Court Opinion

ID: 625026
Source: CourtListenerOpinion
Date Created: 2012-03-09 20:12:38+00
Date Added: 2024-06-11T17:51:09.657815
License: Public Domain

UNPUBLISHED

                  UNITED STATES COURT OF APPEALS
                      FOR THE FOURTH CIRCUIT

                             No. 10-2114

DAVID  SCHWARTZ,   d/b/a Rent    A   Wreck;   RENT   A   WRECK
INCORPORATED, d/b/a Bundy Auto Sales,

                Plaintiffs - Appellees,

          v.

RENT A WRECK OF AMERICA INCORPORATED; BUNDY AMERICAN LLC,

                Defendants – Appellants,

          and

J.J.F. MANAGEMENT SERVICES INCORPORATED,

                Defendant.

                             No. 10-2260

DAVID  SCHWARTZ,   d/b/a Rent    A   Wreck;   RENT   A   WRECK
INCORPORATED, d/b/a Bundy Auto Sales,

                Plaintiffs - Appellants,

          v.

RENT A WRECK OF AMERICA INCORPORATED; BUNDY AMERICAN LLC,

                Defendants – Appellees,

          and

J.J.F. MANAGEMENT SERVICES INCORPORATED,

                Defendant.
                              No. 11-1561

DAVID  SCHWARTZ,   d/b/a Rent    A   Wreck;    RENT    A   WRECK
INCORPORATED, d/b/a Bundy Auto Sales,

                 Plaintiffs - Appellees,

           v.

RENT A WRECK OF AMERICA INCORPORATED; BUNDY AMERICAN LLC,

                 Defendants – Appellants,

           and

J.J.F. MANAGEMENT SERVICES INCORPORATED,

                 Defendant.

Appeals from the United States District Court for the District
of Maryland, at Baltimore.  Peter J. Messitte, Senior District
Judge. (1:07-cv-01679-PJM)

Argued:   January 26, 2012                  Decided:   March 9, 2012

Before KING and DUNCAN, Circuit Judges, and J. Michelle CHILDS,
United States District Judge for the District of South Carolina,
sitting by designation.

Affirmed in part, vacated in part, reversed in             part,   and
remanded by unpublished opinion.        Judge Duncan       wrote   the
opinion, in which Judge King and Judge Childs joined.

ARGUED: Daniel Janssen, QUARLES & BRADY, Milwaukee, Wisconsin,
for Rent A Wreck of America Incorporated and Bundy American LLC.
Jacob Ira Weddle, GORDON & SIMMONS, LLC, Frederick, Maryland,
for David Schwartz and Rent A Wreck Incorporated.      ON BRIEF:
Leah J. Stoecker, QUARLES & BRADY, Milwaukee, Wisconsin, for

                                   2
Rent A Wreck of America Incorporated and Bundy American LLC.
Roger C. Simmons, GORDON & SIMMONS, LLC, Frederick, Maryland,
for David Schwartz and Rent A Wreck Incorporated.

Unpublished opinions are not binding precedent in this circuit.

                                3
DUNCAN, Circuit Judge:

       These consolidated appeals arise out of a jury verdict that

a     contract   arose   based   upon       a   course   of   dealing     between

appellants/cross-appellees          Rent-A-Wreck         of    America,      Inc.

(“RAWA”) and Bundy American, LLC (“Bundy”) on the one hand, and

appellees/cross-appellants David Schwartz and Rent-A-Wreck, Inc.

(“RAWI”), on the other, with respect to RAWI’s and Schwartz’s

operation of a used car rental business in West Los Angeles,

California.      Both sets of parties moved to set aside certain

portions of the jury verdict under Rule 50(b).                    The district

court granted in part and denied in part these motions.                       The

district court then entered a partial judgment in favor of RAWI

and     Schwartz,   from    which    both       sets     of   parties     appeal.

Subsequently, upon motion by RAWI and Schwartz, the district

court ordered RAWA and Bundy to comply with certain directives.

RAWA and Bundy appealed from that order. 1               For the reasons that

follow, we affirm in part, vacate in part, reverse in part, and

remand for further proceedings.

       1
       The appeal from the district court’s first order, dated
September 23, 2010, was docketed as No. 10-2114.     The appeal
from the district court’s second order, dated May 11, 2011, was
docketed as No. 11-1561.     By order of this court, the two
appeals were consolidated.

                                        4
                                        I.

                                        A.

      We    begin   by    setting     forth   the   facts    relevant       to    this

appeal.     In 1962, Schwartz began operating a used car lot under

the name of Bundy Auto Sales.            In 1973, Schwartz began using the

name Rent-A-Wreck.         Schwartz painted a sign with the name “Bundy

Rent-A-Wreck” and placed it outside his business.                       Two years

later, in 1975, Schwartz incorporated under the name Rent-A-

Wreck,     Inc.     On    May   13,   1977,   Schwartz      formed   another      new

company with an investor named Geoffrey Nathanson.                    The name of

the new company, owned equally between Schwartz and Nathanson,

was Bundy American Corporation (“Bundy”).                Bundy was formed for

the   purpose       of     offering    Rent-A-Wreck        brand     auto    rental

franchises.

      In March and April of 1977, shortly before Schwartz and

Nathanson formed Bundy, they had entered into an agreement that

provided that       all    of   Schwartz’s    and   RAWI’s    interests      in    the

Rent-A-Wreck name and marks would be assigned to Bundy; that

Schwartz would assign to Bundy his and RAWI’s rights to the

Rent-A-Wreck name; that the territory of Los Angeles County was

excepted from this assignment; and that the agreement would be

binding upon both parties and their respective heirs, executors,

administrators,      and    permitted    assigns    (the     “1977   Agreement”).

                                         5
On May 13, 1977, Schwartz, for himself and RAWI, executed a

written assignment of the Rent-A-Wreck service mark to Bundy

(the “1977 Assignment”).

      In    1985,     Schwartz       and    Nathanson,        with     the    agreement      of

Bundy’s franchisees, decided to take Bundy public under the name

Rent-A-Wreck of America, Inc.                        For this purpose, they entered

into an agreement (the “1985 Agreement”).                           Pursuant to the 1985

Agreement,      Schwartz        agreed     that       “I    shall    not   engage     in    any

activities     that        compete      with    the     business      of   [RAWA],     except

activities in the protected territory described below, including

the   running       of     my   Bundy     Rent-A-Wreck        operation       in    West    Los

Angeles.”           J.A.    2939     (¶    3).         The    1985    Agreement       further

identified      a    defined       territory--located           within       Los    Angeles--

within     which     Schwartz      could       continue      operating       a     single   car

rental location (called Bundy Rent-A-Wreck).                           RAWA agreed that

it    would   grant        no   franchises,           nor    open    any     RAWA-owned      or

affiliated operations in Schwartz’s protected territory.                                    The

1985 Agreement further provided that it would terminate on June

30, 1985, except that the exclusivity provision would continue

in full force and effect after that date.

