Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION—D.N.J.: Terminated fruit arrangement franchisee must stop using trademarks, (Oct 2, 2015)

By Greg Hammond, J.D.

A fruit arrangement franchisee’s post-termination use of its franchisor’s trademarks constituted trademark infringement and false designation of origin or sponsorship, in violation of the Lanham Act, the federal district court in Newark, New Jersey, has decided. Default judgment was entered against the franchisee after it failed to appear, and an injunction prohibiting continued use of the franchisor’s trademarks was granted (Fruit Flowers, LLC v. Jammala, LLC, September 29, 2015, Salas, E.).

Fruit Flowers, LLC owns a franchising program administered by Incredible Franchise Corp. Jammala, LLC and its owner entered into a franchise agreement with Incredible in November 2007. However, the franchise was terminated in 2014 after Jammala allegedly failed to make royalty payments. Fruit Flowers subsequently filed suit, alleging that Jammala continues to use and advertise the Fruit Flowers trademarks, even after Fruit Flowers demanded that Jammala cease and desist the use of the marks. In December 2014, the Clerk of the Court entered a default against Jammala for failing to appear, plead, or otherwise defend Fruit Flowers’ trademark infringement and false designation of origin claims. Fruit Flowers now seeks default judgment, injunctive relief, and an award of costs and attorney fees.

Default. The court first noted that the defendants were properly served and Fruit Flowers stated a sufficient cause of action because: (1) plaintiff demonstrated it was the owner of the Fruit Flowers marks; (2) the marks are valid and legally protectable; (3) Jammala was not granted any rights to continue use of the Fruit Flowers marks after the franchise agreement was formally terminated in July 2014, and (4) there was little doubt that Jammala’s continued use of the marks was highly likely to cause consumer confusion concerning Jammala’s affiliation with Fruit Flowers. Because Jammala failed to pled or otherwise defend, default judgment was deemed proper.

Injunctive relief. The court next determined that: (1) Fruit Flowers would suffer irreparable injury if an injunction were not granted, because continued infringement of the Fruit Flowers marks would result in consumer confusion and deception; (2) monetary damages would be inadequate to compensate Fruit Flowers for the trademark infringement and unfair competition; (3) the only hardship Jammala would face would be to refrain from “engaging in continuous unlawful conduct”; and (4) injunctive relief would serve the public interest goals of preventing consumer confusion and protecting the trademark holder’s property interest. Jammala was therefore enjoined from any further infringement of the Fruit Flowers marks, as well as from further unfair competition in the sale of edible fruit arrangements. In addition, the court ordered Jammala to file a written report under oath within 30 days, setting forth the manner and form in which it has complied with the injunction.

Although the court found that Fruit Flowers was entitled to fees, it declined to grant attorney fees, costs, or disbursements because Fruit Flowers did not submit any invoices or billing records.

The case is No. 14-5834 (ES).

Attorneys: Kevin J. O'Connor (Lum, Drasco & Positan, LLC) for Fruit Flowers, LLC.

Companies: Fruit Flowers, LLC; Jammala, LLC

Cases: FranchisingDistribution NewJerseyNews