Fantastic Sams Franchise Corporation v. Mosley

Filing 20

MEMORANDUM OPINION AND ORDER GRANTING IN PART 2 MOTION for preliminary injunction and DENYING 16 MOTION to dismiss. (Signed by Judge Gray H Miller) Parties notified.(rkonieczny, 4)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
FANTASTIC SAMS FRANCHISE CORPORATION,
Plaintiff,
v.
GERALD MOSLEY,
Defendant.

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CIVIL ACTION H-16-2318

MEMORANDUM OPINION & ORDER
Pending before the court is plaintiff Fantastic Sams Franchise Corporation’s (“Fantastic
Sams”) motion for a preliminary injunction to require defendant Gerald Mosley to comply with the

Fantastic Sams Salons Corporation License Agreement (“Agreement”) (Dkt. 2, Ex. A) and cease
any trademark infringement. Dkt. 2. A hearing was held on November 29, 2016. Dkt. 18. Also
pending before the court is Mosley’s motion to dismiss. Dkt. 16. Based on the Agreement, the
motion, the evidence presented at the injunction hearing, response, and the applicable law, the court
is of the opinion that a preliminary injunction should be GRANTED IN PART consistent with the
parameters outlined in the following opinion. Mosley’s motion to dismiss is DENIED.

I. BACKGROUND
This case is about whether Gerald Mosley, by opening up the hair salon Shear
Perfection of Cypress, is violating his contractual obligations as a former franchisee of
Fantastic Sams’ hair salons and is infringing on Fantastic Sams’ trademarks and trade dress.
Dkt. 1-2.

On April 18, 2005, Gerald Mosley entered into a ten-year franchise agreement with
Fantastic Sams by contracting with Salons Corp. (the parent company to Fantastic Sams).
Dkt. 2, Ex. A at 12. The Agreement governs the obligation of both parties in the franchise
from inception through termination. Id. Fantastic Sams provides its franchisees a system of
hair care products and services, including registered trademarks, hair products, educational
and training programs, advertising and marketing, operating procedures, and an established
business model. Id. at 5; Dkt. 2, Wells Dec. at 3. Fantastic Sams claims it has expended
“millions of dollars” to develop the goodwill associated with its trade names and trade marks
and the value of the goodwill “exceeds hundreds of millions of dollars.” Dkt. 2 at 15. In May
2005, Mosley, under the Agreement, opened a Fantastic Sams salon at 14315 Cypress Rose
Hill, Suite 120, Cypress, TX 77429. Dkt. 1 at 7; Dkt. 16 at 6. While operating the salon,
Mosley paid licensing fees and benefitted from the Fantastic Sams system. Id. at 16.
Mosley did not exercise his opportunity to renew the franchise, and the Agreement
expired on April 17, 2016. Dkt. 1 at 7; Dkt. 16 at 7. Mosley opened a new salon, named
Shear Perfection of Cypress, at 14710 Mueschke Rd., Suite 500, Cypress, TX 77429. Dkt.
2, Wells Dec. at 6–7.
Mosley asserted in his testimony at the hearing that he received little guidance about
his termination obligations, though those obligations were specified in the Agreement. Lisa
Counts, Fantastic Sams’s Regional Director of the South/West, claims that Mosley conveyed
that he leaving the salon business completely. Dkt. 2, Counts Dec. at 1–2. Accordingly
Fantastic Sams had no reason to believe he was opening a new salon, the primary concern was
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“de-identification” of the former Fantastic Sams location. Dkt. 1 at 10-11; Dkt. 2, Dkt. 2,
Counts Dec. at 1–2; Dkt. 19, Ex. 4. After Mosley’s contract expired, a Fantastic Sams
Franchise Business Consultant visited the location of Mosley’s former Fantastic Sams
location, and found a sign on the door stating “We’re Moving!” along with the new address
for the Shear Perfection of Cypress salon. Dkt. 2, Rolando Dec. at 2; Dkt. 1 at 9-10. The sign
also indicated the salon would continue to use the same phone number (281-758-0200). Id.
Mosley, for his part, claims that he did not receive any notification of Fantastic Sams’
issues with his activities after the expiration of the franchise agreement until the filing of the
live complaint. Dkt. 11. Mosley testified about the steps he was taking comply with his posttermination obligations, while defending his continued operations of the Shear Pleasure of
Cypress salon at its current location. Dkt. 11.
The Agreement contains a Mediation and Arbitration provision for dispute resolution.
Dkt. 2, Ex. A. at 31. However, Fantastic Sams reserved the right to seek temporary injunctive
relief from a court of competent jurisdiction. Id. Fantastic Sams filed a complaint against
Mosley for preliminary injunctive relief, alleging breach of contract, unfair competition, and
trademark and trade dress infringement and dilution under the Lanham Act and common law.
Dkt. 1. Mosley answered the complaint. Dkt. 11. Mosley also moved to dismiss Fantastic
Sams’s claim and responded to Fantastic Sams’s motion for a preliminary injunction. Dkt.
16. A hearing on the preliminary injunction was held on November 29, 2016.

