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Arborjet, Inc. v. Rainbow Treecare Scientific Advancements, Inc. , 794 F.3d 168 ( 2015 )


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  •           United States Court of Appeals
    For the First Circuit
    No. 14-2324
    ARBORJET, INC.,
    Plaintiff, Appellee,
    v.
    RAINBOW TREECARE SCIENTIFIC ADVANCEMENTS, INC.,
    Defendant, Appellant.
    APPEAL FROM THE UNITED STATES DISTRICT COURT
    FOR THE DISTRICT OF MASSACHUSSETTS
    [Hon. Nathaniel M. Gorton, U.S. District Judge]
    Before
    Selya, Circuit Judge,
    Souter,* Associate Justice,
    Lipez, Circuit Judge.
    July 16, 2015
    * Hon. David H. Souter, Associate Justice (Ret.) of the
    Supreme Court of the United States, sitting by designation.
    Scott P. Lopez, with whom Joshua M. D. Segal and Lawson &
    Weitzen, LLP were on brief, for appellant.
    Kristen S. Scammon, with whom Michael S. Day and Torres,
    Scammon & Day, LLP were on brief, for appellee.
    SOUTER, Associate Justice.       This appeal challenges a
    preliminary injunction meant to enforce a contractual agreement
    and prohibit a trademark violation.        We affirm in part and reverse
    in part.
    I.
    Plaintiff-Appellee Arborjet, Inc. manufactures and sells
    TREE-age, an emamectin benzoate solution used to protect trees
    from various pests.       Through the period from August 2008 to
    February     2013,   Arborjet   granted    Defendant-Appellant     Rainbow
    Treecare   Scientific    Advancements,    Inc.   an   exclusive   right   to
    distribute TREE-age.      Their sales agency contract included this
    provision:
    [Rainbow] agrees, in view of the confidential
    information regarding Arborjet's business
    affairs,   plans,    and   necessities,   that
    [Rainbow] will not engage in affairs intended
    to   replicate    [A]rborjet's   products   or
    processes.
    After the termination of this agreement, Rainbow began marketing
    and   distributing      ArborMectin,      another     emamectin   benzoate
    combination meant to compete directly with TREE-age.              Arborjet
    sued Rainbow in Massachusetts trial court, seeking to enjoin
    Rainbow's sales of ArborMectin and claiming breach of contract,
    breach of implied covenant of good faith and fair dealing, false
    - 3 -
    advertising under the Lanham Act and Massachusetts law, 
    15 U.S.C. § 1125
    (a)(1)(B); 
    Mass. Gen. Laws ch. 266, § 91
    , false designation
    of origin under the Lanham Act, 
    15 U.S.C. § 1125
    (a)(1)(A), and
    common law unfair competition.          Rainbow removed the action to
    federal court.
    In the preliminary injunction proceedings from which
    this appeal comes, the district court did not find for Arborjet on
    the prospects of its Lanham Act or state law tort and statutory
    claims, but it did find likely success on those for breach of
    contract and implied covenant of good faith and fair dealing.        The
    court said that Arborjet had "demonstrated a likelihood that it
    will be able to prove that [Rainbow] engaged in research and
    development to create a product very similar to TREE-age," in
    violation of the sales agency agreement.           In summarizing the
    support   it   found   for   this   conclusion,   the   court   described
    ArborMectin as the "defendant's own . . . product" and stated that
    "Rainbow's website describes partnering with several institutions
    and companies to conduct research studies regarding ArborMectin's
    effectiveness," at least one of which "took place while Rainbow
    was . . . subject to the terms of the [sales agency a]greement."
    The district court accordingly granted Arborjet an injunction to
    run during the litigation, with a principal order that "[Rainbow]
    - 4 -
    and those acting in concert with it . . . immediately cease and
    desist selling, distributing and/or marketing ArborMectin."
    II.
    We start with the state law contract claims and a word
    about the deferential standard of review: whether the district
    court abused its discretion in issuing the preliminary injunction
    addressing breach of those obligations.    See TEC Eng'g Corp. v.
    Budget Molders Supply, Inc., 
    82 F.3d 542
    , 544–45 (1st Cir. 1996).
    Thus, we may "set aside [the district court's] ruling only if . . .
    persuaded that [it] mistook the law, clearly erred in its factual
    assessments, or otherwise abused its discretion in granting the
    interim relief."   McGuire v. Reilly, 
    260 F.3d 36
    , 42 (1st Cir.
    2001).   Our review recognizes "the preliminary nature of the
    proceeding; in the context of a preliminary injunction motion, the
    district court's findings need not be overly detailed, and they do
    not bind the court in subsequent proceedings."    TEC Eng'g Corp.,
    
