Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_04-cv-02011/USCOURTS-azd-2_04-cv-02011-0/pdf.json

Nature of Suit Code: 890
Nature of Suit: Other Statutory Actions
Cause of Action: 15:1121 Trademark Infringement

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WO

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

Massage Envy Limited, LLC, an Arizona

limited liability company; and United Club

Services, LLC, an Arizona limited liability

company, 

Plaintiffs, 

vs.

JS and D, an Arizona sole proprietorship;

Barbara Hodge, individually; Fitness

Int ernat ional, Inc., an Ariz ona

corporation; Lawrence Whitnall; and The

Massage Company, LLC, a Texas limited

liability company, 

Defendants. 

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No. CIV 04-2011-PHX-EHC

ORDER

Pending before the Court is Defendants' Motion to Dismiss Counts Six, Seven and

Eight of the Amended Complaint. [Dkt. 46]. The Motion is fully briefed.

Allegations in the Amended Complaint

Plaintiff United Club Services, LLC is the managing member of Plaintiff Massage

Envy Limited, LLC. [Dkt. 45, pp. 1-2]. Plaintiff Massage Envy is allegedly "becoming a wellknown provider of massage and personal health products and services." [Dkt. 45, p . 3].

Plaintiff Massage Envy uses a franchise system, allowing "its franchisees to utiliz e t he

marks, trade dress, processes, and sy st ems of operation associated with Massage Envy."

[Dkt. 45, p. 3].

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On July 18, 2001, Defendant Fitness International, Inc. allegedly became a member

of Plaintiff United Club. [Dkt. 45, p . 8]. Plaintiffs allege that Defendant Fitness' sole

shareholder is Defendant Lawrence Whitnall. [Dkt. 45, p. 8]. Based on Whitnall's

relationship to Plaintiff United Club, Plaintiffs alleged that "[f]rom July 2001 to July 2003,

Whitnall... was an active participant in [Plaintiff] Massage Envy's business, including its

key decision-making regarding the roll-out and long term development of the franchise

system." [Dkt. 45, p. 8]. 

Plaintiffs further allege t hat " [f]rom December 2002 to February 2003, [Defendant]

Whitnall worked as a full-t ime employee of [Plaintiff] Massage Envy and held the position

of Director of Franchise Development ." [Dkt . 45, p. 9]. In that position, Defendant Whitnall

was allegedly "an integral part of Massage Envy's management team... [and] was p rivy to

Massage Envy's confidential p lans and strategies for the development of franchises in

Texas and other geographic regions." [Dkt. 45, p. 9].

"On May 9, 2003, [Plaintiff] Massage Envy and [Defendant] JS and D [an Arizona

limited liability comp any ] entered into a Franchise Agreement for the operation of a

Massage Envy franchise... [in] Mesa, Arizona. [Dkt. 45, p. 4 (parenthetical omitted)]. The

Franchise Agreement allegedly provided "specific design and layout specifications in the

construction and renovation of the franchise" and provided that "t he fixtures, furniture,

items of equipment, furnishing and signs" used in the franchise must be approved by

Plaintiff Massage Envy. [Dkt. 45, p. 4 (parenthetical omitted)]. Defendant Barbara Hodge,

the managing member of Defendant JS and D, allegedly personally guaranteed the

Franchise Agreement. [Dkt. 45, p. 4].

On July 16, 2003, Defendant Fitness allegedly "terminated its relationship with

[Plaintiff United Club]," ending Defendant Whitnall's relationship with Plaintiffs. [Dkt . 45,

p. 9]. In November 2003, Defendant JS and D allegedly "sold the Franchise to a third party

and the franchise relationship with Massage Envy terminated." [Dkt. 45, p. 7].

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 The Amended Complaint includes amendments to Counts One through Five. The

Court found that "[b]ecause Counts One through Five will be referred to arbitration, the

Court will deny as moot Plaintiff's Motion to Amend those Counts of the Complaint." [Dkt.

43, p. 3]. As Counts One t hrough Five are stayed and may be resolved in arbitration, the

Court will not consider the propriety of amending those Counts at this time.

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In December 2003, Defendants Hodge and Whitnall, with three non-parties,

allegedly "formed a Texas limited liability company called 'The Massage Company'"

(Defendant TMC), which operates "a massage and personal health business in Plano,

Texas." [Dkt. 45, pp. 7-8]. Defendant TMC was allegedly "formed for the purpose of

operating a massage and personal health business that is either identical or substantially

similar in all respects to a standard Massage Envy retail facility." [Dkt. 145, p. 8]. 