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II. MOSLEY’S MOTION TO DISMISS AND RESPONSE
Mosley answered the complaint on September 12, 2016. Dkt. 11. On November 23,
2016, after answering the complaint, Mosley filed a motion to dismiss for failure to state a
claim and a response to Fantastic Sams’ motion for a preliminary injunction. Dkt. 16. A
motion asserting the defense of failure to state a claim “must be made before pleading if a
responsive pleading is allowed,” but “no defense . . . is waived by joining it with one or more
other defenses or objections in a responsive pleading or motion.” Fed. R. Civ. P. 12(b).
Mosley’s answer did not preserve a defense of failure to state a claim. Dkt. 11. Because
Mosley’s motion to dismiss was not pled before or jointly with his first responsive pleading,
it was untimely. Therefore, the court DENIES Mosley’s motion to dismiss (Dkt. 16).
Mosley’s response to Fantastic Sams’ motion for a preliminary injunction was also
untimely. Dkt. 16. Mosley was served with Fantastic Sams’s motion for a preliminary
injunction on August 20, 2016. Dkt. 8. Mosley responded on November 23, 2016. Dkt. 16.
Even though the response was untimely, the court will consider Mosley’s response.
III. FANTASTIC SAMS’ MOTION FOR PRELIMINARY INJUNCTION
A.

Legal Standard
The decision to grant or deny a preliminary injunction lies within the sound discretion of the

district court. Miss. Power & Light Co. v. United Gas Pipe Line Co., 760 F.2d 618, 621 (5th Cir.
1985). “A court should issue a preliminary injunction if the movant shows ‘(1) a substantial
likelihood of success on the merits, (2) a substantial threat of irreparable injury if the injunction is not
issued, (3) that the threatened injury if the injunction is denied outweighs any harm that will result
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if the injunction is granted, and (4) that the grant of an injunction will not disserve the public
interest.’” Paulsson Geophysical Servs., Inc. v. Sigmar, 529 F.3d 303, 309 (5th Cir. 2008) (quoting
Speaks v. Kruse, 445 F.3d 396, 399–400 (5th Cir. 2006) (internal quotations omitted)). “A
preliminary injunction is an ‘extraordinary remedy’ and should only be granted if the plaintiffs have
‘clearly carried the burden of persuasion on all four requirements.’” Planned Parenthood of Hous.
and Se. Tex. v. Sanchez, 403 F.3d 324, 329 (5th Cir. 2005) (quoting Karaha Bodas Co., L.L.C. v.
Perusahaan Pertambangan Minyak Dan Gas Bumi Negara, 335 F.3d 357, 363 (5th Cir. 2003)
(internal citations omitted)).

B.

LICENSING AGREEMENT ANALYSIS
Fantastic Sams seeks preliminary injunctive relief to enforce two provisions of the Agreement:

(1) Mosley’s post-termination obligations, and (2) the non-compete provision. For Fantastic Sams
to establish the first element required for injunctive relief, “a substantial likelihood of success on the
merits,” these provisions must be deemed enforceable. Therefore the court will consider the
enforceability of these provisions, and then address the remainder of the elements required to grant
preliminary injunctive relief.
1. Post-Termination Obligations
First, Fantastic Sams alleges that Mosley breached the post-termination provisions of the
Agreement. Among his post-termination obligations, Mosley is required to cease using Fantastic
Sams’ marks and trade dress, to transfer the telephone numbers he used while operating the Fantastic
Sams salon, and to not conduct business that gives the public the impression that the Agreement is
in force. Dkt. 2, Ex. A at 17–19; Dkt. 2, Wells Dec. at 5. Mosley did not challenge the validity of
any of these obligations in his arguments at the hearing or his response. Dkt. 16 at 12.