      On August 12, 1985, RAWA’s offering prospectus was issued

(the “Prospectus”).              It stated, in relevant part, that “[i]n

connection with the formation of Bundy, Schwartz assigned all of

his right, title and interest in and to the trade name and

                                                 6
trademark ‘Rent-A-Wreck’ to Bundy, retaining the right to the

concurrent use of the trade name and trademark at the original

Rent-A-Wreck facility owned by him in West Los Angeles.”                                J.A.

2883 (“Background”).           It further stated, in relevant part, that

Schwartz was “the originator of the Rent-A-Wreck concept and has

operated Bundy Rent-A-Wreck, his West Los Angeles based Rent-A-

Wreck facility, the nation’s first, since 1973.                            Bundy Rent-A-

Wreck    operates       independently         of,     and    not    under     a    license

agreement      from    [RAWA].”        J.A.       2889.     The    Prospectus      further

noted the existence and terms of the 1985 Agreement.

       On August 11, 1987, the RAWA board unanimously approved a

proposal that RAWA would lease and operate Schwartz’s business

and territory in West Los Angeles beginning for an initial term

of one year, with the option for four additional one year lease

terms.        In an agreement executed on September 1, 1987, RAWA

agreed to lease and operate Schwartz’s car rental business (the

“1987 Lease Agreement”).              During the lease period, RAWA replaced

Schwartz’s      original       Bundy    Rent-A-Wreck         sign    with    a    stylized

Rent-A-Wreck sign and logo identical to the ones used by RAWA

franchisees.          On May 20, 1988, RAWI assigned the Rent-A-Wreck

mark     in    the     State     of     California          to     Bundy    (the     “1988

Assignment”).          Schwartz       signed       the    1988    Assignment,      in   his

capacity as the President of RAWI.                       In 1990, Schwartz sold his

controlling interest in RAWA.

                                              7
       In September 1990, RAWA terminated the lease on Schwartz’s

car    rental        location,             and    Schwartz        resumed       operating       an

independent rental car business at the same location.                                  Schwartz

continued using the signage and business forms that RAWA had

left       behind    at   the     end      of     the    lease    term.      RAWA      tolerated

Schwartz’s use of its marks for the next sixteen years. 2                                     Over

time, new employees of RAWA even began including his location on

Uniform Franchise Offering Circulars (“UFOC”) 3 and, when RAWA

established         an    internet         page,        it   included     reference      to   his

location.           The 2001 and 2002 UFOCs state that Schwartz “has

operated a vehicle rental business under the Rent-A-Wreck name

since 1973.         This business is located in Los Angeles, California

and    operates          under    a     royalty-free           agreement.”          J.A.      1544

(Information for Prospective Franchisees, July 1, 2001); J.A.

1744 (Information for Prospective Franchisees, July 1, 2002).

Each       UFOC     attached          as     an     exhibit       a     “List     of    Current

Franchisees,” which included Schwartz.                           J.A. 1676-77; J.A. 1823-

24.         Nonetheless,         there      has     never     been    a   formal       franchise

agreement executed between RAWA and Schwartz.                              The relationship

       2
       In 1993, RAWA relocated its headquarters from California
to Maryland.
       3
       A UFOC is a document that contains information franchisors
must provide to franchisees by law.           The Federal Trade
Commission regulates the contents of a UFOC.

                                                   8
between the two is therefore somewhat unorthodox.                               RAWA imposes

certain     requirements        upon     its       franchisees,         including      ongoing

training; compliance with standards and policies; restrictions

on products and services offered; warrant and customer service

requirements;          sales     quotas;           maintenance,          appearing,          and

remodeling requirements; insurance; and advertising.                              Schwartz’s

rental location does not abide by such requirements.

     In 2001, Bundy, now operating as a wholly owned subsidiary

of RAWA, began to operate auto rental businesses within the Los

Angeles area under the name “Priceless.”                           There are currently

Priceless brand franchises operating in Los Angeles and West

Hollywood.

     In     2005,      RAWA     entered        into     negotiations            with   J.J.F.

Management Services, Inc. (“JJFM”) to sell itself.                                That sale

was completed in 2006.              While the sale was pending, Schwartz

filed     two   lawsuits       against    RAWA,       challenging         the    sale.         On

October    28,    2006,    RAWA    wrote       to     him,   asking       that    he       either

provide evidence of any agreement to use the Rent-A-Wreck name,

or   to    stop   holding       himself        out    to     the    public       as    a    RAWA

franchisee      (the    “October       2006    letter”).           In    June    2007,      RAWA

removed Schwartz from its website.

                                               9
                                           B.

        On June 25, 2007, Schwartz and RAWI filed an action against

RAWA, Bundy, and JJFM 4 in the United States District Court for

the     District     of     Maryland. 5         RAWI    and   Schwartz 6    sought    a

declaratory judgment in their favor pursuant to the terms of the

1985       Agreement,     which   they    alleged      gave   them   a   royalty-free

franchise;        specific    performance        of    the    1985   Agreement;      and

breach of an implied-in-fact contract, which appellees alleged

arose      from   the   parties’    course      of     dealings   between   1977     and

2007.        RAWA and Bundy 7 filed an answer and counterclaims.                      As

relevant here, appellants’ counterclaims included a request for

a declaration that the exclusive franchise sought by appellees

       4
       JJFM was dismissed from the action on March 25, 2009, and
is not a party to this appeal.
       5
       On September 7, 2007, RAWI and Schwartz filed a First
Amended Complaint, alleging, inter alia, violations of the
Lanham Act and seeking cancellation of RAWA’s marks.        The
district court dismissed both of those claims.    The operative
complaint in this action is the Second Amended Complaint, filed
on October 9, 2008.
       6
       As already noted, RAWI and Schwartz are appellees in both
appeals before us, but they are also cross-appellees in the
first appeal. For ease of readability, we will refer to them as
“appellees” throughout our opinion, unless specifically noted
otherwise.
       7
       As already noted, RAWA and Bundy are appellants in both
appeals before us, but they are also cross-appellants in the
first appeal.  For ease of readability, we will refer to them,
unless otherwise specifically noted, as “appellants” throughout
our opinion.

                                           10
was   unenforceable      as   an      unlawful   restraint   on   trade.         They

further sought a declaration that the 1985 Agreement could be

terminated by appellants, or in the alternative, that appellants

had already terminated all of appellees’ rights in the October

2006 letter.

      The parties’ claims were tried to a jury from April 1, 2010

through April 13, 2010.              At the close of evidence, the district

court instructed the jury regarding applicable legal principles,

including    breach      of     contract       and    duration    of   contracts.

Appellants requested that the district court instruct the jury

with respect to the law of assignment.                    Appellants’ proposed

instruction stated that an assignor may not maintain an action

upon a claim after making an absolute assignment of the claim to

another, and that if the jury found that appellees assigned to

appellants the right to use the Rent-A-Wreck name or associated

marks in 1988, it should reject appellees’ claim that the 1985

Agreement grants them the right to use the Rent-A-Wreck name and

also reject appellees’ claim that an implied contract grants

them that right.         Appellants further requested an instruction

regarding    the   law     of      warranties    of    assignment.       Finally,

appellants     requested        an    instruction     regarding    the     law    of

contract termination, which would have required the jury, in the

event it found that a contract existed, to examine whether the

contract had an express, or implied, term of duration.                      If the

                                          11
jury were to find that no term was agreed upon, appellants’

proposed instruction was that the term of such a contract is a

reasonable time given the circumstances and purpose under which

the   contract   arose.   The   district    court   declined   to   give

appellants’ proposed instructions.

