IP Law Daily, TRADEMARK—D. Colo.: Manufactured housing business owners can pursue infringement claims against former partners, (Nov 18, 2019)

By Cheryl Beise, J.D.

Defendants allegedly solicited consumers to invest in manufactured housing community investments funds using Plaintiff’s trademarks.

A series of corporate entities in the business of owning and operating manufactured housing developments can proceed with Lanham Act, Colorado Consumer Protection Act, and unjust enrichment against former business partners and associated entities, the federal district court in Denver has determined. The plaintiffs adequately alleged that the defendants solicited investors for their own investment fund by using the plaintiffs’ unregistered trademarks, including on social media, thereby trading off the goodwill of the plaintiffs’ funds and reputation (RV Horizons, Inc. v. Smith, November 15, 2019, Wang, N.).

Plaintiffs are a series of corporate entities—owned by, among others, non-party individuals David Reynolds and Frank Rolfe—that are in the business of owning and operating manufactured housing developments. Plaintiffs and other entities owned by Reynolds and Rolfe own and operate more than 250 communities in more than 25 states. As part of their business, Reynolds and Rolfe, through Plaintiff Niche Investment Networks, LLC, also run a series of "boot camps" for would-be manufactured housing developers to learn their business methods. These sessions instruct participants using copyrighted materials owned by Plaintiff RV Horizons.

It was at one of these boot camps that Reynolds and Rolfe met defendants Jamie and Ryan Smith approximately 10 years ago. At the time, the Smiths owned several failing manufactured home communities and unsuccessfully attempted to bring on Plaintiffs as managers. The Parties decided to combine their skills—the Smiths’ aptitude for networking and event speaking and Reynolds and Rolfe’s skills with "identifying, acquiring, managing, and repositioning manufactured home communities and networking and fundraising with the bootcamp attendees." This began a years-long relationship with the Smiths promoting Plaintiffs’ investments to potential investors. Initially successful, the relationship would later turn sour. In 2011, Jamie Smith wrote Trailer Cash, a nonfiction book which purportedly contains copyrighted and proprietary information from the Plaintiffs. At some point, the Smiths allegedly began holding their own boot camps, using materials from RV Horizons boot camps and mirroring the latter’s structure and format. In 2016, Plaintiffs formed Plaintiff MHC America Fund LLC, Plaintiff Affordable Housing Community Fund 1, and began raising capital. Plaintiffs again used the Smiths to help promote Fund 1 to potential investors and paid the Smiths approximately $445,000 in 2017 and 2018 in fees and interest from Plaintiff AWA Fund 2 LLC as part of a contract between the Parties regarding Fund 1’s promotion. The Smiths accepted the money but never signed the agreements. After they seemingly entered into this agreement, the Smiths began promoting their own fund, Fund 7, to investors to whom they were supposed to be promoting Plaintiffs’ Fund 1 (and later Plaintiffs’ Fund 2). In 2016 or 2017, the Smiths began working with Defendant Dahn Corporation to solicit investors for Fund 7.

Plaintiffs sued Defendants for direct and contributory trademark infringement and unfair competition under Section 43(a) of the Lanham Act against all Defendants and claims for violations of state law against combinations of Defendants. Before the court were Defendants’ motions to dismiss the Plaintiffs’ Lanham Act claims, their claims for violations of Colorado Consumer Protection Act ("CCPA") and their claims for unjust enrichment under Colorado common law. Plaintiffs alleged that the Smiths and Dahn Corporation used Plaintiffs’ trademarks and goodwill to promote Fund 7. In promoting Fund 7, the Smiths and Dahn also allegedly solicited consumers in the market for manufactured housing community investments via social media and online advertising.

Trademark infringement. Because the Plaintiffs’ trademarks at issue were not registered with the USPTO, in order to establish that they were protectable, Plaintiffs had to establish either that their marks (a) were inherently distinctive, or (b) had acquired distinctiveness through secondary meaning.

The SAC pleaded enough facts, drawing all inferences in favor of Plaintiffs, to support a finding of at least secondary meaning, according to the court. Plaintiffs alleged that each of its entities "uses its name in commerce," "has been exclusively doing business under that name since" the entity’s formation, and "does business all over the country, including Colorado." Plaintiffs claimed that the marks at issue are "capable of distinguishing the services" provided by RV Horizons, Alumni 1-3, AHCF 1-6, AWA, and Fund 1. Plaintiffs also collectively "purchased in excess of $375 million of assets including more than 200 mobile home park communities representing over 20,000 lots in 26 states."

