Stoelting LLC v. Levine et al

Filing 133

ORDER granting 86 Motion for Partial Summary Judgment; denying 94 Motion for Summary Judgment; granting 108 Motion to Substitute Party ; denying as moot 116 Motion to Expedite; granting 123 Motion to Supplement; denying 128 Motion to Strike. (cc: all counsel) (Griesbach, William)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF WISCONSIN

PW STOELTING, L.L.C.,
Plaintiff,
v.

Case No. 16-C-381

STEVEN J. LEVINE, et al.,
Defendants.

DECISION AND ORDER ON SUMMARY JUDGMENT

Plaintiff PW Stoelting, L.L.C. (PW Stoelting) filed this action against Defendants Advanced
Frozen Treat Technology, Inc. (AFTT), a California company; Prism Marketing Corporation (Prism),
a Washington company; and Steven J. Levine, a Washington resident and President who is Director
of AFTT and Prism, alleging that Defendants breached their contract by not paying PW Stoelting for
certain orders and infringed upon PW Stoelting’s trademark in violation of Section 32(1) of the Lanham
Act, 15 U.S.C. § 1114(1). This court has jurisdiction over the trademark claim pursuant to 15 U.S.C.
§ 1121, 28 U.S.C. § 1331, and 28 U.S.C. § 1338, and jurisdiction over the breach of contract claim
under 28 U.S.C. § 1367 and 28 U.S.C. § 1332. Currently before the court are a number of motions:
PW Stoelting’s motion for partial summary judgment (ECF No. 86), Defendants’ motion for summary
judgment (ECF No. 94), PW Stoelting’s motion to substitute (ECF No. 108), Defendants’ motion to
not expedite PW Stoelting’s motion to substitute (ECF No. 116), PW Stoelting’s motion to supplement
the fact record (ECF No. 123), and Defendants’ motion to strike PW Stoelting’s motion to supplement
(ECF No. 128). For the reasons that follow, PW Stoelting’s motion for partial summary judgment,

motion to substitute, and motion to supplement will be granted and Defendants’ motion for summary
judgment, motion to not expedite, and motion to strike will be denied.
BACKGROUND
A.

Termination of Distributorship Agreement
PW Stoelting is a Wisconsin-based manufacturer of food service and cleaning equipment,

including frozen confection equipment. PW Stoelting entered into separate distributorship agreements
with Prism on February 15, 2011, and with AFTT on February 28, 2011—both of which are owned
by Levine—to appoint them as authorized distributors of PW Stoelting’s products. Each agreement
contained a choice of law provision—California for AFTT and Washington for Prism. The agreements,
among other things, established expectations regarding product and parts inventory, as well as yearly
sales goals. The agreements also contained the following identical provisions, here taken from the
agreement with AFTT, regarding termination of the distributorship agreements:
7.1 Unless sooner terminated as provided in Section 7.2 or Section 7.3 below, this
Agreement shall remain in effect until terminated by either party, without cause,
upon thirty (30) days prior written notice thereof to the other.
8.4 Notification required or permitted hereby shall be deemed given upon enclosure
thereof in an adequately post-paid envelope, deposited in a U.S. mail box, and
addressed to the party to be given notice at the address to which that party has
previously requested, by notice hereunder, that notices be sent or, if no such request
has been made, at the address listed for that party in this Agreement.
ECF No. 90-1 at 5–6.
At some point during the course of the next few years the parties’ business relationship soured
and on December 7, 2015, PW Stoelting sent a letter via UPS to Defendants’ counsel, Attorney
Raymond Schreck, that stated the following:

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The purpose of this letter is to inform you of Stoelting’s decision to terminate the
distributorship agreement between Stoelting LCC and AFTT dated February 28, 2011,
as well as the distributorship agreement between Stoelting LLC and Prism dated
February 15, 2011 (the Agreements). This termination is pursuant to the provisions of
Section 7.1 of each of the Agreements. That section gives either party the right to
terminate the agreement, without cause, upon 30 days prior written notice to the other
party. The effective date of the termination of the Agreements will be January 31,
2016.
ECF No. 91-2 at 1. Just prior to when PW Stoelting sent the letter, Schreck informed PW Stoelting
that he was representing Defendants in their dealings with PW Stoelting and stated that all future
communications related to Defendants should be directed to him: “[N]ow that I HAVE been identified
as having been retained to represent my clients on legal and mixed legal-factual matters concerning
Vollrath, PW Stoelting, and any other Vollrath Stoelting entity, from this point FORWARD, the
communications NOW need to go through the attorneys—that is, through me, not my clients.”
Plaintiff’s Proposed Findings of Fact (P PFOF), ECF No. 110 at ¶ 47. PW Stoelting’s letter was
received by Attorney Schreck more than 30 days before January 31, 2016.
On February 1, 2016, Schreck sent a letter to PW Stoelting’s counsel advising them that
Defendants were taking the position that the December 7, 2015 notice was ineffective and that the
distributorship agreement was still in effect because it was sent to counsel rather than to AFTT and
Prism directly and because it was not sent via USPS. The next day PW Stoelting’s counsel sent
AFTT and Prism copies of the notice of termination of the distributorship agreement via USPS.
On March 18, 2016, PW Stoelting sent a cease and desist letter to Defendants demanding that
they change their websites and otherwise stop representing themselves to be authorized distributors
of Stoelting-branded equipment.