      After the jury was unable to reach a unanimous verdict, the

parties agreed to accept a majority verdict.        The jury’s verdict

was in the form of answers to questions on a verdict form.            In

relevant part, the jury responded to those questions as follows:

      [Question No. 1]: Do you find that [appellees], based
      on a course of dealing, have an express or implied
      contract, written or oral, with [appellants], with
      respect to [appellees’] operation of a used car rental
      business in West Los Angeles

      [Answer to Question No. 1]:     Yes

      [Question No. 3]:    If your answer to Question 1 is
      ‘yes,’ check which, if any, of the following are
      features of such contract:

      [First subpart of Question No. 3]:      RAWA Franchise in
      favor of [appellees]

      [Answer to first subpart of Question No. 3]:      Yes

      [Second subpart of Question No. 3]:    Exclusive RAWA
      franchise in favor of [appellees] in West Los Angeles
      as delineated in or after 1985.

      [Answer to second subpart of Question No. 3]:      Yes

      [Third subpart of Question No. 3]: Whether or not as
      a franchisee, the right of [appellees] to use trade
      name and trademark Rent-A-Wreck, and receive same
      benefits as franchisees without the obligations

      [Answer to third subpart of Question No. 3]:      No

                                 12
     [Fourth subpart of Question No. 3]:      Rights of
     [appellees] to any of the foregoing without paying
     fees or royalty to RAWA

     [Answer to fourth subpart of Question No. 3]:      No

     [Fifth subpart of Question No. 3]: Existence of any
     of the foregoing rights in favor of [appellees] in
     perpetuity

     [Answer to fifth subpart of Question No. 3]:      No

     [Question No. 4]:      If these rights were not in
     perpetuity, what would be a reasonable time for the
     rights to last? (indicate duration)

     [Answer to Question No. 4]:    Rest of his life

J.A. 3108a-b.

     The remaining questions on the verdict form concerned the

appellants’ counterclaims:

     [Question  No.  5]:    Did  [appellants] or   their
     predecesors in interest ever expressly authorize
     [appellees] to use the Rent-A-Wreck trade name and
     trademark?

     [Answer to Question No. 5]:    Yes

     [Question No. 6]:    With reference to the foregoing
     question, did the [appellants] or their predecessors
     in interest ever implicitly authorize [appellees] to
     use the Rent-A-Wreck trade name and trademark?

     [Answer to Question No. 6]:    Yes

     [Question No. 7]:    If you find that [appellants] or
     their predecessors in interest either expressly or
     implicitly authorized [appellees] to use the Rent-A-
     Wreck trade name and trademarks, did [appellants]
     expressly or implicitly reserve the right to terminate
     that use by [appellees]?

                               13
      [Answer to Question No. 7]:               No

      [Question No. 10]:   Do you find that the [appellees]
      and [appellants], or [appellants’] predecessors in
      interest, entered into a written contract or contracts
      in 1977 and 1988, which [appellees] have breached?

      [Answer to Question No. 10]:               No

J.A. 3108b-c.

      Following the verdict, appellees filed a Rule 50(b) motion.

Specifically,       appellees           requested             that        a     judgment

notwithstanding the verdict be entered as follows: (1) appellees

were entitled to the same benefits as other RAWA franchisees,

but were not required to fulfill the franchise obligations of

other RAWA franchisees; (2) appellees had no obligation to pay

royalties   or   fees     to    RAWA;     and    (3)       appellees      had   perpetual

rights under the contract.              Appellants also filed a Rule 50(b)

motion.     Appellants requested that a judgment notwithstanding

the verdict be entered rejecting all of appellees’ claims.                            They

further   requested     a      judgment    notwithstanding            the     verdict   on

their counterclaims.

      On September 23, 2010, the district court granted a partial

judgment notwithstanding the verdict under Rule 50(b) in favor

of   appellees   and    denied     appellants’             Rule   50(b)     motion.     In

making its ruling on the parties’ motions, the district court

first noted that “[o]ne prominent issue in this case has been

whether   the    jury’s     responses      to        the    Special    Interrogatories

                                          14
submitted at the close of trial are binding upon the Court or

merely advisory.”        J.A. 3247.          The district court then attempted

to dispose of this issue as follows:                             “First, insofar as the

[jury’s]     findings        are    merely           advisory,      the   Court    reaches

contrary    conclusions        based       on     its      own    consideration        of   the

evidence.       Alternatively, insofar as those jury[] findings are

binding,     the   Court       grants       Plaintiff’s            Renewed     Motion       for

Judgment     and   their      Motion       for       Judgment       Notwithstanding         the

Verdict as to those particular findings.”                         J.A. 3249.

     The    district     court      went        on    to   hold    that   appellees         were

entitled to a royalty-free franchise with an exclusive territory

in West Los Angeles, California, for the duration of Schwartz’s

life.     The district court further held that appellees were not

subject    to   any     of    the   same        franchise         obligations     as    other

franchisees operating in the RAWA network of franchises were.

Appellants      filed   a     notice    of       appeal      on    September    29,     2010.

Appellees filed a notice of cross-appeal on October 23, 2010.

     On November 30, 2010, the district court clarified that

appellees’ territory was exclusive not only as to other Rent-A-

Wreck     franchises,        but    also     franchises           operating     under        the

Priceless name and marks, for which, as discussed above, Bundy,

a wholly owned subsidiary of RAWA, is franchisor.

     While the cross-appeals were pending before us, appellees

moved, in relevant part, to enforce the district court’s final

                                             15
order     of   declaratory           judgment.        Specifically,          they    sought

certain directives from the court regarding the presentation of

appellees on appellants’ website.                     The district court treated

the   motion      as     one   for    clarification      of     the   district      court’s

final    order      of    declaratory        judgment.        On    May   11,    2011,    the

district court issued a memorandum opinion, ordering appellants

to make certain alterations to their website pursuant to the

district court’s September 23, 2010 order.                         RAWA and Bundy filed

an additional notice of appeal, including their objections to

this order, on May 25, 2011.

                                              II.

      On appeal, the parties raise a plethora of arguments.                                At

the outset, appellants contend that we must vacate and remand

because     the     district         court    treated     the       jury’s      verdict   as

advisory and was required to make specific findings under Rule

52(a), which it failed to do.

