A. JOE FISH, Senior United States District Judge
Before the court is the motion of the plaintiffs, ADT LLC and ADT U.S. Holdings, Inc. (together "ADT"), for a preliminary injunction. For the reasons stated below, the plaintiffs' motion is granted.
ADT provides electronic security services and equipment to homes and businesses throughout the United States. ADT's Motion for Preliminary Injunction ("Motion") at 3 (docket entry 4). ADT has been providing alarm services for over a century and today provides monitoring services for nearly one quarter of American homes equipped with alarm systems. Id. In this case, ADT has sued Capital Connect, four other alarm-service sale companies, and five individual alarm-service sales persons. Complaint ("Complaint") (docket entry 1). ADT alleges that Capital Connect and the other defendants sell alarm systems in unannounced door-to-door sales visits, during which the defendants "confuse the homeowners into believing that the defendants are somehow affiliated with ADT." Motion at 1-2. ADT contends that the defendants' sales tactics violate Section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a), and ADT's rights against unfair competition at common law. Id. ADT seeks to enjoin Capital Connect "from continuing to use false sales pitches that are likely to confuse customers as to Capital Connect's affiliation with ADT." Motion at 1.
Capital Connect was established in 2008 in Tucson, Arizona. It sells the "latest technology in security, automation and interactive services." Capital Connect's Response to ADT's Motion for Preliminary Injunction ("Response") at 3 (docket entry
ADT alleges that during Capital Connect's sales pitches, Capital Connect solicits ADT's current customers by "making false and deceptive statements that are intended to mislead (and are misleading) ADT's customers into believing that [Capital Connect] represent[s] ADT, or that ADT has exited the market, or that ADT's installed equipment is outdated and in need of an `upgrade.'" Motion at 3. ADT offers 68 customer declarations to support its claim that Capital Connect's sales tactics confuse ADT's customers. ADT's Sur-reply to Capital Connect's Sur-reply ("ADT's Sur-reply") at 5 (docket entry 77). ADT's declarations, attached in support of its motion for preliminary injunction, cite interactions with Capital Connect's sales associates from 2013 to the present. See ADT's Appendix in Support of Motion for Preliminary Injunction ("ADT's Appendix"), Exhibit 9, Declaration of Joan Homann ¶ 4 (July 11, 2013) (docket entry 7); ADT's Supplemental Appendix in Support of Motion for Preliminary Injunction ("ADT's Supp. Appendix"), Exhibit 3, Declaration of Cathy Brion ¶ 4 (June 16, 2015) (docket entry 17). ADT's litigation manager, who is in charge of its customer complaint department, cites an acceleration during 2015 in the number of customer complaints regarding interactions with Capital Connect. ADT's Appendix, Exhibit 2, Declaration of Marcia Gold ("Gold Decl.") ¶ 5 (docket entry 7). ("The overall numbers in 2015 have nearly tripled over the same five-month period from last year — from 42 to 112 complaints. More troubling is the recent surge in reported misconduct by Capital Connect sales agents: 50 reports of false sales pitches occurring in May 2015 alone ... plus another 41 for the first three weeks of June 2015.").
Capital Connect insists that it has adopted several measures "to ensure each interaction is professional and its reputation is well-regarded." Johnson Decl. ¶¶ 7-14. Capital Connect's sales training manual warns sales associates of the harm a single damaging story on the local news covering its sales tactics could do to the company.
Despite these measures, ADT's customers have reported, and continue to report, to ADT that Capital Connect's sales force engages in the very behavior Capital Connect and the Lanham Act prohibit. ADT alleges that it has received additional customer complaints of false sales tactics by Capital Connect's sales force: 70 complaints in June and 57 complaints in July, equaling 269 complaints in 2015.
ADT filed this suit against Capital Connect, as well as several other defendants,
Under 15 U.S.C. § 1116(a), this court has "power to grant injunctions, according to the principles of equity and upon such terms as the court may deem reasonable, to prevent the violation of any right of the registrant of a mark registered in the Patent and Trademark office." See also FED. R. CIV. P. 65(a)(1).
To obtain a preliminary injunction, it is well established that a movant must show: (1) a substantial likelihood that the movant will ultimately prevail on the merits; (2) a substantial threat that the movant will suffer irreparable injury if the injunction is not granted; (3) that the threatened injury to the movant outweighs whatever damage the proposed injunction may cause the opposing party; and (4) that granting the injunction will not disserve the public interest. Paulsson Geophysical Services, Inc. v. Sigmar, 529 F.3d 303, 309 (5th Cir.2008); Speaks v. Kruse, 445 F.3d 396, 399-400 (5th Cir.2006); Mississippi Power & Light Co. v. United Gas Pipe Line Co., 760 F.2d 618, 621 (5th Cir.1985) (citing Canal Authority of State of Florida v. Callaway, 489 F.2d 567, 572 (5th Cir. 1974)).
The decision to grant or deny a preliminary injunction is left to the sound discretion of the district court. Mississippi Power & Light, 760 F.2d at 621. A preliminary injunction is an extraordinary remedy which should only be granted if the movant has clearly carried his burden of persuasion on all four factors. Id.; Mazurek v. Armstrong, 520 U.S. 968, 972, 117 S.Ct. 1865, 138 L.Ed.2d 162 (1997) (A preliminary injunction is a "drastic remedy" that "should not be granted unless the movant, by a clear showing, carries the burden of persuasion.") (citation omitted) (emphasis in original); PCI Transportation, Inc. v. Fort Worth & Western Railroad Company, 418 F.3d 535, 546 (5th Cir.2005) ("[t]he plaintiff has the burden of introducing sufficient evidence to justify the grant of a preliminary injunction."). As a result, "[t]he decision to grant a preliminary injunction is to be treated as the exception rather than the rule." Mississippi Power & Light, 760 F.2d at 621; House the Homeless, Inc. v. Widnall, 94 F.3d 176, 180 (5th Cir.1996).
Before addressing the merits of ADT's motion for a preliminary injunction, the court turns to Capital Connect's arguments regarding the admissibility of evidence and whether Capital Connect has created a factual dispute necessitating a hearing on ADT's motion for a preliminary injunction. Response at 8, 13; Capital Connect's Sur-reply at 1 (docket entry 75).
Capital Connect first argues that the court should not give ADT's declarations credence because those declarations are riddled with hearsay. Response at 8, 13 n.12 ("ADT's customer declarations are replete
The law is well-settled that because the procedures governing a preliminary injunction are generally less formal than those at trial, the court may rely upon otherwise inadmissible evidence when considering a preliminary injunction. University of Texas v. Camenisch, 451 U.S. 390, 395, 101 S.Ct. 1830, 68 L.Ed.2d 175 (1981) ("[A] preliminary injunction is customarily granted on the basis of procedures that are less formal and evidence that is less complete than in a trial on the merits."); Sierra Club, Lone Star Chapter v. Federal Deposit Insurance Corporation, 992 F.2d 545, 551 (5th Cir.1993) ("at the preliminary injunction stage, the procedures in the district court are less formal, and the district court may rely on otherwise inadmissible evidence."); Federal Savings & Loan Insurance Corporation v. Dixon, 835 F.2d 554, 558 (5th Cir.1987) (citing Camenisch for the proposition that "a preliminary injunction proceeding is not subject to jury trial procedures"); Texas Commerce Bank National Association v. State of Florida, No. 3:96-CV-2814-G, 1997 WL 181532, at *4 (N.D.Tex. Apr. 9, 1997) (Fish, J.) (in deciding whether to grant a preliminary injunction, "the court may rely on hearsay evidence and may even give inadmissible evidence some weight"), aff'd, 138 F.3d 179 (5th Cir.1998).
