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Zetor North America, Inc v. Rozeboom

United States District Court, W.D. Arkansas, Harrison Division

August 14, 2018

ZETOR NORTH AMERICA, INC. PLAINTIFF
v.
BRENT ROZEBOOM, individually and d/b/a Ridgeway Enterprises, and as director of Alberni Enterprises; GLENDA ROZEBOOM, individually and d/b/a Ridgeway Enterprises; RIDGEWAY ENTERPRISES, a private trust company; ALAN SCOTT PETERSON, individually and as Executive Trustee of Ridgeway Enterprises; ANTONIE a.k.a. Tony ROZEBOOM; and ALBERNI ENTERPRISES, a private trust company DEFENDANTS

          MEMORANDUM OPINION AND ORDER

          TIMOTHY L. BROOKS UNITED STATES DISTRICT JUDGE

         Now pending before the Court are the following Motions:

• Motion for Partial Summary Judgment (Doc. 154), Brief in Support (Doc. 155), and Statement of Facts (Doc. 156) by Plaintiff Zetor North America, Inc. ("Zetor NA"); Response in Opposition (Doc. 162) and Statement of Facts (Doc. 163) by Defendants Brent Rozeboom, Glenda Rozeboom, Alan Scott Peterson, and Ridgeway Enterprises (collectively, "the Ridgeway Defendants"); and Reply (Doc. 171) by Zetor NA;
• Motion to Dismiss Counts III, IV, and VII (Doc. 169) by Zetor NA;
• Motion for Summary Judgment (Doc. 157), Brief in Support (Doc. 158), and Statement of Facts (Doc. 159) by the Ridgeway Defendants; Response in Opposition (Docs. 176, 177) and Statement of Facts (Doc. 178) by Zetor NA; and Reply (Doc. 185) by the Ridgeway Defendants; and
• Motion in Limine to Exclude Expert Testimony (Doc. 164) and Brief in Support (Doc. 165) by the Ridgeway Defendants, and Response in Opposition (Docs. 179, 180) by Zetor NA.

         The Court will begin by reviewing the factual and procedural history of the case and explaining the legal standard pertinent when evaluating motions for summary judgment. Then the Court will consider Zetor NA's Motion for Partial Summary Judgment as to Count II of the Ridgeway Defendants' Counterclaim, followed by Zetor NA's Motion to Dismiss Counts III, IV, and VII of its Amended Complaint. Finally, the Court will take up the Ridgeway Defendants' Motion for Summary Judgment as to all remaining claims in the Amended Complaint, along with Defendants' Motion in Limine to exclude the testimony of Zetor NA's expert witnesses, Dr. Steven Kopp and Mr. Dennis Sisson. For the reasons explained below, Zetor NA's Motion for Partial Summary Judgment and Motion to Dismiss are both GRANTED, the Ridgeway Defendants' Motion for Summary Judgment is DENIED IN PART AND MOOT IN PART, and the Ridgeway Defendants' Motion in Limine is GRANTED IN PART AND DENIED IN PART.

         I. BACKGROUND

         Zetor NA filed this case on June 1, 2015, alleging that Brent and Glenda Rozeboom, d/b/a Ridgeway Enterprises ("Ridgeway"), engaged in trademark infringement and dilution, injury to Zetor NA's business reputation, unfair competition, and deceptive trade practices arising under the Lanham Act and the Arkansas Deceptive Trade Practices Act. See Doc. 1. After the parties engaged in some discovery, Zetor NA sought and received leave to file an Amended Complaint (Doc. 21) on January 4, 2016.