      As an alternative to their Rule 52 argument, appellants

argue that the district court erred in denying their Rule 50(b)

motion pertaining to the jury’s finding of the existence of a

contract,      as      well    as    its   specific      features.           Specifically,

appellants contend that the district court should have set aside

the jury’s verdict that appellees have a contract based on a

course    of     dealing       with    appellants,       that      appellants       had   not

                                              16
reserved      the    right      to   terminate      their     relationship        with

appellees, and that appellees had an exclusive territory.                        As to

the exclusivity provision, appellants contend that it is void ab

initio under California law.                Appellants further contend that

the district court erred in setting aside the jury’s verdict

that appellees’ contract entitled them neither to receive the

same     benefits      as     franchisees       without     the     obligations       of

franchisees, nor to receive such benefits without paying fees or

royalties      to   appellants.       On    cross-appeal,         appellees    contend

that the district court should have granted their Rule 50(b)

motion to set aside the jury’s verdict that appellees’ rights

under the contract exist for the duration of Schwartz’s life,

and that the court should instead have ruled that those rights

are perpetual.

       Turning to the remaining issues on appeal, appellants make

three    additional     arguments.         They    contend    that    the     district

court improperly held that the implied contract found by the

jury gave appellees the right to operate exclusively within West

Los Angeles, not only of other Rent-A-Wreck franchises, but also

of     auto   rental    franchises     operated      by     appellants        under   a

different trade name, including the Priceless franchises that

have    coexisted      with    Schwartz’s       rental    location     for     over    a

decade.       They further challenge certain jury instructions given

                                           17
by the district court. 8                 Also, on cross-appeal, appellees assert

that       the    district       court    erred    in   denying   their   request   for

attorneys’ fees.            We address each issue in turn.

                                              A.

       We first address appellants’ challenge under Federal Rule

of Civil Procedure 52.               Appellants argue that the district court

treated          the    jury’s    findings    as    advisory,     and   was   therefore

required to “find the facts specially and state its conclusions

of law separately.”                Fed. R. Civ. P. 52(a)(1).              They further

contend that the district court failed to do so here.

       In relevant part, Rule 52(a) provides that:

       In an action tried on the facts without a jury or with
       an advisory jury, the court must find the facts
       specially and state its conclusions of law separately.
       The findings and conclusions may be stated on the
       record after the close of the evidence or may appear
       in an opinion or a memorandum of decision filed by the
       court.

It     is        well    established        that    “[t]he    Federal     Rule    52(a)

requirement that the trial court find the facts specially and

state separately its conclusions of law is mandatory and must be

fairly observed by district judges.”                     9 C. Wright & A. Miller,

       8
       Finally, appellants challenge the district court’s May 11,
2011 order directing them to modify their website.      We vacate
the May 11, 2011 order in light of our ruling on the appeal from
the September 23, 2010 order.    We remand to the district court
for reexamination of the May 11, 2011 order in light of this
decision.

                                              18
Federal    Practice       and    Procedure         §    2574       (3d   ed.     2008).         By

contrast, Rule 50(b) does not require the district court to make

specific findings of fact or law.                      If a district court tries an

action with an advisory jury, and the parties nonetheless file

motions under Rule 50(b), the proper course of action for the

district   court     is    to     decline      to       adjudicate        the     Rule       50(b)

motions, and instead consider the arguments in the context of

the   court’s     determination         of    whether         to    adopt      the     advisory

jury’s findings.         As an example, in Wooten v. Lightburn, 579 F.

Supp. 2d 769 (W.D. Va. 2008), although the defendant had filed a

Rule 50(b) motion, the court declined to rule on that motion

because the case was tried before an advisory jury, with the

ultimate   decision       left    to    the    district         court.           Id.    at    772.

Instead,   the    Wooten        court    considered           the     parties’         arguments

under Rule 52(a).         Id.

      Here, in contrast, the district court did not determine

that the action was tried with an advisory jury, and did not

make the specific findings of fact or law required by Rule 52.

Instead, the district court adjudicated the parties’ Rule 50(b)

motions.     To    the     extent       it   denied       the       parties’      Rule       50(b)

motions, it held that there was a legally sufficient evidentiary

basis for the jury’s verdict.                      To the extent it granted the

parties’   Rule    50(b)        motions,      it       held    that      there    was     not   a

legally sufficient evidentiary basis for the jury’s verdict.                                    In

                                             19
either     event,      the   district          court    was   treating      the    jury’s

findings as binding.           Therefore, we reject appellants’ argument,

and proceed to address the remaining issues on appeal.

                                               B.

     Both parties challenge the district court’s denial of their

Rule 50(b) motions.          We review the denial of a Rule 50(b) motion

de novo.      First Union Commercial Corp. v. GATX Capital Corp.,

411 F.3d 551, 556 (4th Cir. 2005).                      We affirm, “[i]f, viewing

the facts in the light most favorable to the non-moving party,

there is sufficient evidence for a reasonable jury to have found

in   the    [non-moving           party’s]      favor.”        Id.    (alteration         in

original) (citation omitted).                   We address the district court’s

Rule 50(b) rulings in the following order: (1) the sufficiency

of the jury finding of an implied contract between the parties;

(2) the sufficiency of the jury finding that appellants did not

reserve their right to terminate; (3) whether the exclusivity

provision    is     void     ab    initio      under     California       law;    (4)    the

sufficiency       of   the     jury      finding       with   respect     to     franchise

obligations; and (5) the sufficiency of the jury finding with

respect to royalties and fees.

                                               1.

     Appellants        argue      that    as    a   matter    of   law,    there    is    no

contract, express or implied, between the parties.                                Schwartz

could not possibly have been a party to an exclusive franchise

                                               20
agreement with RAWA, they contend, because he had signed away

any and all of his interest in the Rent-A-Wreck name by virtue

of the 1977 Assignment and the 1988 Assignment.

      Under     California    law, 9    the      interpretation      of      a   contract

presents an issue of law when the language of the contract is

unambiguous, i.e., “clear and explicit.”                    F.B.T. Prods., LLC v.

Aftermath Records, 621 F.3d 958, 963-64 (9th Cir. 2010); accord

Porkert v. Chevron Corp., No. 10-1384, 2012 WL 90142, at *4 (4th

Cir. Jan. 12, 2012) (“Under California law, the interpretation

of a contract presents an issue of law when the language of a

contract is unambiguous.”).             Parol evidence is properly admitted

to   construe    a   contract   only        when    its   language      is   ambiguous.

F.B.T.    Prods.,     621    F.3d      at    963.         “When   the     contract    is

unambiguous, ‘[n]o obligation can be implied, which would result

      9
       We are a federal court sitting in diversity, and must
apply the substantive law of the state in which the district
court sits, which in this case is Maryland.      “Under Maryland
choice-of-law rules, a contractual claim (including a claim for
an implied contract) is governed by the law of the place where
the contract is made, which is the place where the last act
required to make a contract binding occurs.” Harte-Hanks Direct
Mktg./Baltimore, Inc. v. Varilease Techn. Fin. Gr., Inc., 299 F.
Supp. 2d 505, 518 n.13 (D. Md. 2004). As we discuss herein, the
jury found a contract based on a course of dealing between the
parties that began no later than 1985.        Neither party has
pointed to any conduct post-dating 1993 (the year in which RAWA
relocated its corporate headquarters to Maryland) that was
required to make the contract binding. In view of these facts,
we hold that the last act required to make the contract, based
on the course of dealing, binding occurred prior to 1993.     As
such, California law governs the contract.