Contrary to Capital Connect's assertion, most of the declarants' out-of-court statements do not appear to be hearsay. The declarations attached to ADT's filings include the customers' out of court statements to show the customers' state of mind, an exception to the rule against hearsay. FED. R. EVID. 803(3); Armco, Inc. v. Armco Burglar Alarm Co., Inc., 693 F.2d 1155, 1160 n. 10 (5th Cir.1982); Mary Kay, Inc. v. Weber, 601 F.Supp.2d 839, 847 (N.D.Tex.2009) (Fish, J.). Additionally, most of the declarants cite Capital Connect's sales associates'
Regardless, "[a]t the preliminary injunction stage, a district court may rely on affidavits and hearsay materials which would not be admissible evidence for a permanent injunction, if the evidence is `appropriate given the character and objectives of the injunctive proceeding.'" Levi Strauss & Co. v. Sunrise International Trading Inc., 51 F.3d 982, 985 (11th Cir. 1985); accord Dixon, 835 F.2d at 558; Sierra Club, Lone Star, 992 F.2d at 551 ("[T]he district court can accept evidence in the form of deposition transcripts and affidavits."). The court accepts ADT's and Capital Connect's evidence in the form of declarations and exhibits for purposes of ruling on this motion for a preliminary injunction.
Next, Capital Connect "hotly disputes" the facts at issue on this motion. Capital Connect's Sur-reply at 1; Response at 18-20. Capital Connect argues that the court should not grant ADT's motion for injunctive relief because it has disputed the facts ADT has alleged and the credibility of ADT's declarations. Capital Connect's Sur-reply at 1.
While the court may rely on otherwise inadmissible evidence at the preliminary injunction stage and may issue a preliminary injunction without the presentation of evidence, it can do so only when the facts are not disputed. Sierra Club, Lone Star, 992 F.2d at 551; Digital Generation, Inc. v. Boring, 869 F.Supp.2d 761, 777 (N.D.Tex.2012) (Lindsay, J.) (citing 13 MOORE'S FEDERAL PRACTICE ¶ 65.23) ("Deciding controverted issues of fact based on affidavit testimony, however, especially affidavits containing hearsay-within-hearsay, is discouraged.").
Federal Rule of Civil Procedure 65(a)(1) provides that "a preliminary injunction [may issue] only on notice to the adverse party." When parties have raised relevant factual disputes concerning the preliminary injunction, courts have interpreted FED. R. CIV. P. 65(a)(1) to require "a fair opportunity and a meaningful hearing to present their differing versions of those facts before a preliminary injunction may be granted." PCI Transportation, 418 F.3d at 546; Kaepa, Inc. v. Achilles Corporation, 76 F.3d 624, 628 (5th Cir.), cert. denied, 519 U.S. 821, 117 S.Ct. 77, 136 L.Ed.2d 36 (1996); Marshall Durbin Farms, Inc. v. National Farmers Organization, Inc., 446 F.2d 353, 358 (5th Cir. 1971) ("[T]he courts are more cautious about invoking the extraordinary remedy of the preliminary injunction where critical facts are in dispute."). The Third Circuit, in Sims v. Greene, criticized a district court for not holding an evidentiary hearing to resolve apparently conflicting evidence in the parties' submissions because it put the district court judge "in the position of preferring one piece of paper to another." 161 F.2d 87, 88 (3d Cir.1947).
ADT, on the other hand, for the purposes of this motion admits Capital Connect's presentation of the facts. ADT's Sur-reply at 3. ADT argues that Capital Connect has tried to draw conflicting inferences from ADT's proof but that Capital Connect does not dispute ADT's evidence, which as ADT acknowledges, "would require the Court to convene a hearing and make credibility determinations." ADT's Reply at 9.
This Circuit permits the district court to rule on a motion for preliminary injunction without a hearing where no factual disputes are involved. Kaepa, 76 F.3d at 628 ("[i]f no factual dispute is involved,... no oral hearing is required; under such circumstances the parties need only be given `ample opportunity to present their respective views of the legal issues involved.'") (quoting Commerce Park at DFW Freeport v. Mardian Construction Co., 729 F.2d 334, 341 (5th Cir.1984)); see also PCI Transportation, 418 F.3d at 546; Anderson v. Jackson, 556 F.3d 351, 360 (5th Cir.2009). The cases in which the Fifth Circuit has criticized district courts for ruling on an application for preliminary injunction without a hearing fall into two categories. First, the Fifth Circuit has disapproved of ruling on a preliminary injunction where the parties were not given a "fair opportunity" or did not receive sufficient notice before the court rendered its decision. See, e.g., Marshall Durbin Farms, 446 F.2d at 355-56 (finding inadequate notice in clear violation of Rule 65(a) after the district court scheduled a preliminary injunction hearing just days after the plaintiffs requested such relief); Parker v. Ryan, 960 F.2d 543, 544 (5th Cir.1992).
This case does not fall into either category. The Fifth Circuit approves of the resolution of preliminary injunctions without a hearing where the parties were given an opportunity to "present their differing versions" of the underlying facts and the district court determined that there were no disputes regarding the facts necessary to the resolution of the preliminary injunction. See PCI Transportation, 418 F.3d at 546 (district court resolved motion for a preliminary injunction without a hearing where the plaintiff failed to put the underlying contract before the court); Commerce Park at DFW Freeport, 729 F.2d at 341; Esparza v. Board of Trustees, No. 98-CV-50907, 182 F.3d 915, 1999 WL 423109, at *3 (5th Cir. June 4, 1999) ("[J]ust because some facts are disputed, the court does not have to hold a hearing before ruling on a motion for a [preliminary injunction] unless the parties show there are material facts in dispute."); see also Dixon, 835 F.2d at 558-59 (affirming grant of preliminary injunction without a hearing where adverse party failed to point to any convincing factual disputes material to the decision).
Capital Connect attacks the credibility of twelve of ADT's declarants by attaching transcripts of recorded quality assurance calls. Response at 6-8, 15; Capital Connect's Sur-reply at 1-3. Capital Connect offers proof that eleven of ADT's declarants, ten of whom were the same declarants who had recorded quality assurance calls and signed Alarm Upgrade Agreements in which the customer denies any confusion about whether Capital Connect is affiliated with ADT by initialing next to the line in the contract. Capital Connect's Sur-reply at 3. Capital Connect further attacks the credibility of ADT's evidence by pointing out that two customer declarants corrected the typed declaration through hand-written notes. Id. Additionally, Capital Connect seeks to discredit the customer declarants who stated that the sales associate at issue was wearing some Capital Connect gear. Id. Lastly, Capital Connect criticizes the viability of the evidence introduced through ADT's litigation manager as speculative and conclusory. Id. at 4-5.
