Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_07-cv-00807/USCOURTS-azd-2_07-cv-00807-0/pdf.json

Nature of Suit Code: 840
Nature of Suit: Trademark
Cause of Action: 15:1051 Trademark Infringement

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WO

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

Best Western International,

Inc., an Arizona non-profit

corporation, 

Plaintiff, 

vs.

Manuben Patel, an individual, 

Defendant. 

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No. CV 07-00807-PHX-RCB

ORDER

Introduction

 On September 10, 2007, the court granted plaintiff Best

Western, International’s (“BWI”) application for a preliminary

injunction by (doc. 38). In so doing, the court found that BWI

had “shown ‘probable success on the merits,’ or at least serious

questions going to the merits’ with respect to [its] claim that

defendant breached the Membership Agreement; and hence that

defendant is in violation of that Agreement for continued use of

BWI’s marks.” Id. at 3. To support that finding, the court

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1 On November 5, 2007, the court conducted a hearing with respect to

BWI’s application for an “Order to Show Cause Why Manuben Patel Should Not

be Held in Contempt” (“OSC”) for failing to comply with the September 10,

2007 preliminary injunction. See Doc. 41-4. For reasons fully set forth

on the record, the court found defendant to be in contempt and ordered

full compliance with that injunction by no later than 12:00 noon, November

16, 2007. The court did not, however, order sanctions per se, although it

did permit BWI to seek its attorneys’ fees and costs incurred in pursuing

that OSC. 

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relied upon the “ample proof in the record that despite being

given several opportunities to do so, defendant did not comply

with BWI’s Design Excellence Program; and that failure to comply

was the basis for BWI terminating the Membership Agreement with

defendant.” Id.

 In that prior order this court also found that BWI had “shown

more than a ‘possibility of irreparable injury’ in the form of

damage to its goodwill and reputation; loss of control over the

reputation of its trademark; and likelihood of confusion.” Id.

at 4. As the court indicated it would, “more fully” set forth

below are its reasons for granting BWI’s application for a

preliminary injunction.1

 See id. at 3. 

Background

 Plaintiff BWI “operates as a membership organization

consisting of individually owned and operated hotels (i.e., its

members).” Co. (doc. 1) at 2, ¶ 7. BWI “has registered with the

[U.S.] Patent and Trademark Office various trademarks, service

marks and collective membership marks.” Id. at 3, ¶ 12. 

 BWI entered into a “Membership Agreement” with defendant

Manuben Patel on approximately August 9, 1996, with respect to

the Torch-Lite Inn (the “motel”) located in Santa Cruz,

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California. Preliminary Injunction Application (“Appl’n”) (doc.

4), Pollack Affidavit (April 12, 2007) attached thereto at 9, 

¶ 3; and exh. A thereto (copy of Membership Application and

Agreement). Under that Agreement, inter alia, defendant was

granted “a non-exclusive license to use, . . . [BWI] trademarks,

service marks, and identification symbols[.]” Id., exh. A thereto

at 4, ¶ 20. That License Agreement unequivocally states that it

“terminates upon termination of [defendant’s] Membership

Agreement.” Id., exh. A thereto at 4, ¶ 22. The Membership

Agreement further provides that “[w]ithin fifteen (15) days of

license termination, [defendant] shall remove from public view

and cease using all [BWI] symbols.” Id. (emphasis added). 

 On approximately December 19, 2006, BWI notified defendant

that her “membership had been terminated for failure to comply

with [BWI] design standards[.]” Appl’n (doc. 4), Pollack Aff.

attached thereto at 2, ¶ 9. At that time, as the Membership

Agreement requires, BWI “advised Defendant that the signs and

logo items must be removed within fifteen (15) days.” Id.

According to Cheryl Pollack, BWI’s “Director of Member Care and

Development Administration,” despite “repeated requests . . .

Defendant has refused to cease and desist from use of the name,

signage and membership mark, or similar reproductions of” BWI. 

Id. at 1, ¶ 1; and 2 at ¶ 14. 

 BWI filed the present action on April 17, 2007, alleging nine

causes of action including breach of contract, trademark

infringement under the Lanham Act, 15 U.S.C. §§ 1114(a) and 1125,

federal trademark dilution, and two Arizona state law based

causes of action. With the filing of that complaint, BWI filed

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this application for a preliminary injunction, seeking an order

“restraining Defendant[] from using the [BWI] name, marks, logo

and emblem (the Best Western Marks).” Appl’n (doc. 4) at 8. 

 Before the filing of any opposition, the present action was

reassigned to this court. See Doc. 25. Shortly thereafter, on

July 13, 2007, and again on July 31, 2007, BWI filed supplemental

declarations in support of its preliminary injunction

application. The thrust of those declarations is that defendant

is continuing to “unlawfully use” BWI’s marks, and that BWI is

continuing to be “irreparably harmed” thereby. See Doc. 28 at 2;

and doc. 30 at 1 and 2. Pursuant to the court’s order, on August

24, 2007, defendant filed her response to this application (doc.

34); and BWI filed its reply (doc. 36) on August 31, 2007. As

mentioned at the outset, following oral argument on September 10,

2007, the court granted BWI’s application for a preliminary

injunction. See Doc. 38. Detailed below is the “ample proof”

referred to it the court’s prior order which readily supports

granting BWI’s application for a preliminary injunction. Doc. 38

at 3. 

