Opinion ID: 72503
Heading Depth: 2
Heading Rank: 2

Heading: Customer Contracts and Relationships

Text: Second, we consider Camp Creek's allegation that Sheraton interfered with the Inn's contracts and prospective business relationships with its customers. In support of this claim, Camp Creek offers testimony to the effect that almost 300 guests with reservations at the Inn actually stayed at the Gateway. Camp Creek claims that these guests boarded the wrong Sheraton shuttle van at the Atlanta Airport and, when they arrived at the wrong hotel, the Gateway knowingly misappropriated a large percentage of these guests by offering them rates below the Inn's reservation rates and below the Gateway's walk in rate. As noted above, Georgia law requires a plaintiff to offer evidence that the defendant acted improperly and that those acts induced a breach of contract or prompted a third party to discontinue or fail to enter an anticipated business relationship.19 See McDaniel v. Green, 156 Ga.App. 549, 275 S.E.2d 124, 126-27 (1980) (requiring a causal connection between the improper act and the interrupted relationship). Although Camp Creek has presented evidence that Sheraton engaged in a host of improper actions, none of those actions relate to the misappropriation of these (or any other) customers with reservations. Indeed, given that these customers initially made reservations at the Inn, the evidence suggests that any omission of the Atlanta Airport designator from the Inn's 19 It is by no means clear that the reservations at issue constitute a contract under Georgia law. See Brown v. Hilton Hotels Corp., 133 Ga.App. 286, 211 S.E.2d 125, 127 (1974) (permitting a guest to sue for breach of contract when the hotel refused to honor a prepaid reservation). We need not reach the question in this case. 21 name in Sheraton's national advertising and the Reservatron system,20 any bias in the Reservatron system, and any misuse of the Inn's confidential information to restructure the Gateway's rates had no impact whatsoever. The evidence, construed in Camp Creek's favor, merely shows that the Gateway offered to meet or beat the Inn's rates when these guests arrived at their door. As Camp Creek has presented no evidence that suggests these guests canceled their reservations at the Inn because of the Gateway's alleged wrongful activity, we affirm the district court's grant of summary judgment on this issue. Camp Creek's remaining evidence of tortious interference supports only the general contention that Sheraton's improper conduct cost Camp Creek guests who might have otherwise stayed at the Inn. Although a plaintiff claiming tortious interference with prospective business relationships need not identify particular disrupted contracts to recover, Camp Creek has presented no evidence to distinguish between guests who chose not to stay at the Inn as a result of Sheraton's bad acts and those who simply rejected the Inn because the Gateway presented a more attractive (or simply an additional) choice. Camp Creek's failure to identify a causal connection between Sheraton's tortious activity and the interruption of any particular business relationship requires us to affirm the district court's grant of summary judgment. See Hayes, 541 F.Supp. at 429 (plaintiff must demonstrate that absent the interference, those relations were reasonably likely to develop in fact.); McDaniel, 275 S.E.2d at 126-27. III. The Massachusetts Unfair Trade Practices Act (Count IV) 20 Camp Creek admits that it never actually changed the appearance of its vans to comply with Sheraton's demand that it change the Inn's name. As a result, the only way Sheraton could have confused these 300 customers at the airport was by using its own name in connection with the Gateway. 