Capital Connect, however, does not argue that its sales force has not (1) claimed to have been affiliated with ADT, (2) misrepresented the quality of ADT's equipment to gain favor of the customers, (3) claimed that Capital Connect has bought out or taken over ADT, (4) stated that Capital Connect has purchased the customer's account from ADT, (5) misrepresented that ADT have either gone out of business or left the local market, or (6) made other misrepresentations or false statements. Motion at 4. Capital Connect's arguments surrounding these issues are entirely legal in nature. For example, Capital Connect's argument that it did not make the statements because it did not authorize the sales associates to make the statements is a legal argument addressed in Section II.C.1.e below. It is true that Capital Connect disputes certain facts at issue in the case and has raised credibility issues regarding roughly thirteen of ADT's declarants. Response at 6-8, 15; Capital Connect's Sur-reply at 1-3. However, the court finds that Capital Connect has failed to present any evidence contradicting ADT's allegations that are central to the court's resolution of the merits of ADT's motion for preliminary injunction and has failed to attack the credibility of ADT's remaining 55 declarants. Capital Connect does not aver that its sales associates did
In McDonald's Corporation v. Robertson, 147 F.3d 1301, 1308 (11th Cir.1998), the Eleventh Circuit provided guidance to the court in its resolution of a similar situation. In McDonald's, the plaintiff filed a motion for preliminary injunction for trademark infringement claims against one of its franchisees. Id. at 1302-03. The plaintiff submitted affidavit testimony. Id. at 1311-13. The defendant sought to contest plaintiff's evidence, but failed to actually refute or deny any of the underlying allegations, only criticizing the claims as "fabricat[ions]" and "exaggerat[ions]s". Id. at 1308. The Eleventh Circuit affirmed the district court's granting of the preliminary injunction without a hearing, finding that the parties' briefing was sufficient because "material facts are not in dispute, or the disputed facts are not material to the preliminary injunction sought." Id. at 1313.
Here, the parties have had sufficient opportunity to present their respective versions of the facts underlying this dispute. As of August 13, 2015, the parties had notice that unless the court determine[d] that a hearing is necessary to resolve conflicts in the evidence or to make credibility determinations, the court would determine the plaintiffs' request for a preliminary injunction on affidavits and/or deposition and without a hearing, in accordance with FED. R. CIV. P. 43(c). Order of August 13, 2015 (docket entry 51). This practice was approved by the Fifth Circuit in Kaepa. In Kaepa, where the district court did "not rely on any disputed facts," no oral hearing was required and parties "need[ed] only be given ample opportunity to present their respective views of the legal issues involved." 76 F.3d at 628 (internal quotations omitted). Capital Connect and ADT have been given ample opportunity to present their respective views of the legal issues involved. Anderson, 556 F.3d at 361 (finding the requirements of FED R. CIV. P. 65(a)(1) met where the district court allowed extensive briefing without holding an evidentiary hearing); see Dixon, 835 F.2d at 558 (affirming district court's ruling on preliminary injunction without a hearing where it based its findings of fact on "extensive evidence in the form of affidavits, several thousand pages of documents, business records of earnings, sworn statements, [and] admissions of defendants"); Dearmore v. City of Garland, 237 F.R.D. 573, 579 (N.D.Tex. 2006) (Lindsay, J.) (finding that a hearing was not necessary where the issues were "strictly legal in nature," and commenting that the court "would have not held a hearing, and would have decided the matter strictly on the written submissions of the parties" if it had been clear that there were no disputed facts), aff'd, 519 F.3d 517 (5th Cir.2008).
Therefore, the court will determine the merits of the preliminary injunction without a hearing and will "not rely on any disputed facts" in its resolution of the motion basing its decision on the record presented during the "extensive briefing" on the preliminary injunction. Anderson, 556 F.3d at 361.
Section 43(a)(1)(A) makes liable, "[a]ny person who ... uses in commerce any word, term, name, symbol, or device, ... which ... is likely to cause confusion, or to cause mistake ... as to
ADT argues that Capital Connect has caused not only the likelihood of confusion but also actual confusion among home security customers as to the "source, affiliation, connection or sponsorship of its alarm services." Motion at 14. Capital Connect's sales tactics imply an association with ADT to procure business for another in a "bait-and-switch" move that baffles consumers. ADT LLC v. Vision Security, LLC, No. 13-CV-81197, 2014 WL 3764152, at *5 (S.D.Fla. July 30, 2014). The Lanham Act protects consumers from being misled by the use of "unfair practices by an imitating competitor." Moseley v. V Secret Catalogue, Inc., 537 U.S. 418, 428, 123 S.Ct. 1115, 155 L.Ed.2d 1 (2003) (internal quotations omitted). The language of Section 43(a) is broader than much of the Lanham Act in that it "prohibits actions like trademark infringement that deceive consumers and impair a producer's goodwill." Dastar Corporation v. Twentieth Century Fox Film Corporation, 539 U.S. 23, 32, 123 S.Ct. 2041, 156 L.Ed.2d 18 (2003); accord Texas Tech University v. Spiegelberg, 461 F.Supp.2d 510, 523 (N.D.Tex.2006) (Cummings, J.).
The critical question is whether the Capital Connect's sales practices suggest affiliation or endorsement or false association. Scott Fetzer Co. v. House of Vacuums Inc., 381 F.3d 477, 484 (5th Cir. 2004). In determining whether a likelihood of confusion exists, courts consider the following non-exhaustive list of factors: "(1) the type of mark allegedly infringed; (2) the similarity between the two marks; (3) the similarity of the products or services; (4) the identity of retail outlets and purchasers;
In analyzing the "likelihood of confusion," a court should first "consider the application of each digit in light of the specific circumstances of the case" and next "consider the marks in the context that a customer perceives them in the marketplace." Scott Fetzer, 381 F.3d at 485 (quoting Elvis Presley, 141 F.3d at 197); accord Lyons Partnership v. Giannoulas, 179 F.3d 384, 389-90 (5th Cir.1999). The court finds that the digits of confusion weigh in favor of ADT.
Evidence of actual confusion is not necessary to a finding of a likelihood of confusion, but "it is nevertheless the best evidence of likelihood of confusion." Amstar Corporation, 615 F.2d at 263. To show actual confusion, a plaintiff may rely on anecdotal instances of consumer confusion, see Moore Business Forms, Inc. v. Ryu, 960 F.2d 486, 491 (5th Cir.1992), or consumer surveys, see Exxon Corporation v. Texas Motor Exchange of Houston, Inc., 628 F.2d 500, 506 (5th Cir.1980); Scott Fetzer, 381 F.3d at 486.
Capital Connect argues that ADT has not reported nearly enough instances of confusion given the size of the market. See Response at 14, 22-23 (citing Holland America Insurance Co. v. Succession of Roy, 777 F.2d 992, 997 (5th Cir.1985) (vacating
Very little evidence, however, is required to establish the existence of the actual confusion factor. Jellibeans, Incorporated v. Skating Clubs of Georgia, Inc., 716 F.2d 833, 845 (11th Cir.1983); see also World Carpets, Inc. v. Dick Littrell's New World Carpets, 438 F.2d 482, 489 (5th Cir.1971); AmBrit, Inc. v. Kraft, Inc., 812 F.2d 1531, 1544 (11th Cir.1986) ("It is likely that many consumers who were confused never realized they had been confused and that many of those who did realize they had been confused chose not to spend the time to register a complaint with a faceless corporation...."), cert. denied, 481 U.S. 1041, 107 S.Ct. 1983, 95 L.Ed.2d 822 (1987). Furthermore, "an almost overwhelming amount of proof would be necessary to refute" proof of actual confusion. Dick Littrell's New World Carpets, 438 F.2d at 489 ("[R]eason tells us that ... very little proof of actual confusion would be necessary to prove the likelihood of confusion."); Fuji Photo Film Co., Inc. v. Shinohara Shoji Kabushiki Kaisha, 754 F.2d 591, 597 (5th Cir.1985) ("In no case have we sanctioned total disregard of evidence of actual confusion; there is simply no precedent for such a view...."); Soweco, Inc. v. Shell Oil Company, 617 F.2d 1178, 1186 (5th Cir.1980), cert. denied, 450 U.S. 981, 101 S.Ct. 1516, 67 L.Ed.2d 816 (1981).