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PW Stoelting commenced this lawsuit on March 28, 2016. On December 31, 2016, The
Vollrath Company, L.L.C. (Vollrath) merged with PW Stoelting, its wholly owned subsidiary. Vollrath
was the survivor of this merger and PW Stoelting, the non-surviving entity, continued to operate as a
division of Vollrath.
B.

Renewal of the Stoelting Trademark
On January 31, 2016, Vollrath’s intellectual property counsel received an email from the United

States Patent and Trademark Office (USPTO) stating that the Stoelting trademark, U.S. Trademark
RN0823348, was set to expire on January 31, 2017, absent the filing of a declaration of use and/or
excusable non-use and an application for renewal under §§ 8 and 9 of the Trademark Act prior to that
date. On January 13, 2017, after PW Stoelting merged with Vollrath, Vollrath’s counsel filed the
required declaration and application. In the application, the owner of the mark was identified as PW
Stoelting, L.L.C. The Stoelting trademark was renewed by the USPTO on March 10, 2017.
LEGAL STANDARD
Summary judgment is appropriate when the movant shows there is no genuine issue of material
fact and the movant is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a). The fact that
the parties filed cross-motions for summary judgment does not alter this standard. In evaluating each
party’s motion, the court must “‘construe all inferences in favor of the party against whom the motion
under consideration is made.’” Metro. Life Ins. Co. v. Johnson, 297 F.3d 558, 561–62 (7th Cir.
2002) (quoting Hendricks-Robinson v. Excel Corp., 154 F.3d 685, 692 (7th Cir. 1998)). The party
opposing the motion for summary judgment must “submit evidentiary materials that set forth specific
facts showing that there is a genuine issue for trial.” Siegel v. Shell Oil Co., 612 F.3d 932, 937 (7th
Cir. 2010) (citations omitted). “The nonmoving party must do more than simply show that there is
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some metaphysical doubt as to the material facts.” Id. Summary judgment is properly entered against
a party “who fails to make a showing to establish the existence of an element essential to the party’s
case, and on which that party will bear the burden of proof at trial.” Austin v. Walgreen Co., 885
F.3d 1085, 1087–88 (7th Cir. 2018) (citing Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986)).
ANALYSIS
A.

PW Stoelting’s Standing and Motion to Substitute Vollrath
Defendants argue that PW Stoelting lacks standing because it ceased to exist as a legal entity

after it merged with Vollrath at the end of 2016.

PW Stoelting, citing to Federal Rule of Civil

Procedure 25, asserts that “even after a party’s interests are transferred after litigation is underway,
the original party may maintain the suit.” Pl.’s Reply to Defs.’ Motion for Summ. J., ECF No. 100 at
5. In addition, PW Stoelting filed a Civil L.R. 7(h) motion to substitute Vollrath for PW Stoelting as
the plaintiff in this case that Defendants oppose.
Regarding Defendants’ assertion that PW Stoelting does not have standing to maintain this
case, Rule 25 is clear that “[i]f an interest is transferred, the action may be continued by or against the
original party unless the court, on motion, orders the transferee to be substituted in the action or joined
with the original party.” Fed. R. Civ. P. 25(c).
“The most significant feature of Rule 25(c) is that it does not require that anything be
done after an interest has been transferred. The action may be continued by or against
the original party, and the judgment will be binding on his successor in interest even
though he is not named.”
Otis Clapp & Son, Inc. v. Filmore Vitamin Co., 754 F.2d 738, 743 (7th Cir. 1985) (quoting 7A
WRIGHT & MILLER, FEDERAL P RACTICE AND P ROCEDURE § 1958, at 664–65 (footnotes omitted)).
“[I]f a plaintiff transfers an interest that is the subject of a lawsuit, the transferee stands in its shoes.”