                                            21
in the obliteration of a right expressly given under a written

contract.’ ”        Thrifty Payless, Inc. v. Mariners Mile Gateway,

LLC, 111 Cal. Rptr. 3d 173, 182 (Cal. Ct. App. 2010) (quoting

Gerlund v. Elec. Dispensers Int’l, 235 Cal. Rptr. 279, 286 (Cal.

Ct. App. 1987)).

       In     addition    to    express    contracts,      California   law    also

recognizes implied contracts.                   Retired Emps. Ass’n of Orange

Cnty., Inc. v. County of Orange, No. S184059, 2011 WL 5829598,

at *2 (Cal. Nov. 21, 2011).

       The terms of an express contract are stated in words.
       The existence and terms of an implied contract are
       manifested by conduct.     The distinction reflects no
       difference in legal effect but merely in the mode of
       manifesting assent.    Accordingly, a contract implied
       in fact consists of obligations from a mutual
       agreement and intent to promise where the agreement
       and promise have not been expressed in words.

       Even when a written contract exists, evidence derived
       from experience and practice can now trigger the
       incorporation of additional, implied terms.    Implied
       contractual terms ordinarily stand on equal footing
       with express terms provided that, as a general matter,
       implied terms should never be read to vary express
       terms.

Id.    (citations      and     quotation   marks       omitted).   “Whether        the

parties’ conduct creates such implied agreements is generally a

question of fact.”            Scott v. Pac. Gas & Elec. Co., 904 P.2d 834,

839 (Cal. 1995) (quotation marks omitted).                    However, “the law

does not recognize implied contract terms that are at variance

with    the    terms     of    the   contract     as   expressly   agreed     or    as

                                           22
prescribed by statute.”            County of Orange, 2011 WL 5829598, at

*4 (quotation marks omitted).

     Turning to the facts before us, we must first determine

whether   a   reasonable       jury    could        have    found     that     an   implied

contract existed based on a course of dealing between appellants

and appellees.          If we answer that question in the affirmative,

we must proceed to analyze whether the terms of the implied

contract found by the jury are at variance with the terms of any

preexisting contract between the parties.

     First, viewing the facts in the light most favorable to

appellees, we conclude that there was sufficient evidence for a

reasonable jury to have found in appellees’ favor as to the

existence     of   an    implied      contract.            Notably,      the    record   is

replete with evidence that appellants treated appellee Schwartz

as a de facto franchisee between 1990 (when RAWA terminated its

lease of Schwartz’s rental location) and 2005 (when Schwartz

began acting in an adverse manner toward RAWA).                                 As already

noted,    appellants      stated      in    official       company       documents     that

Schwartz was operating under the Rent-A-Wreck name pursuant to a

royalty-free       agreement    and        listed    Schwartz       as    one    of   their

current franchisees.         Under our deferential standard of review,

this evidence creates sufficient factual basis for the jury’s

finding of an implied contract.

                                            23
       Second,          we   hold       that    the   terms    of    the    implied       contract

found by the jury are not at variance with the terms of any

preexisting contract between the parties.                            Notably, the jury did

not    make    any       specific          finding     regarding      whether       the    implied

contract constituted additional terms in a preexisting express

contract between the parties, or whether it was an independent

implied       contract.                 Under   either    construction,          however,       we

believe the jury’s verdict passes muster.                             Appellants point to

the 1977 Assignment and 1988 Assignment as extinguishing all of

appellees’          rights         to    use    the    Rent-A-Wreck         mark.         However,

neither       of    those          agreements     contains      any    language       regarding

whether       appellees            could    continue     to    use    the    trade    name     and

trademark          at    the       original     Rent-A-Wreck         facility.        The    1985

Agreement, on the other hand, postdates the 1977 Assignment, and

specifically provides that Schwartz retains, for an indefinite

period, the right to the concurrent use of the trade name and

trademark at the original Rent-A-Wreck facility owned by him in

West Los Angeles.                  Thus, nothing in either the 1977 Assignment

or     1988        Assignment            specifically         precludes       Schwartz        from

continuing to use the Rent-A-Wreck mark at his West Los Angeles

location, and the 1985 Agreement gives him precisely that right

for an indefinite period.

       In sum, we hold that a reasonable jury could have concluded

that    appellees            had    an     implied     contract      with    appellants       with

                                                  24
respect to appellees’ operation of a used car rental business in

West Los Angeles.

                                      2.

     Appellants contend that, as a matter of law, any franchise

agreement between the parties ended in 2006 and could not have

continued to exist thereafter.             California courts engage in a

three-stage inquiry to determine the duration of a contract.

McCaskey v. California State Auto. Ass’n., 118 Cal. Rptr. 3d 34

(Cal. Ct. App. 2010), provides that:

     [T]he court first consults the terms of the contract;
     then the circumstances and other indicia of intent;
     and only when those steps fail to establish a
     durational term does the court impose a judicially
     determined “reasonable time” limitation on the duty at
     issue.    This last step is a manifestation of the
     broader principle that when any essential term has
     been omitted from the contract, and the parties’
     intent concerning that term cannot otherwise be
     ascertained, the law will supply a reasonable term.

Id. at 49-50 (emphasis omitted).              Here, the first step is not

applicable   because     the   jury   found    an   implied   contract.       The

second   step    seeks    to   ascertain      the    parties’    intent      from

circumstantial    evidence.      Here,     the   jury   did   just   that,    and

determined that the duration of the contract is the remainder of

Schwartz’s life.    As already noted, the jury had a great deal of

evidence to rely upon in determining the terms of the implied

contract, including its duration.             Notably, the 1985 Agreement

contains a provision permitting Schwartz to continue to operate

                                      25
his car rental business at the West Los Angeles location.                                        It

was not unreasonable for the jury to have concluded that the

parties’ conduct subsequent to the 1985 Agreement was consistent

with    this    provision,          and    that    the      parties’      intent       was      to

preserve Schwartz’s right to use the Rent-A-Wreck name for the

duration of his life. 10

       Appellants’       argument          that      the       duration     shall          be    a

“reasonable      time”       fails.        Because     the      first     two    steps       have

prescribed a durational term under California law, there is no

need    to     impose     a     judicially         determined        “reasonable           time”

limitation on the parties’ rights under the contract.

                                              3.

       Appellants       next    contend       that,       as   a   matter       of   law,       any

implied provision giving Schwartz and RAWI the right to operate

exclusively         within     the        territory        delineated       in       the     1985

Agreement      is    void      ab    initio       under     California      Business            and

Professions Code § 16600.

       Section 16600 prescribes that “[e]xcept as provided in this

chapter,     every      contract      by     which    anyone       is   restrained           from

       10
       It therefore follows that the district court did not err
in denying appellees’ Rule 50(b) motion in this regard.    There
was sufficient evidence for the jury to conclude that the course
of the dealings between the parties created an implied contract
that gave Schwartz rights for the duration of his lifetime,
rather than an indefinite duration.

                                              26
engaging in a lawful profession, trade or business of any kind

is to that extent void.”            This is a codification of the “general

rule in California [that] covenants not to compete are void.”