The evidence that ADT has submitted shows "more than fleeting mix-up of names." Xtreme Lashes, LLC v. Xtended Beauty, Inc., 576 F.3d 221, 230 (5th Cir. 2009). The confusion presented in the affidavits shows actual confusion about what entity the sales associate at the door represented, with what entity the sales associate was affiliated, how the sales associate came to arrive at the door, and the purpose for which he/she was at the door. See ADT's Appendix; ADT's Supp. Appendix; ADT's Second Supp. Appendix; ADT's Third Supp. Appendix. Capital Connect argues that customer affidavits are not reliable because they are received by "interested sources" and there is no opportunity to cross-examine the confused individuals. Capital Connect's Sur-reply at 4 (citing A
Capital Connect argues that it has also called into question the credibility of roughly thirteen declarations with its transcripts of telephone calls with the customer, signed upgrade agreements disclaiming association between ADT and Capital Connect, and questioning the customer hand-written edits on the declarations. See Response at 6-8, 15; Capital Connect's Sur-reply at 1-3. For purposes of the preliminary injunction, the court will ignore those declarations to avoid a potential factual dispute. The court finds, however, that the remaining 55 declarations, whose credibility has not been questioned, the four local news reports, and the 269 customer complaints cited by the ADT representative provide ample evidence to support a finding of actual confusion in the market. Second Gold Decl. ¶ 3; see Xtreme Lashes, 576 F.3d at 230 ("To ignore this evidence as anecdotal or irrational tramples upon the province of the trier of fact."); Half Price Books, Records, Magazines, Inc. v. Barnesandnoble.com, LLC, No. 3:02-CV-2518-G, 2003 WL 23175436, at *5 (N.D.Tex. Aug. 15, 2003) (Fish, Chief J.). Since there is actual confusion, ADT has satisfied the "likelihood of confusion" element of the § 1125(a)(1)(A) preliminary injunction analysis. Soweco, 617 F.2d at 1186 ("Actual confusion is, however, strong proof that the likelihood of confusion exists").
Capital Connect argues that ADT has failed to prove that it has a substantial likelihood of success on the merits of this case because the confused customers in the declarations fail to pass the reasonably prudent purchaser standard.
Courts recognize that customers are more likely to be confused where the products or services are closely related. See Davis v. Walt Disney Co., 430 F.3d 901,
Additionally in Better Business Bureau, 681 F.2d at 403, the Fifth Circuit noted that where one implies that he is "acting at the behest" or "under the direction" of another, and this "impression is reinforced by the context in which the representations were made," there is a strong inference of endorsement and thereby confusion. Therefore, situations and phrases that may seem clear to observers in the abstract may nevertheless, in context, be confusing to a reasonably prudent consumer.
Despite the protective measures Capital Connect claims to have implemented, the declarants are actually confused by Capital Connect's sales tactics and the law understands the reasonableness of consumer confusion in similar situations. Id. Therefore, the court finds that for the purposes of the motion for a preliminary injunction, ADT has sufficiently shown actual confusion of reasonably prudent purchasers.
In its response and sur-reply to ADT's motion for preliminary injunction, Capital Connect submits proof that it notified roughly a dozen customers, through disclaimers in its agreement and a telephone call, that it is not affiliated in any way with ADT. Response at 6, 8, and 21. In its reply, ADT cites cases that discuss the "initial interest confusion" doctrine. ADT's Reply at 5. The initial interest confusion doctrine applies when "the Lanham Act forbids a competitor from luring potential customers away from a producer by initially passing off its goods as those of the producer's, even if confusion as to the source of the goods is dispelled by the time any sales are consummated." Dorr-Oliver, Inc. v. Fluid-Quip, Inc., 94 F.3d 376, 382 (7th Cir.1996). This "bait and switch" technique allows competitors to get a foot in the door and engage the customer by using the goodwill established by the senior user to break the ice. Id.; Grotrian, Helfferich, Schulz, Th. Steinweg Nachf. v. Steinway & Sons, 523 F.2d 1331, 1342 (2d Cir. 1975).
In its sur-reply, Capital Connect argues, inter alia, (1) that the initial interest confusion doctrine does not apply here; (2) that if it does apply, it is a de minimis factor; and (3) that "a recent Supreme Court decision brings into serious question the continued viability of initial confusion as a theory of liability." Capital Connect's Sur-reply at 5-10. Some scholars have criticized the "initial interest confusion" doctrine because they argue the senior user has not suffered any economic harm if the confusion is dispelled by the time of the transaction ends. See, e.g., Deborah R. Gerhardt, Lexmark and the Death of Initial Interest Confusion, 7 LANDSLIDE 22, 27 (2014); Jennifer E. Rothman, Initial Interest Confusion: Standing at the Crossroads of Trademark Law, 27 CARDOZO L. REV.
Today, the initial interest doctrine most often appears in Lanham Act disputes based on Internet browsing, metatags, and how well websites are labeled when a user is moving from one website to another. See, e.g., Network Automation, Inc. v. Advanced Systems Concepts, Inc., 638 F.3d 1137, 1147 (9th Cir.2011); Playboy Enterprises, Inc. v. Netscape Communications Corporation, 354 F.3d 1020, 1027 (9th Cir. 2004)).
The Fifth Circuit still recognizes the doctrine, although it has not faced the question of whether it is still valid after Lexmark. Elvis Presley, 141 F.3d at 204 ("Infringement can be based upon confusion that creates initial consumer interest, even though no actual sale is finally completed as a result of the confusion."); National Business Forms & Printing, Inc. v. Ford Motor Company, 671 F.3d 526, 532 (5th Cir.2012) ("Actual confusion that is later dissipated by further inspection of the goods, services, or premises, as well as post-sale confusion, is relevant to a determination of a likelihood of confusion."); John Crane Production Solutions, Inc. v. R2R and D, LLC, 861 F.Supp.2d 792, 799-800 (N.D.Tex.2012) (Fitzwater, Chief J.).
The court concludes that initial interest confusion still appears to be a valid theory under Fifth Circuit law, and that the Supreme Court's analysis in Lexmark did not abrogate the theory. Here, however, the court does not base its "likelihood of confusion" analysis on the viability of the initial interest confusion doctrine, althought ADT's consumers' "initial interest confusion" is relevant to the court's determination of a likelihood of confusion. Elvis Presley, 141 F.3d at 204. The court concludes that ADT has carried its burden of proving "likelihood of confusion" by producing sufficient evidence that Capital Connect's false sales pitches actually confuse customers into thinking there is some affiliation with ADT or that ADT's equipment is faulty. See Elvis Presley, 141 F.3d at 204; Ford Motor Company, 671 F.3d at 532.
