# U ni te d S ta te s Co ur t of A pp ea ls For the Eig hth Circu it

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No. 1 6- 10 69

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Mar ti ni zi ng Int ern at io na l, LLC

ll ll ll ll ll ll ll ll ll ll l Pla in ti

ff - App el la nt

v.

BC Cl ean ers , LLC, et al

.

ll ll ll ll ll ll ll ll ll ll l Defe nd

an ts - App el le es

__ __ __ __ __ __ App eal fro m

Uni te d S ta te s Di st ric t Co ur t fo r th e Dis tri ct of M in ne so ta - Mi nn eap ol is

__ __ __ __ __ __
Su bm it te d: Decem

be r 12 , 20 16 Fil ed : Ap ril 28 , 20 17

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Befo re LOKEN, MURPHY, and KELLY , Cir cu it Ju dg es

.

__ __ __ __ __ __ LOKEN, Ci rcu it Ju dg e.

Mar ti ni zi n g In te rn at io na l, LLC c om m en ced th is act io n ag ai ns t BC Cl ean ers , LLC an d two of it s m em

be r-m an ag ers , Bren t Lun de ll an d Tim ot hy Carv er, as se rti ng cl ai m s of Lan ha m Act tra de m ark in fri ng em en t, se e 15 U.S.C. § 11 25 (a), an d vi ol at io n of th e Mi nn es ot a Decep ti ve Trad e Prac t i c e s A c t (MDTPA), se e Mi nn

. St at

. § 3 2 5D.4 4. Defen da nt s fai le d to ap pe ar. The di st ric t co ur t gr an te d a de fa u l t jud gm en t a g a i ns t BC Cl ean ers , co nc lu di ng th at it wil lfu ll y in fri ng ed Mar ti ni zi ng ’stra de m ark s an d en ga ge d in a de cep ti ve tra de pr act ic e. Mar ti ni zi ng In t’l, LLC v. BC

Cl ean ers , LLC, 20 15 WL 84 83 28 0 (D. Mi nn

. Dec. 9, 20 15 ). The co ur t de ni ed

Mar ti ni zi ng a de fau lt jud gm en t ag ai ns t Lun de ll an d Carv er, co nc lu di ng th ey were no t

pe rs on al ly li ab le fo r tra de m ark in fri ng em en t or a de cep ti ve tra de pr act ic e. Id

. at *3

. Mar ti ni zi ng ap pe al s, arg ui ng th e co ur t erre d w he n it de ni ed a de fau lt jud gm en t

ag ai ns t Lun de ll an d Carv er an d r e d u c ed th e award of at to rn ey s’ fees fo r wil lfu l
in fri ng em en t. Defen da nt s ha ve no t ap pe ared in th is Co ur t. W e affi rm th e gr an t of a
pe rm an en t in

jun ct io n en

joi ni ng BC Cl ean ers fro m us in g Mar t i n i z in g’s tra de m ark s. W e co nc lu de Mar ti ni zi ng fai le d to pr ov e wil lfu l in fri ng em en t by BC Cl ea n e r s an d
th eref or e rev ers e th e award of da m ag es , an acco un ti ng fo r pr of it s, an d at to rn ey s’ fees

. W e affi rm th e de ni al of a d e f a u lt jud gm en t ag ai ns t de fen da nt s Lun de ll an d Carv er.

I.

Ma rtin iz in g’s am en de d co m

pl ai nt al le ge d th at , in Ju ne 20 11
, it en te red int o tw o fran ch is e ag reem en ts wit h Mar ku s Kan ni ng , db a KM Cl ean ers , In c., au th or iz in g us e of Mar ti ni zi ng ’s t r a d em ark s in op erat in g dr y -cl ean in g st or es in Eag an an d In ve r Gro ve Heig ht s, Mi nn es ot a. The ag reem en ts pr oh ib it ed Kan ni ng as fran ch is ee fro m

s e l l in g th e fran ch is e lo cat io ns or as si gn in g th e fran ch is e ag reem en ts wit ho ut
Mar ti ni zi ng ’s pr io r writ te n con se nt