Discussion

I. Preliminary Injunction Standard

 According to the Ninth Circuit, “the basic function of a

preliminary injunction is to preserve the status quo pending a

determination of the action on the merits.” Dep’t of Parks &

Rec. v. Bazaar Del Mundo, Inc., 448 F.3d 1118, 1124 (9th Cir.

2006) (internal quotation marks and citation omitted). “[T]he

status quo is not simply any situation before the filing of the

lawsuit, but rather the last uncontested status that preceded the

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2 Appl’n (doc. 4) at 4.

3 Reply (doc. 36) at 7, n. 8.

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parties’ controversy.” Id. (citing GoTo.Com, Inc. v. Walt Disney

Co., 202 F.3d 1199, 1210 (9th Cir. 2000)). Thus, in GoTo.Com, a

trademark infringement case, the Ninth Circuit held that the

status quo which was to be preserved by the issuance of a

preliminary injunction “existed before [the defendant] began

using its allegedly infringing logo.” GoTo.Com, 202 F.3d at

1210. Likewise, in the present case, the status quo which BWI is

seeking to preserve is the state of affairs before defendant

began her alleged improper use of BWI’s marks. 

 The Ninth Circuit “has recognized two different sets of

criteria for preliminary injunctive relief.” Southeast Alaska v.

U.S. Army Corps, 472 F.3d 1097, 1100 (9th Cir. 2006). Initially,

BWI invoked the “traditional test” for obtaining such relief.2

See id. That “general test . . . requir[es] a plaintiff to

establish (1) a strong likelihood of success on the merits, 

(2) the possibility of irreparable injury to plaintiff if

preliminary relief is not granted, (3) a balance of hardships

favoring the plaintiff, and (4) advancement of the public

interest (in certain cases).” Lands Council v. Martin, 479 F.3d

636, 639 (9th Cir. 2007) (internal quotation marks and citation

omitted). In its reply,3 however, BWI shifted gears slightly and

invoked the “alternative test” in this Circuit for preliminary

relief. See Southeast Alaska, 472 F.3d at 1100 (citations

omitted). That test requires the moving party to “demonstrate[]

either ‘(1) a combination of probable success on the merits and

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the possibility of irreparable injury or (2) the existence of

serious questions going to the merits and that the balance of

hardships tips sharply in [its] favor.’” Grocery Outlet Inc. v.

Albertson’s Inc., 497 F.3d 949, 951 (9th Cir. 2007) (quoting

Sardi’s Restaurant Corp. v. Sardie, 755 F.2d 719, 723 (9th Cir.

1985)) (emphases in original).

 As the Ninth Circuit has repeatedly stated, “[t]hese two

formulations represent two points on a sliding scale in which the

required degree of irreparable harm increases as the probability

of success decreases.” Id. (quoting A & M Records, Inc. v.

Napster, Inc., 239 F.3d 1004, 1013 (9th Cir. 2001) (quotation

marks and citation omitted)); see also Rebecca Irene Fisheries,

LLC v. Gutierrez, 2005 WL 3434443, at *1 (W.D. Wash. 2005)

(citing United States v. Odessa Union Warehouse Co-Op, 833 F.2d

172, 174 (9th Cir. 1987)) (“The analysis is often compressed into

a single continuum where the required showing of merit varies

inversely with the showing of irreparable harm.”) “They are not

separate tests but rather the outer reaches of a single

continuum.” Id. (internal quotation marks and citation omitted). 

As mentioned at the outset, in granting BWI’s application, the

court applied the first preliminary injunction standard

identified in Sardi’s Restaurant, 755 F.2d at 723. Applying that

standard obviates the need to consider whether the balance of

hardships tips decidedly in BWI’s favor.

. . .

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4

 BWI “vigorously disputes” this premise, arguing that it is not a 

 franchise; it is not subject to sections 20020 and 20021 of the California

 Business and Professional Code; and California law does not apply “or in 

 any way governs BWI’s termination of Patel’s Membership.” Reply (doc. 

 36)at 4, n. 4 (citation omitted).

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A. “Probable Success on the Merits”

 “Under the sliding scale theory,” of preliminary injunctions

in this Circuit, “a party seeking an injunction need not

demonstrate that he will succeed on the merits, but must at

least show that his cause presents serious questions of law

worthy of litigation.’” Iconix, Inc. v. Tokuda, 457 F.Supp.2d

969, 975 (N.D. Ca. 2006) (quoting Toanga Press, Inc. v. City of

Los Angeles, 989 F.2d 1524, 1528 (9th Cir. 1993)). “‘Serious

questions’ are those which are ‘substantial, difficult, and

doubtful, as to make them fair ground for litigation and thus for

more deliberative investigation.’” Id. (quoting, inter alia,

Senate of State of Cal. v. Mosbacher, 968 F.2d 974, 977-78 (9th

Cir. 1992)). “Although the serious questions posed by the movant

‘need not promise a certainty of success, nor even a probability

of success,’” the Ninth Circuit has indicated that the movant

“must nevertheless demonstrate a ‘fair chance of success’ on the

merits.” Id. (quoting Gilder v. PGA Tour, Inc., 936 F.2d 417,

422 (9th Cir. 1991)). As more fully discussed below, at the

very least BWI has shown a “fair chance of success on the

merits.” Thus it has satisfied the first element necessary to

obtain a preliminary injunction. 