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Schreiber Foods, Inc. v. Beatrice Cheese, Inc., 305 F. Supp. 2d 939, 956 (E.D. Wis. 2004), aff'd
in part, rev'd in part, 402 F.3d 1198 (Fed. Cir. 2005) (citing Brook, Weiner, Sered, Kreger &
Weinberg v. Coreq, Inc., 53 F.3d 851, 852 (7th Cir.1995)). Although, pursuant to Wis. Stat.
§ 183.1205, PW Stoelting ceased to exist and its interest transferred to Vollrath after the merger, Rule
25 permits PW Stoelting to continue the action.
Rule 25(c) likewise permits the court to allow substitution of the parent company for the
original plaintiff where there is no prejudice or harm to the defendants. Otis Clapp & Son, Inc., 754
F.2d at 743. No harm or prejudice has been shown here. Substitution of Vollrath for PW Stoelting
will not change the substantive rights of the parties given the transfer of PW Stoelting’s assets to
Vollrath at the time of the merger by operation of law. See Feener Bus. Sch., Inc. v. Speedwriting
Pub. Co., 249 F.2d 609, 612 (1st Cir. 1957) (“Only the sheerest technicality was involved in the order
of substitution, whereby the parent corporation, having absorbed its wholly owned subsidiary by
merger, was allowed to be substituted nunc pro tunc for the original nominal plaintiff in this case. We
cannot see that the substitution would involve Feener Business Schools, Inc., or Carleton L. Feener
individually in any possible prejudice.” (citation omitted)). Accordingly, PW Stoelting’s motion to
substitute Vollrath as the plaintiff will be granted.
B.

Distributorship Termination Date
PW Stoelting argues that the notice it sent Defendants in December substantially complied with

the notice requirements of the contract and that, as a result, the distributorship agreement between it
and Defendants was terminated on January 31, 2016. Defendants first argue that the notice did not
substantially comply with the agreement and further that more than substantial compliance is required.
Even if the notice did substantially comply with the distributorship agreement, Defendants next argue
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that their relationship with PW Stoelting is subject to California and Washington state franchise law,
both of which require good cause for termination of an agreement.
1.

Substantial Compliance

PW Stoelting asserts that January 31, 2016, should be held to be the effective date the
distributorship agreement between it and Defendants was terminated as a result of the notice PW
Stoelting sent to Defendants’ attorney in early December of 2015. Defendants argue that the contract
specifies how notice is to be given and contend that because PW Stoelting’s notice of termination was
sent by UPS and delivered to Defendants’ counsel, rather than sent directly to Defendants via USPS,
that the notice was inadequate and failed to comply with the requirements set forth in the
distributorship agreement.
PW Stoelting’s December 7, 2015 notice was sufficient to terminate the agreement between
it and Defendants because it substantially complied with the termination provisions set forth in the
agreements. Both California and Washington generally only require substantial compliance with a
contract provision absent a clear intention otherwise. Producers’ Holding Co. v. Hill, 256 P. 207,
208 (Cal. 1927) (“[P]erformance of a contract need not, in all cases, be literal and exact . . . substantial
performance is all that is required.”); DC Farms, LLC v. Conagra Foods Lamb Weston, Inc., 179
Wash. App. 205, 220, 317 P.3d 543, 550 (Wash. Ct. App. 2014) (“The general rule with respect to
compliance with the terms of a bilateral contract is not strict compliance, but substantial compliance.”
(citing 15 RICHARD A. LORD & SAMUEL WILLISTON, A TREATISE ON THE LAW OF CONTRACTS §
44:52, at 217 (4th ed.2000))). “[I]n California a party is deemed to have substantially complied with
an obligation only where any deviation is unintentional and so minor or trivial as not substantially to
defeat the object which the parties intend to accomplish.” Rouser v. White, 825 F.3d 1076, 1082 (9th
7

Cir. 2016) (internal quotations and citations omitted). In Washington, “[s]ubstantial performance is said
to be the antithesis of material breach; if it is determined that a breach is material, or goes to the root
or essence of the contract, it follows that substantial performance has not been rendered . . . .” DC
Farms, LLC, 179 Wash. App. at 220.
Although the letter was sent via UPS rather than USPS, it is clear that Defendants were made
aware of the notice and that the letter clearly informed Defendants of their intention to terminate the
agreement on January 31, 2016. Further, the notification provision allows for requests by the parties
to mail notice to different addresses at the parties’ requests and Defendants’ counsel unequivocally
stated that all communication regarding the parties should be sent to him.
Defendants’ portrayal of the notification provision as a “time is of the essence” clause is
contravened by the lack of express language stating so. Baypoint Mortg. Corp. v. Crest Premium
Real Estate etc. Tr., 168 Cal. App. 3d 818, 825, 214 Cal. Rptr. 531, 535 (Cal. Ct. App. 1985) (“Time
is not the essence of a contract unless it is so declared.”); Cauff Lippman & Crane Aviation, Inc.
v. The Republic of Nauru, 163 F.3d 605, 1998 WL 657716, at *1 (9th Cir. 1998) (unpublished)
(“Under Washington law, time is of the essence in a contract ‘whenever it appears to have been the
intention of the parties to make time of the essence.’” (quoting Univ. Props., Inc. v. Moss, 63 Wash.
2d 619, 388 P.2d 543, 545 (Wash. 1964))). Defendants’ reliance on the word “shall” in the provision
discussing notice, 8.4, is also of no help. Here, it simply means that notice must be deemed given when
what is described occurs, not that this is the only means by which notice may be given. As PW
Stoelting states in its reply, “The language does not impose an obligation to provide notice only by
United States mail. The plain language of this contractual provision is clear, and does not require either
party to give notices in a certain way.” Pl.’s Reply, ECF No. 118 at 10. Finally, Defendants state that
8