. Mar ti ni zi ng le arn ed th at KM Clean ers an d BC
Cl ean ers en te red in to an Ass et Pu rch as e Agr eem en t da te d Aug us t 22
, 20 14
, wit ho ut
Mar ti ni zi ng ’s co ns en t, an d th at de fen da nt s co nt in ue d to op erat e th e fran ch is ed st or es ,

us in g an d di sp la y in g Mar ti ni zi ng ’s tra de m ark s wit ho ut it s ap pr ov al

. On Ja nu ary 15
, 20 15 , c ou ns el fo r Mar ti ni zi ng se nt a le tt er t o B C Cl ean ers an d Lu nd el l, de m an di ng th at th ey si gn a fran ch is e ag reeme n t o r refr ai n fro m us in g th e tra de m ark s, bu t
de fen da nt s co nt in ue d to us e Mar ti ni zi ng ’s mar k s a n d tra de dr es s. Mar ti ni zi ng

at ta ch ed to th e co m

pl ai nt co pi es of a do cu m en t en ti tl ed “ Ass et Pu rch as e Agr eem en t
of Mar ti ni zi ng Dry Cl ean ers ” be twee n KM Cl ean ers , In c. an d BC Cl ean ers , LLC, an d
th e Ja nu ary 20 15 “ Cea se a n d Des is t” le tt er. The co m pl ai nt ge ne ral ly al le ge d th at

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-Lun de ll an d Carv er were m em be r-m an ag ers who “ ai de d, ab et te d, di rect ed an d

co nt ro ll ed BC wi th res pe ct to th e wro ng fu l co nd uc t.” 1

W he n a de fau lt jud gm en t is en te red

, fact s al le ge d in th e co m pl ai nt are ta ke n as
tru e, bu t “ it rem ai ns fo r th e [d is tri ct ] co ur t to co ns id er whe th er th e un ch al le ng ed fact s

co ns ti tu te a le gi ti m at e cau se of act io n, s i n c e a pa rty i n de fau lt do es no t ad m it m ere

co nc lu si on s of la w.” Mar sh al l v. Bag ge tt , 61 6 F.3 d 84 9, 85 2 (8 th Ci r. 20 10 ) (q uo ta ti on om it te d)

. Thu s, aft er en try of de fau lt

, Mar ti ni zi ng ha d to pr ov e it was

en ti tl ed to th e rel ie f so ug ht in it s co m pl ai nt ag ai ns t each de fen da nt -- tre bl e da m ag es

un de r th e Lan ha m Act, an in jun ct io n en

joi n i n g u s e of it s tra de m ark s an d un fai r

co m pe ti ti on , pre

jud gm en t i nt eres t, co st s, an d at to rn ey s’ fees . W he th er Ma rti ni zi ng

m et th at bu rd en is an is su e o f la w we rev ie w de no vo . Mars ha ll , 61 6 F .3d at 8 53

.

In su pp or t of it s m ot io n fo r en try of de fau lt

, Mar ti ni zi ng su bm it te d two em ai l

res po ns es fro m de fen da nt s, ne it he r of whi ch was fil ed wit h th e co ur t. In a Mar ch 1,
20 15 em ai l, Lun de ll st at ed : “ W e wil l co m pl y wit h [Ma rti ni zi ng ’s de m an ds ]. Si gn ag e wil l [b e] ha nd le d by KM Cl ean ers an d th e la nd lo rd who are op erat in g th e st or es

. The

st or es are n o l on ge r un de r ou r co nt ro l.” In a Ju ne 23 , 20 15 em ai l, Lu nd el l wro te :

As an ad di ti on al fo ll ow- up , B C Cl ean ers , LLC was ne ve r a fran ch is ee of Mar ti ni zi ng

. . . . BC Cl ean ers was op erat i n g t h e un it s fo r KM Cl ean ers , LLC al on g wit h an ag reem en t to pu rch as e th e un it s fro m KM Cl ean ers [th at ] was ne ve r fu ll y ex ecu te d.