Capital Connect argues that it is not "liable for the unauthorized conduct of independent contractors." Response at 18-20. Capital Connect's argument is that the sales force that is going door-to-door selling its services consists of independent contractors, not employees. Id. Therefore, according to Capital Connect, it is not liable unless ADT can prove that Capital Connect authorized its independent contractors to act in the manner ADT has alleged. Id. Moreover, Capital Connect offers
ADT argues that Capital Connect is liable for the conduct of its sales force, whether classified as employees or independent contractors, because the sales force consists of agents under Capital Connect's control as principal. ADT's Reply at 10-11.
"The essential element of an agency relationship is the right of control." In re Carolin Paxson Advertising, Inc., 938 F.2d 595, 598 (5th Cir.1991). As ADT argues, Capital Connect's briefing establishes that Capital Connect exerts control over its sales force. Response at 4-6, 18-20. Capital Connect offers proof that (a) it requires its sales force to wear Capital Connect gear (Clackamas Gastroenterology Associates, P.C. v. Wells, 538 U.S. 440, 449-50, 123 S.Ct. 1673, 155 L.Ed.2d 615 (2003) (holding that whether an organization can hire or fire or set the rules and regulations of the individual's work is relevant to whether one is an employee); (b) it requires its sales force to complete training (Mares v. Marsh, 777 F.2d 1066, 1068 (5th Cir.1985) (finding that training suggests an employment relationship); (c) it requires its sales force to sign a Code of Conduct (Wells, 538 U.S. at 449-50, 123 S.Ct. 1673); (d) it requires its sales force to wear a Capital Connect badge (id.); (e) it requires its sales force to obey its sales rules (id.); and (f) it punishes its sales force if it violates any of these provisions (id.). Response at 4-6, 18-20. Thus, whether the sales force be labeled independent contractors or employees for purposes of this motion for preliminary injunction, the evidence before the court clearly shows that Capital Connect has the right to control its sales force. Hopkins v. Cornerstone America, 545 F.3d 338, 347-48 (5th Cir. 2008), cert. denied, 556 U.S. 1129, 129 S.Ct. 1635, 173 L.Ed.2d 998 (2009); Brock v. Mr. W Fireworks, 814 F.2d 1042, 1049 (5th Cir.) ("subjective beliefs cannot transmogrify objective economic realities"), cert. denied, 484 U.S. 924, 108 S.Ct. 286, 98 L.Ed.2d 246 (1987); In re Carolin Paxson, 938 F.2d at 598.
Anything that occurs during the sales pitch of the sales associate is clearly within the scope of the agency, as it is the central purpose of the principal-agency relationship here. Celtic Life Insurance Company v. Coats, 885 S.W.2d 96, 99 (Tex.1994) (holding that a principal cannot escape liability by claiming that it did not authorize misrepresentations occurring before a sale and that such misrepresentation occurred within the scope of agency); Morrow v. Daniel, 367 S.W.2d 715, 718 (Tex.Civ. App.-Dallas 1963, no writ) (same).
Capital Connect's argument that it escapes liability unless ADT proved that Capital Connect authorized the misleading or false representations fails because it is clear that Capital Connect has the right to control the actions of its sales force, whether the sales personnel are classified as employees or independent contractors. See Meyer v. Holley, 537 U.S. 280, 285-86, 123 S.Ct. 824, 154 L.Ed.2d 753 (2003); see also Potomac Conference Corporation of Seventh-day Adventists v. Takoma Academy Alumni Association, Inc., 2 F.Supp.3d 758, 770-71 (D.Md.2014) (finding a president of an association liable for the actions of the association in Lanham Act context where the president exercised control and guidance for the association's actions). Capital Connect is liable for the actions of its sales associates, who are its agents, operating within the scope of that agency. See Playboy Enterprises, Inc. v. Webbworld, Inc., 991 F.Supp. 543, 553-54 (N.D.Tex.1997) (Sanders, J.) (holding an employer liable for an employee's infringement
ADT alleges that Capital Connect misleads customers, among other tactics, by falsely associating itself with ADT through the use of the terms "upgrade" and "update." Motion at 3-4. ADT claims that Capital Connect's sales force comes to their customers' homes and asserts their systems need to be "updated" or "upgraded". Id. Customers report that this practice confused them, as they inferred this meant the sales associate was affiliated with ADT. Id.; see, e.g., ADT's Third Supp. Appendix, Exhibit 1C, Appendix_000018-20, Declaration of Florence Allen ¶ 5 ("He told me he was at my home to upgrade my alarm equipment."); ADT's Third Supp. Appendix, Exhibit 10, Appendix_000071-73, Declaration of Jose Aviles ¶ 6 ("The representative told me that Capital was an ADT affiliate there to upgrade my alarm panel for free."); ADT's Third Supp. Appendix, Exhibit 1AA, Appendix_000106-108, Declaration of Pauline Pedroza ¶ 6 ("The representative stated that he was there to upgrade my keypad.").
Capital Connect contends that the terms "upgrade" and "update" are not misleading or false and that the use of them during a sales pitch is not a violation of the Lanham Act. Response at 23-24. In Stokely-Van Camp, Inc. v. Coca-Cola Company, 646 F.Supp.2d 510, 529 (S.D.N.Y.2009), a district judge in the Southern District of New York held that Powerade's use of the phrase "Upgrade your formula. Upgrade your Game" on its labels was not "literally false" or "false by necessary implication" because reasonable consumers could interpret the phrase to compare Powerade to Gatorade, or could compare this new Powerade drink to older Powerade drinks. On the other hand, in Volkswagenwerk Aktiengesellschaft v. Church, 411 F.2d 350, 352 (9th Cir.1969), supplemented, 413 F.2d 1126 (9th Cir. 1969), the Ninth Circuit noted that a Volkswagen repair specialist could use the VW mark in his advertisements, but he "must not do so in a manner which is likely to suggest to his prospective customers that he is part of Volkswagen's organization of franchised dealers and repairmen." The key analysis is whether the use of any term, or any protected mark leads to a "likelihood of confusion" surrounding the context of the alleged misleading use. Better Business Bureau, 681 F.2d at 403 (holding that the false impression "is reinforced by the context in which the representations were made"). Here, Capital Connect's sales associates approach a door, mention "upgrade" or "update," and refer to the security alarm system already installed, implying a relationship with ADT. See Mary Kay, Inc. v. Weber, 661 F.Supp.2d 632, 644 (N.D.Tex. 2009) (concluding that by using language that suggests that the defendants act as an "outlet" for Mary Kay independent beauty consultants, they imply a relationship between the defendants and those Mary Kay consultants). Showing a knowledge of the pre-existing security alarm system and referencing the alarm system as needing an upgrade leads a rational person to conclude that the salesperson is in some way affiliated with the pre-existing alarm service provider. As in Volkswagenwerk or Better Business Bureau, the context of the verbal exchange "reinforce[s]" the false inference made by the consumer. Better Business Bureau, 681 F.2d at 403; Volkswagenwerk, 411 F.2d at 352.
No matter whether the statements at issue are ambiguous or true but misleading, the plaintiff must present evidence of actual deception. See Pizza Hut, Inc. v. Papa John's International, Inc., 227 F.3d 489,
To recapitulate, for purposes of the present motion, ADT has offered sufficient evidence of actual confusion resulting from Capital Connect's use of the terms "upgrade" and "update" in the context of door-to-door sales pitches to warrant the suspension of the practice pending a resolution of the case on the merits. ADT has satisfied the court that there is substantial likelihood that [it] will ultimately prevail on the merits. See Paulsson, 529 F.3d at 309.