“[i]n Washington, where a contract has a mandatory notice of claim provision, substantial compliance
is not sufficient, nor is actual notice.” Defs.’ Resp., ECF No. 109 at 14. Simply put, neither of the
contract provisions at issue are a notice of claim provision. The provisions address how to terminate
the contract and a manner by which notice may be given. They do not set forth a contractual
obligation to provide notice to the other party regarding a claim.

Thus, the provisions are

distinguishable from those discussed in Mike M. Johnson, Inc. v. Cty. of Spokane, 78 P.3d 161
(Wash. 2003). It follows that PW Stoelting substantially complied with termination and notice
provisions of the contract.
2.

Applicability of California and Washington Franchise Law

Defendants’ argument that the termination was not effective because the agreement is subject
to California and Washington franchise law as they were required to pay a franchise fee to PW
Stoelting also fails.
I.

California Law

Turning first to California law, under the California Franchise Relations Act
“franchise” means a contract or agreement, either expressed or implied, whether oral or
written, between two or more persons by which:
(a) A franchisee is granted the right to engage in the business of offering, selling or
distributing goods or services under a marketing plan or system prescribed in
substantial part by a franchisor; and
(b) The operation of the franchisee's business pursuant to that plan or system is
substantially associated with the franchisor's trademark, service mark, trade name,
logotype, advertising, or other commercial symbol designating the franchisor or its
affiliate; and
(c) The franchisee is required to pay, directly or indirectly, a franchise fee.

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Cal. Bus. & Prof. Code § 20001 (West). “[F]ailure to satisfy any statutory element of the franchise
definition is fatal.” Thueson v. U-Haul Int’l, Inc., 144 Cal. App. 4th 664, 670, 50 Cal. Rptr. 3d 669,
672 (Cal. Ct. App. 2006). Here, AFTT asserts that it is a franchisee because it was required to pay
a franchise fee. “‘Franchise fee’ means any fee or charge that a franchisee or subfranchisor is
required to pay or agrees to pay for the right to enter into a business under a franchise agreement,
including, but not limited to, any payment for goods and services.” Cal. Bus. & Prof. Code § 20007
(West). “The purchase or agreement to purchase goods at a bona fide wholesale price if no obligation
is imposed upon the purchaser to purchase or pay for a quantity of goods in excess of that which a
reasonable businessperson normally would purchase by way of a starting inventory or supply or to
maintain a going inventory or supply,” however, is not considered the payment of a franchise fee. Cal.
Bus. & Prof. Code § 20007(a). (West).
AFTT was not a franchisee because it was not required to purchase more than a reasonable
quantity of goods at wholesale prices. The California Department of Business Oversight’s guidance
on franchises in California defines bona fide wholesale price as “the price at which goods are
purchased and sold by a manufacturer or wholesaler to a wholesaler or dealer where there is ultimately
an open and public market in which sales of the goods are effected to consumers of the goods.”
CALIFORNIA DEPARTMENT OF BUSINESS OVERSIGHT, Commissioner’s Release 3-F: When Does
An