 1. Breach of Contract

 Starting from the premise that the Membership Agreement is a

franchise agreement governed by California law,4 defendant

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5 That statute reads as follows:

 Except as otherwise provided by this chapter, no franchisor 

may terminate a franchise prior to the expiration of its term, 

except for good cause. Good cause shall include, but not be 

limited to, the failure of the franchisee to comply with any 

lawful requirement of the franchise agreement after being given 

notice thereof and a reasonable opportunity, which in no event 

need be more than 30 days, to cure the failure.

Cal. Bus. & Prof. Bode § 20020 (West 1997). 

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contends that BWI cannot show the requisite probability of

success on the merits because it did not have “good cause” to

terminate that Agreement as section 20020 of the California

Business and Professions Code mandates.5

 In arguing lack of good

cause, defendant claims that when she initially entered into the

Membership Agreement in August, 1996, BWI “did not disclose” that

it had “had recently initiated a new series of design cycles[.]” 

Doc. 34 (Resp.), exh. A thereto (Decl’n of Manuben Patel

(8/22/07)) at 1, ¶¶ 2 and 3. Ms. Patel further declares that

had she “known of the design cycles when [she] purchased” the

subject property, [she] would have negotiated a lower price.” 

Id. at 2, ¶ 5. Nonetheless, defendant claims to have expended

almost $750,000.00 “trying to comply” with BWI’s “new

guidelines.” Id. at 2, ¶ 6.

 “Despite [those] efforts,” defendant contends that BWI

“refused to approve the remodel.” Id. at 2, ¶ 7. Further BWI

also supposedly “refused to cooperate with the work and often did

not communicate with [defendant].” Id. To illustrate, defendant

points out that she paid for a counter redesign three times. Id.

at 2, ¶ 8. Each time, however, defendant claims that the design

was “disapproved” by BWI’s inspector, even though she “hired an

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architect who had designed other [BWI] counters[,]” and BWI

approved those plans. Id.

 According to defendant “[t]hroughout 2006, [she] tried to

resolve the . . . design concerns with [BWI], but to no avail.” 

Id. at 3, ¶ 10. Defendant asserts that she and Ms. Pollack then

“agreed to meet informally” in the fall of 2006 “to discuss the

design issues.” Id. Rather than the “informal” meeting which

defendant anticipated, as defendant describes it, that meeting

was a “formal committee hearing before 12 people.” Id. at 3, 

¶ 11. Defendant claims that “[b]ecause [she] did not have notice

of the hearing, [she] did not have plans or reports showing [her]

compliance with [BWI’s] requirements.” Id. Nor, in the claimed

absence of notice, did she have “a chance to prepare with [her]

attorney or be represented in any manner at the hearing.” Id.

Nonetheless, as defendant recalls it, “[a]t the end of the

hearing, [BWI] told [her] that because the [property] had always

passed its inspections with high marks, [BWI] was going to take

the design problems under advisement.” Id. at 3, ¶ 12. 

Therefore, defendant’s impression when she left that meeting was

that she and BWI “were going to resolve [their] dispute[.]” Id.

At that point defendant “did not believe [her] [BWI] franchise

was in jeopardy.” Id. 

 When she returned from Phoenix though, defendant learned that

her property was no longer listed on BWI’s website. Id. at 3, 

¶ 13. Consequently, one of her regular customers had trouble

making an online reservation. Id. Defendant then contacted BWI

and “learned that after the Phoenix hearing, [BWI] had terminated

[her] [Membership] [A]greement and . . . removed [the property]

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from its reservations system.” Id. at 4, ¶ 14. Thereafter,

defendant “received a letter from [BWI] dated December 19, 2006,

which formally terminated [her] franchise.” Id. According to

defendant, that “letter provided no factual basis or any other

reason for the termination.” Id. 

 In light of the foregoing, plaintiff requested

reconsideration of BWI’s termination decision. Id. at 4, ¶ 15;

see also Reply (doc. 36), exh. A (doc. 36-2) (Decl’n of Neal

Crandall 8/30/07) thereto; and exh. 20 (doc. 36-22) thereto. 

When BWI declined to reconsider, on April 30, 2007 (roughly two

weeks after the filing of this action), defendant commenced a

federal court action in the Northern District of California

against BWI, alleging “breach . . . [of] the franchise agreement

and violat[ions] [of] California franchise law.” Resp. (doc.

34), exh. A thereto (doc. 34-2) at 4, ¶ 16. In that lawsuit

defendant further alleges that BWI acted in “bad faith” in

terminating the Membership Agreement because she had “confirmed

with its design requirements.” Id. 

 As a result of having her Membership Agreement cancelled,

defendant claims that her business has been “devastated”

primarily because she is no longer a part of BWI’s online

reservation system. Id., exh. A (doc 34-2) thereto at 4, ¶ 18. 

Thus, defendant asserts losses of “over $350,000 in the first

half of 2007.” Id. at 5, ¶ 18. In addition to those losses,

defendant declares that BWI’s “demands that [she] cease using its

logo have been similarly injurious.” Id. at 5, ¶ 19. More

specifically, defendant declares that “it will cost [her] at

least $18,000 to replace all the other items – i.e. shampoos,

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28 6 Co. (doc. 1) at 7, ¶ 25.

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towels, sheets, soap – with Best Western logos[]” – costs for

which BWI has “refused to reimburse” her. Id.

