on the other hand, point out that Amano’s sale of the
franchisees was an instalment sale that will not be completed until 2019. They
contend that Amano retained title in order to secure the four transferees’
payment obligations. Only upon the final annual payment in 2019 will Amano
officially transfer the franchises pursuant to Section 17 of the Franchise
Agreements. (P1. P1 Reply 1; P1. SUF

¶11 18—19).7 It is undisputed, in any event,

that Amano’s name appears as the obligated party on each of the twenty-two
Franchise Agreements as well as the two Truck Notes.
Amano moved his trucks from the Manida Street Depot to the
unapproved Tsirkos Depot, which he manages, in contravention of Section
8
6.15 of the Franchise Agreements, and also stopped making payments under
the Truck Notes. (P1. Br. 11; Compi.

¶J 33—33). Mister Softee regarded this as a

manifestation of intent to abandon the Franchise Agreements. Mister Softee

Amano asserts he was only given the signature pages for the fourteen 2012
Franchise Agreements, “which he was compelled to sign,” and that he was also
“compelled to sign” the two Truck Notes even though the four transferees were the
actual purchasers and titleholders of the trucks. (Def. Br. 4; Amano Cert. ¶1113—17).
He claims he feared Mister Softee would “push” him out of his job at the Manida Street
Depot commissary if he resisted. (Amano Cert. ¶ 17). Because neither Amano’s
memorandum of law in opposition nor his Amended Answer raises duress as a defense
to breach of contract, I consider these allegations as intended only to portray Mister
Softee’s sharp management and litigation practices.
Pursuant to Section 17, Spabo had the right to approve any proposed assignment
of the Franchise Agreements by Amano to third parties.
8
Amano submits that it was the four transferees, not he, that moved the trucks
out of the Manida Street Depot, since he had already sold his franchises by that time.
(See Keppler Cert., Ex. B 25:20—26:5).
6

8

therefore sent Amano a notice of termination on February 18, 2014, which
Amano received the following day. (P1. Br. 11).
Neither Amano’s relocation to the unapproved depot nor Amano’s receipt
of the notice is disputed. What is disputed is Amano’s compliance with his
post-termination obligations—mainly, ceasing use of and returning Mister
Softee’s trademarks and other intellectual property and adhering to the noncompete provisions of the Franchise Agreements. (P1. Br. 11). Mister Softee
alleges that Amano breached these obligations when his trucks continued to be
operated—unaltered in appearance and in his former Mister Softee territories—
following termination. (Id.).
Amano denies responsibility for the four transferees’ use of the trucks
and trademarks. (Def. Br. 1). He admits to having “pass-through” responsibility
for forwarding payments from the four transferees to Mister Softee. (Def. Br. 8
n.7; Amano Cert.

¶

14). He stresses, however, that after his transfer of the

franchises, he personally participated in the ice cream industry only by
managing an ice cream wholesale business located at the Tsirkos Depot. (Def
Br. 2—3; Amano Cert. ¶j 9—10).9
This Court previously found Amano’s abdication of responsibility
unavailing, and explained:
Amano, however, is still the owner of the franchises; he is the signer
of the twenty-two Franchise Agreements on which Mister Softee
bases its claims. He says he is the franchisee only “on paper,” but
the “paper” in question is a binding contract. Under the Agreements,
Amano is the person obligated to de-identify the trucks, return all
copyrighted and trademarked materials, and cease using them. No
one denies that these trucks are still in use and are still selling
Mister Softee products under the Mister Softee trademark.

Amano also states in a certification submitted with his briefing that in 2012, at
the Manida Street Depot, he managed a commissary owned and operated by Spabo.
(Amano Cert. ¶ 16). Assuming that this might technically involve the retail sale of ice
cream, I assume that Mister Softee would not regard it as a violation of the noncompete provision.

9

Amano has outsourced the operation of the infringing trucks, but
he is still the responsible party. The four transferees have not taken
over the franchises; even if the franchises had not been cancelled,
the actual transfer would not have taken place earlier than 2019,
when the last instalment payment was made on the notes. Having
maintained title to the trucks, and stayed on the Agreements as
franchisee to secure that debt, Amano cannot walk away from that
status for purposes of these claims only.
Amanollahi I at *6. Amano has not raised any new colorable defense or
submitted additional evidence to disturb this finding.
In addition to infringement and non-compete claims, Mister Softee
alleges that Amano owes certain amounts as well as attorney’s fees and costs
under the Franchise Agreements and Truck Notes.’° Under the Franchise
Agreements, in addition to attorney’s fees and costs, Spabo seeks the minimum
$3,400/year royalty fee multiplied by the number of years remaining in the
term of the Franchise Agreements, which amounts to $462,400 for all 22
franchises (P1. Br. 23—24). Under the Truck Notes, Amano allegedly owes MSSM
a balance of $10,530.45.” MSSM also seeks $920.40 for repairs and
maintenance performed on the trucks under a theory of unjust enrichment. (P1.
Br. 12).
Amano repeats that because he sold his franchises to the four
transferees, who are the “true owners and users” of the two trucks—all with
the knowledge of Mr. Softee—he cannot be liable for royalties or outstanding
payments under the contracts he signed. (Def. Br. 13—14). For these reasons,
he contends, he also could not have been unjustly enriched by repairs made to

Amano suggests that because it is really the four transferees who are in default
of their obligations under the Franchise Agreements and Truck Notes, they are
“arguably” necessary parties under Federal Rule of Civil Procedure 19(a)(1). There has
been no motion to join them.
10

The Mister Softee Plaintiffs arrive at this sum pursuant to Section 11.1 of the
Truck Notes, which allows MSSM to accelerate all payments due upon default.
Plaintiffs allege Amano failed to make August 2013 and September 2013 payments for
lesser amounts. Acceleration of all payments offset by $100,000 MSSM purportedly
collected from the four transferees, then adding interest, results in a balance of
$10,530.45, as of January 18, 2016. (see P1. Br. 12).
11

10

the two trucks. (Id. at 15). Finally, he challenges Plaintiffs’ requests for
attorney’s fees as premature and inappropriate. (Id. at 18—19).
D. Amano’s Counterclaims
Amano has asserted counterclaims for breach of Spabo’s Section 5
obligations to Amano under the Franchise Agreements and for its violation of
NYFA Section 683, which requires franchisors to register an offering prospectus
with the New York Department of Law and to furnish a copy to franchisees.
(Am. Answer