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2. Enforceability of the Non-Compete Agreement
Second, Fantastic Sams seeks to enforce the non-compete provisions of the Agreement.
Specifically, the relevant provision requires Mosley:
To refrain, for a period of two (2) years from the effective date of expiration
or termination of this Agreement, from directly or indirectly participating as
an owner, partner, member, director, officer, employee, consultant, lender or
agent, or serve in any other capacity in any business engaged in the sale or
rental of products or services the same or similar to those of the Fantastic
Sams System, within a five (5) mile radius of the Fantastic Sams Salon
operated pursuant to this agreement.
Dkt. 2, Ex. A at 29.
Mosley argues that the non-compete provision should be rendered unenforceable. Dkt. 16 at
13. Under Texas law: “a covenant not to compete is enforceable if it is ancillary to or part of an
otherwise enforceable Agreement at the time the Agreement is made to the extent that it contains
limitations as to time, geographical area, and scope of activity to be restrained that are reasonable and
do not impose a greater restraint than is necessary to protect the goodwill or other business interest
of the promisee.” Tex. Bus. & Com. Code Ann. § 15.50. If the covenant not to compete is not in
compliance with the Act, “the court shall reform the covenant to the extent necessary to cause the
limitations contained in the covenant as to time, geographical area, and scope of activity to be
restrained to be reasonable and to impose a restraint that is not greater than necessary . . . .” Id.; see
also Ray Mart Inc. v. Stock Bldg. Supply of Tex. LP, 302 F. App’x 232, 236 (5th Cir. 2008) (defining
“otherwise enforceable” and “ancillary” agreements). “Texas law presumes a party has read and
knows the terms of a contract that he has signed.” Daily Instruments Corp. v. Heidt, 998 F. Supp. 2d
553, 566 (S.D. Tex. 2014), appeal dismissed (Sept. 11, 2014) (citing In re Bank One, N.A., 216
S.W.3d 825, 826 (Tex. 2007)).

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a. Ancillary or Part of an Otherwise Enforceable Agreement
The court concludes that the Agreement is an “otherwise enforceable agreement.” Both
parties made a number of promises to each other under the Agreement that were enforceable. See Ray
Mart Inc., 302 F. App’x at 236 (holding an employment agreement was “otherwise enforceable”
because the parties made “multiple enforceable promises” to each other). Amongst other contractual
obligations, Mosley paid franchising fees under the Agreement, and Fantastic Sams provided Mosley
with training, products, and other services over the course of his ten years operating a Fantastic Sams
salon. Dkts. 1, 2, 16. The non-compete provision is merely one part of the Agreement that covers this
business relationship.
Mosley objects that there was no consideration given for the non-compete agreement, making
the provision unenforceable. Dkt. 16 at 15. For a non-compete provision to be considered “ancillary”
to an “otherwise enforceable agreement,” there are two elements to the inquiry: (1) consideration
given to the otherwise enforceable agreement must give rise to the party’s interest in restraining
competition, and (2) the covenant must be designed to enforce the returned consideration or promise.
Ray Mart, 302 F. App’x at 237. Here, as consideration, Mosley received Fantastic Sams’s proprietary
and confidential information in the form of training, business models, and operations manuals. Dkt.
2, Ex. A at 18, 21–23. Mosley also received an exclusivity commitment from Fantastic Sams to not
license competing operations near his salons. Id. at 13. The benefits directly gave rise to Fantastic
Sams interest in restraining Mosley from competition and were given to Mosley in exchange for his
promise not to compete. Id. The Agreement also contains provisions designed to enforce Mosley’s
promise not to compete as return consideration. Dkt. 2, Ex. A at 29. After this exchange of
consideration, the court finds the non-compete a valid ancillary provision.