A g r e e me n t

Constitute

a

“ F r a n c h ise ”,

June

22,

1994,

http://www.dbo.ca.gov/commissioner/releases/3-f.asp (last visited Dec. 17, 2018). AFTT purchased
equipment at 45% of the list price and parts and accessories at 50% of the list price. In support of
their claim that these prices are wholesale prices, PW Stoelting relies on the affidavit of Richard
Koehl, the former general manager of PW Stoelting and current head of the Stoelting division of
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Vollrath, who states the prices AFTT and P rism paid “are in line with the prices paid by all of
Stoelting’s domestic distributors” and that these prices “are consistent with the wholesale pricing
system in the frozen treat equipment industry.” Koehl Aff., ECF No. 90 at ¶¶ 13–14. While
Defendants’ dispute Koehl’s assertion, they have provided no evidence of their own to contradict
Koehl’s statement regarding wholesale prices.
Regarding the amount of required inventory, AFTT was expected to maintain an inventory of
parts and equipment collectively worth $68,305.50. This required inventory was equal to 3.8% of
AFTT’s expected sales goal of $1,800,000 for 2011, which AFTT exceeded. During the course of
Defendants’ distributorship, AFTT and Prism collectively purchased over $20,000,000 worth of
products and parts from PW Stoelting. Given the low cost of the required inventory compared to the
dollar amount of AFTT’s sales, no reasonable jury would find that this required inventory level at
wholesale prices exceeds what a reasonable business person would normally purchase, and thus the
mandatory purchases do not constitute a franchise fee under California law.
ii.

Washington Law

Turning next to Washington law, under the Franchise Investment Protection Act
“Franchise” means:
(a) An agreement, express or implied, oral or written, by which:
(i) A person is granted the right to engage in the business of offering, selling,
or distributing goods or services under a marketing plan prescribed or
suggested in substantial part by the grantor or its affiliate;
(ii) The operation of the business is substantially associated with a trademark,
service mark, trade name, advertising, or other commercial symbol designating,
owned by, or licensed by the grantor or its affiliate; and

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(iii) The person pays, agrees to pay, or is required to pay, directly or indirectly,
a franchise fee.
Wash. Rev. Code Ann. § 19.100.010(6) (West). “Franchise fee” means “any fee or charge that a
franchisee or subfranchisor is required to pay or agrees to pay for the right to enter into a business or
to continue a business under a franchise agreement, including, but not limited to . . . any payment for
the mandatory purchase of goods or services or any payment for goods or services available only from
the franchisor . . . .” § 19.100.010(8). “The purchase or agreement to purchase goods at a bona fide
wholesale price,” however, is not considered payment of a franchise fee. § 19.100.010(8)(a). Here
Prism, like AFTT, purchased merchandise at 45% of the list price and parts and accessories at 50%
of the list price and was required to maintain an inventory totaling $30,000, equivalent to 15% of
Prism’s 2011 sales goal of $200,000, which it met. In Washington, in order “[t]o qualify as a franchise
fee, a fee must constitute an ‘unrecoverable investment’ by the franchisee in the franchisor,” Atchley
v. Pepperidge Farm, Inc., No. CV-04-452-EFS, 2012 WL 6057130, at *9 (E.D. Wash. Dec. 6, 2012)
(citing Corp. Res. Inc., v. Eagle Hardware & Garden, Inc., 115 Wash. App. 343, 350, 62 P.3d 544
(Wash. Ct. App. 2003); Wright–Moore Corp. v. Ricoh Corp., 908 F.2d 128, 136 (7th Cir.1990)), and
is made for “the right to enter into or to continue a business under a franchise agreement.” Bryant
Corp. v. Outboard Marine Corp., No. C93-1365R, 1994 WL 745159, at *2 (W.D. Wash. Sept. 29,
1994), aff'd sub nom., 77 F.3d 488 (9th Cir. 1996). Here, Prism’s required purchase on inventory was
recoverable, as Prism could still sell the equipment after the distributorship agreement was terminated
and the contract provided an option for PW Stoelting to purchase the items back after termination. See
ECF No. 90-1 at 5 (“7.7 Upon termination of this Agreement, Supplier shall have the option to
repurchase any or all of the Products sold to Distributor hereunder during the preceding one (1) year

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. . . .”). Further, the purchase of inventory was not for the right to enter into the distributorship
agreement, but rather to ensure that Prism had inventory to sell to customers. It thus follows that the
mandatory purchase of inventory for sale at wholesale prices falls under the exemption and is not a
franchise fee under Washington law.
As a result, the distributorship agreement is not subject to either California or Washington
franchise law and PW Stoelting was free to terminate the agreements without cause pursuant to the
terms of the agreements. It follows that the distributorship agreement between PW Stoelting and
Defendants was terminated as of January 31, 2016. Accordingly, PW Stoelting’s motion for partial
summary judgment is granted.
C.

Trademark Claim
1.