¶J 15—34 & p. 8). Amano seeks compensatory damages, rescission

of the 22 Franchise Agreements, and attorney’s fees and costs. (Id.). Amano
does not cross-move for summary judgment on his counterclaims and does not
dispute Plaintiffs’ argument that his NYFA counterclaim fails as a matter of law
in light of uncontroverted evidence that Amano was “provided” with at least one
prospectus. (Def. Br. 15; see P1. Reply 7).
The Mister Softee Plaintiffs submit no evidence to counter Amano’s
deposition testimony that MSI and Spabo failed to train him, consult on
inventory, provide ongoing consultation and advice, assist with and enforce
quality control measures, and provide a safe and sanitary warehouse
environment at the ice cream truck depot to which it designated Amano’s
trucks. (See Def. Br. 16 (citing Keppler Cert., Exs. A—B. (Amano’s 2014 and
2015 deposition testimony))). Rather, in rejoinder, Mister Softee relies
exclusively on Section 22.3 of the Franchise Agreements, which requires 30
days’ notice prior to commencement of any action for damages. (P1. Reply 8).
They contend that Amano’s failure to satisfy this condition precedent bars his
breach of contract counterclaims.
E. Procedural History
The procedural history is extensive, but the pertinent motion practice is
as follows. Following my July 1, 2014 Order and Opinion granting a
preliminary injunction, Plaintiffs filed a July 24, 2014 motion, replete with
supporting evidence, to hold Amano and the four transferees in contempt for
violating the July 1, 2014 Order (ECF No. 32). Plaintiffs filed a motion for
11

replevin on August 6, 2014 (ECF No. 41), seeking to take possession of the two
trucks on which Amano had failed to make payments under the Truck Notes.
The motion for replevin was terminated by Order of the Court (Magistrate
Judge Steven C. Mannion) dated October 6, 2014, referring the case to
mediation pursuant to Local Civ. R. 301.1 (ECF No. 58). Following a settlement
conference on August 13, 2015, the parties filed a Stipulated Order in lieu of
the contempt motion (ECF No. 97). Therein, Amano denied wrongdoing but
agreed, inter alia, (1) to inform any owner or operator of infringing ice cream
trucks parked at his employer’s depot that they must de-identify their trucks of
all Mister Softee trademarks and trade dress features or else (2) to eject the
offending party from the depot. The Court (Magistrate Judge James B. Clark,
III) ordered the same on August 25, 2015 (ECF No. 98).
Now before the Court is Plaintiffs’ motion for summary judgment.
II. LEGAL STANDARD
Federal Rule of Civil Procedure 56(a) provides that summary judgment
should be granted “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.”
Fed. R. Civ.P. 56(a); see also Anderson v. Liberty Lobby, Inc., 477 U.S. 242,
248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986); Kreschollek v. S. Stevedoring Co.,
223 F.3d 202, 204 (3d Cir. 2000). In deciding a motion for summary judgment,
a court must construe all facts and inferences in the light most favorable to the
nonmoving party. See Boyle v. County of Allegheny Pennsylvania, 139 F.3d
386, 393 (3d Cir. 1998). The moving party bears the burden of establishing
that no genuine issue of material fact remains. See Celotex Corp. v. Catrett, 477
U.S. 317, 322—23, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). “[Wlith respect to an
issue on which the nonmoving party bears the burden of proof.

.

.

the burden

on the moving party may be discharged by ‘showing’—that is, pointing out to
the district court—that there is an absence of evidence to support the
nonmoving party’s case.” Celotex, 477 U.S. at 325.

12

en, the non-moving
Once the moving party has met that threshold burd
is some metaphysical doubt
party “must do more than simply show that there
v. Zenith Radio Corp., 475
as to material facts.” Matsushita Elec. Indus. Co., Ltd.
. The opposing party
U.S. 574, 586, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986)
issue as to a material fact
must present actual evidence that creates a genuine
Civ. P. 56(c) (setting forth
for trial. Anderson, 477 U.S. at 248; see also Fed. R.
rely to support its assertion
types of evidence on which nonmoving party must
and
ported allegations
that genuine issues of material fact exist). “[Ujnsup
t.” Schoch v. First Fid.
pleadings are insufficient to repel summary judgmen
see also Gleason v. Norwest
Bancorporation, 912 F.2d 654, 657 (3d Cir. 1990);
nonmoving party has created
Mortg., Inc., 243 F.3d 130, 138 (3d Cir. 2001) (“A
sufficient evidence to allow a
a genuine issue of material fact if it has provided
g party has failed “to make a
jury to find in its favor at trial.”). If the nonmovin
element essential to that
showing sufficient to establish the existence of an
burden of proof at trial,
party’s case, and on which that party will bear the
.

.

.

a complete failure of proof
there can be ‘no genuine issue of material fact,’ since
g party’s case necessarily
concerning an essential element of the nonmovin
& Sur. Co., 972 F.2d 53,
renders all other facts immaterial.” Katz v. Aetna Cas.
55 (3d Cir. 1992) (quoting Celotex, 477 U.S. at 322—23).
t’s role is not to
In deciding a motion for summary judgment, the cour
er, but to determine
evaluate the evidence and decide the truth of the matt
, 477 U.S. at 249, 106 S.
whether there is a genuine issue for trial. Anderson
ince of the fact finder. Big
Ct. 2505. Credibility determinations are the prov
1358, 1363 (3d Cir.1992).
Apple BMW Inc. v. BMWof N. Am., Inc., 974 F.2d
operate in a
The summary judgment standard, however, does not
ment, the judge must view
vacuum. “[I]n ruling on a motion for summary judg
tantive evidentiary
the evidence presented through the prism of the subs
254, 106 5. Ct. 2505,
burden.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242,
en” is discussed in the
2513, 91 L. Ed. 2d 202 (1986). That “evidentiary burd
following sections.
13

III.

DISCUSSION
Mister Softee’s Claims
A. Permanent Injunction
Mister Softee asks me to convert my preliminary injunction order into a

permanent one. In support of his request, he points to Amano’s failure to
adduce new facts. (P1. Reply 2). Because I agree that Amano has not presented
evidence to create a genuine dispute as to material facts, I will briefly recast my
previous findings under the appropriate standard and issue a permanent
injunction. See Ciba-Geigy Corp. v. Bolar Pharm. Co., 747 F.2d 844, 847 (3d
Cir. 1984) (lamenting the “confusion created when a district court converts an
opinion granting a preliminary injunction into an opinion granting a permanent
injunction without expressly recasting its findings accordingly”).
I must consider the following four factors in determining whether to
grant a permanent injunction: (1) whether Mister Softee has actually succeeded
on the merits; (2) whether denial would irreparably harm Mister Softee; (3) a
balancing of the harm that an injunction would inflict on Amano; and (4)
whether the injunction would be in the public interest. Shields v. Zuccarini, 254
F.3d 476, 482 (3d Cir. 2001); see also Amoco Prod. Co. v. Viii. of Gambeil, AK,
480 U.S. 531, 546 n.12, 107 S. Ct. 1396, 1404 n.12 (1987) (“The standard fora
preliminary injunction is essentially the same as for a permanent injunction
with the exception that the plaintiff must show a likelihood of success on the
merits rather than actual success.”).
1. Trademark Infringement
To state a Lanham Act claim for trademark infringement, 15 U.S.C.

§ 1114, and unfair competition, 15 U.S.C. § 1 125(a)(1), a plaintiff must show
three elements: “(1) it has a valid and legally protectable mark; (2) it owns the
mark; and (3) the defendant’s use of the mark to identify goods or services
causes a likelihood of confusion.” A & H Sportswear, Inc. v. Victoria’s Secret
Stores, Inc., 237 F.3d 198, 210 (3d Cir. 2000). At the time I issued the
preliminary injunction to Mister Softee, the evidence was undisputed that
14

somebody had infringed Mister Softee’s valid trademarks; Amano simply denied
that he was personally responsible. Amanollahi 1, 2014 WL 3110000, at *6.
Amano concedes the validity and ownership of Mister Softee’s marks, but
argues that it was the four transferees, not he, that “used” the Mister Softee
marks. (Def. Br. 7, 10). These bare allegations miss the mark where, as here,
the Plaintiffs have put forth undisputed evidence that Amano was the
franchisee; that the four transferees continued to use Mister Softee’s marks on
Amano’s trucks in an unquestionably confusing manner after termination of
the Franchise Agreements; and that Amano supplied goods and services to the
four transferees’ illegal operations in the form of parking, supplies, and
collection of royalties. (E.g., Reino Cert., Ex. A 36:15—19; 42:3—43:2; Def. Br. 8
n.7). See 800-JR Cigar, Inc. v. GoTo.com, Inc., 437 F. Supp. 2d 273, 280
(D.N.J.2006) (“The theory of contributory infringement.