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Because the court finds the broader Agreement is an “otherwise enforceable agreement,” and
the non-compete provision is “ancillary” to that contract as required by Texas code, the court must
next consider if the time, geographic area, and scope of activity limitations on competitions are
reasonable.
b. Reasonable Time, Geographic Area, and Scope of Activity Limitations .
First, as to geographic scope, the non-compete provision prohibits Mosley from operating a
competing business within a five mile radius of his former Fantastic Sams salon location. Mosley
challenged the reasonableness of the geographic scope by arguing that it was inequitable because
Fantastic Sams reserved the right to license another franchise location within 0.5 miles under the
Agreement. However, the Agreement does not need to be fully equitable to be reasonable and a five
mile radius is a fairly small geographic area, so the court finds the geographic scope limitations
reasonable.
Second, the scope of activity to be restrained is limited to a hair salon business. Mosley did
not challenge this provision and the court heard no evidence upon which to question the
reasonableness of the limitation on the scope of the activity. Third, with regard to timing, Mosley
would be enjoined from the above activities for an two year period. Mosley did not challenge this
provision either.
The inquiry for the court is whether these limitations are “reasonable and [does] not impose
a greater restraint than is necessary to protect the goodwill or other business interest of the promisee.”
Tex. Bus. & Com. Code Ann. § 15.50 (West). The court finds a two-year period and a five-mile
radius limitation in operating a competing hair salon is a reasonable restraint to protect Fantastic
Sams’ goodwill and business interests. These restraints do not impose a broad or unnecessary
restraint on Mosley.
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3. Injunctive Relief
Because the court has found the Agreement, including the non-compete provision,
enforceable, the court turns to whether Fantastic Sams has met the four elements required for
a preliminary injunction Paulsson Geophysical Servs., 529 F.3d at 309.
First, the breach of contract action is likely to succeed on its merits. Fantastic Sams alleges
that Mosley is violating his post-termination obligations because he is continuing to use the telephone
number he used while a Fantastic Sams franchisee, there is a yellow pages online listing at yp.com
that identifies his new location as a Fantastic Sams location, his Cosmetology Salon License is still
registered under the name “Fantastic Sams’-Cypress Rosehill,” and the merchant authorization receipt
received by customers of Shear Pleasure of Cypress on their bank statements reflects Fantastic Sams
as a merchant. Dkt. 2 at 20–21; Dkt. 2, Nichols Dec., Exs. 1–5. Mosley, while conceding his posttermination obligations are enforceable, challenges Fantastic Sams’s allegations that he is violating
them. Dkt. 16. Mosley testified about his efforts to transfer the telephone number, his efforts to
correct the merchant information on the credit card receipts, and his inability to alter information on
third-party web site listings. The court concludes that it is substantially likely that Mosley will be
found, to some extent, to have breached these post-termination obligations, despite his efforts to
remedy these defects. Therefore, granting an injunction is appropriate to the extent necessary to
compel Mosley to completely comply with his post-termination obligations.
With respect to the non-compete provision, Fantastic Sams has established through testimony
at the hearing that Shear Pleasure of Cypress, a salon business, is approximately two miles from the
location of Mosley’s former Fantastic Sams location. The court directly asked Mosley’s counsel if
he had any evidence that showed the Shear Pleasure location was outside the five mile radius required