Hill Med. Corp. v. Wycoff, 103 Cal. Rptr. 2d 779, 784 (Cal. Ct.

App.    2001). 11       The    California      Supreme   Court    has   held    that

“[s]ection 16600 is unambiguous, and if the Legislature intended

the statute to apply only to restraints that were unreasonable

or overbroad, it would have included language to that effect.”

Edwards v. Arthur Andersen LLP, 189 P.3d 285, 293 (Cal. 2008).

At     the    same   time,     as   the     Ninth    Circuit     recently    noted,

California courts construing § 16600 have differentiated between

“post-contract” covenants and “in-term” covenants.                      See Comedy

Club, Inc. v. Improv West Assocs., 553 F.3d 1277, 1291 (9th Cir.

2009) (discussing California case law).                   In Dayton Time Lock

Serv., Inc. v. Silent Watchman Corp., 124 Cal. Rptr. 678 (Cal.

Ct.    App.    1975),    for    example,       a   California    appellate     court

addressed an in-term “exclusive dealing clause” in a franchise

       11
        There are two statutory exceptions to § 16600. Sections
16601 and 16602 permit broad covenants not to compete in two
situations: where a person sells the goodwill of a business and
where a partner agrees not to compete in anticipation of
dissolution of a partnership.    Appellees argue that § 16601 is
applicable here because the 1985 Agreement “was by definition a
sale”--a contention in support of which they offer no supporting
authority.   Appellees’ Br. 53.   We note that the jury found an
implied franchise agreement, which would not constitute a sale
under any definition. We therefore conclude that neither of the
statutory exceptions is applicable here.

                                          27
agreement, and held that “[e]xclusive dealing contracts are not

necessarily       invalid,”        but     “[t]hey     are      proscribed    when       it    is

probable     that       performance          of     the    contract       will     foreclose

competition       in    a     substantial         share   of     the    affected    line       of

commerce.     A determination of illegality requires knowledge and

analysis     of   the       line     of   commerce,       the    market    area,    and       the

affected share of the market.”                        Id. at 682 (emphasis added)

(citation omitted).            Under California law, this is a question of

fact.     See Fisherman’s Wharf Bay Cruise Corp. v. Superior Court,

7 Cal. Rptr. 3d 628, 649-52 (Cal. Ct. App. 2003) (reversing

grant   of    summary         judgment      because       a     triable   issue     of    fact

existed as to whether exclusive dealing foreclosed competition

in a substantial share of the affected market).                              A California

appellate     court      recently         noted    that       Dayton’s    conclusion      that

exclusive dealing contracts were sometimes permissible in the

context      of    a        franchise       relationship          was     based     on        the

franchisor’s           need     to        “maintain       some     control        over        the

franchisee.”           Kelton v. Stravinski, 41 Cal. Rptr. 3d 877, 882

(Cal. Ct. App. 2006).                 The Ninth Circuit has construed Dayton

and Kelton as follows:

     Dayton Time Lock and Kelton make evident that under []
     § 16600 an in-term covenant not to compete in a
     franchise-like   agreement   will   be  void   if   it
     “foreclose[s] competition in a substantial share” of a
     business, trade, or market.    Also, California courts
     are less willing to approve in-term covenants not to
     compete outside a franchise context because there is

                                              28
      not a need to protect and maintain [the franchisor's]
      trademark, trade name and goodwill.

Comedy Club, Inc., 553 F.3d at 1292 (alteration in original)

(emphasis added) (citations and quotations omitted).

      Interpreting § 16600 in light of the case law yields the

conclusion that an in-term exclusive dealing agreement in the

context     of    a    franchising      agreement      does   not     run    afoul    of    §

16600, provided          that    it    does   not    foreclose       competition      in    a

substantial share of the market.                   In applying Dayton 12 and Kelton

to this case, we conclude that appellees are entitled to the

exclusive territory provision if two circumstances can be met:

(1) the implied contract found by the jury is a franchising

agreement,        whereby       RAWA    can    maintain       some    control        as    is

necessary to protect its trademark, trade name, and goodwill;

and   (2)        the    exclusivity       arrangement         does     not     foreclose

      12
        Appellants urge us to read Arthur Andersen as overruling
Dayton, arguing that Arthur Andersen’s reasoning precludes the
creation or application of judicially created exceptions to §
16600.    Although that argument is not without merit, Arthur
Andersen did not specifically overrule Dayton or Kelton, nor has
it been so construed by any California court. Additionally, the
Ninth Circuit’s decision in Comedy Club postdates Arthur
Andersen.    In sum, we do not believe that the Ninth Circuit
“disregarded clear signals emanating” from the California
Supreme Court “pointing to a different rule,” and therefore
defer to its interpretation of California law.      Mellon Bank,
N.A. v. Ternisky, 999 F.2d 791, 796 (4th Cir. 1993) (quoting
Factors Etc., Inc. v. Pro Arts, Inc., 652 F.3d 278, 283 (2d Cir.
1981)); see id. (deferring to Third Circuit’s interpretation of
Pennsylvania law).

                                              29
competition            in   a    substantial    share   of    the     affected       line    of

commerce.

         Appellants contend that the first requirement is not met

here to the extent the district court ruled that appellees do

not have to comply with any franchisee obligations.                                 We agree.

However, because, as discussed below, we reverse the district

court’s grant of appellees’ Rule 50(b) motion with regard to

that issue, we proceed to the second requirement.

         Following Fisherman’s Wharf, we conclude that the question

of   whether       the      exclusive     territory     at    issue       would     foreclose

competition in a substantial share of the market for rental cars

is   a        question      of    fact   for   the   jury.         This    issue     was    not

presented         to    the      jury.    Accordingly,       we    vacate     the    district

court’s denial of appellants’ Rule 50(b) motion in this regard,

and instruct the district court to submit to a jury the question

of   whether            the       exclusive    territory          provision       forecloses

competition         in      a    substantial   share    of    the    market       for   rental

cars. 13

         13
       Appellees argue that even if they are not entitled to the
exclusivity provision under California law, they have an
implied-in-fact contract under Maryland law.       Because RAWA
relocated its headquarters to Maryland in 1993, they contend,
any course of dealing between the parties thereafter giving rise
to a contract implied in fact occurred in Maryland. We are not
persuaded by this argument.      As already noted, we believe
California law applies to the implied contract found by the
jury.   It bears further note that the exclusivity provision is
(Continued)
                                               30
                                      4.

     We next turn to the district court’s grant of appellees’

Rule 50(b) motion requesting a judgment that although they are

entitled to the benefits afforded to other RAWA franchisees,

they do not have the obligations of other RAWA franchisees.                  On

appeal,    we    must   determine   whether,   viewing   the   facts   in   the

light     most    favorable   to    appellants,    there   was    sufficient

evidence for the jury to conclude that appellees were required

to fulfill the same obligations as other RAWA franchisees.                  We

conclude that there was such a basis for the jury’s finding

because appellants listed Schwartz as a current franchisee on

the UFOCs.       It was reasonable for the jury to conclude that the

implied agreement was a franchise agreement, with the attendant

benefits and obligations, whether or not appellees were actually

in compliance with their franchisee obligations.               The jury was

also free to draw a contrary inference, of course; however, we

do not believe the district court was correct to hold that this

was only permissible inference. 14

derived from the 1985 Agreement, which was made in California.
We therefore reject appellees’ argument in this regard.
     14
        It bears note that if we were to uphold the district
court’s judgment that appellees were not required to fulfill the
same obligations as other RAWA franchisees, the grant of an
exclusive territory to appellees would be void ab initio under §
16600.   As already discussed, appellees are entitled to the
(Continued)
                                      31
                                           5.