 Based upon the foregoing events defendant maintains that

BWI’s allegation that she did not “comply with Best Western

design standards”6 is “unsupported.” Resp. (doc. 34) at 10. 

Moreover, defendant contends that BWI has not “set forth which

design standards or regulations [she] violated. . . because there

were none.” Id. Hence, as previously mentioned, defendant is

taking the position that BWI did not have good cause to terminate

its Membership Agreement with her. In the absence of good cause

for termination, defendant asserts that BWI cannot show that it

will “prevail on the merits.” Id. at 11. BWI, therefore, is not

entitled to a preliminary injunction. 

 Careful examination of the record belies defendant’s

position, however. As will soon become evident, not only is

there substantial proof of defendant’s repeated non-compliance

with BWI’s Design Program, but BWI thoroughly documented that

non-compliance. Moreover, to the extent defendant may have a

claim against BWI for its termination of the Membership

Agreement, that is not sufficient to defeat this application for

a preliminary injunction. See AT&T Corp. v. Vision One Security

Systems, 1995 WL 476251, at *6 (S.D.Cal. 1995)(recognizing that

while defendant “may have claims against AT&T for its conduct in

relation to the termination of the license, . . . any such claims

are not sufficient to defeat the merits of the preliminary

injunction[]”) (citing, inter alia, Burger King Corp. v. Hall,

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770 F.Supp. 633, 636 (S.D. Fla. 1991) (allegation of wrongful

termination of franchise agreement gives rise to a claim for

damages, not the right to continue using the mark)). 

 BWI paints a very different picture of the circumstances

giving rise to cancellation of defendant’s Membership Agreement 

– circumstances which BWI contends show a probability of success

on the merits as to its breach of contract and trademark

infringement claims. Those circumstances are outlined in the

declaration of Neal Crandall, BWI’s Manager of Brand Development,

who has worked in BWI’s design department for “approximately 

. . . 13 years[,]” and “was involved in . . . drafting . . . the

Design Excellence Program [“the Program” or “the Design

Program][.]” Reply, exh. A thereto (doc. 36-2) at 1, ¶ 1; and

at 2, ¶ 5. One aspect of Mr. Crandall’s job is to “evaluate

whether existing BWI Members [are] comply[ing] with [that] Design

. . . Program.” Id. at 2, ¶ 3. In that capacity Mr. Crandall

has become “familiar with” defendant’s situation and has

corresponded with her about “her Motel and compliance with [the]

Design . . . Program.” Id.

 Despite defendant’s assertions to the contrary, what emerges

through Mr. Crandall’s declaration and accompanying exhibits is a

fairly extensive history of defendant not complying with BWI’s

Design Program. In fact, even prior to the Design Program which

is the focus of this action, in November 1997, defendant’s motel

was placed on “probationary status due to noncompliance with”

BWI’s design Renovation Guidelines in effect at that time. See

id., exh. 5 thereto (doc. 36-7). Apparently defendant did bring

her property into compliance after that. In 2003, however, BWI’s

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Board of Directors adopted another set of design criteria, i.e.

the “Design Excellence Program.” Id., exh. A (doc. 36-2) at 2, 

¶ 5. That Program consisted of three design phases for various

aspects of member properties, such as lobbies, guest rooms and

grounds. Id. at 2-3, ¶ 7. Included in that Program were

“deadlines for compliance with th[o]se three phases[.]” Id. The

“purpose” of this particular Design Program, according to Mr.

Crandall, “was to ensure greater conformity between all Member

properties, to ensure that all BWI properties meet the same

standards for quality, and to implement a plan for each Member to

update and renovate the Member’s property.” Id. at 2, ¶ 6. 

 As “part of [its] overall policy to notify members of changes

in BWI rules, regulations, standards, and guidelines[,]” BWI

conducted a mass mailing and introduced the Program at its annual

convention. Id. at 3, ¶¶ 8 and 10. BWI then “began to inspect

Member properties to ensure that the Members were aware of the .

. . Program and its deadlines, and began offering its assistance

to Members, when requested, in complying with the . . . Program.” 

Id. at 4, ¶ 12. As part of this process, BWI first inspected

defendant’s motel “in March 2004 - . . . 9 months before the

deadline for complying with Design Phase I and . . . 21 months

before the deadline for complying with Design Phase II.” Id. at

4, ¶ 13 (citing exh. 3 thereto). That March 2004 inspection

revealed a number of ways in which defendant’s motel was not in

compliance with the Program. See id., exh. 3 thereto. Those

deficiencies were outlined in a “Design Excellence Checklist” –

the first of several reports in which BWI documented defendant’s

non-compliance with the Design Program. That Checklist notified

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defendant that she had nine months, or until January 1, 2005, in

which to bring her motel into compliance with Phase I of the

Program. See id. The BWI Board did give defendant a short

extension, however, until January 23, 2005, by which “to renovate

and update her property[]” to bring it into compliance with Phase

I. Id. at 5, ¶ 19 (citing exh. 4 thereto). 

 Defendant did not meet that extended deadline. Therefore, by

letter dated April 20, 2005, BWI advised defendant that her

property was “placed in a probationary status.” Id., exh. 4

thereto (doc. 36-6) at 1. As in November 1997, defendant was

further advised that if the listed conditions were not corrected

by the next design review process, her “property may be placed in

hearing status[.]” Id. at 2. Also as in November 1997, that

April 2005 letter went on to explain that if defendant’s

“property is placed on design probation twice within the 24-month

period following the first probation notification, that may also

result in [her] membership being placed in hearing status.” Id.