Validity of the Stoelting Trademark

Defendants argue that the Stoelting trademark was not renewed because PW Stoelting, not
Vollrath, was identified as the owner of the trademark when Vollrath filed its declaration of use and
application for renewal under §§ 8 and 9 of the Trademark Act. Because of that error, combined with
the fact that the deadline for filing the documents as well as the six-month grace period had passed,
Defendants argue Vollrath’s attempt to renew the Stoelting trademark was void ab ignitio.
Consequently, Defendants argue that the Stoelting trademark should be cancelled by this court.
Section 8 of the Lanham Act requires a trademark owner to file an affidavit or declaration
of use or excused non-use, among other documents, before the fifth and tenth years of registration.
15 U.S.C. § 1058(a), (b)(1)(A). These documents must be filed within the one-year period
immediately preceding the expiration or within the six-month grace period that immediately follows the
expiration. § 1058(a)(1)–(2). “Filing by the current owner is a statutory requirement that must be met
13

prior to the expiration of the six-month grace period established under 15 U.S.C. § 1058(c)(1).” In
Re Media Cent. Ip Corp., 65 U.S.P.Q.2d 1637 (Com'r Pat. & Trademarks July 2, 2002).
Although Vollrath does not deny the error in the documentation it filed with the USPTO, it
asserts that the validity of the mark should be decided by the USPTO rather than this court. After
being alerted to its error by Defendants’ summary judgment motion, intellectual property counsel for
Vollrath filed a Section 7 Amendment Request for the mark to remedy the error on August 10, 2018.
“The USPTO may make a correction to a registration in appropriate cases, upon written request by
the owner of the registration.” Trademark Manual of Examining Procedure § 1109.10. “Whenever
a mistake has been made in a registration and a showing has been made that the mistake occurred in
good faith through the fault of the owner, the Director may issue a certificate of correction.” 37
C.F.R. § 2.175(a).
Subsequent to the motions for summary judgment being fully briefed, PW Stoelting filed a 7(h)
motion to supplement the fact record with proof that the USPTO granted its request to amend and now
lists Vollrath as the owner of the mark in question. Defendants argue that PW Stoelting’s motion
should be struck, stating that the supplement is untimely and that PW Stoetling’s motion is, in essence,
an unauthorized sur-reply. Regarding timeliness, PW Stoelting filed its Section 7 Amendment Request
less than a month after Defendants’ summary judgment motion identified the issue. The USPTO
issued the new registration certificate on October 16, 2018, and PW Stoelting’s counsel filed its motion
to supplement a week later. PW Stoelting did not unduly delay filing its amendment request with the
USPTO or its motion to supplement with the court. Defendants’ assertion that P W Stoelting is
attempting to file a sur-reply is simply false. PW Stoelting has instead merely submitted the updated

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registration certificate for consideration by the court. Defendants have suffered no prejudice.
Accordingly, PW Stoelting’s motion to supplement the fact record is granted.
Regardless, Defendants argue that “there was no valid renewal registration to amend because
Plaintiff’s renewal application was void ab initio when the Section 8 Renewal Declaration was filed
by and under the name of the wrong entity,” Defs.’ Reply to Mot. to Supplement, ECF No. 127 at 2,
and that the court should cancel the trademark registration pursuant to 15 U.S.C. § 1119. A list of
correctable and non-correctable errors is set forth in § 1201.02(c) of the Trademark Manual of
Examining Procedure. Defendants point to the following non-correctable error in support of their
argument: “If an application is filed in the name of entity A, when the mark was assigned to entity B
before the application filing date, the application is void as filed because the applicant was not the
owner of the mark at the time of filing.” § 1201.02(c), Non-Correctable Errors (2).
Vollrath’s application, however, is not void because PW Stoelting was not a legally distinct
entity at the time it submitted the required documentation in January of 2017 as it was already a
division of Vollrath at that point due to the merger on December 31, 2016. While the Trademark
Manual of Examining Procedure does not appear to provide a definition of entity, other definitions and
decisions of the Trademark Trial and Appeal Board (TTAB) evince a definition focused on whether
the entity exists as an individual legal identity. Accu Pers. Inc. v. Accustaff Inc., 38 U.S.P.Q.2d 1443
(T.T.A.B. Feb. 23, 1996) (denying summary judgment that application was void ab initio because the
four companies “did not survive the merger as entities separate and apart from the corporation” that
was listed as owner); see also In Re Atlanta Blue Print Co., 19 U.S.P.Q.2d 1078 (Com’r Pat. &
Trademarks Sept. 12, 1990) (accepting Section 8 declaration where owner filed under its trade name
because the trade name is “not a separate legal entity”); Re: Trademark Registration of Ace III
15