22 Next, we address Camp Creek's claim that the defendants violated the Massachusetts Unfair Trade Practices Act. See Mass. Gen. Laws ch. 93A (the Massachusetts Act). As the district court correctly observed, that statute applies only to cases in which the actions and transactions constituting the alleged unfair method of competition or the unfair or deceptive act or practice occurred primarily and substantially within the commonwealth [of Massachusetts]. Id. § 11. Sheraton, as the party seeking to rely on this provision, bears the burden of establishing that its conduct falls outside the Massachusetts Act's reach. Id.21 To determine whether the conduct in a particular case took place primarily and substantially within Massachusetts, the courts have examined: (1) where the defendant committed the deceptive or unfair acts; (2) where the plaintiff was deceived and acted upon the defendant's unfair acts; and (3) where the plaintiff suffered losses caused by the defendant's unfair acts. See Play Time, Inc. v. LDDS Metromedia Communications Inc., 123 F.3d 23, 33 (1st Cir.1997). In the present case, the second and third prongs of the test favor Sheraton, because Camp Creek felt the sting of any deception in Atlanta, Georgia. See Clinton Hosp. Ass'n v. Corson Group, Inc., 907 F.2d 1260, 1266 (1st Cir.1990) (applying Bushkin Assoc., Inc. v. Raytheon Co., 393 Mass. 622, 473 N.E.2d 662 (1985)). Camp Creek, therefore, relies on the first prong of the analysis and argues that the appellees acted in Massachusetts because Sheraton made all the plans and decisions at issue at its corporate headquarters in Boston. Camp Creek's argument, however, overlooks the fact that, although 21 Camp Creek's suggestion that Sheraton should not be heard to complain about the application of the Massachusetts Act because it requires its franchisees to sign agreements governed by Massachusetts law is also unpersuasive. See e.g., Popkin v. National Benefit Life Ins. Co., 711 F.Supp. 1194, 1200 (S.D.N.Y.1989) (dismissing a contractual choice of law argument as irrelevant to this inquiry). 23 Sheraton's contemplation of these acts may have taken place in Massachusetts, the acts themselves took place outside the Commonwealth.22 Moreover, the proposition that Camp Creek advances would require the application of the Massachusetts Act in every case involving a Massachusetts defendant, a proposition the courts have rejected. See Clinton Hosp., 907 F.2d at 1266 (rejecting bright line rules); Healthco Int'l, Inc. v. A-dec, Inc., No. 87-0235-S (D.Mass. Apr. 17, 1989) (reading Bushkin to reject the argument that the Massachusetts Act applies to every defendant resident in Massachusetts). We therefore affirm the district court's grant of summary judgment on this issue.23 IV. Georgia Trade Secrets Act (Count X) Camp Creek also asserts that Sheraton misappropriated confidential information regarding the Inn in violation of the Georgia Trade Secrets Act (GTSA). See O.C.G.A. § 10-1-760 et seq. The record shows that Tom Faust, the manager of the Gateway Hotel, improperly came into possession of information concerning the Inn's occupancy levels, average daily rates, discounting policies, rate levels, long term contracts, marketing plans, and operating expenses. Camp Creek also presented evidence that Faust used this information to propose the Inn's ejection from the Sheraton system and that he may have used it to compete against the Inn for customers. 22 The acts Camp Creek cites include the name change (nationwide), misuse of confidential information (Atlanta), misleading advertisements (nationwide), and preferential treatment in the Reservatron system (nationwide). 23 Our application of this express limitation found in the Act renders unnecessary any determination of whether a Georgia court, applying Georgia principles of conflicts of law, would apply the Massachusetts Act at all. See Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496, 61 S.Ct. 1020, 1021, 85 L.Ed. 1477 (1941) (holding that a federal court hearing a diversity case applies the conflicts of law rules of the state in which it sits). 24 To support a claim for misappropriation of trade secrets, Camp Creek must show that (1) it had a trade secret and (2) the opposing party misappropriated the trade secret. See generally, DeGiorgio v. Megabyte Int'l, Inc., 266 Ga. 539, 468 S.E.2d 367 (1996) (applying O.C.G.A. §§ 10-1- 761, 763). Georgia defines trade secrets broadly to include non-technical and financial data that derives economic value from not being generally known and is the subject of reasonable efforts to maintain its secrecy. Id. § 10-1-761(4).24 Whether a particular type of information constitutes a trade secret is a question of fact. See Salsbury Lab. v. Merieux Lab., 908 F.2d 706, 712 (11th Cir.1990) (citing Wilson v. Barton & Ludwig, 163 Ga.App. 721, 296 S.E.2d 74, 78 (1982)). Our review of the record reveals that Camp Creek has provided evidence upon which a reasonable jury could find that the information in this case meets Georgia's statutory definition of a trade secret. 