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by the non-compete provision, and Mosley’s counsel conceded that there was no contradictory
evidence. The court concludes it is substantially likely that Mosley will be found in violation of this
provision of his non-compete covenant prohibiting operation of another hair salon within a five mile
radius of the former Fantastic Sams location in the two-year period following contract termination.
Second, Mosley’s violation of the post-termination and non-compete provisions of the
agreement are likely to cause irreparable harm to Fantastic Sams. “[A] preliminary injunction will
not be issued simply to prevent the possibility of some remote future injury. A presently existing
actual threat must be shown. However, the injury need not have been inflicted when application is
made or be certain to occur; a strong threat of irreparable injury before trial is an adequate basis.”
United States v. Emerson, 270 F.3d 203, 262 (5th Cir. 2001). Fantastic Sams argues that the sign
posted on Mosley’s former salon directing customers to the new salon, Mosley’s use of the same
phone number, and other actions are a clear indication that Mosley is luring Fantastic Sams’
customers to his new business. Dkt. 2 at 28–29. Mosley testified that most hair salon customers are
likely to follow their stylist, rather than a specific brand, and his stylists joined him in his move to a
new business. Dkt. 16 at 10. Fantastic Sams, more compellingly, argued the existence of Mosley’s
nearby salon, which offers nearly identical hair care services to Fantastic Sams, prevents Fantastic
Sams from licensing a new franchise in the area. Dkt. 2 at 28–29. The court also notes that the
Agreement actually contains a provision that requires Mosley to concede that violations of the
Agreement constitute irreparable harm to Fantastic Sams. Id. The court agrees with Fantastic Sams
that Mosley’s continued operations of a nearby salon, in violation of the Agreement, hurts other
franchisees, poses a risk of loss of goodwill, and inhibits the opening of new Fantastic Sams
franchises in the area. All of these injuries cause irreparable harm to Fantastic Sams as a whole, and
that harm cannot be fully remedied with damages.
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The balancing of hardships favors granting Fantastic Sams an injunction. The court
acknowledges that it is a business hardship for Mosley to relocate Shear Pleasure of Cypress to a new
location outside of the five mile radius required by the non-compete provision. But the court also
notes that from Mosley’s answer, response, and testimony at the hearing, he appears willing and easily
able to comply with the remainder of the post-termination and non-compete provisions, such as
transferring the phone number, correcting the merchant information with the credit card, and
removing any remaining identification associated with Fantastic Sams. Dkts. 11, 16. Finally, these
hardships are self-induced, Mosley chose to open up a new salon in violation of the non-compete
provision of the Agreement. Without an injunction, Fantastic Sams as a whole is being harmed, as
they continue to experience the loss of goodwill, loss of customers, and loss of new franchise business
opportunities. Therefore, the balance of hardships favors granting the injunction for Fantastic Sams.
Finally, the public will not be disserved through enforcement of this Agreement. Valid noncompete agreements encourage sharing of competitive information to help increase efficiency and
performance of a business venture. Marsh USA Inc. v. Cook, 354 S.W.3d 764, 769 (Tex. 2011).
Such agreements also protect companies that invest “significant resources in developing good will
that an employee could otherwise immediately take and use against them in business.” Id. It is
reasonable that to protect Fantastic Sams’ confidential information and good will by restraining
Mosley from immediately taking and using them in his own business. Therefore, the court concludes
it is in the public interest to enforce this non-compete provision.
For the foregoing reasons, the court finds that principles of equity require injunctive relief for
Fantastic Sams. Therefore, the court GRANTS the injunction required to enforce the post-termination
and non-compete provisions of the Agreement.

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C.

TRADEMARK INFRINGEMENT ANALYSIS
Fantastic Sams also seeks a preliminary injunction based on allegations against Mosley for

claims of trademark and trade dress infringement and dilution under the Lanham Act and common
law. First, to grant a preliminary injunction, the court must conclude that Fantastic Sams has
established that there is a substantial likelihood that it will succeed on the merits of its trademark
claims.

1. Legal Standard
To prevail on a claim of trademark infringement under the Lanham Act, plaintiff must
show: (1) it possesses a valid mark; and (2) defendant’s use of its trademarks creates a
likelihood of confusion as to source, affiliation, or sponsorship. Elvis Presley Enter., Inc. v.
Capece, 141 F.3d 188, 193 (5th Cir. 1998). However, it is important to remember that “mere
reproduction of a trademark does not constitute trademark infringement if there is no
likelihood of confusion.” 4 J. Thomas McCarthy, McCarthy on Trademarks and Unfair
Competition § 25:28 (4th ed. 2009). And, “likelihood of confusion” is not possible confusion,
it is probable confusion. Bd. of Supervisors for LSU A&M Coll. v. Smack Apparel Co., 550
F.3d 465, 478 (5th Cir. 2008). In this respect, “[c]ontext is especially critical,” and a court
is required to “consider the marks in the context that a customer perceives them in the
marketplace.” Scott Fetzer Co. v. House of Vacuums Inc., 381 F.3d 477, 485 (5th Cir. 2004).
Dilution occurs when an activity diminishes a mark’s ability “to clearly and unmistakably
distinguish the source of a product.” Scott Fetzer Co., 381 F.3d at 489 (citing 15 U.S.C. § 1127;
Horseshoe Bay Resort Sales Co. v. Lake Lyndon B. Johnson Improvement Corp., 53 S.W.3d 799, 812
(Tex.App.—Austin 2001, pet. den.)). The elements of a dilution claim are: (1) plaintiffs’ ownership
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of a famous and distinctive mark; (2) use by the defendant of the mark; (3) association between the
two marks due to similarity; and (4) the association between the two marks is likely to impair the
distinctiveness of the mark or harm plaintiffs’ reputation. Nat’l Bus. Forms & Printing, Inc. v. Ford
Motor Co., 671 F.3d 526 (5th Cir. 2012). Under Texas law, a plaintiff must show a distinctive mark
and a likelihood of dilution. E. & J. Gallo Winery v. Spider Webs Ltd., 286 F.3d 270, 278–79 (5th
Cir. 2002).