Commc’ns, I Nc., 62 U.S.P.Q.2d 1049 (T.T.A.B. Dec. 6, 2001) (cancelling registration because an
individual is a separate entity from a corporation); In Re Media Cent. Ip Corp., 65 U.S.P.Q.2d 1637
(Com’r Pat. & Trademarks July 2, 2002) (refusing a Section 8 Declaration because a subsidiary is a
separate entity from the parent company).
PW Stoelting is more akin to an operating division as defined by the Trademark manual of
Examining Procedure: “An operating division that is not a legal entity that can sue and be sued does
not have standing to own a mark or to file an application to register a mark.” § 1201.02(d). As such,
Vollrath’s submissions are not void ab initio because filing the required documentation under the name
of an operating division is a correctable error. § 1201.02(c), Correctable Errors (2). Given that the
error was correctable, and has since been corrected by the USPTO, cancelling the Stoelting mark
would be improper.
Defendants also argue that Vollrath’s attempt to renew the PW Stoelting mark was done
fraudulently and that the mark should be cancelled as a result. “Fraud in procuring a trademark
registration or renewal occurs when an applicant knowingly makes false, material representations of
fact in connection with his application.” In re Bose Corp., 580 F.3d 1240, 1243 (Fed. Cir. 2009)
(quoting Torres v. Cantine Torresella S.r.l., 808 F.2d 46, 48 (Fed. Cir. 1986)). “[A] trademark is
obtained fraudulently under the Lanham Act only if the applicant or registrant knowingly makes a false,
material representation with the intent to deceive the PTO.” Id. at 1245. “When drawing an inference
of intent, ‘the involved conduct, viewed in light of all the evidence . . . must indicate sufficient
culpability to require a finding of intent to deceive.’” Id. (quoting Kingsdown Med. Consultants, Ltd.
v. Hollister Inc., 863 F.2d 867, 867 (Fed. Cir. 1988)).

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Defendants’ argument fails, however, because the record does not support their claim that
Vollrath’s renewal application was made with intent to deceive, as opposed to simply being a mistake.
“There is no fraud if a false misrepresentation is occasioned by an honest misunderstanding or
inadvertence without a willful intent to deceive.” Id. at 1246 (citing Smith Int’l, Inc. v. Olin Corp.,
209 U.S.P.Q. 1033, 1043 (T.T.A.B. 1981)). In support of their claim Defendants merely point out the
fact that in the renewal application PW Stoelting was listed as the owner of the mark and Paul Egbert
identified himself as the Vice-President of Marketing for PW Stoelting when he signed the supporting
declaration. But while the renewal application was admittedly incorrect in these respects, there is no
reason to believe that the error was anything but inadvertence on the part of PW Stoelting or its
attorneys. Defendants have failed to offer any evidence that the errors were intended to deceive
rather than merely the result of negligence, and “[m]ere negligence is not sufficient to infer fraud or
dishonesty.” Id. at 1244 (quoting Symbol Techs., Inc. v. Opticon, Inc., 935 F.2d 1569, 1582 (Fed.
Cir.1991)). As a result, Defendants have failed to meet their burden.
2.

