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JEG Powersports, LLC v. M & N Dealership VI, LLC

United States District Court, W.D. Oklahoma

September 8, 2017

JEG POWERSPORTS, LLC, d/b/a STILLWATER HONDA and d/b/a HONDA OF STILLWATER, an Oklahoma Limited Liability Company Plaintiff,
v.
M & N DEALERSHIP VI, LLC, d/b/a BARRY SANDERS HONDA, and d/b/a BARRY SANDERS SUPERCENTER, and d/b/a STILLWATER HONDA CARS, and d/b/a STILLWATER HONDA MOTORS, Defendant.

          ORDER

          VOE HEATON CHIEF U.S. DISTRICT JUDGE

         Plaintiff JEG Powersports, LLC, d/b/a Stillwater Honda and d/b/a Honda of Stillwater (“JEG”) sued M & N Dealership VI, LLC, d/b/a Barry Sanders Honda and d/b/a Barry Sanders Supercenter and d/b/a Stillwater Honda Cars and d/b/a Stillwater Honda Motors (“M&N”), asserting tradename infringement and unfair competition/false advertising claims under the Lanham Act, 15 U.S.C. §§ 1051-1141, and unfair competition and tradename infringement claims under Oklahoma law. Plaintiff sought injunctive relief and monetary damages. Before trial, plaintiff limited its claims against defendant, asserting only trademark infringement claims under the Lanham Act, 15 U.S.C. § 1125(a), and Oklahoma common law. Specifically, JEG alleged that M&N infringed its unregistered tradenames “Honda of Stillwater” and “Stillwater Honda.” The case was tried to a jury, which found in favor of M&N with respect to plaintiff's claims based on its tradename “Honda of Stillwater.” The jury found in favor of plaintiff with respect to its infringement claims based on its tradename “Stillwater Honda” and awarded plaintiff damages in the amount of $160, 000.00.[1] The court must now address plaintiff's request for injunctive relief and enhanced damages. The parties have filed supplemental briefs addressed to these issues.[2]

         The court is bound by the jury's conclusions that defendant infringed plaintiff's tradename “Stillwater Honda” in violation of both the Lanham Act and Oklahoma common law.[3] It now concludes, having considering the evidence and the parties' supplemental submissions, that plaintiff is entitled to injunctive relief, but not enhanced damages. The court's analysis and rationale for these conclusions follows a summary of the pertinent facts.

         Background

         JEG and M&N are both authorized Honda dealerships in the City of Stillwater, Oklahoma. JEG mainly sells recreational vehicles, such as motorcycles and ATVs, and M&N is a car dealership, selling new and used vehicles. JEG purchased the dealership in 2007, along with its predecessor's tradenames, “Stillwater Honda” and “Honda of Stillwater, ” which it has used since then.[4] Plaintiff registered both tradenames with the Oklahoma Secretary of State in May 2010, but not with the United States Patent and Trademark Office.[5]

         In early 2014 defendant, which was operating as Barry Sanders Super Center, offered to purchase the rights to use the tradename “Stillwater Honda” and the domain name http://www.stillwaterhonda.com from JEG for $1, 000. Plaintiff refused to sell. The next month defendant increased the offer to $10, 000, but plaintiff again refused to sell. Defendant then reached agreement with American Honda Motor Company to do business using the tradename “Stillwater Honda Cars, ” instead of “Stillwater Honda.” In June 2014, M&N registered the tradename “Stillwater Honda Cars” with the Oklahoma Secretary of State. On September 8, 2014, plaintiff sent defendant a cease and desist letter, demanding that it stop using its tradenames. Defendant did not respond to the letter. Defendant finalized its name change from Barry Sanders Super Center to “Stillwater Honda Cars” in October 2014.

         In conjunction with its business, defendant displays the tradename “Stillwater Honda” on the outside of its store, with the word “Cars” also appearing, but in a somewhat separate portion of the building's frontage. In the past defendant also has referred to “Stillwater Honda” in radio advertisements. The radio ads ran through approximately the end of 2015, but not since then. Since defendant changed the name of its business, defendant's customers repeatedly have called plaintiff, instead of defendant, by mistake on a daily basis. Sometimes the callers are irate and angry because of some issue they have had with defendant. Plaintiff's evidence included testimony that the calls it received, but which were actually intended for defendant, averaged 9-12 per day. While that number likely overstated the number, the court finds that a substantial number of misdirected calls happened on a regular basis. Defendant's customers also have stopped by plaintiff's store, thinking they are at defendant's car dealership, and plaintiff has received misdirected parcels and fax messages. This constant customer confusion interrupts plaintiff's business, requiring plaintiff's employees to divert their time and attention from their other responsibilities. There was some reputational harm to the plaintiff due to the customers' confusion and bad publicity defendant had received. However, the reputational harm appears to be less significant (in terms of its impact on plaintiff) than the frequent interruptions from misdirected calls.