“If that occurs,” defendant was informed that her BWI “membership

may be canceled” pursuant to BWI’s Bylaws and Rules and

Regulations. Id. In the meantime, BWI informed defendant that

it would be revisiting her property on approximately July 20,

2005, to report on her “progress . . . attempt[ing] to meet

[BWI’s] design standards.” Id., exh. 4 (doc. 36-6) thereto at 1. 

 At that second inspection, on August 2, 2005, defendant still

was not in compliance with Phase I, which originally had a “due

date” of January 1, 2005, but which had been extended until

January 23, 2005. See id. at 6, ¶ 22; and exh. 6 thereto (doc.

36-8) at 1. Thus, from BWI’s standpoint, defendant “made

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virtually no legitimate effort, of which [it] was aware, to

comply with Design Phase I.” Id. at 6, ¶ 23. 

 Despite the passage of another five months, a January 11,

2006, inspection revealed that defendant still was not in

compliance with Design Phase I, which should have been completed

a year earlier. See id., exh. 7 (doc. 36-9) thereto at 1. Thus

defendant’s “Membership remained on probation[.]” Id. at 6, 

¶ 25. After that January 2006 inspection, defendant sought a 90

day extension to bring her motel into compliance with Design

Phase I. Id. at 7, ¶ 27. On February 23, 2006, the Design

Review Committee, of which Mr. Crandall is a member, denied that

request. Id. The Committee’s rationale was that it “only ha[d]

authority to grant an extension not to exceed a year and . . .

[defendant] had already had over a year to bring . . . her Motel

into compliance and had failed to do so[.]” Id. Upon that denial

defendant could have sought an additional extension, but she did

not. See id.

 Yet another BWI inspection in July 2006 revealed that

defendant’s motel still was not in compliance with Design Phase

I, and further that it was not in compliance with Design Phase

II. See id. at 7, ¶ 30; and exh. 9 (doc. 36-11) thereto. 

Therefore, by letter dated September 15, 2006 (“the termination

letter”), defendant was informed that “grounds exist for . . .

[BWI] to cancel [her] membership[,]” and thus the Board would be

“consider[ing] cancellation of [her] . . . membership at an

upcoming Board meeting.” Id. at 8, ¶ 31; and exh. 10 (doc. 36-

12) thereto at 1. Defendant was also specifically informed that

“[b]ecause [she] [did] not meet the conditions stated in the

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7 Defendant maintains, as noted earlier, that she had no notice of

this meeting. Even if there is a factual dispute as to whether defendant

actually received this notification, that does not preclude a finding that

BWI has shown a probability of success on the merits with respect to its

breach of contract and trademark infringement causes of action. 

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April 20, 2005 probation letter, [her] [BWI] membership [was]

be[ing] placed in hearing status.” Id., exh. 10 (doc. 36-12)

thereto at 10. That letter continued: “if your membership is

cancelled, you will immediately be prohibited from using any

[BWI] signs, marks or logos, and from conducting business in

anyway as a [BWI] hotel.” Id. (emphasis in original). Defendant

was instructed that it was “critical that [she] submit all

relevant information pertaining to this situation because the

Board’s final decision will include consideration of what you

submit.” Id. (emphasis in original).7

 In addition to summarizing “the incomplete design items[,]”

that termination letter included an enclosure entitled “HEARING -

DESIGN ISSUES[,]” explaining the hearing process. See id. at 3. 

In that letter BWI informed defendant that “[d]ue to the property

not being maintained to [its] standards and as stated in . . .

the [BWI] Bylaws and [in] . . . the [BWI] Rules and Regulations,

the Board of Directors ha[d] grounds for cancellation of [her]

membership.” Id. BWI further informed defendant that “[t]he

non-compliance with [its] Rules and Regulations and New

Construction and Refurbishment Guidelines occurred as a result of

[her] not completing renovation requirements in a timely

fashion.” Id.

 As the termination letter allowed, defendant requested a

hearing before the Board. See id., exh. 12 (doc. 36-14) thereto. 

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8 At the contempt hearing, Sabrina Patel characterized herself as the

 longtime general manager of the BWI motel at issue.

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Prior to that hearing, BWI provided defendant with copies of all

of the documents which it intended to present to the Board at the

hearing. See id., exh. 13 (doc. 36-15) thereto. Additionally,

prior to that hearing, as it “routinely” does, a “‘pre-Board’

inspection” of defendant’s property was conducted at the Board’s

request. Id., exh. A (doc. 36-2) thereto at 10, ¶ 42. The

purpose of that inspection was “to inform the Board as to whether

the Member’s property is likely to comply with the provisions of

the . . . Design Guidelines, which was distributed to members in

2006 and became effective on January 1, 2007, and whether

[defendant] would meet the 2007 Design Phase III deadline if the

Membership was not terminated.” Id. Once again, defendant’s

motel did not pass inspection. Rather, that inspection

“revealed that [she] had still not complied with Design Phases I

and II[]” even though “she had had 24 months - since January 2005

- to comply with Design Phase I and 12 months - since January 20

- to comply with Design Phase II.” Id. at 11, ¶ 43; and at 12-

13, ¶ 50. 