     We now turn to appellants’ final Rule 50(b) challenge: that

the district court erred in setting aside the jury’s verdict

that the contract between the parties did not provide a royalty-

free franchise.        On appeal, we must determine whether, viewing

the facts in the light most favorable to the nonmoving party,

there   was   sufficient       evidence     for   the   jury       to    conclude      that

appellees were required to pay royalties pursuant to the implied

contract.      We conclude that there was no such basis for the

jury’s finding because appellants specifically stated in their

UFOCs   that       Schwartz     was    operating        under       a      royalty-free

agreement.         Notably,    appellants       point   to    no    evidence      in    the

record that could support a reasonable inference that appellants

ever asked appellees for any fees or royalties.                            Absent such

evidence,     we    conclude    that   a   reasonable        jury       could   not    have

interpreted the course of dealing between the parties to require

exclusive territory provision under California law only if the
implied contract found by the jury is a franchising agreement,
whereby appellants can maintain some control as is necessary to
protect their trademark, trade name, and goodwill.    Under the
district court’s order, appellants have no control over
appellees’ use of their trademark, trade name, or goodwill, and
appellees would therefore not be entitled to the exclusive
territory provision.

                                           32
payment of fees or royalties.           Therefore, we affirm the district

court’s grant of appellees’ Rule 50(b) motion on this ground.

                                        C.

      Having resolved the parties’ respective challenges to the

district court’s Rule 50(b) rulings, we turn to the remaining

issues on appeal, beginning with appellants’ contention that the

district court erred in precluding Priceless--a subsidiary of

RAWA that operates its own locations within Schwartz’s exclusive

territory--from         operating       within       Schwartz’s            territory.

Specifically,        they    argue   that    (1)    there     was     no    evidence

presented      at    trial   to    justify   this    outcome,       and    (2)     that

Priceless and its franchisee were necessary and indispensable

parties    under     Rule    19.     Because   we   are     persuaded       that    the

contract implied by the jury could not have contained any terms

relating to Priceless or other auto rental businesses operating

under anything other than the Rent-A-Wreck name and marks, we

vacate the district court’s judgment in this regard, and order

the district court to enter a judgment that excludes Priceless.

      As already discussed, the jury found a contract based on

the   course    of    dealings     between   the    parties    with       respect    to

appellees’ operation of a used car rental business in West Los

Angeles.    The jury further found an exclusive RAWA franchise in

favor of appellees in West Los Angeles as delineated in or after

1985.     The jury did not find, nor was it asked to, whether the

                                        33
contract between the parties precluded RAWA from opening any

RAWA-owned or affiliated operations in West Los Angeles that

were not operating under the “Rent-A-Wreck” name.                               Therefore,

any finding by the district court that RAWA or its affiliates

are bound by the specific provisions of the 1985 Agreement in

that regard cannot be supported by the jury verdict.

     Moreover, the jury’s verdict was based on the course of

dealings between the parties.                     It is undisputed that this course

of dealing included the coexistence in West Los Angeles--for

over a decade--of both Schwartz’s business and the Priceless

franchises.        As such, even if this question were before the

jury, it could not have concluded that the exclusivity provision

of the implied contract foreclosed the continued operation of

the Priceless franchises.

                                                  D.

     We next address appellants’ contention that the district

court   erred      in    failing        to        give    certain     jury    instructions

proffered by them.              Specifically, appellants contend that the

district    court       should    have       given        its   proffered     instructions

regarding    the    law    of     assignment,             the   law   of     warranties   of

assignment,     and       the     law        of        termination    of     contracts    of

indefinite duration.            We review jury instructions under an abuse

of discretion standard, which we have explained as follows:

                                                  34
        We review jury instructions holistically and through
        the prism of the abuse of discretion standard. . . .
        [A] single instruction to a jury may not be judged in
        artificial isolation, but must be viewed in the
        context of the overall charge. . . . Accordingly, we
        simply determine whether the instructions construed as
        a whole, and in light of the whole record, adequately
        informed the jury of the controlling legal principles
        without misleading or confusing the jury to the
        prejudice of the objecting party.

     The party challenging the jury instructions faces a
     heavy burden, for we accord the district court much
     discretion to fashion the charge. . . A district court
     will be reversed for declining to give an instruction
     proposed   by  a   party   only   when  the   requested
     instruction (1) was correct; (2) was not substantially
     covered by the court's charge to the jury; and (3)
     dealt with some point in the trial so important, that
     failure to give the requested instruction seriously
     impaired that party's ability to make its case.

Noel v. Artson, 641 F.3d 580, 587 (4th Cir. 2011) (emphasis

added).

     With respect to their proposed instruction on the law of

assignment, appellants argue that without instructing the jury

on the legal ramifications of the 1977 Assignment and the 1988

Assignment, the jury could not properly consider RAWA’s defense-

-that    any   contract,    including    the      purported     1985    Agreement,

could    not   create   a   franchise    relationship.          We     reject   this

argument for two reasons.         First, the district court instructed

the jury regarding appellants’ breach of contract claim, and

also permitted appellants to argue that the 1988 Assignment was

dispositive     of   Schwartz’s   claims     as    a   matter   of     law.     More

significantly, however, the proposed instruction is incorrect:

                                        35
as   already     discussed,        the     jury    could    have    found      an   implied

franchise        agreement             notwithstanding             the        assignments.

Accordingly, the district court did not err in failing to give

the appellants’ proposed assignment instruction.

      Appellants        have     also      failed    to    demonstrate         that    their

proposed instruction with respect to the law of warranties of

assignment--based          on    the    Restatement       (Second)       of   Contracts    §

333(1)--dealt with some point in the trial so important that

failure     to   give      the   requested        instruction      seriously        impaired

their      ability    to    make    their    case. 15       Appellants        sought    that

instruction to advance their allegation that Schwartz, in spite

of the assignments, repeatedly averred that RAWA did not own the

Rent-A—Wreck marks, and that these actions caused it to incur

attorneys’ fees that were properly an element of damages that

could have resulted from a breach of warranties.                              However, as

appellees point out, the Restatement (Second) of Contracts § 333

(1981), provides that “when a warranty of an assignor is broken,

the assignee is entitled to the usual remedies for breach of a

contract.”       Id., cmt. d.           Notably, California subscribes to the

American      Rule,     under      which    parties       cannot    generally       recover

      15
        It is also doubtful whether the instruction is legally
correct.   Appellants argue that it was legally correct because
it was based on the Restatement (Second) of Contracts § 333(1),
but they acknowledge that California has not yet accepted that
section of the Restatement.