The analysis for determining whether harm is irreparable encapsulates the purpose of a preliminary injunction. An injury is generally considered to be irreparable if the injury cannot be undone through monetary relief. Enterprise International, Inc. v. Corporacion Estatal Petrolera Ecuatoriana, 762 F.2d 464, 472-73 (5th Cir.1985) (stating the "possibility that adequate compensatory or other corrective relief will be available at a later date, in the ordinary course of litigation, weigh[s] heavily against a claim of irreparable harm"). An injunction is appropriate only if the anticipated injury is imminent and irreparable. Chacon v. Granata, 515 F.2d 922, 925 (5th Cir.), cert. denied, 423 U.S. 930, 96 S.Ct. 279, 46 L.Ed.2d 258 (1975).
If determining the amount of damage would be extremely difficult, the court can consider the harm irreparable. ICEE Distributors, Inc. v. J & J Snack Foods Corporation, 325 F.3d 586, 597 (5th Cir.2003); Wilkinson v. Manpower, Inc., 531 F.2d 712, 714 (5th Cir.1976). To be considered irreparable, the injury in question must imminent and cannot be speculative. Watson v. Federal Emergency Management Agency, 437 F.Supp.2d 638, 648 (S.D.Tex.2006), vacated, 2006 WL 3420613 (5th Cir.2006).
ADT argues that for "the purposes of awarding a preliminary injunction in a Lanham Act case, irreparable injury is presumed once the plaintiff has shown a likelihood of confusion." Motion at 15 (citing Abraham v. Alpha Chi Omega, 708 F.3d 614, 627 (5th Cir.), cert. denied, ___ U.S. ___, 134 S.Ct. 88, 187 L.Ed.2d 254 (2013); accord, e.g., S & H Industries, Inc. v. Selander, 932 F.Supp.2d 754, 765 (N.D.Tex.2013) (Lynn, J.); Mary Kay, 661 F.Supp.2d at 640; Hawkins Pro-Cuts v. DJT Hair, No. 3:96-CV-1728-R, 1997 WL 446458, at *7 (N.D.Tex. July 25, 1997) (Buchmeyer, Chief J.); see also Clearline Technologies Limited v. Cooper B-Line, Inc., 948 F.Supp.2d 691, 715 (S.D.Tex. 2013) (presumption of irreparable harm
Capital Connect responds that there is no presumption of irreparable harm. Response at 11, 14 (citing Ellipse Communications, Inc. v. Caven, No. 3:07-CV-1922-O, 2009 WL 497268, at *1 (N.D.Tex. Feb. 26, 2009) (O'Connor, J.) ("the Fifth Circuit has avoided expressly adopting a presumption of irreparable injury.")).
Historically, upon a showing of likelihood of confusion in Lanham Act preliminary injunction suits, courts have presumed a showing of irreparable harm. See, e.g., Camel Hair and Cashmere Institute of America, Inc. v. Associated Dry Goods Corporation, 799 F.2d 6, 14 (1st Cir.1986); McNeil-PPC, Inc. v. Pfizer Inc., 351 F.Supp.2d 226, 250 (S.D.N.Y.2005). However, three recent United States Supreme Court cases, one of which involved a Lanham Act claim, have counseled against presuming an irreparable injury on a motion for a preliminary injunction. eBay Inc. v. MercExchange, LLC, 547 U.S. 388, 393, 126 S.Ct. 1837, 164 L.Ed.2d 641 (2006) (rejecting a perceived "categorical" rule under Federal Circuit precedent that where a patent had been infringed, an injunction would issue presuming irreparable harm); Winter v. Natural Resources Defense Council, Inc., 555 U.S. 7, 22, 129 S.Ct. 365, 172 L.Ed.2d 249 (2008) (holding that a possibility of irreparable harm was "too lenient" and that the "plaintiffs seeking preliminary relief [must] demonstrate that irreparable injury is likely in the absence of an injunction") (emphasis in original); Lexmark, 134 S.Ct. at 1395 (stating that while the plaintiff alleged enough to proceed under § 1125(a), it could not obtain relief "without evidence of injury proximately caused by Lexmark's alleged misrepresentations") (emphasis in original). Following those decisions, many circuits have abandoned the presumption of irreparable harm in suits seeking a preliminary injunction under the Lanham Act. See, e.g., Time Warner Cable, Inc. v. DIRECTV, Inc., 497 F.3d 144, 161 (2d Cir. 2007); PBM Products, LLC v. Mead Johnson & Co., 639 F.3d 111, 126-27 (4th Cir. 2011); Herb Reed Enterprises, LLC v. Florida Entertainment Management, Inc., 736 F.3d 1239, 1249-51 (9th Cir.2013); Axiom Worldwide, Inc., 522 F.3d at 1227.
Some Fifth Circuit rulings continue to recognize the presumption. Abraham, 708 F.3d at 626-27 ("[a]ll that must be proven to establish liability and the need for an injunction against infringement is the likelihood of confusion — injury is presumed"); Clearline Technologies, 948 F.Supp.2d at 707-08; Southern Snow Manufacturing Co., Inc. v. SnoWizard Holdings, Inc., No. 06-CV-9170, 2014 WL 1652436, at *9 (E.D.La. Apr. 24, 2014). Other courts have avoided "expressly adopting this presumption of irreparable injury." Paulsson, 529 F.3d at 312; BuzzBallz, LLC v. JEM Beverage Company, LLC, No. 3:15-CV-0588-L, 2015 WL 3948757, at *6 (N.D.Tex. June 26, 2015) (Lindsay, J.); T-Mobile US, Inc. v. AIO Wireless LLC, 991 F.Supp.2d 888, 927-29 (S.D.Tex.2014). A recent Fifth Circuit case affirmed a Western District of Texas decision that had abandoned the presumption. Eastman Chemical Company v. PlastiPure, Inc., 969 F.Supp.2d 756, 767-68 (W.D.Tex.2013), aff'd, 775 F.3d 230 (5th Cir.2014). Finally, the Southern District of Texas recently held that the presumption of irreparability of harm still exists under a Lanham Act claim based "on alleged comparative misrepresentations" by a competitor. Greater Houston Transportation Company v. Uber Technologies, Inc., No. 4:14-CV-0941, 2015 WL 1034254, at *21 (S.D.Tex. Mar. 10, 2015).
One court in this circuit aptly labeled the state of the presumption of irreparable harm for preliminary injunctions brought under the Lanham Act as "somewhere between
ADT alleges that it is irreparably harmed by Capital Connect's sales tactics because Capital Connect (a) confuses its customers as well as the market generally (Gold Decl. ¶ 13); (b) disrupts ADT's relationships with its customers, using false pretenses to induce customers to uninstall their ADT equipment, install defendants' equipment, terminate their contracts, and execute new contracts for security services with defendants (id. ¶ 15); (c) damages ADT's goodwill and reputation (id. ¶ 16); (d) unfairly exploits ADT's enormous investments of money and effort for over a century (id. ¶ 18); (e) injures customers who are misled (id. ¶ 18); (f) diminishes customer confidence in ADT's goods and services (id. ¶¶ 15-18); and (g) interferes with ADT's business relations and contracts with its own customers. See T-Mobile USA, Inc. v. Ataricom, Inc., No. 3:09-CV-1542-K, 2009 WL 3233542, at *2 (N.D.Tex. Sept. 14, 2009) (Kinkeade, J.) (concluding that "tortious interference with business relationships," as well as "loss of goodwill and damage to its reputation," prove irreparable injury to plaintiff in Lanham Act case).