In su pp or t of it s m ot io n fo r de fau lt jud gm en t, Mar ti ni zi ng su bm it te d wit h an at to rn ey affi da vi t co pi es of it s fran ch is e ag reem en ts wit h Kan ni ng , th e pu rp or te d Ass et
Pu rch as e Agr eem en t an d “ Cl os in g Doc um en ts ” be twee n KM Cl ean ers an d BC

The Ass et Pu rch as e Agr eem en t do cu m en ts re v eal th at Lun de ll si gn ed th e 1 Agr eem en t on be ha lf of BC Cl ean ers , an d th at Lun de ll an d Carv er pe rs on al ly
gu aran te ed BC Cl ean ers ’ fin an ci al ob li ga ti on s u nd er t ha t Ag reem en t.

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-Cl ean ers , th e Ja nu ary 20 15 Cea se an d Des is t le tt er, ph ot os of th e dr y -cl ean in g st or es

sh owi ng us e of th e Mar ti ni zi ng tra de m ark s, and do cu m en ts su pp or ti ng it s clai m fo r

an award of $1 8,5 92 .92 in co st s an d at to rn ey s’ fees

. The at to rn ey cl ai m ed pe rs on al
kn owl ed ge of fact s su pp or ti ng th e cl ai m fo r co st s an d at to rn ey s’ fees

, bu t no fir st

ha nd kn owl ed ge of f

act s re la ti ng to th e u nd erl y in g fr an ch is e tr an sa ct io ns

.

II

.

In ou r rev ie w of th is ab br ev ia te d reco rd

, we fo un d th e m os t no ta bl e as pe ct to
be th at th e al l e g a t i on s of tra de m ark in fri ng em en t an d de cep ti ve tra de pr act ic e by
de fen da nt s in th e am en de d c o mp la in t are di re ct ly co nt ra di ct ed by th e te rm s of th e Ass et Pu rch as e Agr eem en t th at was m ad e pa rt of th e am en de d co m pl ai nt

. As rel ev an t
he re, t he Agre em en t p ro vi de d:

4. USE OF NAME S e l l e r w i ll tra ns fer to Bu y er th e rig ht s it ha s to us e th e na m e

“ Mar ti ni zi ng Dry Cl ean ers ”, th ru th e as si gn m en t of th e F r a n c hi se

a g r e em en t wit h Mar ti ni zi ng in co nd uc ti ng it s bu si ne ss

. Sel le r sh a l l

e x e c u t e an y ne ces sa ry do cu m en ts to [e]ffect th is co ns en t up on rece ip t of pa y m en t in fu ll o f th e Pro m is so ry Not e he ret o at ta ch ed Mar ke d Exh ib it D.

5. MARTI NIZ ING FRANCHISE Sel le r wil l tra ns fer it s in te res t to th e Bu y er in th e Mar ti ni zi ng fran ch is e fo r th es e lo cat io ns up on pa y m en t in fu ll of th e at ta ch ed Pro m is so ry Not e

m ark ed ex hi bi t D. Bu y er wil l pa y Sel le r th e pr or at ed sh are of th e an nu al Fran ch is e fee fro m Sep te m be r 1 th ru Nov em

be r 30
, 20 14

. Thi s m on ey to be pa id May 31
, 20 15

. Bu y er to pa y th e tra ns fer fee up on tra ns fer of th is Fran ch is e to th em

.

Exh ib it D is an in te res t-f ree $1 0,0 00 Pro m is so ry Not e da te d Aug us t 22
, 20 14
, pe rs on al ly gu aran te ed by Lun de ll an d Carv er, in whi ch BC Cl ean ers pr om is ed to pa y KM Cl ean ers $5 ,00 0 o n Oct ob er 1 5, 2 01 4, an d $ 5,0 00 on Nov em be r 30 , 20 14

.

