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Star Buffet Inc v. TGB Glory LLC

United States District Court, E.D. Arkansas, Western Division

March 29, 2019

STAR BUFFET, INC. and SOUTHERN BARNS, INC. PLAINTIFFS COUNTERDEFENDANTS
v.
TGB GLORY, LLC d/b/a BARNHILL'S STEAKS and BUFFET, and STEVEN C. BARNHILL DEFENDANTS COUNTERCLAIMANTS

          ORDER

          SUSAN WEBBER WRIGHT, UNITED STATES DISTRICT JUDGE

         Plaintiffs Star Buffet, Inc. (“Star Buffet”) and Southern Barns, Inc., [1] filed this trademark/service mark[2] infringement action pursuant to the Lanham Act, 15 U.S.C. § 1116, against TGB Glory, LLC (“TGB”), doing business as Barnhill's Steaks and Buffet, and Steven C. Barnhill (“Steven Barnhill”). Before the Court are Defendants' first and second motions for summary judgment [ECF Nos. 17, 18, 19, 30, 31, 32], Plaintiffs' responses in opposition [ECF Nos, 22, 23, 37, 41 (under seal)], and Defendants' replies [ECF Nos. 24, 42]. After careful consideration, and for reasons that follow, the motions for summary judgment are denied.

         I. Summary Judgment Standard

         Summary judgment is appropriate when “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). As a prerequisite to summary judgment, a moving party must demonstrate “an absence of evidence to support the non-moving party's case.” Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986). Once the moving party has properly supported its motion for summary judgment, the non-moving party must “do more than simply show there is some metaphysical doubt as to the material facts.” Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986).

         The non-moving party may not rest on mere allegations or denials of his pleading but must come forward with ‘specific facts showing a genuine issue for trial. Id. at 587. “[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).

         II. Background

         In 1991, Defendant Steven Barnhill opened the first Barnhill's restaurant in Florida through his company, Barnhill's Country Buffet, Inc. (“BCB”). BCB used various service marks in connection with the restaurant that featured the word “Barnhill's” as the dominate feature. BCB's enterprise quickly grew to include seven restaurants.

         In 1993, BCB granted Charles Barnhill, Steven Barnhill's father, permission to use Barnhill's service marks in connection with a restaurant in Nacogdoches, Texas, called “Barnhill's Steaks & Buffet.” From that time until the present, Charles has used Barnhill's marks at the Nacogdoches restaurant.

         In 1995, Lovett's Buffet, Inc. (“Lovett's”) purchased BCB, and Steven Barnhill stayed on as an employee. After the purchase, Lovett's changed its name to Barnhill's Buffet, Inc. (“BBI”) and expanded the business to include 45 restaurants, in several states, that used the Barnhill's service marks. From 1999 through 2006, BBI obtained five federal trademark registrations for the Barnhill's name and logos (“the BBI marks”).[3]

         On December 2, 2007, BBI and Star Buffet Management, Inc. (“SBM”), a wholly-owned subsidiary of Star Buffet, entered an agreement whereby SBM would purchase Barnhill's restaurants from BBI. The next day, BBI filed a voluntary petition for Chapter 11 bankruptcy in the United States Bankruptcy Court for the Middle District of Tennessee.

         According to a motion filed on December 4, 2007 in the bankruptcy case, BBI was then operating 29 buffet style restaurants under the name “Barnhill's Buffet.”[4] The bankruptcy record shows that when BBI filed its Chapter 11 petition, it sought to sell substantially all of the company's assets and originally planned to sell 21 restaurants to SBM.[5] However, BBI and SBM entered an amended purchase agreement stating that SBM would purchase only sixteen BBI restaurants for $5 million. The bankruptcy court approved the amended agreement and sale on January 31, 2008.

         On February 4, 2008, BBI sought permission to sell four of its remaining restaurants to Starlite Holdings, Inc., another wholly-owned Star Buffet subsidiary, for the sum of $1 million.[6] The bankruptcy court initially denied the proposed sale but eventually found that it met the requirements of 11 U.S.C. § 363(b)(1) and granted approval.[7]

         The approved asset purchase agreements by which Star Buffet's wholly-owned subsidiaries purchased a total 20 restaurants from BBI contained the following provision:

Perpetual License of Trade names. At the Closing but effective as of the Effective Time, Seller shall grant to Buyer a perpetual license to use any trade names, trademarked names, or graphics owned by Seller for purposes of operating the Restaurants (the “License”).[8]

         There is no indication in the record that the seller retained any right to control the licensee or that the buyer had exclusive rights to use the marks.

         On April 28, 2008, BBI voluntarily converted the Chapter 11 proceeding to Chapter 7.[9] On January 5, 2010, for consideration of $2, 000, the Chapter 7 bankruptcy trustee transferred to Steven Barnhill “all of the bankruptcy estate's rights and interests in the Barnhill's trademark, name and logos including associated trademarks under which the debtor operated its restaurant businesses.”[10] Plaintiffs filed no objection to this sale. The bill of sale provided that the assets were conveyed “‘as is, where is' without any express or implied warranties . . . .”[11] When Steven Barnhill made this purchase, two of the five BBI marks had been cancelled for non-use, and by September 20, 2013, they had all been cancelled.[12]

         On April 21, 2014, Star Buffet's wholly-owned subsidiary, CC Starts, Inc. (“CC Starts”), submitted an application in the United States Patent and Trademark Office (“PTO”) to register the service mark BARNHILL'S SALADS BUFFET DESSERTS. On December 9, 2014, the mark was registered as United States Trademark Registration No. 4, 652, 229, and on August 8, 2017, CC Starts assigned the registration to Star Buffet.