.

.

requires proof of

either an intent to induce another to infringe a trademark or continued supply
of goods or services to one whom the supplier (contributory infringer) knows or
has reason to know is engaging in trademark infringement.”).
Amano denies that he is the franchisee under any of the Franchise
Agreements (Def. Counter.

¶J 2 1—31). But these binding contracts leave no

doubt that Amano bears legal responsibility to abide by their terms, and no
12

At best, Amano’s argument that he was “coerced” into remaining the
responsible party only “on paper” amounts to a defense that prior or contemporaneous
agreements altered the plain meaning of the Franchise Agreements and Truck Notes—
indeed altered them to the extent that he was not in fact obligated by the terms of the
contracts at all. Even if Amano were to expressly make this argument (he does not),
however, it would fail. As Section 21.1 of the Franchise Agreements state, “This
agreement reflects the entire agreement between parties and may not be changed
except by a written document signed by both parties.” (FA § 21.1). This merger clause
requires “full application of the parol evidence rule to bar the introduction of extrinsic
evidence to alter, vary, or contradict the terms” of the Franchise Agreements. Ixe
Banco, S.A. v. MBNA Am. Bank, N.A., No. 07 CIV. 0432 (LAP), 2008 WL 650403, at *7
(S.D.N.Y. Mar. 7, 2008) (citing Jarecki v. Shung Moo Louie, 95 N.Y.2d 665, 669 (N.Y.
2001)).
12

Amano also implies in a footnote that the Franchise Agreements Mister Softee
has submitted as part of the record on this motion were manipulated and that his
signatures were obtained by fraud in the factum. (See Def. Br. 18 n. 14)). Amano offers
15

evidence has been adduced to disrupt this Court’s previous finding
that, as the
legally responsible individual, Amano also contributed to the infring
ement of
Mister Softee’s trademarks. As I explained at the preliminary injunction
stage:
Amano is currently supplying ice cream products to the four
transferees currently operating the Mister Softee trucks. He was
collecting their royalty payments and (at least for a time) forwarding
them to Mister Softee. (Amano Dep. Tr. at 42:3-43:23). Their
infringing sales are certainly the source of the four transferees’
payments to Amano on the promissory notes. He is profiting from
their infringement, and he is indisputably aware of it.
Amano admits to providing assistance to the infringers in the form
of depot services, including overnight parking and storage, in return
for rental payments. P1. Reply at 7 (citing Amano Dep. Tr. 38:7—21,
42:3-43:23). The depot in question is an unauthorized site under
the Agreements Amano signed. And the court is not blind to the fact
that Amano is managing the depot as an employee of Tsirkos,
another defaulting franchisee who has continued to use M[iste
r]
Softee’s trademarks on his trucks. Amano does not really deny any
of this.
Amanollahi j, 2014 WL 3110000, at *8. See generally id. at *6_8.
Amano’s alleged compliance with the preliminary injunction is no defens
e
to entry of a permanent one. (See Def. Br. 11—12). “[A] defendant cannot
automatically moot a case simply by ending its unlawful conduct
once sued.
Otherwise, a defendant could engage in unlawful conduct, stop when
sued to
have the case declared moot, then pick up where he left off.” Alread
y, LLC v.
Nike, Inc., 133 S. Ct. 721, 727, 184 L. Ed. 2d 553 (2013) (citation
omitted)
(distinguishing between situations where a defendant’s conduct cannot
reasonably be expected to recur from situations where a defend
ant is free to
return to his old ways). See also United States v. Gregg, 32 F. Supp.
2d 151,
158—59 (D.N.J. 1998), aff’d, 226 F.3d 253 (3d Cir. 2000) (protestors’
no supporting evidence or genuine argument, and at any rate, such a defens
e fails
where, as the record shows here, the aggrieved party had a basic unders
tanding of the
contract he executed. See, e.g., Provident Bank v. Cmty. Home Mor’tg. Corp.,
498 F.
Supp. 2d 558, 574 (E.D.N.Y. 2007) (“Where, as here, there is no eviden
ce that the
mortgagors were unaware that they were signing mortgage notes, or were
falsely
informed as to the nature of the notes, fraud in the factum cannot be asserte
d as a
defense
.

.

.

16

observance of preliminary injunction did not moot case and eliminate the need
for a permanent injunction).
Construing all inferences in favor of Amano, I nevertheless find that there
is no genuine dispute of material fact as to Amano’s contributory infringement
of the Mister Softee marks.
2. The Non-Compete Provisions
Mister Softee asks that the preliminary injunctive relief based on the
non-compete covenant be extended to a permanent injunction. See Amanollahi
j, 2014 WL 310000, at *17_18 (limiting the scope of geographic and subject
matter restrictions to engaging in retail (but not wholesale) ice cream sales
within a five-mile radius of his former Mister Softee territories (rather than
within any franchisee’s territory)). Amano counters only that he is not
competing with the Plaintiffs and has not “for nearly two, full years.” (Def. Br.
11—12). To that extent, Amano is correct; the non-compete is for a term of two
years, and by its terms expired on July 1, 2016.
It is nevertheless necessary to rule on Mister Softee’s contentions. They
are not moot because Mr. Softee seeks release of the $50,000 bond posted to
secure the preliminary injunction. See Am. Bible Soc. v. Blount, 446 F’.2d 588,
594—96 (3d Cir. 1971) (because plaintiff had posted an injunction bond upon
issuance of a preliminary injunction, plaintiffs’ demand for a permanent
injunction was not moot despite effectively mooted subject matter); see also
Nokia Corp. v. InterDigital, Inc., 645 F.3d 553 (2d Cir. 2011) (holding that
wrongfully enjoined parties are entitled to a presumption in favor of recovery
against an injunction bond for provable damages). That is, Mister Softee must
show actual success, rather than a likelihood of success, on the merits of the
non-compete claims in order to demonstrate that Amano was not wrongfully
enjoined.
As I explained above, compliance with a preliminary injunction is not a
cognizable defense. To justify specific enforcement of the non-compete, Mister
17

Softee need only show that the restraint is reasonable, to the extent it protects
Mister Softee’s brand name, business goodwill, and ability to replace
terminated franchisees. See BDO Seidman v. Hirshberg, 93 N.Y.2d 382, 388—89
(N.Y. 1999); Carvel Corp. v. Eisenberg, 692 F. Supp. 182, 186 (S.D.N.Y.1988).
Amano has failed to present evidence contrary to the findings in my July 1,
2014 Opinion. In fact, he states that he does not contest the validity of the
non-compete provisions.’ (Def. Br. 11). There being no material facts in
3
dispute as to the enforceability of the non-compete provisions, I have no reason
to depart from my prior holding. See generally Amanollahi I, 2014 WL 3110000,
at *11_1414
3. Irreparable Harm and the Public Interest
I reach the same conclusions with respect to the irreparable harm and
public interest factors. At the preliminary injunction stage, Mister Softee
established irreparable injury to its business as a matter of law if Amano
continued to contributorily infringe the Mister Softee trademarks, and
established that its business goodwill and client relationships would be harmed
if the non-compete provision were not enforced. Amanollahi j, 2014 WL
3110000, at *14. Mister Softee also established that injunctive relief would
benefit the public by preventing consumer confusion and enforcing reasonable
contractual obligations. Id. at *13_15. Amano did not raise material factual
disputes as to those factors then, and does not do so now.