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-Fro m th e pl ai n m ea n i n g of th es e Ass et Pu rch as e Agr eem en t pr ov is io ns ,

to ge th er wi th th e o th er fa ct s o f rec or d, we co nc lu de th e fo ll owi ng :

Fi rs t, th e Ass et Pu rch as e Agr eem en t co nt ract ua ll y ob li ga te d Kan ni ng an d KM
Cl ean ers to as si gn th e fran ch is e ag reem en ts to BC Cl ean ers

. The Agr eem en t de ferr ed

Kan ni n g ’s as si gn m en t of hi s fran ch is ee in te res t in th e dr y -cl ean in g st or es un ti l

Nov em be r 30
, 20 14
, aft er de fen da nt s fin is he d pa y in g th e Exh ib it D Pro m is so ry Not e.
In th e in te rim pe rio d, th e Agr eem en t ob li ga te d KM Cl ean ers to co nt in ue pa y in g th e

an nu al fran ch is e fee to Ma r t i n i z i n g , wit h BC Cl ean ers ag reei ng to rei m bu rs e KM
Cl e a n e r s on May 31
, 20 15

. KM Cl ean ers ’ pr om is e to as si gn va li d fran ch is e
ag reem en ts ne ces sa ril y

in cl ud ed ob ta in in g M art in iz in g’s ap pr ov al

. 2

Se c on d, un ti l th e fran ch is ed st or es were tra ns ferr ed to BC Cl ean ers in

acco rd an ce wit h th e Ass et Pu rch as e Agr eem en t, Kan ni ng an d KM Cl ean ers rem ai ne d

Mar ti ni zi ng ’s au th or iz ed fran ch is ee. Mar ti ni zi ng di d no t al le ge th at it te rm in at ed th e fran ch is e ag reem en ts

. See Mi nn

. St at

. § 80 C.1 4, su bd

. 3. To pr ev ai l on it s cl ai m of

tra de m ark in fri ng em en t, Mar ti ni zi ng m us t pr ov e th at de fen da nt s’ co nduc t w as “ li ke ly

to cau se co nf

us io n” as to th e or ig in or ap pr ov al of p r od uc ts or se rv ic es

. See, e.g ., Eve res t Cap it al Ltd

. v. Eve res t Fu nd s Mg m t., L.L.C., 39 3 F.3 d 75 5, 75 9 (8 th Ci r. 20 05 ), ci ti ng 15 U.S.C. § 11 25 (a)( 1) (A). Here, co nt in ue d op erat io n of th e st or es

un de r f r a nc hi se ag reem en ts th at ha d no t be en te rm in at ed ob vi ou sl y cau se d no

cu st om er co nf

us io n wha ts oe ve r. As Lun de ll pu t it in hi s se co nd em ai l, BC Cl ean ers si m pl y op erat ed th e st or es “ fo r KM Cl ean ers ” du rin g th is in te rim pe rio d. Mar ti ni zi ng do es no t al le ge th at BC Cl ean e r s w r o n g f ul ly act ed as KM Cl ean ers ’ ag en t, an d we ha ve tro ub le po si ti ng wha t th at cl ai m wou ld be

. If th e in te rim arra ng em en t vi ol at ed

Und er Mi nn es ot a la w, a fran ch is or m ay no t “ un reas on ab ly wit hh ol d co ns en t” 2

to as si gn m en t of a fran ch is e if th e fran ch is ee to be su bs ti tu te d m eet s th e fran ch is or ’s

“ pr es en t q ua li fic at io ns an d s ta nd ard s.” M in n. St at . § 8 0C .14 , su bd . 5.

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-th e un te rm in at ed f ran ch is e ag reem en ts , an y cl ai m wou ld pr es um ab ly be ag ai ns t
fran ch is ee Kan ni ng , no t t he se de fen da nt s.

Thi rd

, un li ke th e cat eg or ic al de m an d a tra de m ark own er typic al ly di rect s at an in fri ng in g co m

pe ti to r, Mar ti ni zi ng ’s Ja nu ary 20 15 Cea se an d Des is t le tt er in vi te d BC
Cl ean ers an d Lun de ll to be co m e “ an au th or iz ed Mar ti ni zi ng fran ch is ee.” Im pl ic it in
th is in vi ta ti on was t he gra nt of a reas on ab le pe rio d o f ti m e fo r de fen da nt s to de ci de
whe th er to acce pt

. Mea nwh il e, t h e s t o r e s co nt in ue d to op erat e un de r th e KM
Cl ean ers fran ch is e, cau si ng no li ke li h o o d of cu st om er co nf us io n, on ly a po ss ib le
cl ai m by Marti ni zi ng ag ai ns t Kan ni ng for an y un pa id fran ch is e fee s.