         According to the Amended Complaint, the Rozebooms, joined by Defendants Alan Scott Peterson, who is identified as the Executive Trustee of Ridgeway, and Antonie (aka Tony) Rozeboom, who is named as an owner/operator of Ridgeway, conspired together "to facilitate the infringing and deceptive acts or omissions of Ridgeway," id. at 3, along with separate Defendant Alberni Enterprises, which is described as a "private trust company," id. at 4. Specifically, Ridgeway is accused of advertising, marketing, selling, and distributing new and used tractor parts using the Zetor mark. The Zetor tractor mark is owned by HTC Holding a.s. ("HTC"), which is a Czechoslovakian company that has granted an exclusive license to use the Zetor mark to its wholly-owned subsidiary, another Czech company called Zetor Tractors a.s. ("Zetor Tractors"). Plaintiff Zetor NA is described in the Amended Complaint as "a Florida Corporation .... [that] has been granted a license to use the Zetor trademark and Zetor Tractors promotional materials in the United States . . . ." Id.

         Since the Ridgeway Defendants are not authorized dealers of Zetor products, Zetor NA believes that Ridgeway's advertising and sale of Zetor tractor parts, through Ridgeway's website and other means, tend to create and have created confusion in consumers as to the source of these tractor parts. According to Zetor NA, Ridgeway fails to clearly distinguish in its advertising which tractor parts it sells that are genuine Zetor parts, and which are manufactured by other entities. In addition, Zetor NA accuses Ridgeway of using the Zetor mark in promotional materials without permission and in a manner that is confusing to consumers. Counts I, II, and III are claims arising under the Lanham Act. Count I is for trademark infringement, Count II is for federal unfair competition, and Count III is for dilution of a trademark's value. Count IV arises under Arkansas law governing trademark, Ark. Code Ann. § 4-71-213, and states a cause of action for trademark dilution and injury to business reputation. Count V is a common-law cause of action for trademark infringement and unfair competition. Count VI alleges a violation of the Arkansas Deceptive Trade Practices Act ("ADTPA"), with respect to Ridgeway's "false and misleading representations with the intent to confuse purchasers and potential purchasers . . . ." Id. at 14. Count VII is a claim for copyright infringement as to certain photographic works created and published in the Czech Republic and allegedly used in promotional materials by Ridgeway. Finally, Count VIII is a claim for civil conspiracy to infringe trademark rights, asserted by Zetor NA against all Defendants.

         On January 29, 2016, less than a month after Zetor NA filed its Amended Complaint, separate Defendants Brent and Glenda Rozeboom moved to compel arbitration, citing the Court to a settlement agreement they entered into with Zetor NA, Zetor Tractors, and HTC on behalf of themselves and Ridgeway in 2009. This settlement agreement resolved a previous, similar dispute between the Rozebooms/Ridgeway and all three related Zetor companies concerning Ridgeway's use of the Zetor mark in its advertising materials. See Doc. 28-2. On February 29, 2016, separate Defendants Alan Scott Peterson and Ridgeway filed a similar motion to compel arbitration. After the arbitration issue was fully briefed, the Court held a hearing on March 17, 2016, to allow the parties to present oral argument. On April 22, 2016, the Court issued an Opinion and Order (Doc. 96) denying the motions to compel arbitration, and finding that the arbitration clause in the 2009 settlement agreement did not apply to any of the claims raised in the instant lawsuit.

         Shortly thereafter, Defendants filed an interlocutory appeal of the Court's order denying arbitration, and the Court's decision was affirmed by the Eighth Circuit in an opinion filed on July 3, 2017. See Doc. 111-1. The formal mandate issued on September 11, 2017, (Doc. 111), and the Court reset the matter for a jury trial. See Doc. 116. Then the Ridgeway Defendants filed a three-Count Counterclaim (Doc. 137) on December 11, 2017. After the parties finished taking discovery, they filed the dispositive motions and the motion in limine that are now before the Court for resolution.

         Zetor NA's Motion for Partial Summary Judgment seeks to dismiss Count II of the Ridgeway Defendants' counterclaim for breach of contract. Zetor NA contends that the 2009 settlement agreement did not create a forward-looking contractual relationship between the parties, including granting a license to Ridgeway to use the Zetor mark in a particular manner-other than the legal ways trademarks may ordinarily be used under the "fair use" doctrine, absent a license. Further, Zetor NA argues that it could not have breached the settlement agreement merely by filing the instant lawsuit.