Amano’s contention that the Franchise Agreements were invalid at the inception
is discussed in connection with his counterclaim for rescission, infra.
‘4
In Amanollahi j, see icL at *4_13, I looked to the preliminary injunction opinion
of Judge Swain of the United States District Court for the Southern District of New
York in a similar case involving Mister Softee. Since then, Judge Swain has found for
the plaintiffs on the merits of their non-compete provision where the defendant failed
to present evidence contrary to findings made at the preliminary injunction stage. See
Mister Softee, Inc. v. Tsirkos, No. 14CV1975-LTS-RLE, 2015 WL 7458619, at *5
(S.D.N.Y. Nov. 23, 2015) (granting permanent injunction on motion for default
judgment).
13

18

In opposition, Amano alleges that he is not liable for trademark
infringement and has not competed with Mister Softee in years—incorrect and
irrelevant arguments, respectively. He also says he would be unduly burdened
by a permanent injunction, while simultaneously maintaining that he has no
intention of re-entering the ice cream business. (Def. Br. 12—13; see Reino
Cert., Ex. B 30:10—13). It is impossible to imagine how complying with federal
trademark law would unduly burden Amano. Amano also argues that a
permanent injunction will not benefit the public because children’s predilection
for ice cream makes them oblivious to distinctions between brands. This appeal
to intuition lacks evidentiary support, but at any rate, “‘brand indifferent’
customers do not count in the equation of likelihood of confusion.” McNeil
Nutritionals, LLC v. Heartland Sweeteners, LLC, 511 F.3d 350, 366 (3d Cir.
2007) (quoting 4 Thomas McCarthy, McCarthy on Trademarks and Unfair
Competition

§ 23:5 (4th ed. 2007)).
*

*

*

As there are no genuine factual disputes as to any of the requisite
factors, I am ruling in favor of Mister Softee as to both trademark infringement
and the non-compete provision. Mister Softee has not argued to extend the
expiration date of the non-compete provision, and this Court has not been
called upon to make any findings of fact on Mister Softee’s motion for
contempt, which might have warranted such an extension. (See Dkt. No. 97
(stipulated Order In Lieu of Contempt Motion)).’ On this record, I must find
5
that the non-compete provision expired on July 1, 2016. Therefore, so far as
the non-compete provisions in this case are concerned, Amano may engage in
the retail ice cream business in any of his former territories, provided he does
not infringe Mister Softee’s trademarks or violate any other provision of the
agreements. Like the preliminary injunction, the permanent injunction extends

15
Cf Mister Softee, Inc. v. Tsirkos, No. 14CV1975-LTS-RLE, 2015 WL 7458619, at
*5 (S.D.N.Y. Nov. 23, 2015) (extending the non-compete
beyond the two-year period
because two contempt orders found that defendant had continued to operate in the
restricted territories after the preliminary injunction).

19

to other persons who were in active concert or participation with Amano who
received actual notice of the injunction.
B. Recovery of Royalties
Beyond the permanent injunction, Mister Softee seeks a ruling that it is
entitled to future royalties it would have received under the Franchise
Agreements.
Section 19.2 requires Amano to pay Spabo “all unpaid fees” and “monies
owed” upon termination. (FA

§ 19.2). The Agreements were terminated as of

February 19, 2014. Amounts unpaid as of that date would have been owed.
What Spabo is claiming here, however, is an entitlement to lost future
royalties in the amount of $462,400. Mister Softee calculates that amount by
multiplying the number of remaining years on each of the 22 Franchise
Agreements as of February 19, 2014—the date of termination—by the $3,400
minimum annual royalty fee contemplated under Section 4.2 of the
agreements. (P1. Br. 23—24). Amano again simply denies liability under the
contracts by virtue of the 2009 sale of the franchises to the four transferees.
For the reasons discussed above, that argument is unavailing. If the
agreements had continued, Amano would have continued to owe the fees,
subject to reimbursement under whatever arrangement he has with the
transferees. But we are getting ahead of ourselves.
I must first consider the scope of Spabo’s entitlement to future royalties.
Under New York law, plaintiffs seeking lost future profits must show that the
16
loss was caused by the defendant’s breach of contract, that the amount lost
can be proven with reasonable certainty, and that the parties contemplated
this type of damages at the time the contract was made. Kenford Co. v. Erie
Cty., 67 N.Y.2d 257, 261 (N.Y. 1986). “[T]he damages may not be merely
speculative, possible or imaginary, but must be reasonably certain and directly
traceable to the breach, not remote or the result of intervening causes.” Id. In

Pursuant to Section 22.1 of the Franchise Agreements, New York law applies.
(See FAs).
16

20

determining whether the damages sought were within the reasonable
contemplation of the parties, the Court may consider “the nature, purpose and
particular circumstances of the contract known by the parties.” Travellers Int’l,
A.G. v. Trans World Airlines, Inc., 41 F.3d 1570, 1578 (2d Cir. 1994) (quoting
Kenford Co., Inc. v. County of Erie, 73 N.Y.2d 312, 319 (N.Y. 1989)). Often these
difficulties are addressed by the inclusion of a liquidated damages provision;
that was not done here.’
7
I therefore consider more fundamental principles of law. Hornbook law
supplies a starting point:
When one party commits a material breach of contract, the other
party has a choice between two inconsistent rights—it can either
elect to allege a total breach, terminate the contract and bring an
action or, instead, elect to keep the contract in force, declare the
default only a partial breach, and recover those damages caused by
that partial breach—but the nonbreaching party, by electing to
continue receiving benefits under the agreement, cannot then refuse
to perform its part of the bargain.
13 Williston on Contracts § 39:32 (4th ed.); see also VFS Fin., Inc. v. Falcon
Ffty LLC, 17 F. Supp. 3d 372, 380 (S.D.N.Y. 2014) (“New York’s doctrine of
election of remedies provides that ‘the non-breaching party must choose
between two remedies—it can elect to terminate the contract and recover
liquidated damages or it can continue the contract and recover damages solely
for the breach.”’ (quoting ESP Inc. v. Office of Corn ‘r of Baseball, 76 F. Supp. 2d
383, 387—88 (S.D.N.Y. 1999)).

17
I also have severe doubts as to whether future royalties for the entire remainder
of a ten-year term were reasonably within the contemplation of the parties. Indeed, the
provision imposing that ten-year term suggests that they were not contemplated: “The
term of this Agreement shall be for ten (10) years, unless earlier terminated in
accordance with this Agreement.
(FA § 3.1 (emphasis added)).
.

.