Fo ur th

, on Marc h 1 , 20 15 , Lun de ll an d B C Cl ean ers rep li ed to Mart in iz in g’s
C e as e an d Des is t le tt er. The y de cl in ed to se ek a fran ch is e ag reem en t, st at ed th ey

were no lo ng er op erat in g th e st or es , an d agr eed to co m pl y wit h th e ceas e an d des is t
de m an ds in Mar ti ni zi ng ’s Ja nu ary le tt er. Bec au se BC Cl e a n e r s ha d be en us in g Mar ti ni zi ng ’s tra de m ark s with ou t ap pr ov al an d ag reed to st op , th e di st ric t cou rt di d

n o t a bu se it s di sc ret io n in gr an ti ng a pe rm an en t in jun ct io n en

joi ni ng BC Cl ea n e r s

“ fro m an y an d a ll fur th er u se of [ Mar ti ni zi ng ’s] na m e an d re gi st ered m ark s.”

Bec au se th e Lan ha m Act i s g ro un de d in eq ui ty an d ba rs pu ni ti ve rem ed ie s,

“ rel ie f in a Lan ha m Act cas e sh ou ld be li m it ed to an in jun ct io n if th at is su ffi ci en t to
do eq ui ty.” Mi nn es ot a Pet Bree de rs , In c. v. Sch el l & Kam pe te r, In c., 41 F.3 d 12 42
, 12 47 (8 th C ir. 19 94 ) (ci ta ti on s om it te d)

. Here, Mar ti ni zi ng arg ue d to th e di st ric t

co ur t th at it was en ti tl ed to mo ne y da m ag es (in de ed

, tre bl e da m ag es ) be cau se BC
Cl ean ers op erat ed th e fran ch is ed st or es “ as if it were a n au th or iz ed Mar ti ni zi ng
In te rn at io na l fran ch is ee,” ig no rin g pl ai n la ng u ag e in th e fran ch is e ag reem en ts

req ui rin g Mar ti n i z i n g ’s co ns en t. Bu t th e do cu m en ta ry reco rd es ta bl is he s on ly th at
BC Cl ean ers (i) en te red in to an ag reem en t to acq ui re th e st or e as se ts an d ob ta in a

va li d as si gn m en t of th e f r a n c h is e ag reem en ts , (ii ) op erat ed th e st or es du rin g th e
pe rio d whe n th e ex is ti ng fran ch is ee ha d pr om is ed to ob ta in Mar ti ni zi ng ’s co ns en t to

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-th e as si gn m en ts , an d th en (ii i) va cat ed th e st or es whe n th e un co m pl et ed de al fel l
th ro ug h. W he th er a Lan ha m Act pl ai nt iff m us t pr ov e wil lfu l in fri ng em en t to reco ve r

m on ey da m ag es is an op en qu es ti on in th is ci rcu it aft er th e Lan ha m Act am en dm en ts
in 19 99

. See Mas te r s v

. U H S o f Del., In c., 63 1 F.3 d 46 4, 47 1 n.2 (8 th Ci r. 20 11 ).

Bu t ev en if wil lfu l in fri n g e men t is no t a pr ereq ui si te , on th is reco rd we co nc lu de

Mar ti ni zi ng fai le d to pr ov e th at BC C l e a ne rs ’ co nd uc t m ak es th is th e ki nd of

ex cep ti on al cas e th at wou ld en ti tl e Mar ti ni zi ng to da m ag e s , a n acco un ti ng of
in fri ng er pr of

it s, or at to rn ey s’ fees

, in ad di ti on to th e in jun ct iv e rel ie f we ha ve up he ld

. See 15 U.S.C. § 11 17 (a); Mi nn

. St at

. § 32 5D.4 5. Fo r ex am pl e, Mar ti ni zi ng m ad e no sh owi ng wha t fran ch is e fees were no t pa id by Kan ni ng du rin g th e m on th s whe n BC
Cl ean ers was o pe rat in g t he st or es un de r th e u nt erm in at ed ag reem en ts

.