Procedural History

On September 24, 2004, Plaintiffs filed a Complaint with seven counts. On May 27,

2005, the Court stayed Counts One through Five p ending the conclusion of arbitration

proceedings, pursuant to the parties agreement that the Franchise Agreement subjected

those claims to mandatory arbitration. [Dkt. 43, pp. 3-4]. 

The Court also granted Plaintiffs leave to amend Counts Six and Seven and leave

to add Count Eight, for breach of guaranty against Defendant Hodge. [Dkt. 43, p. 4]. On

June 10, 2005, Plaintiffs filed an Amended Complaint.1 

The parties agree that Count Eight is governed by the Franchise Agreement and

thereby subject to mandatory arbitration. [Dkts. 46, pp. 3-4; 50, p. 4]. The Court will stay

Count Eight pending the conclusion of arbitration proceedings.

Legal Standard

A court may dismiss a complaint only if it is clear that no relief could be granted

under any set of fact s t hat could be proved consistent with the allegations. Swierkiewicz

v. Sorema N.A., 534 U.S. 506, 514 (2002) (citation omitted). All material allegations of the

complaint must be accepted as true and in a light most favorable to Plaintiff. In re

Broderbund/Learning Co. Securities Litigation, 294 F.3d 1201, 1203 (9th Cir. 2002).

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Discussion

A. Personal Jurisdiction over Defendants Hodge, Whitnall and TMC

The plaintiff bears the burden of showing personal jurisdiction is p rop er. Dole Food

Comp any , Inc. v. Watts, 303 F.3d 1104, 1108 (9th Cir. 2003). Where the motion is decided

without an evident iary hearing, the court asks only whether the "pleadings and affidavits

make a prima facie showing of personal jurisdiction," with any conflicts between the parties

resolved in the plaintiff's favor. Id.

If, as here, there is no ap p licable federal statute, the court applies the personal

jurisdiction statute of the state in which it sits. See Panavision Int'l, L.P. v. Toeppen, 141

F.3d 1316, 1320 (9th Cir. 1998). Under Arizona law, a court may exercise personal

jurisdiction over parties to the extent permitted by t he Unit ed States Constitution. Ariz. R.

Civ. P. 4.2(a). The Constitution allows a court to exercise jurisdiction over non-resident

parties who have minimum contacts wit h t he forum state such that suit in the forum state

does not offend "traditional notions of fair p lay and substantial justice." Schwarzenegger

v. Fred Martin Motor Co., 374 F.3d 797, 801 (9th Cir. 2004). Specific jurisdiction is proper

if a non-resident defendant has (1) purposefully taken action in the forum state and

received the benefit s of the forum state's laws; (2) the claim arises out of that action; and

(3) exercising jurisdiction is reasonable. Core-Vent Corp . v. Nobel Industries AB, 11 F.3d

1482, 1484 (9th Cir. 1993).

1. Defendant Hodge

Parties may consent "to submit their controversies for resolution within a p art icular

jurisdiction." Chan v. Society Expeditions, 39 F.3d 1398, 1406 (9th Cir. 1994). "Where such

forum-selection provisions have been obtained through freely negotiated agreements and

are not unreasonable and unjust, their enforcement does not offend due process." Id.

(quotat ions omitted). Plaintiff Massage Envy and Defendant Hodge entered a Franchise

Agreement providing as follows: 

you and your owners agree that all actions arising under this Agreement or

otherwise as a result of the relationship bet ween you and us must be

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commenced in the stat e, and in the state or federal court of general

jurisdiction closest to, where our principal business address then is located,

and you (and each Owner) irrevocably submit to the jurisdiction of those

courts and waive any objection you (or t he Owner) might have to either the

jurisdiction of or venue in those courts.

[Dkt. 1, ex. 1, p. 39]. The parties agree that Plaintiffs' claim against Defendant Hodge is

governed by the Franchise Agreement . Plaintiff Massage Envy's principal place of

business is in Scottsdale, Arizona. [Dkt. 45, p. 1]. Defendant Hodge does not argue this

forum selection clause is unenforceable. Defendant Hodge has consent ed to this Court's

exercise of personal jurisdiction over her.