         Star Buffet has continuously used the BARNHILL'S SALADS BUFFET DESSERTS mark on signs, menus, and other materials at the Barnhill's Country Buffet in Jonesboro, Arkansas, one of the restaurants it purchased from BBI in 2008. Defendants Steven Barnhill and TGB operate Barnhill's Steaks Buffet, a restaurant located in Jacksonville, Arkansas that opened for business in 2017. Defendants promote their Jacksonville restaurant with the service mark BARNHILL'S STEAKS BUFFET, which Plaintiffs contend is confusingly like BARNHILL'S SALADS BUFFET DESSERTS. After making unsuccessful demands that Defendants cease alleged trademark infringement, Plaintiffs commenced this action charging willful infringement of a trademark, trademark infringement and false designation of origin, and unfair competition.

         Defendants counterclaimed, seeking (1) a declaration that Defendants do not violate Plaintiffs' rights by using the service mark BARNHILL'S STEAKS BUFFET service mark and (2) cancellation of Star Buffet's trademark registration for BARNHILL'S SALADS BUFFET DESSERTS. Defendants assert that pursuant to the 2008 asset purchase agreements, Star Buffet acquired only a license to use the BBI Barnhill's service marks and that BBI retained ownership of the marks. Defendants further assert that pursuant to the bill of sale entered in BBI's Chapter 7 proceeding on January 7, 2010, Defendant Steven Barnhill is the owner of the mark BARNHILL'S SALADS BUFFET DESSERTS. In answer to the counterclaim, Plaintiffs assert, among other things, Defendants' abandonment of all rights in any mark relevant to this case.

         III. Defendants' First Motion for Summary Judgment

         Defendants move for summary judgment, claiming they have superior rights in the mark BARNHILL'S SALADS BUFFET DESSERTS based on prior use. Specifically, Defendants argue that (1) Star Buffet used the BBI marks in the capacity of a licensee and such use inured to the benefit of the licensor, BBI, and then to Steven Barnhill after he purchased the BBI marks from the bankruptcy trustee, (2) Star Buffet, as a licensee, is estopped from making any adverse claims against Defendants, (3) the continued use of Barnhill's marks by Steven Barnhill's father, Charles Barnhill, inured to the benefit of Steven Barnhill, and (4) Star Buffet's PTO registration for the BARNHILL'S SALADS BUFFET DESSERTS marks should be cancelled.

         The Court finds that this motion must be denied because there are material questions of fact. First and foremost is the question whether the Defendants lost priority in their marks when their registrations were cancelled or when defendants failed to use them following the purchase agreements approved by the bankruptcy court. The Lanham Act provides that a mark shall be deemed to be “abandoned” if either of the following occurs:

(1) When its use has been discontinued with intent not to resume such use. Intent not to resume may be inferred from circumstances. Nonuse for 3 consecutive years shall be prima facie evidence of abandonment. “Use” of a mark means the bona fide use of such mark made in the ordinary course of trade, and not made merely to reserve a right in a mark.
(2) When any course of conduct of the owner, including acts of omission as well as commission, causes the mark to become the generic name for the goods or services on or in connection with which it is used or otherwise to lose its significance as a mark. Purchaser motivation shall not be a test for determining abandonment under this paragraph.

15 U.S.C.A. § 1127.

         A party claiming abandonment under § 1127(1), [13] formerly § 1127(a), must prove (1) discontinued use and (2) intent not to resume use, which may be inferred from the circumstances. Id.; Hiland Potato Chip Co. v. Culbro Snack Foods, Inc., 720 F.2d 981, 983-84 (8th Cir. 1983). Proof of nonuse for three consecutive years creates a rebuttable presumption of abandonment, which shifts the burden of production to the mark owner to show use within the relevant period or an intent to resume use. See Cumulus Media, Inc. v. Clear Channel Commc'ns, Inc., 304 F.3d 1167, 1176 (11th Cir. 2002)(surveying cases regarding the effect of the three-year presumption).

         Plaintiffs point to the following statement by the bankruptcy trustee appointed in BBI's Chapter 7 case: “Following the closing of the sale . . . on February 29, 2008, the Debtor was no longer operating any restaurants.”[14] Plaintiffs also note that in December 2009, when the Chapter 7 trustee was administering the bankruptcy estate, the PTO began cancelling BBI's trademark registrations for failure to file affidavits of continued use.[15] The record is void of any information indicating that the bankruptcy trustee took any action with respect to perpetual licenses that BBI granted in connection with the sale of restaurants. After Stephen Barnhill purchased the bankruptcy estate's rights in Barnhill's marks, “as is, ” the PTO cancelled the remaining BBI registrations, [16] and Barnhill's own testimony indicates that he did not use the BBI marks from 2011 until January 2017, when he opened the Jacksonville Barnhill's restaurant.

         Plaintiffs contend that the bankruptcy trustee abandoned the BBI marks and that Stephen Barnhill's nonuse of the marks between 2011 and 2017 creates a rebuttable presumption that he abandoned the marks before Star Buffet's 2014 trademark registration. Defendants counter that the “bankruptcy trustee entered into perpetual licenses with Plaintiffs' related companies[, ]” and “the licensee's use inures to the benefit of the trademark owner.”[17] Contrary to Defendant's account of events, ...


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