 Mr. Crandall attended defendant’s termination hearing, but

defendant did not. See id. at 11, ¶¶ 44 and 46. Instead,

defendant’s daughter, Sabrina Patel,8

 “appeared before the Board

in an effort to show why [defendant’s] Membership should not be

terminated and to explain why [defendant] had repeatedly failed

to comply with Design Phases I and II, three years after being

advised of the compliance deadlines.” Id. at 11, ¶ 45. Ms.

Patel did not “present any good cause or reason for [defendant’s]

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repeated failure to comply with the Design Program and its

compliance deadlines, and [she] provided no reasonable assurance

that [defendant] would promptly comply with the Design Phases I

and II compliance deadlines, which were past, or that [defendant]

had taken steps to ensure that she would be able to comply with

the Design Phase III compliance deadline in 2007.” Nor did Ms.

Patel “provide any explanation as to why [defendant’s] Membership

should not be terminated.” Id. at 11-12, ¶ 47. 

 Following that hearing, “the BWI Board voted to terminate

[defendant’s] Membership[]” and advised her of its decision in

writing. Id. at 13, ¶ 51; and exh. 18 (doc. 36-20) thereto. 

Defendant sought reconsideration, but the Design Review Committee

denied that request because she “did not meet the criteria[.]” 

Id. at 13, ¶ 55; (citing exh. 21 (doc. 36-23) thereto). That

“denial was based, in part, on the fact that [defendant] had

received numerous extensions to comply with Design Phases I and

II and despite these extensions had yet to comply[.]” Id. at 13,

¶ 56. Procedurally defendant’s request for reconsideration also

was improper because she did not comply with BWI’s Rules and

Regulations pertaining to such requests. See id. 

 On January 11, 2007, defendant again requested

reconsideration of the Board’s cancellation decision. See id. at

14, ¶ 59; and exh. 24 (doc. 36-26) thereto. BWI denied this

request. Id. at 14, ¶ 60; and exh. 23 (doc. 36-25) thereto. 

 The parties disagree as to which law applies here -

California or Arizona. The court will leave final resolution of

that issue for another day. There is no need to resolve that

choice of law issue at this juncture because the elements

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necessary to prove a breach of contract claim are substantially

similar regardless of whether the court applies California or

Arizona law. 

 To prevail on a breach of contract claim under Arizona law,

“a plaintiff must show a contract, a breach of contract, and

damages.” Konrath v. Amphitheater Unified School Dist. No. 10,

2007 WL 2809026, at *26 (D.Ariz. Sept. 26, 2007) (citing Graham

v. Asbury, 540 P.2d 656, 657 (1975)). Similarly, under

California law, “‘[a] cause of action for breach of contract is

comprised of the following elements: (1) the contract, (2)

plaintiff’s performance or excuse for nonperformance, (3)

defendant’s breach, and (4) the resulting damages for

plaintiff.’” Cal-Agrex, Inc. v. Tassell, 2007 WL 2782969, at *1

(N.D.Cal. Sept. 25, 2007) (quoting Careau & Co. v. Sec. Pac. Bus.

Credit, Inc., 222 Cal.App.3d 1371, 272 Cal.Rptr. 387, 395

(Ct.App. 1990)). 

 Here, there is no dispute that a contract existed between BWI

and defendant in the form of the Membership Agreement. At this

juncture damages to BWI also are not at issue as defendant is not

challenging BWI’s claims that she owes it “at least $17,853.35,

representing certain fees, dues, charges and costs imposed on the

membership, excluding interest[,]” as well as liquidated damages. 

See Co. (doc. 1) at 8, ¶ 30; and at 10, ¶ 45. Rather, in the

context of this preliminary injunction application, the issue at

this point centers on whether, as BWI contends, it can show a

“fair chance of success on the merits” as to its breach of

contract claim. See Iconix, 457 F.Supp.2d at 975 (internal

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quotation marks and citation omitted). BWI has met this

standard. 

 BWI’s “Rules and Regulations” require that “all members 

. . . participate in all mandatory programs and promotions which

may be adopted by the Board[,]” such as the Design Program. See

Crandall Aff. (doc. 36-2), exh. 8 (doc. 36-10) thereto at 11,

Chap. V, § 500.42. Further, those Rules and Regulations

expressly provide that BWI “may cancel the membership” if a

member “fails to conform to the obligations or meet the

standards” such as those contained in the Design Program. See

id., exh. 8 thereto at 18, Chap. XI, § 1100.5. Similarly, BWI’s

“Bylaws and Articles” gives BWI the “right to cancel any

membership” under one of several conditions, including “[f]ailure

to conform to the obligation to meet the standards as set forth

in the Membership Application and Agreement, Articles of

Incorporation, Bylaws, current Rules and Regulations or Board

policies.” Id., exh. 24 (doc. 36-27) thereto at 4, Art. II, 

§ 8(A)(2). More succinctly, the Membership Agreement

unequivocally states that it terminates “upon default of any

obligation to [BWI], as more fully set forth in the Bylaws, Rules

and Regulations, and Operations Manual.” Appl’n (doc. 4),

Pollack Aff. attached thereto, exh. A thereto at 4, Part II, 

¶ 18(b) (emphasis added). 