2. Analysis
Fantastic Sams alleges Mosley infringed on its trademark and trade dress in two
general categories: (1) Mosley’s use of the Fantastic Sams name and branded products, and
(2) Mosley’s use of trade dress that is associated with the Fantastic Sams brand. Fantastic
Sams also argues that Mosley’s activities are likely to cause trademark dilution. The court
looks at each of these claims in turn and concludes that Fantastic Sams has not met the burden
of proving that there is a substantial likelihood these claims will succeed on their merits.
Therefore, Fantastic Sams is not entitled to the “extraordinary remedy” of a preliminary
injunction on trademark grounds.
a. The Fantastic Sams Name
The parties do not dispute that the Fantastic Sams name and logos are valid marks on
the register of the United States Patent and Trademark Office. Dkt. 2, Wells Dec. at 2. But
Fantastic Sams must also establish the second element of trademark infringement: that
Mosley’s use of the mark creates a likelihood of confusion. Bd. of Supervisors for LSU A&M
Coll., 550 F.3d at 478. Fantastic Sams offered only limited evidence that Mosley was “using”
the mark at all. Specifically, Fantastic Sams offered testimony and evidence at the hearing
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regarding Mosley’s use of a single bottle of Fantastic Sams shampoo at his new salon, the
inclusion of the Fantastic Sams name in Mosley’s salon Cosmetology License, and the
appearance of the name Fantastic Sams on the credit card receipt merchant system, the latter
of which Mosley presented evidence of his attempts to rectify. Dkt. 19, Ex. 1. Also, the court
must consider this use in the context of a customer of the salon. A customer knows he is
entering a business that has a completely different and separate name – Shear Perfection of
Cypress. It is uncertain about whether these alleged uses of the Fantastic Sams marks are
enough to create a likelihood of confusion. The court concludes that Fantastic Sams has not
presented sufficient evidence that its claims of trademark infringement based on the use of
Fantastic Sams marks alone are substantially likely to succeed on their merits.
b. Fantastic Sams Trade Dress
Fantastic Sams argues that Mosley is also infringing on its trade dress. “Trade dress” is the
“total image and overall appearance of a product” and “may include features such as the size, shape,
color, color combinations, textures, graphics, and even sales techniques that characterize a particular
product.” Amazing Spaces, Inc. v. Metro Mini Storage, 608 F.3d 225, 250–51 (5th Cir. 2010). To
prevail on a trade dress infringement claim under the Lanham Act, Fantastic Sams must prove three
elements: (1) the trade dress is inherently distinctive or has acquired a secondary meaning; (2) its
trade dress is primarily nonfunctional and therefore protectable; and (3) there is a likelihood that
defendant’s trade dress will lead to customer confusion. Pebble Beach Co. v. Tour 18 I Ltd., 155 F.3d
526, 536 (5th Cir. 1998).
Fantastic Sams’ briefing in support of its injunction does not specifically describe the elements
of its trade dress, but states “has established a distinctive trade dress over the course of nearly forty
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years of doing business.” Dkt. 2 at 34. However, during testimony at the hearing, Fantastic Sams
representatives noted that Mosley’s use of black salon chairs from his Fantastic Sams salon, a now
out-of-date coupon containing a picture of his stylists in his old Fantastic Sams salon with Fantastic
Sams paint colors and wall hangings in the background (Mosley’s new Shear Pleasure of Cypress
Salon uses a different paint color scheme), and the layout of Mosley’s salon are all features of
Mosley’s business that could identify it with Fantastic Sams’ trade dress. Dkt. 19, Ex. 3 at 1–5;
Several of these elements, such as the chairs and salon layout, seem to serve a primarily functional
purpose, which would disqualify them as trade dress. Finally, Fantastic Sams provided no examples
of customer confusion from Mosley’s use of these elements. The court concludes that this evidence,
alone is insufficient for Fantastic Sams to establish these items are elements of its inherently
distinctive trade dress, let alone that Mosley’s use of these elements will create customer confusion.
Therefore, Fantastic Sams has not shown it has a substantial likelihood of succeeding on the merits
of its trade dress infringement case.
c. Dilution
Fantastic Sams suggests that the court consider that its trademarks and trade dress are diluted
through the “circumstantial evidence” that Shear Pleasure of Cypress is operating under the “exact
same mark, trade name, and trade dress in the promotion and operation of his competing business as
he used when he was a licensed franchisee of Fantastic Sams.” Dkt 2 at 37. Therefore, Fantastic
Sams argues that dilution is “inevitable.” Id.

