Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION—N.D. Cal.: Century 21 franchisee liable for unpaid fees and trademark infringement, (Jul 11, 2014)

By Edward L. Puzzo, J.D.

A Century 21 franchisee defaulted on its franchise agreement and was liable for unpaid royalty and advertising fees and trademark infringement, the federal district court in San Jose, California has ruled (Century 21 Real Estate LLC v. Ed/Var Inc., July 10, 2014, Davila, E.).

Under an agreement with franchisor Century 21 Real Estate signed in 2000, franchisee Ed/Var Inc. agreed to pay Century 21 monthly royalty and advertising fees. Ed/Var co-owner Carlos Vargas also signed a personal guaranty of Ed/Var's obligations. In 2012, Century 21 issued three notices of default based on Ed/Var's failure to make the required royalty and advertising fee payments. In January 2013, after Ed/Var failed to cure the defaults, Century 21 terminated the franchise agreement and filed this lawsuit alleging breach of contract and guaranty, and trademark infringement. Century 21 moved for summary judgment; Ed/Var and Vargas failed to oppose the motion.

Breach of contract. Century 21's breach of contract claim, construed under New Jersey law where Century 21 has its principal place of business, required proof of a contract, a breach of that contract, damages therefrom, and plaintiff's own performance of its contractual duties, the court explained. Century 21 met this burden, the court ruled, by showing that Ed/Var failed to properly report royalty-bearing transactions and failed to pay the royalty and advertising fees required under the franchise agreement. Since Ed/Var failed to produce evidence to the contrary, Century 21 was entitled to summary judgment on this issue, the court ruled.

Trademark infringement. Century 21 showed that its marks were registered and that the franchisee continued to use the marks for one month after the termination of the franchise agreement as a holdover franchisee, which was infringement under the Lanham Act, stated the court.

Based on these findings, the court assessed damages of over $177,000 in unpaid royalty and advertising fees and interest, $2,367 in trademark claims, and further imposed a permanent injunction against Ed/Var and Vargas' use of Century 21 marks.

The case is Civil Action No. 5:13-cv-00887 EJD.

Attorneys: Aaron Paul Rudin (Gordon & Rees LLP) for Century 21 Real Estate LLC.

Companies: Century 21 Real Estate LLC; Ed/Var Inc.

Cases: FranchisingDistribution Advertising CaliforniaNews