IP Law Daily, TRADEMARK—M.D. Fla.: Junk clear-out service franchisor's complaint mostly survives dismissal motion, (Jan 26, 2024)

By Kenneth H. Ryesky, M.B.A., J.D.

Former franchisee alleged to have continued "identical business under a new name" while continuing to display sign bearing the franchisor's "incontestable" trademark from office building after receiving termination notice.

The federal district court in Tampa, Florida has mostly denied a former clean-out and junk removal services franchisee's motion to dismiss a complaint against it by the former franchisor. The ex-franchisor had alleged that its now-terminated franchisee breached the franchise agreement by using the franchise trademarks to promote its competing services. The court found that the franchisor had adequately pleaded trademark infringement, breach of contract, and unfair competition, but granted the motion to dismiss the complaint's requests for injunction and attorney fees, finding them to be remedies and not causes of action; these were dismissed without prejudice and with leave to amend for consideration at further stages of the litigation. Having declined to dismiss the franchisor's federal Lanham Act claims, the court retained supplemental jurisdiction over the Florida state law claims (CHHJ Franchising LLC v. Spaulding , January 22, 2024, Jung, W.).

Background. CHHJ Franchising LLC (CHHJ) franchises the College HUNKS Hauling Junk & Moving® clean-out, moving, and junk removal services. Spaulding Hauling & Moving LLC and Victor Spaulding (collectively, Spaulding) entered into a franchise agreement with of CHHJ in 2021, and operated under that franchise name in New Jersey.

In 2023, CHHJ believed that Spaulding was not complying with the franchise agreement, and sent Spaulding several default and/or cure notices, culminating in a Notice of Termination in June 2023; no response to any of those notices was ever received. Spauding allegedly continued to operate as a purported franchisee of CHHJ, and had begun to do so even before the termination notice was sent. Following an unanswered Cease & Desist and Payment Demand in July 2023, CHHJ brought suit against Spaulding, alleging (1) Breach of Franchise Agreement; (2) Breach of Guaranty; (3) Federal Trademark Infringement; (4) Federal Unfair Competition and False Designation of Origin; (5) Unfair Competition; (6) request for injunction; and (7) request for attorney fees. Spaulding moved for dismissal.

Trademark infringement. The court found that CHHJ had adequately pleaded its trademark infringement claim. There being no dispute that CHHJ possessed a valid mark, CHHJ needed to show that (1) Spaulding had improperly used such valid trademark; and (2) a likelihood of confusion.

CHHJ was found to have adequately pleaded Spaulding's unauthorized use of the mark. Here, CHHJ alleged that Spaulding continued to display the CHHJ mark on a sign attached to the building in which Spaulding had its offices. Spaulding's contention that the continued presence of the signage resulted from passive inaction was irrelevant (and was a question of fact that would need to be proven at trial), as was its assertion that it never provided clean-out services or conferred with potential customers at the location.

Additionally, CHHJ alleged that Spaulding used the CHHJ mark on third-party websites to advertise clean-out and junk removal services. Although there was deep dispute over whether and to what extent Spaulding wielded control over those websites, the allegation was sufficient at the pleading stage.

The court further found that CHHJ had adequately pleaded likelihood of confusion. The name “College HUNKS Hauling Junk & Moving®” at minimum gives suggestion as to the services provided, and weighs significantly towards likely confusion by the public.

Moreover, CHHJ had submitted filings with the USPTO to give some of the particular trademark so-called "incontestable" status under the Madrid Protocol [15 U.S.C. §1141 et seq.], thereby giving CHHJ the benefit of presumptions at the fact-finding phase of litigation regarding the trademarks' validity, ownership, and rights to use.

CHHJ's allegations that Spaulding was merely continuing the business it conducted under the franchise and that other franchisees are using the same trademark also weigh towards likely confusion.

CHHJ's complaint had no allegations of Spaulding's intent, and identified no individuals who were actually confused. Nevertheless, the type of mark and its similarity to others led the court to find that likely confusion was adequately pleaded.

Having adequately pleaded improper use and likelihood of confusion, CHHJ adequately pleaded trademark infringement; this subsumed CHHJ's Lanham Act and common law unfair competition allegations, which the court likewise found were adequately pleaded.

Injunctive relief. The court denied CHHJ's request for a preliminary injunction. Injunctive relief is a remedy and not a stand-alone cause of action to be filtered out on a dismissal motion. Moreover, a preliminary injunction requires a showing of imminent or continuing harm, and entails a heavy burden of persuasion which, in light of the "bitterly contested facts" alleged, CHHJ has not carried. Additionally, Spaulding was not given adequate notice and opportunity to respond if an injunction were to be granted. The injunction request count of CHHJ's complaint was dismissed without prejudice, leaving open an opportunity for CHHJ to seek it "as a properly-pled remedy."

Attorney fees are similarly remedial and not substantive causes of action; the court also dismissed CHHJ's request for attorney fees at this stage of the litigation (although they are available under both the Lanham Act and the franchise agreement.

The case is No. 8:23-cv-01979-WFJ-AAS.

Attorneys: Dennis D. Leone (Shankman Leone, PA) and Anne P. Caiola (Caiola & Rose, LLC) for CHHJ Franchising LLC. Robert R. Axenfeld (Axenfeld Law Group, LLC) and Robert B. Gough, III (Hill Ward Henderson, PA) for Victor Spaulding and Spaulding Hauling & Moving LLC.

Companies: CHHJ Franchising LLC; Spaulding Hauling & Moving LLC

Cases: Trademark FloridaNews