Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION—D. Minn.: Dry cleaners engaged in deceptive acts, infringed franchisor’s trademarks, (Dec 10, 2015)

By Greg Hammond, J.D.

A dry cleaning franchisor was entitled to default judgment for trademark infringement and deceptive trade practices claims against a company that purchased two franchise locations from a franchisee without the franchisor’s consent and without paying any fees. Finding that none of the defendants made an appearance and that the franchisor stated claims for trademark infringement and violations of the Minnesota Deceptive Trade Practices Act (MDTPA), the federal district court in Minneapolis ordered the company to pay nearly $25,000 in damages, costs, and attorney fees (Martinizing International LLC v. BC Cleaners, LLC, December 9, 2015, Davis, M.).

BC Cleaners, LLC purchased two existing Martinizing dry cleaning stores in Minnesota without consent from franchisor Martin Franchises, Inc. The owner of the trademarks, Martinizing International LLC, filed suit against BC, alleging trademark infringement, violation of the MDTPA, and unfair competition. After BC and two of its purported members failed to appear in court, Martinizing moved for default judgment.

Individual defendants. The court first denied default judgment with regard to the two individual defendants, finding that neither individual personally committed trademark infringement. In particular, the court noted that BC did not sign a franchise agreement and the two individuals did not sign personal guaranties submitting themselves to individual liability. Martinizing also failed to provide any basis to pierce the corporate veil or to find the two individuals personally liable.

BC liability. Default judgment, however, could be granted against BC because Martinizing established that BC was liable for trademark infringement under the Lanham Act and the MDTPA. In particular, Martinizing demonstrated that BC was not a franchisee and did not have permission from Martinizing, but it nevertheless operated the franchised locations using the Martinizing marks in a manner likely to cause confusion. The court additionally determined that BC engaged in a deceptive trade practice by using the marks without permission and passing itself off as an authorized Martinizing franchisee.

Relief. The court awarded Martinizing nearly $10,000 in damages for trademark infringement, consisting of fees for transferring the franchise agreements, annual franchise fees, and interest. Martinizing was additionally entitled to permanent injunction because it established success on the merits; the court presumes irreparable harm when trademark infringement is established; any harm to BC caused by permanent injunction would flow directly from its own illegal conduct; and public interest supports granting injunctive relief to prevent further violation of the Lanham Act and MDTP. Lastly, Martinizing was granted attorney fees and costs in the amount of $15,511.

The case is No. 15-551 (MJD/BRT).

Attorneys: Aaron R. Hartman (Monroe Moxness Berg PA) and K. Dino Kostopoulos (Kostopoulos Rodriguez, PLLC) for Martinizing International LLC.

Companies: Martinizing International LLC; Martin Franchises, Inc.; BC Cleaners, LLC

Cases: FranchisingDistribution StateUnfairTradePractices MinnesotaNews