The court found that a fact finder could find that the Defendants sought to derive benefit from the goodwill of Plaintiffs. For example, Plaintiffs alleged that Elevation (an entity the Smiths used to promote Fund 7) falsely claimed that RV Horizons was Elevation’s management company in its two newsletters. In addition, Plaintiffs alleged that Defendants’ Offering Package used trademarks for RV Horizons, Alumni 1-3 AHCF 1-6, AWA, and Fund 1 without authorization. Defendants also purportedly falsely represented to potential investors that they were responsible for all of these funds’ successes, when Defendants in fact were not involved whatsoever with the funds.

The Smith Defendants argued that the SAC failed to allege that they had used the Plaintiffs’ names as trademarks. However, Plaintiffs alleged that the Offering Package repeatedly referred to the Plaintiffs as "Affiliates," and specifically in the context of mobile housing community investment and management to bolster the credibility of the managers behind Fund 7. This sufficed to allege trademark use in commerce at this stage, according to the court. In addition to direct infringement, the SAC alleged claims of contributory trademark infringement against the Smiths, Elevation, and Dahn. Even if the Smith Defendants were not found liable for direct infringement, the facts in the SAC could nevertheless support a finding that the Smith Defendants (a) enabled a third party (Dahn Corporation) to directly infringe on Plaintiffs’ marks, and (b) failed to take reasonable measures to remedy Dahn Corporation’s infringement.

Dahn Corporation’s motion to dismiss direct and contributory infringement claims also was denied. Plaintiffs alleged that Dahn used their protectable marks, at least by creating with Elevation and the Smith Defendants the Offering Package for Fund 7 and by soliciting investors and purchasers of their services using the Offering Package and other commercial advertising. Plaintiffs alleged that Dahn either induced the alleged infringement or enabled the infringement (and is therefore liable for contributory trademark infringement) because Dahn’s facilitation of Fund 7’s Offering Package contributed to the creation of the Offering Package, Dahn controlled Fund 7, and benefitted from the successes of Fund 7.

Colorado Consumer Protection Act. Plaintiffs also alleged that Fund 7, Elevation, the Smiths, and Dahn violated the Colorado Consumer Protection Act ("CCPA"), a claim premised on Defendants’ unfair or deceptive trade practices. Dahn moved to dismiss this claim. The court found that that the SAC’s allegations against Dahn—based on the Offering Package used for Fund 7—met the heightened pleading standard of Rule 9(b). The SAC specifically identified Dahn’s website and a link to Elevation Capital’s website (and thus the Fund 7 Offering Package) therein. The court found that SAC adequately sets forth the time and place of the alleged unfair or deceptive trade practices.

Unjust enrichment. The SAC asserted unjust enrichment against all Defendants. This claim was based on Defendants’ profiting off Plaintiffs’ goodwill, boot camp materials, and investor lists, and was brought on behalf of RV Horizons, Fund 1, Class C, Fund 2, and Class B. The Smith Defendants did not challenge this claim, but Dahn argued that the SAC failed to state a claim against because it failed to distinguish the factual predicate between Dahn and the Smith Defendants.

In Response, Plaintiffs cited to the Private Placement Memorandum, which "explains that Fund 7 ‘will enter into a property management agreement with Dahn … to manage the day-to- day operations of Fund 7’s storage facilities and mobile home parks.’ … Fund 7 intends to pay Dahn to manage its mobile home parks." Plaintiffs further contended that "Dahn is an active participant in Fund 7: it created Fund 7, acts as a property manager for Fund 7’s manufactured housing communities, and is currently promoting Fund 7 on its own website." The court found that these allegations sufficed to state a claim for unjust enrichment. The SAC plausibly alleged that Defendants received multiple things of value—investor lists, boot camp materials, the turnarounds, association with RV Horizons’ successes—that it would be inequitable for them to retain without payment.

Defendants’ motions to dismiss were denied.

This case is No. 1:18-cv-02780-NYW.

Attorneys: Christopher Hulbert Toll (Holland & Hart, LLP) for RV Horizons, Inc., MHC America Fund, LLC and MHC America Fund Class C, LLC. Michael David Crosbie (Shutts & Bowen LLP) for Jamie Smith., MHPI VII, LLC and Elevation Capital Group, LLC.

Companies: RV Horizons, Inc.; MHC America Fund, LLC; MHC America Fund Class C, LLC; MHPI VII ; Elevation Capital Group, LLC

Cases: Trademark ColoradoNews