24 The Georgia Trade Secrets Act provides in pertinent part: Trade secret means information, without regard to form, including, but not limited to, technical or nontechnical data, a formula, a pattern, a compilation, a program, a device, a method, a technique, a drawing, a process, financial data, financial plans, product plans, or a list of actual or potential customers or suppliers which is not commonly known by or available to the public and which information: (A) Derives economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use; and (B) Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy. O.C.G.A. § 10-1-761(4). We note that although the Georgia State Legislature amended this provision in July 1996, the amended language plays no part in our decision. Compare AmeriGas Propane L.P. v. T-Bo Propane, Inc., 972 F.Supp. 685, 697-98 (S.D.Ga.1997) (discussing the amendment and its intended effect). 25 First, Camp Creek has presented expert testimony suggesting that this information is closely guarded in the hotel industry, that a competitor could not easily derive the information through other means, and that a competitor could make use of such information to the detriment of the owner. See Berman Aff. ¶ 29. This evidence shows that the information is valuable and not of the type any intelligent competitor could have compiled by legitimate alternative means. Second, although Camp Creek did provide the information to Sheraton, it provided that information pursuant to the Reservation Agreement and on the apparently mutual understanding that it would be kept confidential. See Sunderji Aff. Exh. C (Sheraton representative's letter noting that information would be kept in strict confidentiality).25 To the extent Camp Creek disclosed this type of information elsewhere, it did so on the express condition that it would not be made public except as part of aggregate industry statistics, untraceable to the individual Inn. Whether Camp Creek's efforts to keep the information secret in this case were reasonable under the circumstances presents a question for the trier of fact. Cf. Avnet, Inc. v. Wyle Lab. Inc., 263 Ga. 615, 437 S.E.2d 302, 303-04 (1993) (comparing and analyzing different measures taken to secure secrecy of confidential information). 25 We are cognizant of the fact that not all confidential information rises to the level of a trade secret. See TDS Healthcare Sys. Corp. v. Humana Hosp. Ill., Inc., 880 F.Supp. 1572, 1584 (N.D.Ga.1995). Nevertheless, Camp Creek's evidence on this point is more than sufficient to survive Sheraton's motion for summary judgment. 26 Camp Creek's evidence would also support a finding that Sheraton misappropriated the information from Camp Creek.26 A defendant misappropriates a trade secret by knowingly acquiring it through improper means. See O.C.G.A. § 10-1-761(2). The GTSA provides that: Improper means includes theft, bribery, misrepresentation, breach or inducement of a breach of a confidential relationship or other duty to maintain secrecy or limit use .... Id. § 10-1-761(1) (emphasis added). Although we have already held that Camp Creek has failed to show that a confidential relationship existed between the parties, the evidence shows that Camp Creek provided the data in question to Sheraton Reservations with the understanding that its use would be limited and that it would be kept confidential. Sheraton contends that it came into possession of the information by legitimate means, either compiling the data itself or receiving it pursuant to the Reservations Agreement. Although this may accurately describe Sheraton 26 The GTSA provides the following definition of misappropriation in pertinent part: (A) Acquisition of a trade secret of another by a person who knows or has reason to know that the trade secret was acquired by improper means; or (B) Disclosure or use of a trade secret of another without express or implied consent by a person who: .... (ii) At the time of disclosure or use, knew or had reason to know that knowledge of the trade secret was: .... (II) Acquired under circumstances giving rise to a duty to maintain its secrecy or limit its use; or (III) Derived from or through a person who owed a duty to the person seeking relief to maintain its secrecy or limit its use;.... O.C.G.A. § 10-1-761(2). 