 The record as presently constituted shows, as discussed

above, that defendant did not conform to the Design Program

obligations or meet the standards of that Program. Moreover,

that non-compliance was repeated and is well documented in the

record. Defendant’s non-compliance provided BWI with more than

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sufficient grounds to cancel her Membership Agreement. Thus, BWI

has met the first prong necessary to obtain injunctive relief –

probable success on the merits of its breach of contract claim.

2. Trademark Infringement

 Likewise, BWI has shown a probability of success with respect

to its claim for trademark infringement. “Success on the merits

for a trademark infringement claim requires a plaintiff to prove: 

(1) ownership of a valid trademark, and (2) likelihood of

confusion.” Paul Frank Industries, Inc. v. Sunich, 502 F.Supp.2d

1094, 1099 (C.D.Cal. Aug. 21, 2007) (citing Brookfield

Communications, Inc. v. West Coast Entm’t Corp., 174 F.3d 1036,

1046 (9th Cir. 1999)). In the present case, there is no dispute

that BWI owns the marks which defendant continues to use. Appl’n

(doc. 4), Pollack Aff. attached thereto at 2, ¶ 12. Furthermore,

for reasons which will soon become obvious, defendant did not

even attempt to argue that there is no likelihood of confusion

here. 

“The likelihood of confusion determination asks ‘whether the

similarity of the marks is likely to confuse customers about the

source of the products.’” Topline Corp. v. 4273371 Canada, Inc.,

2007 WL 2332471, at *5 (W.D. Wash. Aug. 13, 2007) (quoting

GoTo.com, 202 F.3d at 1205)). The Ninth Circuit has “developed

eight factors, the so-called Sleekcraft factors, to guide the

determination of likelihood of confusion.” GoTo.com, 202 F.3d at

1205. Those factors are: “(1) strength of the mark, 

(2) proximity of the goods, (3) similarity of the marks, 

(4) evidence of actual confusion, (5) marketing channels used,

(6) degree of care likely to be exercised by the purchaser, 

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(7) evidence of bad faith intent in selecting the mark, and 

(8) likelihood of expansion or overlap of the products.” 

Silverlit Toys Manufactory, Ltd. v. Absolute Toy Marketing, Inc.,

2007 WL 521239, at *7 (N.D.Cal. Feb. 15, 2007) (citing AMF, Inc.

v. Sleekcraft, 599 F.2d 341, 348-49 (9th Cir. 1979)). “[E]ach of

these factors is not necessarily relevant in every case,”

however. Id. “[T]he list of factors functions as a guide and is

neither exhaustive nor conclusive.” Id. (citing Metro Pub., Ltd.

v. San Jose Mercury News, 987 F.2d 637, 640 (9th Cir. 1993)). 

“In fact, the Ninth Circuit has warned against ‘excessive

rigidity’ in applying the factors and noted that ‘it is often

possible to reach a conclusion with respect to likelihood of

confusion after considering only a subset of factors.’” Id.

(quoting Brookfield Communications, 174 F.3d at 1054) (other

citations omitted). Such is the case here in that an examination

of Sleekcraft factors three, four and six plainly shows that the

requisite likelihood of confusion exists on this record. 

 Focusing for the moment on the third factor -- similarity of

the marks -- it is undisputed that defendant is using BWI’s

marks. Therefore, the alleged infringing mark is not just

similar, it is identical. Consequently, “the likelihood of

confusion is very high[.]” See AT&T, 1995 WL 476251, at *6

(citing S & R Corp. v. Jiffy Lube International, Inc., 968 F.2d

371, 375 (2nd Cir. 1992) (citing other cases so holding))

(“[C]ourts have underscored that the likelihood of confusion is

very high where the alleged infringer is using the exact

trademark to which the plaintiff holds the rights.); cf. Gucci

America, Inc. v. Pieta, 2006 WL 4725706, at *5 (C.D.Cal. 2006)

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(citation omitted) (“The use of an identical mark on identical

products is the paradigm of likelihood of confusion.”) 

 Further, it is undisputed that plaintiff owns the BWI marks

and that defendant is using that mark in connection with her

hotel, without BWI’s consent, after cancellation of the

Membership Agreement. Given the court’s finding that BWI has

shown a probability of success on its claim that defendant

breached the Membership Agreement, “[i]t is . . . clear that

using the [BWI] Marks is likely to cause confusion among

consumers, who will wrongly believe” that defendant is operating

a hotel properly affiliated with BWI. See Dunkin’ Donuts

Franchised Restaurants LLD v. Cardillo Capital, Inc., 2007 WL

2209245, at *5 (M.D.Fla. June 30, 2007). Adding to this

confusion is the fact that defendant had operated as a BWI

affiliated hotel for roughly a decade. This, combined with

defendant’s continued unauthorized use of the BWI marks, “greatly

increases the possibility” that consumers will presume that

defendant’s hotel retains its BWI affiliation. Cf. Howard

Johnson International, Inc. V. Craven Properties Ltd, Inc., 2002

WL 31014858, at *3 (M.D.Fla. 2002) (“fact that the facility had

previously operated a s Howard Johnson franchise would greatly

increase the possibility that consumers would interpret ‘H.J.

Inns’ as designating a Howard Johnson establishment[]”). 

