Antitrust Law Daily Wrap Up, ADVERTISING—W.D. N.Y.: Breach of settlement agreement did not warrant permanent injunction, attorney fee award, (Oct 24, 2013)

By John W. Arden, J.D., LL.M.

A limousine service’s continued representation of itself as “Magic Mist” limousine company and its operation of a “MigicMistLimo” website breached a settlement agreement of false advertising and unfair competition claims brought by a competing limousine service, according to the federal district court in Buffalo, New York (Buffalo Niagara Chauffeured Services, Inc. v. Leehan, October 20, 2013, Skretny, W.). However, the breaches did not warrant the issuance of a permanent injunction barring such actions or an award of attorney fees to the competitor.

Buffalo Niagara Chauffeured Services commenced this action against James Leehan, d/b/a Magic Mist Limousine Services, and others, alleging unfair competition and false advertising under the federal Lanham Act and New York state law. Buffalo Niagara claimed that the defendants attempted to trade on the goodwill associated with its trademark and caused actual consumer confusion by repeatedly and prominently identifying itself as “Buffalo Limousine” on the Internet and in promotional literature.

In an amended complaint, Buffalo Niagara named James Leehan, d/b/a Magic Mist Limousine Service, and Aces Limousine Service as defendants, alleging that Aces was “now operating Buffalo Airport Limousine and continues to promote the business using the same infringing marks used by Leehan.”

The parties settled the lawsuit in January 2013, with Buffalo Niagara entering into separate stipulations of dismissal with Leehan and Aces. Pursuant to his agreement with Buffalo Niagara, Leehan agreed to cease using any designation that was confusingly similar to the “Buffalo Limousine” trademark and to immediately remove the “buffaloairportlimo” website. He was expressly allowed to direct visitors from that website to the “magicmistlimo” domain for 30 days. The stipulation of dismissal between Buffalo Niagara and Aces required Aces to cease all business contact with Leehan and cease using any designation that is confusingly similar to BUFFALO LIMOUSINE and other marks owned by Buffalo Niagara. The district court entered both stipulations.

Soon thereafter, Aces’ counsel emailed Buffalo Niagara’s counsel, seeking permission to buy Leehan’s “Magic Mist” name and website. “This would violate our stipulation with your client,” he stated. “Would your client consent to us proceeding in light of the settlement?” Buffalo Niagara declined on the ground that Aces’ own website still contained references that violated the stipulation.

Buffalo Niagara later became aware that Aces was answering the “Magic Mist” telephone lines and appeared to be operating the magicmistlimo website. When asked about this, Aces’ counsel asserted that Magic Mist was out of business and his client was using the assumed name for their business, which does not violate the stipulation. Buffalo Niagara contended that the providing assistance to James Leehan did in fact violate the settlement.

Based on this exchange, Buffalo Niagara moved for contempt, requesting that the district court permanently enjoin Aces from “using, owning, or maintaining any assets currently or formerly owned by Defendant James Leehan” and seeking an award of reasonable attorney fees for the contempt motion. The district court confirmed that it had subject matter jurisdiction over the motion.

Breach of stipulation. The court agreed with Buffalo Niagara that Aces “engaged in an inappropriate business contact with Leehan regarding the promotion or operation of a limousine service within the State of New York.” Aces’ counsel confirmed that Aces purchased the Magic Mist Limo website from Leehan, contrary to previous assertions that Aces had only assumed a defunct name. Aces’ argument that this did not constitute a “business contact” with Leehan was nonsensical, the court found. “Further, the fact that Leehan was selling the website because he was no longer continuing in the limousine business does not remove the transaction from the scope of the Stipulation.”

Permanent injunction. Buffalo Niagara argued that the court should enforce the stipulation by depriving Aces of the benefit of the violation and that the only way to do this was to enjoin it from any further use of the assets currently or formerly owned by Leehan.

However, Buffalo Niagara offered no argument to support the request for a permanent injunction, in the court’s view. To obtain a permanent injunction, a plaintiff must show a likelihood of irreparable harm if the injunction is not granted. “No such showing has been attempted here,” the court observed. Although the sale constituted an improper business contact, Buffalo Niagara’s stipulations with Aces and with Leehan did not preclude the use of the Magic Mist name or website. The stipulation of dismissal with Leehan expressly contemplated that the Magic Mist Limo website would continue to operate. There was no allegation that Aces was utilizing any trademark “confusingly similar” to Buffalo Limo trademarks, the court found. Thus, the motion for a permanent injunction was therefore denied.

Attorney fees. The district court likewise denied Buffalo Niagara’s motion for attorney fees incurred in pursuing the motions. “Here, there is certainly a colorable argument that Aces’ purchase of the website after counsel admitted it would violate the Stipulation was in bad faith,” the court stated. Nevertheless, there was no apparent prejudice to Buffalo Niagara from the website purchase. An argument could be made that Aces did not believe it was violating the spirit of the stipulation. Accordingly, there was no clear evidence that the challenged actions were undertaken for “reasons of harassment or delay or for other improper purposes.” The request for attorney fees therefore was denied.

The case is No. 12-CV-681S.

Attorneys: Charles B. von Simson (Damon Morey LLP) for Buffalo Niagara Chauffeured Services, Inc. Julia Claire Mombrea (Nesper, Ferber & DiGiacomo, LLP) for Aces Limousine Service, Inc. Rebecca M. Stadler (Del Vecchio & Stadler LLP) for James Leehan.

Companies: Buffalo Niagara Chauffeured Services, Inc.; Aces Limousine Service, Inc.

Cases: Advertising NewYorkNews