27 Reservations' initial receipt of the information, Sheraton has all but admitted that the Gateway's possession and use of the data, as one of Camp Creek's competitors, was improper and in violation of Sheraton's own policies. See e.g., III Johnson Dep. at 380 (discussing procedures); I Faust Dep. at 220-25 (discussing the Gateway's acquisition and use of the Inn's confidential information). As the GTSA includes the diversion of information acquired under legitimate circumstances within its definition of misappropriation, see O.C.G.A. §§ 10-1-761(1), 10-1-761(2)(B)(ii)(II) & (III), Camp Creek has presented evidence which would allow a reasonable jury to find in its favor on this claim. Although Camp Creek has presented evidence that the defendants made some competitive use of the information, Sheraton maintains that Camp Creek has failed to provide evidence of damages on its trade secret claim. As we have already noted, Camp Creek's generalized evidence on damages does not isolate losses directly attributable to any particular misuse of confidential information. See supra Part I(B)(3). Nevertheless, the GTSA expressly provides for the award of a reasonable royalty in the event that the plaintiff cannot prove damages or unjust enrichment by a preponderance of the evidence. See O.C.G.A. § 10-1-763(a). Moreover, the district court may determine that injunctive relief is appropriate to the extent that the Gateway continues to make use of Camp Creek's confidential information to compete for guests. See O.C.G.A. § 10-1-762. Judgment as a matter of law, therefore, is inappropriate at this time, and we reverse the district court's grant of summary judgment. V. Additional Statutory Claims Camp Creek's complaint goes on to assert a number of additional statutory claims for relief, relying again on the conduct described above. We provide a brief discussion of each claim. A. Lanham Act and Georgia Deceptive Trade Practices Act (Counts VI & VII) 28 Camp Creek sets forth a rather novel argument that Sheraton's use of the words Sheraton ... Atlanta Airport in connection with the Gateway Hotel constitutes a violation of the Lanham Act. See 15 U.S.C. § 1125(a). As it is hornbook law that a licensee may not sue its licensor for trademark infringement, see 2 J. Thomas McCarthy, McCarthy on Trademarks and Unfair Competition § 18:63, at 18-103 (4th ed.1996), and any Lanham Act plaintiff must have rights in the name at issue to seek protection, see Conagra, Inc. v. Singleton, 743 F.2d 1508, 1512 (11th Cir.1984), Camp Creek eschews any claim to the term Sheraton alone. Instead, Camp Creek claims a property interest in the use of Atlanta Airport in combination with Sheraton and alleges that the defendants engaged in reverse palming off, trading on the goodwill that Camp Creek had acquired in the combination of the two terms. Although we see a host of difficulties with Camp Creek's argument, we, like the district court, will confine our discussion of this matter to whether the defendant's designation was actually false. As even the title of section 1125 makes clear, Camp Creek must provide some evidence that the defendants falsely designated the Gateway Hotel in some way.27 As the district court correctly observed, there can be no Lanham Act claim if the Gateway's use of Sheraton ... Atlanta Airport is accurate and creates no false impression. See Original Appalachian Artworks v. Schlaifer Nance & Co., 679 F.Supp. 1564, 1577 (N.D.Ga.1987) (If there is one immediately apparent characteristic of section 1125, it is that in order to sustain a cause of action thereunder, a plaintiff must establish the existence of some type of false designation, description, or representation. The operative word 27 The title of that section is False designations of origin and false descriptions forbidden. Moreover, although we would never have discovered it by reading Camp Creek's briefs on this issue, § 1125(a) uses the word false or some derivation thereof no less than six times. See 15 U.S.C. § 1125(a). 