Capital Connect rejoins that ADT submitted no proof of any damage to ADT's reputation or goodwill, as shown by most ADT's declarants who "testify about their happiness with ADT" and its products and services. Capital Connect's Sur-reply at 2. ADT offers evidence that Capital Connect continues to disparage the quality of ADT's equipment/service and misleads customers into thinking Capital Connected is associated with ADT. Motion at 3-4; ADT's Reply at 3-4. The harm from Capital Connect's "casting aspersions" on ADT "flows directly from the audience's belief" in the denigrations and misrepresentations. Lexmark, 134 S.Ct. at 1393. Courts recognize that even where products or services continue to enjoy strong reputations in the market, those products or services would suffer irreparable harm in the absence of an injunction preventing a competitor from continuing to make disputed advertising claims challenged as false under the Lanham Act. See Groupe SEB USA, Inc. v. Euro-Pro Operating LLC, 774 F.3d 192, 204-05 (3d Cir.2014).
ADT has shown that Capital Connect's sales force continues to mislead and confuse its customers as it continues to receive more customer complaints. Motion at 3-4; ADT's Reply at 3-4. If Capital Connect continues sales tactics that mispresent the nature of its relationship to ADT, ADT has lost control of its brand. Paulsson, 529 F.3d at 313 (holding that where misrepresenting party continued "to use the mark" the senior user "had lost control of the quality of the technology that was being associated with its mark"); ICEE Distributors, 325 F.3d at 596-97 (accord). As this court and others have recognized, "if one trademark user cannot control the quality of the unauthorized user's goods and services, he can suffer irreparable harm." Mary Kay, 661 F.Supp.2d at 640 (citing Hawkins Pro-Cuts, Inc., 1997 WL 446458, at *7). Capital Connect operates its business in a manner that leaves ADT "powerless to control" its reputation and place in the market, and without an injunction, ADT will suffer irreparable harm. Mary Kay, 661 F.Supp.2d at 640; see also Groupe SEB, 774 F.3d at 205 (concluding that harm to brand reputation
In making this determination, the court is not presuming harm but is "drawing fair inferences from the facts in the record." Groupe SEB USA, 774 F.3d at 205. Capital Connect has "unfairly exploited" ADT's "time, effort, and expense exerted to create and define its brand." T-Mobile, 991 F.Supp.2d at 929 (finding that this exploitation led to "T-Mobile's loss of future goodwill or customer loyalty"); BDO Seidman LLP v. Alliantgroup, L.P., No. 08-CV-905, 2009 WL 1322555, at *8 (S.D.Tex. May 11, 2009) (same). ADT's lack of control over its reputation in the marketplace caused by Capital Connect's misrepresentations to ADT's customers, Capital Connect's continuing practice of disrupting ADT's customer relations through misleading sale pitches, and Capital Connect's continuing exploitation of ADT's goodwill and reputation lead this court to conclude that ADT has proven irreparable harm sufficient to satisfy the second element of its motion for preliminary injunction.
While courts are willing to consider a loss of customers or goodwill as a harm, the movant must come forward with evidence that such an injury is irreparable by showing that the loss cannot be measured in money damages. See Millennium Restaurants Group, Inc. v. City of Dallas, 181 F.Supp.2d 659, 666 (N.D.Tex.2001) (Fish, J.); Digital Generation, 869 F.Supp.2d at 778. Capital Connect argues that ADT has failed to prove that monetary damages would not adequately remedy the harm it alleges Capital Connect has caused. Response at 16-17; see Paulsson, 529 F.3d at 312 ("[A]n injury is irreparable only if it cannot be undone through monetary remedies.").
A party sufficiently proves that monetary damages are not adequate when it brings forward evidence, in the form of affidavits, declarations, or any other support, that shows imminent harm that is difficult to quantify. Brink's Inc. v. Patrick, No. 3:14-CV-0775-B, 2014 WL 2931824, at *8 (N.D.Tex. June 27, 2014) (Boyle, J.). ADT has shown that Capital Connect is disparaging its brand and is continuing to use ADT's reputation and good will to mislead ADT's customers into buying Capital Connect's services. Motion at 3-4; ADT's Reply at 3-4. Courts agree that the damage caused by this sort of Lanham Act violation is difficult to quantify. See Paulsson, 529 F.3d at 313 (holding that damage due to lack of control of its brand and exploitation of its reputation "could not be quantified"); see also, Better Business Bureau, 681 F.2d at 403; Groupe SEB USA, 774 F.3d at 205 (holding that harm to brand reputation and goodwill "is impossible to quantify"); Brink's, 2014 WL 2931824, at *8.
To be considered irreparable, the injury in question must be imminent. Chacon, 515 F.2d at 925; Watson, 437 F.Supp.2d at 648. Capital Connect argues that ADT's alleged irreparable injury is not imminent because ADT's customer declarations date from 2013 to earlier this year. Response at 11-12; Capital Connect's Sur-reply at 2 n.3.
The classic example of when an injunction is not appropriate due to lack of imminent need is in Seven-Up Co. v. Coca-Cola Co., "where the defendant had not used the challenged presentations in five years and the presentations were outdated and essentially useless at the time the injunction was requested." Eastman Chemical
Here, ADT has not only shown a possibility that Capital Connect might repeat its sales tactics but it has also shown that Capital Connect continues to use those sales tactics, as evidenced through the recent complaints ADT has received. ADT's Reply at 3-4. Capital Connect's continued use of these tactics is strong evidence that ADT will be irreparably harmed if an injunction is not issued to stop this imminent threat of misrepresentation. Travelhost, Inc. v. Modglin, No. 3:11-CV-0456-G, 2012 WL 2049321, at *5-6 (N.D.Tex. June 6, 2012) (Fish, J.) (holding that defendants continuing behavior in violation of a non-compete clause led the court to reconsider the need for a preliminary injunction, and on reconsideration grant the preliminary injunction); General Motors Corporation v. Phat Cat Carts, Inc., 504 F.Supp.2d 1278 1287-88 (M.D.Fla.2006) (accord).
Further, Capital Connect argues that ADT unreasonably waited "at least eight months" to seek emergency injunctive relief, and therefore this court cannot grant ADT relief because ADT has failed to prove imminent need. Response at 11-12; Capital Connect's Sur-reply at 2 n.3 "Absent a good explanation, a substantial period of delay militates against the issuance of a preliminary injunction by demonstrating that there is no apparent urgency to the request for injunctive relief." Gonannies, Inc. v. Goupair.Com, Inc., 464 F.Supp.2d 603, 609 (N.D.Tex. 2006) (Lindsay, J.) (internal quotations omitted); Citibank, N.A. v. Citytrust, 756 F.2d 273, 276 (2d Cir.1985). Where parties fail to explain or justify the delay between the facts underlying the need for the preliminary injunction and the motion for the injunction, courts readily decline motions to enjoin for lack of urgency. Ellipse Communications, 2009 WL 497268, at *1-2 (N.D.Tex. Feb 26, 2009) (O'Connor, J.) (no explanation provided); Gonannies, 464 F.Supp.2d at 609 (no irreparable injury where plaintiff waited six months after discovering allegedly infringing use before seeking injunction and provided no explanation); Innovation Ventures, LLC v. Ultimate Lifestyles, LLC, No. 4:08-CV-232, 2009 WL 1490588, at *3 (E.D.Tex. May 27, 2009) (no irreparable injury where plaintiff waited nine months after learning of infringing sale and provided no explanation).