.“

It also does not seem equitable that Mister Softee may, without any effort to
mitigate, simply collect up to ten years’ worth of royalties on an agreement it
terminated. In connection with the preliminary injunction, I found that two years was
a reasonable duration for the non-compete, because that was an adequate time for
Mister Softee to obtain substitute franchisees. Neither side has submitted relevant
proofs, however, and Mister Softee, as the party with the burden of proof, will not
prevail on this issue.
21

The case law as to similar terminated franchise arrangements confirms
that lost future royalties are not routinely available as damages. In ATC
Healthcare Services, Inc. v. Personnel Solutions, Inc., a federal trial court
applying New York law to a terminated franchise agreement declined to award
lost future royalties where the plaintiff elected to terminate the contract rather
than sue for an ongoing breach based on missed royalty payments. The court
determined that the plaintiff’s own actions, i.e., the termination, and not the
defendant’s breach directly deprived it of future royalties that would have been
generated. No. 01 CV 762 CBA, 2006 WL 3758618, at *11_12 (E.D.N.Y. Dec.
19, 2006); see also Kissinger, Inc. v. Singh, 304 F. Supp. 2d 944, 949—51 (W.D.
Mich. 2003) (applying similar proximate cause analysis).
Other courts applying state laws similar to New York’s have consistently
reached the same result:
Defendants have cited multiple cases where future lost profits were
not awarded under franchise agreements where, as in this case, the
agreement was terminated by the franchisor, even when the breach
was caused by the franchisee’s failure to make royalty payments.
Kissinger, Inc. v. Singh, 304 F. Supp. 2d 944 (W.D. Mich. 2003);
Postal Instant Press, Inc. v. Sealy, 43 Cal. App. 4th 1704 (1996);
Burger King Corp. v. Hinton, Inc., 203 F. Supp. 2d 1357, 1366 (S.D.
Fla. 2002); I Can’t Believe It’s Yogurt v. Gunn, 1997 WL 599391, at
*2324 (D. Cob. Apr. 15, 1997).
Dunkin’ Donuts, Inc. v. Arkay Donuts, LLC, No. CIV. 05-387 (WHW), 2006 WL
2417241, at *5 (D.N.J. Aug. 21, 2006) (reaching the same result under New
Jersey law and collecting cases from other jurisdictions).
Here, Mister Softee decided to terminate Amano’s Franchise Agreements
because Amano moved his trucks out of the Manida Street Depot and stopped
making payments under the Truck Notes.’ Mister Softee faced a choice:
8

Mister Softee misstates that under Sections 18.2.11 and 18.2.4, the Franchise
Agreements automatically terminate upon Amano’s abandonment or breach of
agreements (i.e., leaving the Manida Street Depot and stopping payments on Truck
Notes) (see P1. Br. 10; P1. SUF ¶J 28—29). The contract language is clear, however, that
“SPABO has the right to terminate this Agreement, effective upon delivery of the notice
oftermination,” for these occurrences. (SeeFA 18.2, 18.2.4, 18.2.11; cf icLat 18.1
18

22

terminate the Agreements, or remain within the Agreements and sue for the
ongoing unpaid royalties. It chose the former. On the record currently before
me, Amano is not as a matter of law entitled to future royalties under the
Franchise Agreements. Amano’s motion for summary judgment must be denied
on this count.’
9
C. Recovery of Amounts Due Under the Truck Notes
Under the Truck Notes, Mister Softee seeks $9,348.21 allegedly due as of
May 18, 2015, plus 1.75% in prejudgment interest per month. Each Truck Note
provides that upon an event of default—which includes failure to make
payments due—MSSM has the right to accelerate all payments. (TN

§ 11. 1).20

The Truck Notes also clearly provide for 1.75% monthly interest on overdue
payments. (Id.

§ 4). Mister Softee submits evidence showing that Amano failed

to make scheduled monthly payments under the notes in August and
September of 2013. (Reino Cert., Ex. F). And a certification by Mister Softee
Vice President James F. Conway, Jr. attests that Mister Softee agreed to release
the liens on the two trucks secured under the notes in exchange for a
$100,000 payment by the four transferees, leaving a balance of $9,348.21.
(Conway Cert. ¶j 15—16). With prejudgment interest accruing from May 18,
2015, Mister Softee submits it is entitled to $10,530.45, as of January 18,
2016. (P1. Br. 12).
Amano does not offer evidence in opposition or dispute these overdue
amounts. Again, he only argues that he does not “own” the trucks and that
Mister Softee is aware of this fact. (See Def. Counter.

¶J 39—43). For reasons

(contemplating automatic termination of the Franchise Agreement upon certain other
occurrences)).
Judge Swain did award lost future royalties in Tsirkos, No. 14CV1975-LTS-RLE,
2015 WL 7458619, at *5 (S.D.N.Y. Nov. 23, 2015), but on a motion for default
judgment. Although consistent application of the franchise agreements is generally
desirable, in this contested matter I find otherwise.
19

Pursuant to Section 19, New Jersey law governs disputes arising out of the
Truck Notes. (TN § 7.1).
20

23

articulated in Amanollahi 1 see 2014 WL 3110000, at *6, and above, this
argument fails. Amano admits both to being responsible for payments under
the Truck Notes and to being the legal signatory and debtor under the notes.
(See, e.g., Reino Cert., Ex. A 35:19—38:6 (testifying that he signed and took
responsibility for payments under the Truck Notes even though the Four
Transferees immediately took possession of the trucks because he expected to
profit from their business at his depot commissary)). Having introduced no
written amendments releasing him or naming the four transferees as debtors
under the Truck Notes, Amano cannot simply remove himself from the process
and tell Mister Softee to go after the transferees. MSSM is entitled to recover
the $9,348.21 balance from Amano.
Whether MSSM may recover pre-judgment interest on this balance
requires additional analysis. Pre-judgment interest “on contract and equitable
claims is based on equitable principles,” and lies within the court’s discretion.
County of Essex v. First Union Nat. Bank, 186 N.J. 46, 61, 891 A.2d 600, 608
(2006) 21 The district court may exercise this discretion based upon
“considerations of fairness,” and an award of prejudgment interest may be
denied “when its exaction would be inequitable.” Thabault v. Chait, 541 F.3d
512, 533 (3d Cir.2008) (quoting Ambromovage v. United Mine Workers of Am.,
726 F.2d 972, 982 (3d Cir. 1984)). Under New Jersey law, “the purpose of
prejudgment interest is to ‘compensate the plaintiff for the loss of income that
would have been earned on the judgment had it been paid earlier.”’ Id. (quoting
Ruffv. Weintraub, 105 N.J. 233, 244—45 (1987)).
Finding no genuine dispute of material facts and, finding no reason to
depart from the contractual interest rate or the unchallenged date of accrual
MSSM submits, I will grant summary judgment in favor of Mister Softee on the
balance of $9,348.21 plus prejudgment interest at the 1.75% monthly rate to
New Jersey law governs this Court’s ability to award pre—judgment interest. See
Jarvis v. Johnson, 668 F.2d 740, 748 (3d Cir. 1982) (reaffirming a district court ruling
that the New Jersey pre-judgment interest rule had to be applied in federal court
21

under Erie).

24

which the parties contractually agreed, accruing from May 18, 2015. Postjudgment interest will accrue in accordance with 28 U.S.C.