 Additionally, even though “actual confusion is not necessary

to a finding of likelihood of confusion under the Lanham Act[,]”

Academy of Motion Picture Arts v. Creative House, 944 F.2d 1446,

1456 (9th Cir. 1991) (citation omitted), there is proof in this

record of actual confusion. Thus, this fourth Sleekcraft factor

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also supports a finding of likelihood of confusion in the present

case. More specifically, Christopher L. Myren, the General

Manager of another BWI property located in Santa Cruz,

California, declares that some of his “Hotel guests have reported

to [him] that they have been confused as to which property ([his]

or the [defendant’s]) was a BWI property and at which property

[they] had reservations.” Not. of Filing of Suppl. Declarations

(doc. 28), exh. A thereto (doc. 28-2) (Declaration of Christopher

L. Myren (July 13, 2007)) at 2, ¶ 7. Mr. Myren further declares

that “[t]hese guests have gone to the [defendant’s motel] instead

of coming to [his] Hotel because they . . . thought the

[defendant’s motel] was a BWI property.” Id. at 2, ¶ 8. As a

result of this confusion, Mr. Myren claims to “have lost numerous

customers and reservations[.]” Id. at 2, ¶ 8. 

The sixth Sleekcraft factor – the degree of care likely to be

exercised by the purchaser – provides further support for a

finding of likelihood of confusion here. A consumer, seeing

BWI’s marks on defendant’s motel, would have no reason to verify

whether that property is, in fact, a BWI affiliated property. 

That is why, despite the fact that defendant’s BWI membership was

terminated December 19, 2006, “BWI has received complaints about

[defendant’s] Motel.” Decl’n of Cheryl Pollack (July 31, 2007)

(doc. 30-2) at 2, ¶ 3. Consumers mistakenly believe that

defendant’s motel is a BWI sanctioned property and thus it must

meet BWI’s quality standards. They are also under the mistaken

impression that BWI has control over defendant’s motel so that

BWI will be able to respond to their complaints. Thus, as the

foregoing demonstrates, when, as here, “a likelihood of confusion

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exists, a court may reasonably conclude that continuing

infringement would result in loss of control over the plaintiff’s

reputation and loss of goodwill.” See AT&T, 1995 WL 476251, at

*6 (citing Apple Computer, Inc. v. Formula International Inc.,

725 F.2d 521, 526 (9th Cir. 1984)). 

 For all of these reasons, the court easily finds that BWI has

demonstrated a likelihood of confusion and thus, in turn, it has

shown a probability of success on its trademark infringement

cause of action. 

. . .

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 B. “Possibility of Irreparable Injury” 

 In a trademark infringement case, “a reasonable showing of

likelihood of success on the merits raises a presumption of

irreparable harm.” Silver Toys Manufactory, Ltd. v. Absolute Toy

Marketing, Inc., 2007 WL 521239, at *6 (N.D.Cal. Feb. 15, 2007)

(citing, inter alia, LGS Architects, Inc. v. Concordia Homes, 434

F.3d 1150, 1155-56 (9th Cir. 2006)). This presumption arises

because, as alluded to earlier, “[i]nfringing activity may lead

to a loss of control over [a plaintiff’s] reputation and/or

dilution of the good will that [plaintiff] has built up over the

years.” Paul Frank Industries, 502 F.Supp.2d at 1102. Thus,

“[f]or trademark infringement, the inquiry . . . conflates the

two prongs [of the preliminary injunction standard] ‘into the

single question of whether the plaintiff has shown a likelihood

of success on the merits.’” PDL, Inc. v. All Star Driving School,

2007 WL 1515139, at *2 (E.D.Cal. May 22, 2007) (quoting GoTo.com,

202 F.3d at 1205 n.4); see also Honor Plastic, 462 F.Supp.2d at

1127 (quoting GoTo.com, 202 F.3d at 1205) (“‘[A] plaintiff is 

. . . entitled to a preliminary injunction in a trademark case

simply when it shows a likelihood of confusion.’”) Because, as

just discussed, BWI has established a probability of success on

its trademark infringement claims, a presumption of irreparable

harm has arisen. Therefore, BWI has satisfied both prongs

necessary to obtain a preliminary injunction as to its trademark

infringement claim. Likewise, given the close connection between

that claim and BWI’s breach of contract, that irreparable injury

finding, along with the court’s earlier finding of a probability

of success on the contract claim, provides another basis for

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granting BWI injunctive relief. Accordingly, as the court has

previously ruled, BWI is entitled to a preliminary injunction. 

See El Pollo Loco, Inc. v. Hashim, 316 F.3d 1032, 1038 (9th Cir.

2003) (no abuse of discretion in trademark infringement action

where district court granted preliminary injunction to franchisor

upon a showing of probable success on the merits where francishor 

terminated the franchise agreement for material

misrepresentations in application, and franchisee continued

unauthorized use of the franchisor’s trademark). 

Conclusion

 The court is keenly aware that “[a] preliminary injunction is

a drastic and extraordinary remedy that should not be granted

unless the movant, by a clear showing, carries the burden of

persuasion.” CKE Restaurant v. Jack in the Box, Inc., 494

F.Supp. 2d 1139, 1142 (C.D.Cal. 2007) (citing Mazurek v.

Armstrong, 520 U.S. 968, 972 (1997)). As the foregoing

discussion shows, because BWI met this burden it was entitled to

the preliminary injunction which this court issued on September

10, 2007. 

 IT IS ORDERED that the orders entered on September 10, 2007

are confirmed. 

 DATED this 5th day of November, 2007.

copies to all counsel of record

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