Turn in g to th e in di vi du al de fen da nt s, as m em be r-m an ag ers of BC Cl ean ers , a li m it ed li ab il it y co m

pa ny, Lun de ll an d Carv er en joy ed li m it ed li ab il it y fo r BC
Cl ean ers ’ li ab i l i t i e s , de bt s, an d ob li ga ti on s -- in cl ud in g to rts

. See Mi nn

. St at

. § 32 2B .30 3, su bd

. 1. Thu s, fo r Mar ti ni zi ng to pr ev ai l ag ai ns t Lun de ll an d Carv er,

“ we m us t fin d a th eo ry in th e co m pl ai nt to su p p o r t i mpo si ng pe rs on al li ab il it y .”

Mar sh al l, 61 6 F.3 d at 85 3. The ge ne ral ru le is th at a co rp or at e of f i c e r o r l i m it ed
li ab il it y co m

pa ny m em

be r is pe rs on al ly li ab le fo r tra de m ark in fri ng em en t if he or sh e di rect ly pa rti ci pa te s in th e in fri ng em en t. See, e.g ., Uni te d St at es v. W as hi ng to n Mi nt , LLC, 11 5 F. Su pp

. 2d 10 89
, 11 06 ( D

. M i n n

. 20 00 ), an d cas es ci te d. Si m il arl y , fo r in di vi du al li ab il it y un de r th e MDTPA, a c o r p o r a t e of fic er m us t pa rti ci pa te in th e

co rp or at io n’s de cep ti ve tra de pr act ic e. See Ave ry v. So la rg iz er In t’l, In c., 42 7
N

. W. 2 d 67 5, 68 3 (Mi nn . Ap p. 19 88 ); Ell in gs on v. W or ld Am us em en t Serv . As s’n
, 22 2 N.W. 33 5, 3 39 (Mi nn . 19 28 ).

Here, Lun de ll an d C arv er were in vo lv ed in BC Cl ean ers , bu t Mar ti ni zi ng

su bm it te d no ev id en ce ad dr es si ng th e ex te nt of th ei r in vo lv em en t in th e co nt in ue d us e of Mar ti ni zi ng tra de m ar k s a fte r BC Cl ean ers en te red in to th e Ass et Pu rch as e Agr eem en t bu t pr io r to KM Cl ean ers co mp l e ti ng th e Agr eem en t by as si gn in g it s

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-fran ch is e ag reem en ts to BC Cl e a n e r s

. Mo re im po rta nt ly, as Mar ti ni zi ng fai le d to

pr ov e th at it was en ti tl ed to m on et ary rem ed ie s ag ai ns t BC Cl ean ers , th es e in di vi du al
de fen da nt s are li ke wis e no t li ab le fo r da m ag es , an acco un ti ng fo r pr of it s, an d

at to rn ey s’ fees

. Nor di d th e di st ric t co u r t a b u s e it s di sc ret io n in no t gr an ti ng in jun ct iv e rel ie f ag ai ns t th e in di vi du al de fen da nt s, as BC Cl ean ers ha d ag reed to st op

us in g th e tra de m ark s. The refo re, we affi rm th e de ni al of a de fau lt jud gm en t ag ai ns t
Lun de ll an d C arv er.

Fo r th e fo reg oi ng reas on s, th e jud gm en t of th e di st ric t co ur t is affi rm ed in pa rt

an d r e v e r s e d i n pa rt. The cas e is rem an de d wit h di rect io ns to en te r an am en de d jud gm en t th at ret ai ns pa rag rap hs 1.a

. an d 5, m od ifi es pa rag r a ph s 1.b

. an d 2, an d
de le te s p arag rap hs 3, 4 , and 6 o f th e Ju dg m en t d at ed Decem be r 9, 2 01 5.

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