§ 1961 from the

date judgment is entered.
D. Unjust Enrichment
Under a theory of unjust enrichment, Mister Softee seeks to recover
22
$1,362.15, inclusive of interest, that MSSM spent to repair Amano’s two
trucks secured under the Truck Notes.
In broad strokes, to recover for unjust enrichment under New Jersey
23
law, a plaintiff must show first, that it conferred a benefit on the defendant
and second, that the defendant’s retention of that benefit without payment
would be unjust. Heyman v. CitiMortgage, Inc., No. CV 14-1680 (KM), 2015 WL
5921199, at *9 (D.N.J. Oct. 9, 2015). More specifically, the plaintiff must show
that it “expected remuneration from the defendant at the time it performed or
conferred a benefit and that the failure of remuneration enriched defendant
beyond its contractual rights.” Nelson v. Xacta 3000 Inc., No. CIV.A.08-5426
(MLC), 2009 WL 4119176, at *7 (D.N.J. Nov. 24, 2009) (quoting Va. Sur. Co. v.
Macedo, No. 08—5586, 2009 WL 3230909, at *11 (D.N.J. Sept.30, 2009)). New
Jersey courts interpret the requirement that a plaintiff must confer a benefit on
the defendant as requiring that “the plaintiff allege a sufficiently direct

Mister Softee arrives at this figure by taking the $920.49 MSSM spent on
repairs plus 1.5% monthly prejudgment interest from October 1, 2013, to the time of
filing and subtracting an unspecified credit to Amano for $16.05. (P1. Br. 25; Reino
Cert., Ex. H).
22

As Mister Softee’s unjust enrichment claim is asserted outside of the contracts,
the Franchise Agreements’ and Truck Notes’ choice of law provisions do not apply. As
a federal court adjudicating state law claims that are pendent to a federal trademark
claim, I must apply New Jersey choice of law rules. Klaxon Co. v. Stentor Elec. Mfg. Co.,
313 U.S. 487, 496—97, 61 S. Ct. 1020, 102 1—22, 85 L. Ed. 1477 (1941). As numerous
courts have held that unjust enrichment laws do not significantly vary from state to
state, and the parties point to no relevant conflict, I will apply New Jersey law. See
Snyder v. Famam Companies, Inc., 792 F. Supp. 2d 712, 723 (D.N.J. 2011) (collecting
cases finding no actual conflict among states’ unjust enrichment laws).

23

25

relationship with the defendant to support the claim,” or else a mistake on
24
the part of the person conferring the benefit, see Napier v. Pub. Serv. Elec. &
Gas Co., No. A-4532--12T1, 2014 WL 3444670, at *4 (N.J. Super. Ct. App. Div.
July 15, 2014). See also Avram v. Samsung Elecs. Am., Inc., No. CIV. 2:11-6973
(KM), 2013 WL 3654090, at *21 (D.N.J. July 11, 2013).
An unjust enrichment claim must fail, however, where an express
contract governs the relationship between the parties on the same subject
matter. See In re Phillis/Magnavox Television Litig., No. CIV.A. 09-3072 PGS,
2010 WL 3522787, at *10 (D.N.J. Sept. 1, 2010); Moser v. Mimer Hotels, Inc., 6
N.J. 278, 280 (1951)) (“It is a well settled rule that an express contract excludes
an implied one. An implied contract cannot exist when there is an existing
express contract about the identical subject.” (internal quotation marks
omitted)).
Neither party attempts to apply these nuanced requirements to the facts
at hand with any particularity. Amano argues he was not “enriched”—i.e., that
the four transferees, not he, benefited. Indeed, he claims he was not even
aware of the repairs at the time they were made. (Def. Br. 15; Def. Counter.

¶J

46—47). Mister Softee contends that regardless of who actually possessed

the trucks, Amano benefitted from the repairs because the four transferees
paid rent to Amano to park the trucks in his depot and also purchased
supplies from Amano’s commissary. (P1. Reply 6—7).
Mister Softee has failed to show the absence of genuine and material
issues of fact. There is no evidentiary basis for Mister Softee’s claim that it
reasonably expected remuneration from Amano for repairs. Work orders and a
monthly billing statement sent to “Metro Softee Inc.” at the Manida Street
Depot do not really speak to the issue. (See Reino Cert., Exs. G—H).

Nelson v. Xacta 3000 Inc., Civ. No. 08-5426, 2009 WL 4119176, at *7 (D.N.J.
Nov.24, 2009) (citing Maniscalco v. Brother Int’l Corp., 627 F. Supp. 2d 494, 505—06
(D.N.J. 2009)).
24

26

There may also be an issue as to whether the parties’ explicit contract
allocates repair expenses to Mister Softee or to the franchisee. Mister Softee
submits work orders for the repairs and seeks prejudgment interest at a rate of
1.5% per month, seemingly on the basis of a monthly billing statement. (See
Id.). The silence of the Franchise Agreements may mean that the parties did not
think it was important, or left it to be worked out informally. Finally, I cannot
find any manifest injustice in MSSM’s expenditure of a relatively small sum to
service trucks from which its affiliates were still profiting in October of 2013
(i.e., over four months prior to termination of the Franchise Agreements).
Mister Softee’s motion for summary judgment on this claim is therefore denied.
E. Recovery of Attorney’s Fees
Mister Softee asks that I rule as a matter of law that it is entitled to an
award of reasonable attorney’s fees and litigation costs pursuant to Section 9 of
the Franchise Agreements, Section 13 of the Truck Notes, and the Lanham Act
itself, see 15 U.S.C. § 1117(a). Under New York law, which applies to the
Franchise Agreements, “a contract that provides for an award of reasonable
attorneys’ fees to the prevailing party in an action to enforce the contract is
enforceable if the contractual language is sufficiently clear.” NetJets Aviation,
Inc. v. LHC Commc’ns, LLC, 537 F.3d 168, 175 (2d Cir. 2008). Similarly, under
New Jersey law, which applies to the Truck Notes, “contracts which permit the
aggrieved party to recover fixed or reasonable attorney’s fees as part of his or
her damages are enforceable unless some larger public policy mandates a
contrary result.” Merrill Lynch Bus. Fin. Servs. Inc. v. Comtel Techs., Inc., No.
*3 (D.N.J. Nov. 14, 2006) (quoting
CIV. 06-4247 (DRD), 2006 WL 3327885, at
Befer v. Merling, 322 N.J. Super. 124, 141 (App. Div. 1999)).
Section 9 of the Franchise Agreements provides that, if a franchisee is in
breach of any material obligation under the Franchise Agreements or related
agreements, and if Mister Softee “engages an attorney to enforce its rights
(whether or not formal judicial proceedings are initiated), [franchiseej shall pay
all reasonable attorney’s fees, court costs and litigation expenses [Mister Softee]
27

incurs.” (FA

§ 9). Section 13 of the Truck Notes provides that if MSSM uses an

attorney “to enforce this obligation or to protect the collateral secured,” the
buyer “shall pay to MSSM the collection costs incurred.

.

.

and the costs of

suit, including attorney’s fees and costs in any appeal taken, but in no event
shall this sum for attorney’s fees be less than 15% of the outstanding and
unpaid indebtedness.” (TN

§ 13).

That seems clear enough. See Mister Softee, Inc. v. Tsirkos, 2015 WL
7458619, at *6 (awarding Mister Softee attorney’s fees under the same
provision of the franchise agreements on a motion for default judgment). I
perceive no ambiguity requiring factual development at trial. See Celanese Ltd.
v. Essex Cty. Improvement Auth., 404 N.J. Super. 514, 528 (App. Div. 2009)
(“The interpretation of a contract is ordinarily a legal question for the court and
may be decided on summary judgment unless there is uncertainty, ambiguity
or the need for parol evidence in aid of interpretation.” (internal quotation
marks omitted)); Gen. Phoenix Corp. v. Cabot, 300 N.Y. 87, 92 (1949) (“Where
the intention of the parties may be gathered from the four corners of the
instrument, interpretation of the contract is a question of law.”).
Amano does not argue otherwise, or identify any countervailing public
policy; he asserts only that an award of attorney’s fees is premature and that it
would be inequitable to permit Mister Softee to “profit off their own misdeeds.”
(Def. Br. 18). Mister Softee’s entitlement to fees, however, is clear. To fix the
amount, I agree, would be premature, but I will require appropriate
submissions in connection with entry of final judgment. See Merrill Lynch Bus.
Fin. Servs. Inc., 2006 WL 3327885, at *3 (“[A] claim for attorney’s fees ‘is an
element of damages which must be proved in the same manner as any other
item and which must be assessed by the finder of fact as a matter of right and
in the actual amount established by the proofs.”’ (quoting Befer, 322 N.J.
Super. at 141)); Latona v. Latona, 621 N.Y.S.2d 973 (App. Div. 1994)
(“Attorney’s fees should not be awarded without conducting a hearing or
requiring proof by affidavit substantiating the attorney’s fees requested.”).
28

Because Mister Softee is entitled to reasonable attorney’s fees under the
contracts, I do not reach the redundant issue of attorney’s fees under 15 U.S.C.