2. Defendant Whitnall

From December 2002 to February 2003, Defendant Whitnall allegedly "worked as a

full-time emp loy ee of Massage Envy and held the position of Director of Franchise

Development." [Dkt. 45, p. 9]. In that role, Defendant Whitnall was allegedly "an integral

part of [Plaintiff] Massage Envy 's management team, and was involved in every aspect of

developing and growing [Plaintiff] Massage Envy's business, which included prospecting

new territories for future franchises." [Dkt. 45, p. 9]. Plaintiff further alleges that " [f]rom

July 2001 t o July 2003, [Defendant] Whitnall... was an active participant in [Plaintiff]

Massage Envy's business, including its key decision-making regarding the roll-out and

long term development of the franchise system." [Dkt. 45, p. 8]. Defendant Whit nall's

alleged active participation was in his role as sole shareholder of Defendant Fit ness, a

managing member of Plaintiff United Club, who was in turn a managing member of Plaintiff

Massage Envy. [Dkt. 45, pp. 2, 8]. These allegations, if true, demonstrate that Defendant

Whitnall had extensive and intentional contact with Plaintiffs Massage Envy and United

Club, cit iz ens of Arizona, related to the development of their business and franchises.

Because that conduct is the basis for Plaintiffs' claims against him, Defendant Whit nall had

sufficient contacts with Arizona citizens to make this Court's exercise of personal

jurisdiction against him reasonable.

//

//

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 At this stage of the litigation, the Court need not decide which state's law governs

Count Seven, a claim for trade dress infringement under st at e law. Any injury caused by

this claim arguably occurred in Arizona, where Plaint iffs operate. The acts of trade dress

infringement arguably occurred in Texas, where Defendant TMC operates. Both Arizona

and Texas follow the Restatement (Third) of Unfair Competition. See Enter. Leasing Co. v.

Ehmke, 197 Ariz. 144, 148, 3 P.3d 1064, 1068 (Ct. App. 1999); In re Bass, 113 S.W. 735, 739

(Tex. 2003). 

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3. Defendant TMC

In December 2003, Defendant Hodge and Whitnall formed Defendant T MC, a Texas

company. [Dkt. 45, p. 7]. Plaintiff alleges that Defendant T M C "was formed for the purpose

of operating a massage and personal health business that is either identical or substantially

similar in all respects to a standard Massage Envy retail facility." [Dkt. 45, p. 8]. Defendant

TMC's business operations in Texas allegedly constitute infringement of trade dress. [Dkt.

45, pp. 17-19]. If Defendants Hodge and Whitnall formed Defendant TMC to infringe on

Plaintiffs' trade dress, such action aimed toward an Arizona entity arguably is sufficient to

make the exercise of personal jurisdiction reasonable. See Ochoa v. J.B. Martin & Sons

Farms, Inc., 287 F.3d 1182, 1189 n.2 (9th Cir. 2002).

B. Counts Six and Seven: Trade Dress Infringement

Trade dress is "the total image, design, and appearance of a product and may

include features such as size, shape, color, color combinations, texture or graphics." Clicks

Billiards, Inc. v. Sixshoot ers, Inc., 251 F.3d 1252, 1258 (9th Cir. 2001). To state a claim for

trade dress infringement, a plaintiff must allege: "(1) that its claimed dress is nonfunctional;

(2) that its claimed dress serves a source-identifying role either because it is inherently

distinctive or has acquired secondary meaning; and (3) t hat t he defendant's product or

service creates a likelihood of consumer confusion." Id.; Restatement (Third) of Unfair

Competition, § 16.2 "Restaurants and similar establishments may have a total visual

appearance that constitutes predictable trade dress." Id. (interior features of a pool hall can

constitut e actionable trade dress); see also Fuddruckers, Inc. v. Doc's B.R. Others, Inc., 826

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F.2d 837, 841 (9th Cir. 1987) ("a restuarant's decor, menu, layout and style of service may

acquire the source-distinguishing aspects of protectable trade dress").

Plaintiffs allege that Defendants "JS and D, Whitnall and [TMC]... have used or are

currently utilizing words, terms, symbols, devices, elements, color schemes, decor, lay out

and/or designs in their massage and personal health business..., which are inherently

distinctive of [Plaintiff] Massage Envy ." [Dkt . 45, p. 17]. Plaintiff further alleges that

Defendant TMC operates "a massage and personal health business that is eit her identical

or substantially similar in all respects to a standard Massage Envy ret ail facility." [Dkt. 145,

p. 8]. These allegations state a claim for trade dress infringement.

Accordingly,

IT IS ORDERED that Defendants' Motion to Dismiss [dkt. 46] is GRANTED IN

PART and DENIED IN PART.

IT IS FURTHER ORDERED that Count Eight of t he Amended Complaint, with the

previously stayed Counts One through Five, is STAYED pending the conclusion of

arbitration proceedings concerning that Count.

DATED this 31st day of March, 2006.

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