                                             36
attorneys’ fees.        See Kim v. Euromotors West/The Auto Gallery,

56 Cal. Rptr. 3d 780, 785 (Cal. Ct. App. 2007).                     Thus, even if

the   district    court     had   provided    the    jury     with       appellants’

proposed instruction, it would not have aided appellants’ cause.

      Finally, as to their proposed instruction on the law of

contract     termination,      appellants     contend       that    the       district

court’s    actions   meant    that   the    jury    could    not   have       properly

considered     RAWA’s       affirmative     defense--that          any     franchise

agreement between RAWA and Schwartz was terminable on reasonable

notice.      Here,   too,    appellants’     argument    fails.          As    already

discussed, the duration of an implied agreement is a question of

fact under California law, to be determined by a jury.                             The

district court properly instructed the jury, in relevant part,

that “[i]f you happen to find that there was an understanding,

but there was no understanding as to the duration, then you

would have to indicate what an appropriate duration was.”                        J.A.

1274.      This   instruction      differed    from     appellants’           proposed

instruction only in that it did not use the “reasonable time”

language.      Functionally,      however,     there    is    scant       difference

between “appropriate duration” and “reasonable time.”                     Thus, the

appellant’s    proposed      instruction    was    substantially         covered   by

the district court’s charge to the jury.

                                      37
       In sum, the district court did not abuse its discretion in

refusing to provide any of the three instructions advanced by

appellants.

                                           E.

       Finally, we address appellees’ challenge to the district

court’s order denying their motion for attorneys’ fees under

section 35(a) of the Lanham Act.                 They argue that in so doing,

the district court incorrectly applied a bad faith standard.

Appellees    further    contend       that      the   district      court’s   factual

findings were clearly erroneous because they were “spitefully

held      hostage”      by      appellants’            trademark       infringement

counterclaim.       Appellees’ Br. 68.            Appellants contend that the

district    court     applied        the   correct      standard,      and    in     the

alternative, that any error was harmless because appellees have

failed to meet the applicable standard.

       “[I]n exceptional cases,” the Lanham Act permits the award

of “reasonable attorney fees to the prevailing party.” 15 U.S.C.

§ 1117(a).      The statute does not define what qualifies as an

“exceptional case.”          “We have defined the ‘exceptional case’ as

one in which ‘the defendant’s conduct was malicious, fraudulent,

willful    or   deliberate      in    nature.”         Retail    Servs.,      Inc.   v.

Freebies    Publ’g,    364    F.3d    535,      550   (4th   Cir.    2004)    (quoting

People for the Ethical Treatment of Animals v. Doughney, 263

F.3d 359, 370 (4th Cir. 2001)).              In this circuit, we employ a

                                           38
       dual standard of proof upon prevailing plaintiffs and
       defendants.    A prevailing plaintiff seeking attorney
       fees must demonstrate that the defendant acted in bad
       faith.    However, when an alleged infringer is the
       prevailing party, he can qualify for an award of
       attorney fees upon a showing of something less than
       bad faith by the plaintiff.

Id. (citations and quotation marks omitted).                             “Some pertinent

considerations      for        judging       a     plaintiff’s          (or   counterclaim

plaintiff’s)      conduct        when      the      defendant          prevails    include

economic   coercion,      groundless             arguments,      and    failure    to    cite

controlling law.      Thus, the focus tends to be on the plaintiff’s

litigation conduct or pre-litigation assertion of rights.”                               Id.

at 550-51.     “The question, however, is not whether snippets of

the record or isolated arguments clearly lack merit.                               We must

determine,   in    light       of    the     entire      case,    whether     defendants’

claims and assertions were so lacking in merit that the action

as a whole was ‘exceptional.’ ”                  Id. at 551.

       Here, the district court stated, in relevant part: “I’m not

sure how I conclude that [appellants] acted in bad faith in any

way or otherwise . . . put forward a totally groundless claim.”

Supp. J.A. 59.      It further stated that appellants were “entitled

to test the legitimacy of the [trademark infringement] claim,”

that   appellants    played          “hard       ball”   with     Schwartz,       and    that

“they’re   entitled       to    do    that.         That’s       what    happens    in   the

commercial world.”        Supp. J.A. 67-68.

                                             39
      We     conclude   that    although     the   district    court      did    not

specifically       address     the   “something     less     than   bad    faith”

standard, its conclusions that appellants did not put forward a

totally groundless claim and that their actions were not beyond

the   norm    of   commercial    dealing     satisfy   the    applicable        legal

standard.      Moreover, even under the lesser standard, we do not

believe that appellees have demonstrated clear error.                     Notably,

they have merely cited snippets of conversation in support of

their argument, see Appellees’ Br. 69 (describing a conversation

between Schwartz and the holder of a controlling interest in

RAWA), which we have specifically held insufficient under the

“something less” standard.

                                      III.

      For the foregoing reasons, we affirm the district court’s

judgment in part, vacate it in part, reverse it in part, and

remand for further proceedings.               To summarize, we reject the

appellants’ Rule 52 challenge.             With respect to the Rule 50(b)

challenges, we affirm the district court’s judgment that there

existed an implied contract based on a course of dealing between

the parties with respect to Schwartz and RAWI’s operation of a

used car rental business in West Los Angeles; that Schwartz and

RAWI are not required to pay royalties or fees to RAWA or Bundy;

and that the parties’ rights under the contract shall last for

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the duration of Schwartz’s life.                 We vacate the district court’s

denial of RAWA and Bundy’s Rule 50(b) motion seeking judgment as

a matter of law that the grant of an exclusive franchise within

Los   Angeles    to    Schwartz       and   RAWI       is    void     ab     initio    under

California      law.     We    hold    that       the       question    of    whether       an

exclusive     territorial      provision         forecloses         competition        in    a

substantial      share   of     the    market          of    the    affected       line     of

commerce--which, if answered in the affirmative, would void the

exclusivity      provision         under    California             law--is     a    factual

question; therefore, remand is required to permit a factfinder

to make that factual finding.                In the event that the exclusive

territory     provision       is    valid,        we     nonetheless         reverse      the

district     court’s     judgment       that       the       provision       operates       to

prohibit the Priceless entities from operating within Schwartz’s

and RAWI’s territory.           We further reverse the district court’s

judgment that RAWI and Schwartz are entitled to the benefits of

other RAWA franchisees but do not have the same obligations as

those franchisees.            Instead, we reinstate the jury’s verdict

that Schwartz and RAWI cannot obtain such benefits unless they

agree to fulfill the same obligations as other RAWA franchisees.

With regard to the remaining issues on appeal, we reverse the

district court’s judgment that the implied contract found by the

jury requires the Priceless entities to cease operations within

appellees’ exclusive territory.                  We affirm the district court’s

                                            41
decision not to give appellant’s proposed jury instructions.      We

also affirm the district court’s denial of appellees’ motion for

attorneys’ fees.   Finally, we vacate the district court’s May

11, 2011 order in light of our decision today.

                                                 AFFIRMED   IN PART,
                                                  VACATED   IN PART,
                                                 REVERSED   IN PART,
                                                      AND   REMANDED

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