§ 1117(a). Upon final judgment in this action, Mister Softee may prove up its
attorney’s fees and expenses pursuant to Federal Rule of Civil Procedure 54(d),
and Amano will be given the opportunity to dispute any such submission.
Amano’s Counterclaims
Mister Softee seeks to dispose of Amano’s counterclaims by summary
judgment. Its burden is to show that there is no genuine dispute of material
fact, or more simply that there is an absence of evidence supporting Amano’s
case. See Celotex, 477 U.S. at 325.
F. Rescission of the Franchise Agreements
I found in Amanollahi I that Amano’s claims for rescission under NYFA
Section 683 with respect to the eight 2007 Franchise Agreements are barred by
the three-year statute of limitations. I also found sufficient evidence that
25
Amano admitted receiving at least one prospectus satisfying Section 683. 2014
WL 3110000, at *11. Moreover, I found no evidence that any failure to provide
a prospectus was willful or material—a required showing for rescission of a
franchise agreement under New York General Business Law Section 691. Id. at
10. Amano has put forth no new evidence to challen
ge this preliminary
determination. Indeed, his brief offers no rejoinder at all to Plaintiffs’ argument
regarding this counterclaim. Finding no genuine dispute of material fact, I will
grant Mister Softee’s motion for summary judgment denying this counterclaim
for rescission.
G. Breach of the Franchise Agreements
Amano claims that Mister Softee breached its obligations under the
Franchise Agreements to provide training, periodic assistance, continuing
consultation, and advice on such subjects as inventory and quality control
standards. He also claims that Mister Softee breached its obligation to provide
25

Amano admits this much in his brief. (See Def. Br. 15).
29

a clean and safe warehouse environment at prescribed truck depots. (See Am.
Answer

¶J

32—34). Amano seeks money damages for these breaches. (Id.

¶

34

26
& p.8).
Mister Softee argues that Amano’s counterclaim should be disposed of as
a matter of law because Amano did not comply with the condition precedent of
27
30 days’ written notice set forth in Section 22.3 of the Franchise Agreements:
As a condition precedent to commencing an action for damages or
for violation or breach of this Agreement, you must notify Spabo
within thirty (30) days after the occurrence of the violation or breach
and failure to timely give notice shall preclude any claim for
damages.
28
New York courts require that a condition precedent be clear and
unmistakable. See Bank of New York Mellon Trust Co. v. Morgan Stanley
Mortgage Capital, Inc., 821 F.3d 297, 305 (2d Cir. 2016). Where they are clear,

however, “conditions precedent are strictly enforced to implement the parties’
To be clear, these are counterclaims, not defenses. Any defect in Spabo’s
performance does not shield Amano from complying with the terms of the Franchise
Agreements or paying amounts owed thereunder. “[U]nder settled franchise law, the
non-breaching party may not stop performance while continuing to take advantage of
the contract’s benefits.” Red Roof Franchising, LLC v. Patel, 877 F. Supp. 2d 124, 133—
34 (D.N.J. 2012); see also McDonald’s Corp. v. Robert A. Makirt, Inc., 653 F. Supp. 401,
403 (W.D.N.Y. 1986) (failure of defendants to pay the monthly franchise fees was
breach of the contract despite alleged wrongs of plaintiff and defendants could not use
their counterclaims to avoid judgment for amounts already due under franchise
agreement); Maguire v. Campagnoli & Co., 17 N.Y.S.2d 129, 13 1—32 (Sup. Ct. N.Y.
1939) (“[lIt is against the law as well as sound morals to permit a party to a contract to
repudiate the contract or his obligation under it, and at the same time retain the
consideration that he has received.”). Arnano (and/or the four transferees he enabled
and from whom he profited) continued to make use of Mister Softee’s trademarks and
other services throughout the time Amano alleges Spabo breached its franchisor
duties and even after termination of the franchises.
26

Section 22.3 does not itself require that the notices be written. Section 20,
however, requires that all notices under the Franchise Agreement be in writing.
Therefore, the effect of the two sections in combination is to require written notice
under Section 22.3.
27

I again apply New York law pursuant to the choice of law provision in the
Franchise Agreements. See FA § 22.1.

28

30

express agreement,” and will only be excused ii the party who benefits
wrongfully hindered or prevented their occurrence. Eastman Kodak Co. v.
Bostic, 91-CIV-1797 (LJF), 1991 WL 243378, at *3 (S.D.N.Y. Nov. 14, 1991);
see David Fanarof Inc. v. Dember Const. Corp., 600 N.Y.S.2d 226 (App. Div.
1993) (“When commercial parties expressly agree that a specified occurrence
shall be a condition precedent to the creation or enforceability of a right or
obligation, and there is no ambiguity arising out of other language in their
contract, the only question for the court is whether the condition precedent has
been complied with.”); see also Clayton Indus., Inc. v. City of Newburgh, 792
N.Y.S.2d 587, 588 (App. Div. 2005) (failure to serve written notice of claim prior
to commencing action was failure to comply with condition precedent and
grounds for judgment in favor of defendant). Even arguably substantial
compliance with an express condition precedent—such as oral rather than
written notice—is generally rejected as unsatisfactory. See, e.g., Oppenheimer &
Co. v. Oppenheim, Appel, Dixon & Co., 86 N.Y.2d 685, 692—96 (1995) (collecting
cases).
Amano concedes, or at any rate does not contest, Mister Softee’s
interpretation of the Section 22.3 notice requirement. I nevertheless raise an
interpretive issue. This section—drafted as a single sentence—states initially
that timely notice is “a condition precedent to commencing an action for
damages or for violation or breach of this Agreement.” (FA

§ 22.3; emphasis

added. I refer to this as “clause 1.”). Because a counterclaim does not
“commence” an action, the literal application of clause 1 to Amano’s
29
counterclaim is uncertain. On the other hand, the next clause of the sentence
adds that that “failure to timely give notice shall preclude any claim for

A counterclaim does not commence an action. See, e.g., Fed. R. Civ. P. 3 (“A
civil action is commenced by filing a complaint with the court.”); N.Y.C.P.L.R. 304
(McKinney) (“An action is commenced by filing a summons and complaint or summons
with notice.”); see also Local Union No. 38, Sheet Metal Workers’ Int’l Ass ‘n, AFL-CIO v.
Pelella, 350 F.3d 73, 82 (2d Cir. 2003) (“[A] defendant does not ‘institute’ an action
when he asserts a counterclaim. Rather, a plaintiff must commence the action by filing
a complaint that names a defendant.” (emphasis added)).