First Sale Doctrine and Trademark Infringement

Defendants assert that PW Stoelting’s trademark claim should be dismissed because their use
of the Stoelting trademark is permissible under the first sale doctrine. Generally, “trademark law does
not apply to the sale of genuine goods bearing a true mark even though the sale is not authorized by
the mark owner.” Standard Process, Inc. v. Banks, 554 F. Supp. 2d 866, 869 (E.D. Apr. 18, 2008),
amended, No. 06-C-843, 2008 WL 11344638 (E.D. Wis. June 17, 2008). This rule, known as the first
sale doctrine, provides that “‘the right of a producer to control distribution of its trademarked product
does not extend beyond the first sale of the product.’” Id. (quoting Sebastian Int’l, Inc. v. Longs
Drug Stores Corp., 53 F.3d 1073, 1074 (9th Cir.1995)). PW Stoelting claims that the first sale
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doctrine is not applicable because Defendants’ websites give the impression that they are authorized
dealers of products that bear the Stoelting trademark. “[T]he first sale doctrine does not protect
unauthorized resellers who use other entities’ trademarks when such use gives a reasonable impression
that the resellers are authorized dealers for a product.” Id.; see Australian Gold, Inc. v. Hatfield,
436 F.3d 1228, 1240–41 (10th Cir. 2006); Trudeau v. Lanoue, No. 04 C 7165, 2006 WL 516579, at
*4 (N.D. Ill. Mar. 2, 2006).
Here, based on the record, a reasonable jury could find that Defendants’ representations on
their website could give the impression that the resellers are authorized dealers of PW Stoelting’s
product, negating the application of the first sale doctrine and rendering summary judgment on this
issue inappropriate. While the parties dispute much regarding what was present on the website after
the distributorship agreement was terminated on January 31, 2016, it is undisputed that in February and
March of 2016, pages on AFTT and Prism’s websites were titled “Superior Freezers CA new and
used Stoelting frozen treat equipment” and “Superior Freezers NW new and used Stoelting frozen treat
equipment,” implying that they could sell new PW Stoelting equipment which they could no longer do
once the distributorship agreement ended. Additionally, in March of 2016 both AFTT and Prism’s
websites contained links next to PW Stoelting product images that led to full-color Stoelting-produced
specification sheets about the equipment, which can also lead to consumer confusion. See D 56, Inc.
v. Berry’s Inc., 955 F. Supp. 908, 920 (N.D. Ill. 1997) (“[R]esale of plaintiff's genuine trademarked
products does not shield them from charges of trademark infringement where they use plaintiff's
trademark and promotional materials in its displays and advertising.”). Although Defendants claim that
they got the specification sheets from publicly accessible sources, the issue is not the source of the
sheets but the effect linking to and displaying them with PW Stoelting products has upon consumers
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and whether it leads to consumer confusion. “‘The “keystone” of trademark infringement is “likelihood
of confusion” as to source, affiliation, connection or sponsorship of goods or services among the
relevant class of customers and potential customers.’” Sorensen v. WD-40 Co., 792 F.3d 712, 726
(7th Cir. 2015) (quoting Sands, Taylor & Wood Co. v. Quaker Oats Co., 978 F.2d 947 (7th Cir.
1992)); Team Tires Plus, Ltd. v. Tires Plus, Inc., 394 F.3d 831, 835 (10th Cir. 2005) (“[T]he relevant
confusion under trademark law is not limited to confusion of consumers as to the source of the goods,
but also includes confusion as to sponsorship or affiliation.”). Defendants also continued to use the
word “Stoelting” in metatags on their websites after the termination of the agreement, including 85 uses
of the word in metatags on AFTT’s website. The use of a trademark in metatags can also lead to
consumer confusion. See Brookfield Commc’ns, Inc. v. West Coast Entm’t Corp., 174 F.3d 1036,
1064 (9th Cir. 1999) (“Using another's trademark in one's metatags is much like posting a sign with
another's trademark in front of one's store.”); see also Promatek Indus., Ltd. v. Equitrac Corp., 300
F.3d 808, 812 (7th Cir. 2002) (finding a “strong likelihood of consumer confusion” as a result of the use
of a trademark as a metatag). Finally, there is evidence of actual customer confusion. At least one
customer sent a purchase order for Stoelting equipment to AFTT in April and July of 2016 and referred
to AFTT as “Superior Freezers/Stoelting.” For all of these reasons, Defendants are not entitled to
summary judgment on PW Stoelting’s trademark claim under the first sale doctrine.
Defendants also attempt to argue that PW Stoelting’s trademark claim should be dismissed
because there is nothing in the record that could establish a likelihood of consumer confusion.
“Likelihood of confusion is a question of fact, which means that summary judgment is appropriate only
if no reasonable factfinder could find in favor of the nonmoving party on that issue. Epic Sys. Corp.
v. YourCareUniverse, Inc., 244 F. Supp. 3d 878, 890 (W.D. Wis. 2017) (citing Sorensen, 792 F.3d
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at 726). Based on the previously discussed facts and evidence, the court is convinced that a
reasonable factfinder could find in favor of PW Stoelting regarding consumer confusion. Accordingly,
Defendants’ motion for summary judgment with regards to PW Stoelting’s trademark infringement
claim is denied.
D.

Breach of Contract Claim
Defendants also attempt to argue that they are entitled to summary judgment with respect to

PW Stoelting’s breach of contract claim. PW Stoelting has alleged that Defendants owe PW Stoelting
in excess of $200,000 for equipment ordered for Menchie’s franchisees by Defendants. While
Defendants dispute the amount owed, arguing that they are owed credits from PW Stoelting that would
reduce the balance owed, Defendants have failed to point to undisputed facts that establish they are
entitled to summary judgment regarding PW Stoelting’s breach of contract claim. Their motion for
summary judgment is therefore denied with respect to this claim.
CONCLUSION
For the foregoing reasons, PW Stoelting’s motion to substitute The Vollrath Company, L.L.C.
as the plaintiff in this case (ECF No. 108) is GRANTED. The clerk is directed to substitute The
Vollrath Company, L.L.C. for PW Stoelting as Plaintiff in this case. Defendants’ motion to not
expedite PW Stoelting’s motion to substitute (ECF No. 116) is DENIED as moot. PW Stoelting’s
motion to supplement the fact record for summary judgment (ECF No. 123) is GRANTED and
Defendants’ motion to strike PW Stoelting’s motion to supplement the fact record for summary
judgment (ECF No. 128) is DENIED. PW Stoelting’s motion for partial summary judgment (ECF No.
86) is GRANTED and Defendants’ motion for summary judgment (ECF No. 94) is DENIED.

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Dated this 17th day of December, 2018.
s/ William C. Griesbach
William C. Griesbach, Chief Judge
United States District Court

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