29 is false.' ); Debs v. Meliopoulos, No. 1:90-cv-939-WCO, (N.D.Ga. Dec. 18, 1991) (noting that relief may be granted if the defendant creates a false impression). It is beyond dispute that the Gateway is a Sheraton property located in the vicinity of the Atlanta Airport and its use of the disputed terms is literally accurate. See Original Appalachian Artworks, 679 F.Supp. at 1577-78 (rejecting a section 1125(a) claim when the challenged association was factually accurate). As we find nothing false about the defendant's use of Sheraton ... Atlanta Airport, we affirm the district court's grant of summary judgment in favor of the defendants on the Lanham Act claim.28 Moreover, as the parties do not dispute that Georgia's Deceptive Trade Practices Act, O.C.G.A. § 10-1-372, involves the same dispositive question as the Lanham Act claim, we similarly affirm the district courts disposition of that claim. See Jellibeans, Inc. v. Skating Clubs of Georgia, Inc., 716 F.2d 833, 839 (11th Cir.1983). B. Additional Prayers for Relief 28 Indeed, the only way that the Gateway's use of Sheraton ... Atlanta Airport could create a false or misleading impression is if potential guests associated those terms with the Inn. Camp Creek has not only failed to produce any evidence of such a particular association, but the prior existence of the SHAA and the evidence of customer confusion between those franchises contradicts any such suggestion. We also reject Camp Creek's conceptually befuddled suggestion that the Gateway has engaged in reverse passing off. Section 1125(a) prohibits both passing off, where A sells its product under B's name, and reverse passing off, where A sells B's product under A's name. See Waldman Pub. Corp. v. Landoll, Inc., 43 F.3d 775, 780 (2d Cir.1994). Although Camp Creek's evidence might be read to show that the Gateway sold its own rooms using the goodwill the Inn had built up in its name (passing off), there is no evidence to support the proposition that the Gateway sold the Inn's product (reverse passing off). See Debs, (collecting cases and fact patterns). 30 Camp Creek maintains that in addition to its claims for damages on the counts discussed above, it has independent claims for unjust enrichment, injunctive relief, punitive damages, and attorneys fees. We address each argument in turn.
Camp Creek argues that, under both Massachusetts and Georgia law, a person who has been unjustly enriched at the expense of another is required to make restitution. See Salamon v. Terra, 394 Mass. 857, 477 N.E.2d 1029, 1031 (1985) (quoting Restatement of Restitution § 1 (1937)); Regional Pacesetters, Inc. v. Halpern Enter., Inc., 165 Ga.App. 777, 300 S.E.2d 180, 184-5 (1983). Camp Creek asserts that the facts in this case support its argument that the Gateway unjustly enriched itself by competing with the Inn for business in the Atlanta Airport market. As previously discussed, Camp Creek may recover damages from the defendants to the extent that a jury determines that the Gateway's competition constitutes a breach of the defendants' implied contractual duties. Recovery on a theory of unjust enrichment, however, is only available when as a matter of fact there is no legal contract. See Regional Pacesetters, 165 Ga.App. 777, 300 S.E.2d 180, 185 (1983). As a result, the district court properly granted summary judgment to the defendants.
The district court seems to have misconceived Camp Creek's claim for an injunction pursuant to Georgia law, see O.C.G.A. § 9-5-1, as a demand for a preliminary injunction. Consequently, regardless of whether the district court's observation that Fed.R.Civ.P. 65 precludes Camp Creek's application for an injunction under state law is correct,29 the district court erred by 29 We note that the district court's conclusion in this regard is unsupported by citation, but decline to address the matter further. 31 applying the standards governing temporary injunctions. In view of the fact that Camp Creek's petition is for a permanent injunction, to be decided at the conclusion of a trial on the merits, the district court's reliance on plaintiff's likelihood of success on the merits is misplaced. We therefore reverse the district court's grant of summary judgment in Sheraton's favor on this issue. 3. Attorney's Fees, Punitive Damages, and Discovery Matters (Count XI) The district court's resolution of Camp Creek's claims for attorneys' fees, punitive damages, and its motion to compel discovery depend, at least to some degree, on the conclusion that Sheraton was entitled to summary judgment on all of Camp Creek's substantive claims. Our determination that Camp Creek has set forth evidence sufficient to present to a jury on its contract and GTSA claims requires us to vacate the district court's denial of these prayers for relief and remand for reconsideration of Count XI in light of our opinion.