         Injunction

         A court may grant an injunction under the Lanham Act “according to the principles of equity and upon such terms as the court may deem reasonable.” 15 U.S.C. § 1116(a) To obtain a permanent injunction, a plaintiff “bears the burden of showing: (1) actual success on the merits; (2) irreparable harm unless the injunction is issued; (3) the threatened injury outweighs the harm that the injunction may cause the opposing party; and (4) the injunction, if issued, will not adversely affect the public interest.” Fisher v. Oklahoma Health Care Auth., 335 F.3d 1175, 1180 (10th Cir. 2003); see eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388, 391 (2006) (to obtain relief, plaintiff seeking a permanent injunction “must demonstrate: (1) that it has suffered an irreparable injury; (2) that remedies available at law, such as monetary damages, are inadequate to compensate for that injury; (3) that, considering the balance of hardships between the plaintiff and defendant, a remedy in equity is warranted; and (4) that the public interest would not be disserved by a permanent injunction”).[6]

         As for the first factor, defendant acknowledges that plaintiff achieved success on the merits at least as to the “Stillwater Honda” name. Doc. #89, p. 8. The jury concluded that defendant's use of the name “Stillwater Honda Cars” infringed plaintiff's tradename “Stillwater Honda” under the Lanham Act and under Oklahoma common law. The more difficult issue is whether plaintiff established the second factor -- that it has suffered an irreparable injury.

         The Tenth Circuit has previously held that ‘[i]rreparable injury is frequently presumed where a trademark is wrongfully appropriated by another.” Lorillard Tobacco Co. v. Engida, 213 Fed.Appx. 654, 656-57 (10th Cir. 2007)) (quoting SCFC ILC, Inc. v. Visa USA, Inc., 936 F.2d 1096, 1100-01 (10th Cir.1991), overruled on other grounds by O Centro Espirita Beneficiente Uniao Do Vegetal v. Ashcroft, 389 F.3d 973, 975 (10th Cir.2004) (en banc));[7] Gen. Motors Corp. v. Urban Gorilla, LLC, 500 F.3d 1222, 1229-30 (10th Cir. 2007) (“infringement alone can constitute irreparable injury and ... the movant is not required to show that it lost sales”) (internal quotation marks omitted). However, as the court noted in Lorillard, that conclusion may have been affected by the Supreme Court's “disapprov[al] [of] the use of categorical rules in connection with injunctive relief in intellectual property actions” in eBay. Lorillard, 213 Fed.Appx. at 657. The general consensus among the courts that have addressed the issue is that the eBay analysis extends to trademark/tradename cases. E.g., Ferring Pharm., Inc. v. Watson Pharm., Inc., 765 F.3d 205, 214 (3d Cir. 2014) (a presumption of irreparable harm in trademark infringement cases is no longer permitted), holding modified on other grounds by Reilly v. City of Harrisburg, 858 F.3d 173 (3d Cir. 2017); Tony's Taps, LLC v. PS Enters., Inc., 2012 WL 1059956, at *4 n. 6 (D. Colo. March 29, 2012). Assuming eBay applies to tradename cases, plaintiff must do more than merely demonstrate that its tradename has been infringed to establish irreparable injury. The court concludes, though, that the required showing has been made here.

         Plaintiff did not establish any identifiable lost sales at trial, yet the jury awarded damages in the amount of $160, 000. The jury necessarily found plaintiff suffered substantial harm from defendant's infringement of its tradename. Based on the evidence that was introduced at trial, that harm resulted principally from the disruption to plaintiff's business caused by consumer confusion. The award, though, only covers past harm. If an injunction does not issue and defendant is not required to change its name, “[p]laintiff's only remedy would be to sue [defendant] repeatedly.” Neurovision Med. Prod., Inc. v. NuVasive, Inc., 2014 WL 12554861, at *1 (C.D. Cal. Aug. 5, 2014). As one commentator noted, “[i]f an injunction were denied, the court would be telling plaintiff to sit by and watch defendant continue to violate the law and infringe upon plaintiff's rights until such time as plaintiff decided to sue again for money damages as compensation for the past injury incurred.” 5 McCarthy on Trademarks and Unfair Competition 30:2. Because attorney's fees are awarded only in “exceptional” cases, it could be costly for plaintiff to bring such lawsuits. Neurovision, 2014 WL 12554861, at *1. Repeated litigation would be another source of disputation to plaintiff's business operations. Id.[8]

         The court concludes that, because of the likelihood of future harm if defendant continues to violate plaintiff's rights to its tradename, plaintiff has demonstrated both the required irreparable harm and that it has no adequate remedy at law.

         As for the third factor - the balance of hardships - defendant asserts that an injunction would have a devastating effect on its business. Defendant asserts that it would have to close its dealership for an indeterminate amount of time and would incur substantial costs associated with changing its name from “Stillwater Honda Cars” to something else, including having to spend “hundreds of thousands of dollars” in advertising. However, as defendant appears to acknowledge, the impact of any injunction would be reduced considerably if defendant is allowed a reasonable time to effect the name change. A transition period would allow it to continue to ...


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