The court acknowledges that Mosley, either

intentionally or carelessly, used some potentially identifiable trademark and trade dress elements from
his former Fantastic Sams franchise. However, this hardly rises to the level of “exact same”
considering Mosley has re-branded his salon with a new name, new paint scheme, and new salon
products. Also, the court observes that the use of some of these elements, such as the black salon
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chairs, are arguably not even protected trade dress. Finally, the court has no basis to draw a
conclusion that customers of Shear Pleasure of Cypress will mistakenly believe the salon is associated
with the Fantastic Sams franchise. Fantastic Sams does not offer any direct evidence of actual
dilution through customer surveys and the like. Dkt. 2 at 37. Therefore, Fantastic Sams has not
established that it will be substantially likely to succeed on the merits of a dilution cause of action.
Finally, the court notes the preliminary injunction to enforce the post-termination provisions
of the Agreement will require that Mosley will correct some of the alleged sources of customer
confusion, such as transferring of the phone number and complying with the de-identification
provisions.
Because establishing a substantial likelihood of success on its merits is a required element for
a preliminary injunction and Fantastic Sams failed to do so for its trademark and trade dress claims,
the court DENIES Fantastic Sams’ motion for preliminary injunction on trademark and trade dress
infringement and dilution grounds.
D.

Bond
Finally, the court will address the matter of a bond. “No restraining order or preliminary

injunction shall issue except upon the giving of security by the applicant, in such sum as the court
deems proper, for the payment of such costs and damages as may be incurred or suffered by any party
who is found to have been wrongfully enjoined or restrained.” Fed. R. Civ. P. 65(c)). The amount
of security “is a matter for the discretion of the trial court.” Kaepa, Inc. v. Achilles Corp, 76 F.3d
624, 628 (5th Cir. 1996) (internal quotations omitted). Fantastic Sams argues it should not be subject
to a bond requirement because Mosley has no “realistic likelihood of harm” and because there is a
strong likelihood it will succeed in its claims on its merits. Dkt. 2 at 41–42. The court ORDERS that
this preliminary injunction will not be effective until Fantastic Sams posts a $1000.00 bond.
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V. CONCLUSIONS
The court DENIES Mosley’s motion to dismiss. Dkt. 16.
The court GRANTS IN PART Fantastic Sams’ motion for a preliminary injunction to the
extent required to enforce the Agreement and ORDERS as follows:
1. For a period of two years from April 17, 2016, Defendant and all those who act in concert or
participation with him are HEREBY ENJOINED from directly or indirectly participating as an owner,
partner, member, director, officer, employee, consultant, lender, or agent, or serve in any other
capacity in any business engaged in the sale or rental of products or services the same as or
substantially similar to those of the Fantastic Sams System, within a five mile radius of his former
Fantastic Sams salon, including, without limitation, the competing hair salon located at 14710
Mueschke Rd. Suite 500 Cypress, TX 77429;
2. Defendant and all those who act in concert or participation with him are HEREBY ENJOINED
from conducting business in any manner that gives the general public the impression that the
Agreement is still in force or that Defendant is in any way associated with Fantastic Sams;
3. Defendant and all those who act in concert or participation with him are hereby ORDERED to
immediately turn over to Fantastic Sams the telephone number 281-758-0200 and to execute any
paperwork necessary to effect the transfer of the telephone number to Fantastic Sams; and
4. It is further ORDERED that this Preliminary Injunction will not be effective unless and until
Fantastic Sams executes and files with the court a bond in conformity with the law, or a cash deposit
in lieu thereof, in the amount of $1000.00.
Signed at Houston, Texas on December 23, 2016.

___________________________________
Gray H. Miller
United States District Judge
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