ADT argues that it has not unreasonably delayed because it was investigating the claims, wanted to ensure that it had enough representation of confused customers to support a claim of likelihood of confusion in the marketplace, and did not anticipate the recent increase in complaints about Capital Connect. ADT's Reply at 12-13 (citing Tough Traveler, Limited v. Outbound Products, 60 F.3d 964, 968 (2d Cir.1995); accord BP Chemicals Limited v. Formosa Chemical & Fibre Corporation, 229 F.3d 254, 264 (3d Cir.2000) ("a delay caused by a plaintiff's good faith efforts to investigate an infringement or to determine how serious an infringement is does not preclude a finding of irreparable harm"); 6 McCarthy on Trademarks § 31:32 (4th ed.2015)).
While there has been a delay from the time when ADT first learned of Capital Connect's sales tactics through a customer complaint
Capital Connect's last argument as to why ADT has not suffered an irreparable injury is that Capital Connect has implemented "safeguards" to prevent its sales force from engaging in the conduct at issue here. Response at 14-15. This argument is supported primarily by an unreported District of Utah opinion applying Utah state law. Vivint, Inc. v. Elite Security Services, Inc., No. 2:12-CV-692, 2012 WL 6596855, at *2 (D.Utah Dec. 18, 2012) (denying preliminary injunction after defendant described safeguards taken against inappropriate sales practices and noting that plaintiff "failed to present any additional actions or procedures that it contends [defendant] should or could adopt to stop such occasional errant behavior."). This case is not binding on this court, and that court did not analyze the Lanham Act violation, but focused on principles of Utah common law. Id.
The only other case Capital Connect cites for the proposition that its safeguards prevent a finding of irreparable harm is Federal Express Corporation v. Robrad, LLC, No. 3:14-CV-2152-B, 2014 WL 3880806, at *3 (N.D.Tex. Aug. 7, 2014) (Boyle, J.). This case is distinguishable from Federal Express. In Federal Express, there was no evidence that the defendant continued to use the allegedly infringing material, and the potential use of the allegedly harmful material was speculative. Id. Here, there is strong evidence that Capital Connect is continuing to misrepresent its affiliation with ADT and is continuing to confuse ADT's customers. ADT's Reply at 3-4.
The court can see no further relevance of Capital Connect's safeguards to ADT's claims that Capital Connect's sales tactics continue to cause ADT irreparable harm. Regardless of the safeguards Capital Connect claims to have implemented, its sale force is still causing irreparable harm to ADT through its misrepresentations. Motion at 3-4; ADT's Reply at 3-4.
Capital Connect argues that its lawful interests will be adversely affected by an injunction because an injunction will "stymie competition," harm its standing in communities it serves, dictate the speech of its sale force, and would be impossible to monitor. Response at 24 n.15. First, the injunction will not stymie competition where it only prevents illegal unfair competition. See, e.g., C.E. Services, Inc. v.
Lastly, preventing one's agents from breaking federal law is not impossible to monitor and accepting that argument would be against public policy. T-Mobile, 991 F.Supp.2d at 929 (concluding that the balance of hardships favored granting injunction where defendant argued that changes were too costly); Osmose, Inc. v. Viance, LLC, 612 F.3d 1298, 1321 (11th Cir.2010) (balance of hardships favored granting injunction where effect of injunction only prohibited defendant from using false statements and did not prohibit defendant from using the contested study in its entirety).
Additionally, the court has not granted ADT as wide and broad a preliminary injunction as it requested. The narrow scope of the injunction that solely prevents Capital Connect from continuing to violate the Lanham Act and continuing to compete unfairly "reduces the impact" of any lawful interests Capital Connect may have through the issuance of this injunction. See T-Mobile, 991 F.Supp.2d at 929.
ADT's interest in obtaining this preliminary injunction far outweighs Capital Connect's interest in continuing to violate the Lanham Act. Chevron Chemical Company v. Voluntary Purchasing Groups, Inc., 659 F.2d 695, 705 (5th Cir.1981) (holding that a violator of the Lanham Act should be required to keep a safe distance from the line between legal and illegal conduct), cert. denied, 457 U.S. 1126, 102 S.Ct. 2947, 73 L.Ed.2d 1342 (1982).
"The public interest is always served by requiring compliance with Congressional statutes such as the Lanham Act and by enjoining the use of infringing marks." S & H Industries, 932 F.Supp.2d at 765 (quoting Quantum Fitness Corporation v. Quantum LifeStyle Centers, LLC, 83 F.Supp.2d 810, 832 (S.D.Tex.1999)). "[T]he public has an interest in not being deceived." New York City Triathlon, LLC v. NYC Triathlon Club, Inc., 704 F.Supp.2d 305, 344-45 (S.D.N.Y.2010) (citing
The fourth element weighs in favor of granting the preliminary injunction to prevent further violations of the Lanham Act.
All four factors weigh in favor of a preliminary injunction. The court therefore grants ADT's motion. All that remains is to determine the scope of that injunction.
"[C]ourts in trademark cases have a responsibility to tailor the relief to the violation, a responsibility that includes consideration of disclaimers." Westchester, 214 F.3d at 674. "As with injunctive relief generally, an equitable remedy for trademark infringement should be no broader than necessary to prevent the deception." Id. at 671 (citing Soltex Polymer Corporation v. Fortex Industries, Inc., 832 F.2d 1325, 1329 (2d Cir.1987); Better Business Bureau, 681 F.2d at 405).
The Fifth Circuit has stated that a "competitive business once convicted of unfair competition ... should thereafter be required to keep a safe distance away from the margin line even if that requirement involves a handicap as compared with those who have not disqualified themselves." Voluntary Purchasing, 659 F.2d at 705. The law forbids Capital Connect from engaging in any activity that suggests endorsement by, sponsorship by, or affiliation with ADT, and the court will preliminarily enjoin the behavior that Capital Connect currently exhibits in violation of the Lanham Act and principles of unfair competition. Mary Kay, 661 F.Supp.2d at 644 (broadly enjoining the Lanham Act defendants from violating the law).
The court has modified and narrowed the scope of ADT's proposed preliminary injunction (docket entry 7, Exhibit 1, Proposed Injunction). First, the court has stricken the word "outdated" from paragraph 1 because preventing a competitor from discussing the age of equipment unduly restrains Capital Connect's speech in its sales pitches.
Next, the court has stricken paragraph 2 in its entirety.
Additionally, the court has stricken "directly or by its agents" in the beginning of paragraph (3), finding it redundant in light of the definition of Enjoined Parties. The court has stricken the second half of subparagraph (3)(g) as too broad. Lastly, the court has narrowed the scope of subparagraph (3)(i) to ensure Capital Connect's
For the reasons detailed above, the plaintiffs' motion for preliminary injunction is