29

31

damages.” (Id.; emphasis added. I refer to this as “clause 2.”). Amano’s
counterclaim falls within that latter, clause 2 definition. Clause 1, then, has a
narrow preclusive effect (it applies only to “commencing an action”), but a
broader subject matter (it applies to an action for damages, or for violation or
breach of the Agreement, which could include, e.g., a claim for specific
performance or injunctive relief). Clause 2 has a broader preclusive effect (it
precludes “any claim”, not just commencement of an action), but a narrower
subject matter (it applies only to a “claim for damages”). A court interpreting a
contract should do so in a way that makes sense of the drafting, so that no
part is rendered inexplicable or superfluous. See Solco Plumbing Supply, Inc. v.
Hart, 999 N.Y.S.2d 126, 128 (App. Div. 2014).
Clause 1 is seemingly aimed at enforcing a pause, so that disputes can
be adjusted before involving the courts. Clause 2 ensures that, in any case,
Mister Softee will not pay damages for any lapse of which it was not properly
notified. Mister Softee’s interpretation of Section 22.3, which in any event is not
contested, is a reasonable one.
Rather than dispute Mister Softee’s interpretation of Section 22.3, Mr.
Amano argues that he substantially complied with the notice requirement. He
cites his own deposition testimony that he raised his grievances to Spabo orally
over the course of their relationship. (See Keppler Cert., Ex. B

¶J

43-54). He

admits he never furnished notice in writing, but argues that the writing
requirement is “de minimis.” (Def. Br. 18; Def. Counterstatement

¶J

52—57). I

find these arguments insubstantial. The purpose of Section 22.3 is apparent: it
aims to allow the parties to work out the routine complaints that arise in the
relationship without resort to litigation. The requirement of written notice is a
guarantor of clarity, and is therefore reasonable and essential. Claims that oral
complaints were made, years after the fact, are precisely what this requirement
was designed to avoid. Mister Softee is therefore within its rights in insisting on
compliance.

32

Amano also seems to suggest that Mister Softee waived its right to
enforce the condition precedent by choosing not to enforce other provisions of
the Franchise Agreements. (Def. Br. 17—18). But in support, Amano points only
to the fact that Mister Softee did not exercise its right under Section 18.2.1 to
terminate the Franchise Agreements for Amano’s failure to complete initial
training (which he claims Mister Softee did not actually offer). Amano’s
argument fails. The plain language of Section 18 makes clear that a
franchisee’s failure to complete training is an occurrence upon which Mister
Softee may elect to terminate the franchise relationship; it is not bound to do
so, nor is termination automatic. (See FA
to terminate this Agreement

.

.

.

§ 18.2—18.2.1 (“SPABO has the right

If you fail to complete initial training as

provided in Section 7.”)). Moreover, the Franchise Agreements do not detail
what training entails and it is clear that whether a franchisee has completed
training is a determination within Mister Softee’s discretion. (Id.

§ 7 (“You shall

attend and satisfactorily complete Mister Softee’s training program. Mister
Softee and/or Spabo will train you.

.

.

and one other individual tuition-free.”)).

It is hornbook law that “[t]he waiver of one right under a contract does
not necessarily waive other rights under the contract; rather, the parties to a
contract may waive parts of its provisions.” 13 Williston on Contracts

§ 39:18

(4th ed.). Waiver requires knowing, voluntary, and intentional abandonment of
contractual rights, which should only be found upon “a clear manifestation of
intent to relinquish a contractual protection.” Fundamental Portfolio Advisors,
Inc. v. Tocqueville Asset Mgmt., L.P., 7 N.Y.3d 96, 104 (2006) (internal quotation
marks omitted). “Generally, the existence of an intent to forgo such a right is a
question of fact,” id., but here, I find that Amano has failed to raise any
genuine question of material fact to suggest that Mister Softee intended to
°
3
waive the protection of the wholly unrelated Section 22.3 condition precedent.
See Russo v. Rozenhoic, 13 N.Y.S.3d 391, 395 (App. Div. 2015) (“A party
asserting a waiver of rights has the burden of establishing that the purported waiver
constituted an intentional, voluntary relinquishment of a known right.”); 225 FzjIh Ave.
Retail, L.L.C. v. 225 5thL.L.C., No. 601659/07, 2009 WL 2208336, at 10 (N.Y. Sup.

3°

33

For these reasons, I grant Mister Softee’s motion for summary judgment
dismissing the breach of contract counterclaims based on lack of notice under
Section 22.3.
V. RELEASE OF INJUNCTION BOND
Amano has not answered Mister Softee’s motion to release the bond that
it posted as a condition of this Court’s issuance of the July 1, 2014 preliminary
’
3
injunction. The preliminary injunction as to which the bond served as
security has now expired. As I have already found, Amano was not wrongfully
enjoined under the July 1, 2014 Order, and the purpose of the bond has been
discharged. See Section III.A.2, supra. That being the case, the bond itself will
be discharged, and I will grant Mister Softee’s motion to vacate the bond and
release the posted collateral.
VI. CONCLUSION
For the foregoing reasons, Mister Softee’s motion for summary judgment
is GRANTED as to Mister Softee’s request for a permanent injunction,
entitlement to the balance due under the Truck Notes, dismissal of Amano’s
counterclaims, and entitlement to reasonable attorney’s fees in an amount to
be proven in connection with entry of final judgment.

Ct. July 7, 2009), affd sub nom. 225 FU1h Ave. Retail LLC v. 225 5th, LLC, 915
N.Y.S.2d 1 (App. Div. 2010) (finding no waiver as a matter of law where there was no
question of fact as to whether plaintiff had demonstrated a clear manifestation of
intent to relinquish the protection of a certain contractual provision); Sulner v. G.A.
Ins. Co. of New York, 637 N.Y.S.2d 144, 145 (App. Div. 1996) (affirming dismissal on
summary judgment because insured’s “unsupported, conclusory allegation that the
insurer’s adjusters led her to believe that defendants were waiving their right to
enforce [an] express condition precedent in the policy [was] wholly insufficient to
establish such a clear manifestation of intent (internal quotation marks arid citation
omitted)).

Counsel for Mister Softee notes that counsel for Amano has not responded to
several inquiries as to whether Amano would oppose Mister Softee’s motion to release
the injunction bond. (ECF No. 128). As Amano has failed to submit any memorandum
of law in opposition to Mister Softee’s motion by the September 19, 2016 return date, I
will consider the motion uncontested, but nevertheless analyze it for sufficiency.
31

34

Summary judgment is DENIED as to Spabo’s entitlement to future
royalties and MSSM’s recovery of repair costs under a theory of unjust
enrichment.
The Clerk of the Court is directed to release the Plaintiffs’ $50,000 bond
deposited as security pursuant to the Court’s Preliminary Injunction Order,
and to return the bond to Fisher Zucker, LLC on behalf of the Plaintiffs.
Reza Amanollahi and his agents, employees and any persons acting in
concert with him who have actual knowledge of this injunction are hereby
permanently enjoined from:
unlawfully using Mister Softee’s trademarks or trade dress or
1.
any colorable imitation thereof;
knowingly contributing to the infringement of Mister Softee’s
2.
trademarks or trade dress in any manner whatsoever including,
but not limited to:
renting or otherwise providing space to park or store
a.
ice cream trucks at a commissary or depot to entities or
individuals unlawfully using Mister Softee’s trademarks or
trade dress or any colorable imitation thereof; and
selling or otherwise providing ice cream products, ice
b.
cream mix, other frozen confections, and the supplies and
equipment necessary to operate an ice cream truck business
to individuals or entities that unlawfully use Mister Softee’s
trademarks or trade dress or any colorable imitation thereof.
Counsel shall arrange for a conference call with the Court within 10
days, in order to identify outstanding claims and identify the steps required to
poise the case for final judgment.

/t(
KEVIN MCNULTY
United States District Jud
DATED: September 30, 2016

35