         Next, Zetor NA moves to voluntarily dismiss Counts III, IV, and VII of its Amended Complaint. The Ridgeway Defendants do not oppose the Motion and have also moved for summary judgment as to all remaining claims in the Amended Complaint. Assuming Counts III, IV, and VII are voluntarily dismissed, this leaves Counts I, II, V, VI and VIII for substantive review on summary judgment.

         Beginning with the trademark-related claims arising from either federal trademark law or the common law, as stated in Counts I, II, and V, the Ridgeway Defendants contend that: (1) Zetor NA lacks standing to bring such claims because it does not own the trademark in question and has not acquired rights to sue on behalf of the owner of the mark (HTC) for infringement or unfair competition, and (2) the Ridgeway Defendants' use of the mark is not likely to cause consumer confusion or damage. Related to the second argument is the Ridgeway Defendants' Motion in Limine, which argues among other things that the Court should exclude Zetor NA's expert witness testimony and consumer survey concerning the likelihood of confusion that could result from the Ridgeway Defendants' use of the Zetor mark.

         As for Count VI of the Amended Complaint, which asserts violations of the ADTPA, the Ridgeway Defendants argue the claim must be dismissed because there is no proof that Zetor NA suffered "actual financial loss," as defined by the statute, since Zetor NA is not a consumer of Ridgeway goods and therefore has not been damaged in the manner that the statute contemplates.

         Finally, as to Count VIII for civil conspiracy, the Ridgeway Defendants argue that nothing more than threadbare allegations have been asserted to support the claim, and there is no evidence that the Defendants conspired together to commit any underlying tort.

         II. LEGAL STANDARD

         The Court "shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a). "[A] genuine issue of material fact exists if: (1) there is a dispute of fact; (2) the disputed fact is material to the outcome of the case; and (3) the dispute is genuine, that is, a reasonable jury could return a verdict for either party." RSBI Aerospace, Inc. v. Affiliated FM Ins. Co., 49 F.3d 399, 401 (8th Cir. 1995). The moving party has the burden of showing the absence of a genuine issue of material fact and that they are entitled to judgment as a matter of law, but the nonmoving party may not rest upon mere denials or allegations in the pleadings and must set forth specific facts to raise a genuine issue for trial. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256 (1986); Celotex Corp. v. Catrett, 477 U.S. 317, 324 (1986). The Court must view all evidence and inferences in a light most favorable to the nonmoving party. See McCleary v. ReliaStar Life Ins. Co., 682 F.3d 1116, 1119 (8th Cir. 2012).

         III. DISCUSSION

         A. Zetor NA's Motion for Partial Summary Judgment on Count II of the Counterclaim

         The Ridgeway Defendants' Counterclaim at Count II alleges that when Zetor NA filed the instant lawsuit, it breached the parties' 2009 settlement agreement. The Ridgeway Defendants contend that the instant suit "seek[s] damages for conduct specifically permitted under the terms of the Agreement," which "granted Ridgeway a license to make use of the Zetor name as specifically set forth therein." (Doc. 137, p. 5). The argument goes that because Zetor NA sued Ridgeway for using the mark in the manner the parties agreed was acceptable under the terms of their 2009 settlement agreement, Zetor NA constructively breached the settlement agreement and damaged the Ridgeway Defendants in the form of decreased sales, loss of good will, and damage to Ridgeway's business reputation.

         Zetor NA's position in its Motion for Partial Summary Judgment is that the 2009 settlement agreement did not grant Ridgeway a license to use the Zetor name and mark. Instead, the settlement agreement merely listed-for purposes of clarity-many of the ways in which Ridgeway could legally use the Zetor mark without having to secure a license and without violating federal or state trademark law.

         In the settlement agreement, Ridgeway agreed that it would "permanently cease and desist the use of the ZETOR Mark." (Doc. 137-1, p. 3). In particular, Ridgeway agreed not to not use the mark "or other indicator of source that is confusingly similar to the Zetor mark," and also consented to stop "promoting and advertising that Ridgeway sells 'Zetor original equipment manufacturer parts' or 'Zetor OEM parts' or similar phrases." Id. The only instance when Ridgeway was permitted to use the Zetor mark was in "promotional/advertising materials (printed or otherwise) to describe that a Ridgeway product is compatible with a referenced Zetor product or technology." However, when using the mark for this purpose, Ridgeway was required to make certain that:

a. The Zetor word mark is not part of the advertised product name.
b. The Zetor word mark is used in a descriptive phrase such as "fits," "for use with," "for," or "compatible with." c. The Zetor word mark appears less prominent than the product name.
d. The product is in fact compatible with, or otherwise works with, the referenced Zetor product.
e. The reference to Zetor does not create a sense of endorsement, sponsorship, or false association with Zetor or Zetor products or services.
f. The use does not show Zetor or its products in a false or derogatory light.

Id.

         Zetor NA argues that the settlement agreement did not create a license for Ridgeway to use the mark, as Count II of the Counterclaim alleges. Instead, the settlement agreement merely outlined for Ridgeway's benefit an acceptable set of uses of the mark that would not violate federal or state trademark law. According to Zetor NA's analysis, anyone could use its mark in the ways described in the settlement agreement and not run afoul of the law, since such uses would comport with the "fair use doctrine," which the law has exempted from trademark enforcement. Zetor contends that, since the settlement agreement conferred no special rights or privileges on Ridgeway to use the mark, the agreement could not possibly have been breached, as a matter of law, by Zetor NA's decision to sue Ridgeway for illegally using the mark.

         The Court agrees that the Ridgeway Defendants cannot make out a cognizable breach of contract action based on Zetor NA's decision to sue for infringement in this case. Although the Ridgeway Defendants argue that their usage of the Zetor mark does, in fact, conform to the usage restrictions spelled out in the settlement agreement or otherwise qualifies as fair use, this argument is simply an affirmative defense to the claims in the Amended Complaint. The Amended Complaint itself does not allege that Defendants used the Zetor mark according to the terms of the settlement agreement. Instead, it alleges a use that was contrary to the terms of the settlement, in that it maintains: "Ridgeway's advertising, marketing and sale of goods using the Zetor name is confusing to the consumer as to the source of the goods and the quality of the product, and dilutes and tarnishes the reputation and good will of the Zetor name." (Doc. 21, p. 7). All causes of action asserted in the Amended Complaint flow from Zetor NA's contention that Defendants' illegal use of the mark. Therefore, as a matter of law, Zetor NA's decision to file this lawsuit alleging such illegal use could not possibly have breached the parties' settlement agreement. Zetor NA's Motion for Partial Summary Judgment is GRANTED, and Count II of the Counterclaim for breach of contract is DISMISSED WITH PREJUDICE.

         B. Zetor NA's Motion to Dismiss Counts III, IV, and VII

         Zetor NA moves to voluntarily dismiss Counts III, IV, and VII of the Amended Complaint, without prejudice. The Ridgeway Defendants did not file any opposition to the Motion. Therefore, the Motion to Dismiss (Doc. 169) is GRANTED, and Counts III, IV, and VII are DISMISSED WITHOUT PREJUDICE pursuant to Federal Rule of Civil Procedure 41(a)(2).

         C. Ridgeway Defendants' Motion for Summary Judgment and Motion in Limine

         1. Motion for Summary Judgment

         The Ridgeway Defendants' Motion for Summary Judgment seeks dismissal of all Counts in the Amended Complaint. Now that Counts III, IV, and VII have been dismissed, this leaves only Counts I, II, V, VI, and VIII.

         a. Count I-Lanham Act Violation for Trademark Infringement

         Count I pleads federal trademark infringement under the Lanham Act, 15 U.S.C. § 1114. To prove infringement, there must be evidence of a use of the mark in commerce, without the owner's consent, in a manner that is likely to cause confusion. 15 U.S.C. § 1114(1); B & B Hardware, Inc. v. Hargis Indus.,569 F.3d 383, 389 (8th Cir. 2009). The parties here do not dispute that the Zetor mark was used in ...


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