    82 F.3d at 545
    ; see also Narragansett Indian Tribe v. Guilbert,
    
    934 F.2d 4
    , 6 (1st Cir. 1991) ("[A] party losing the battle on
    likelihood of success may nonetheless win the war at a succeeding
    trial on the merits.").
    To grant a preliminary injunction, a district court must
    find the following four elements satisfied: (1) a likelihood of
    - 5 -
    success on the merits, (2) a likelihood of irreparable harm absent
    interim relief, (3) a balance of equities in the plaintiff's favor,
    and (4) service of the public interest.     See Voice of the Arab
    World, Inc. v. MDTV Med. News Now, Inc., 
    645 F.3d 26
    , 32 (1st Cir.
    2011) (citing Winter v. Natural Res. Def. Council, Inc., 
    555 U.S. 7
    , 20 (2008)).   The second through fourth considerations are not
    disputed, so we focus solely on likelihood of success, and find no
    abuse of discretion in the conclusion that Arborjet was likely to
    succeed on its contract claims.1
    Rainbow argues first that it was clear error to find a
    likely showing that it contributed to the creation of ArborMectin,
    contending that the record undisputedly shows that a different
    company, Rotam, created ArborMectin on its own.       The evidence
    before the district court, however, was not nearly as one-sided as
    Rainbow says.    To be sure, the Environmental Protection Agency
    (EPA) lists Rotam as the approved creator of ArborMectin, but the
    question is whether Rainbow contributed to its creation.   And, on
    that point, the district court was presented with two e-mails from
    1 The district court treated claims based on the express terms
    and the implied covenant of good faith dealing together, and none
    of the authorities cited by Arborjet provide any basis for treating
    them differently here.    We need not reach the implied covenant
    claim because we affirm as to the written terms.
    - 6 -
    a Rainbow sales representative describing ArborMectin as Rainbow's
    own product, and truly undisputed evidence that Rainbow conducted
    at least ten studies across the United States on the effectiveness
    of ArborMectin, some of them years before Rotam submitted its
    formula to EPA for approval.     It was certainly plausible, then,
    for the court to infer that Rainbow played a role in the product's
    creation. Although Rainbow counters that the statements were false
    and that its studies were merely the practices of a sensible
    distributor, these arguments at best show only that, if the court
    had accepted them, it could reasonably have reached the opposite
    conclusion.   But "where the facts can support two plausible but
    conflicting   interpretations    of     a   body   of   evidence,   the
    factfinder's choice between them cannot be clearly erroneous."
    deBenedictis v. Brady-Zell (In re Brady-Zell), 
    756 F.3d 69
    , 72
    (1st Cir. 2014).
    Next, Rainbow argues that the district court fell into
    legal error when it interpreted the contractual language quoted
    earlier.   Rainbow cites a dictionary definition of "replicate" to
    contend that "affairs intended to replicate" applies only to
    efforts to produce a compound that would be an exact copy of TREE-
    age.   Thus, Rainbow concludes, the contractual prohibition does
    - 7 -
    not apply to the development of ArborMectin, which both parties
    understand to differ from TREE-age in toxicity and other details.
    The     district     court    considered      and     rejected    this
    argument, in faithfully applying Massachusetts contract law that
    "[t]he words of a contract must be considered in the context of
    the entire contract rather than in isolation."                  Brigade Leveraged
    Capital Structures Fund Ltd. v. PIMCO Income Strategy Fund, 
    995 N.E.2d 64
    , 69 (Mass. 2013) (internal quotation marks omitted).
    The phrase at issue here ("will not engage in affairs intended to
    replicate     [A]rborjet's        products")       is   prefaced    by   language
    indicating    Arborjet's        concern    about    guarding     information   not
    available to the public and potentially damaging if disclosed to
    competitors ("in view of the confidential information regarding
    Arborjet's         business     affairs,      plans,      and      necessities").
    Accordingly, the prohibition was probably aimed at preventing
    efforts by Rainbow to place Arborjet at a competitive disadvantage,
    reflecting a concern broader than the mere creation of an exact
    copy.2   That said, we need not determine here the exact scope of
    2 Another point casts further doubt on Rainbow's reading: at
    the date of the contract, the active agent in TREE-age was
    apparently under patent protection. See Rainbow's Memorandum of
    Law in Opposition to Motion for Preliminary Injunction at 1, No.
    14-cv-14129 (D. Mass. filed Nov. 18, 2014), ECF No. 17 (stating
    that ArborMectin was created after the patent on emamectin benzoate
    - 8 -
    the generally worded prohibition; for now it is enough to say
    simply that the dictionaries do not confine "replicate" to exact
    duplication, and Rainbow's claims of superiority for "our" product
    (which Rainbow extensively tested) raise a likelihood that Rainbow
    will be shown to have made efforts to develop ArborMectin as a
    competing product in violation of the contractual restriction
    during the contract period. For that matter, common sense suggests
    that, if the parties had an object as narrow as Rainbow claims,
    they would have written clearer language specific to that aim.
    See 
    id. at 70
     ("Common sense is as much a part of contract
    interpretation as is the dictionary or the arsenal of canons."
    (internal quotation marks omitted)).   Thus the district court did
    not abuse its discretion in entering the portion of the preliminary
    injunction based on Arborjet's contract claim.3
    expired). If that is true, it seems highly unlikely (albeit not
    impossible) that Arborjet would include a contractual prohibition
    on exact copies only, as the patent laws already saw to that.
    3Rainbow initially argued that the injunction must be vacated
    because it has no limit on time. Rainbow appears to have wisely
    backed away from that argument, as the preliminary nature of the
    injunction ensures that it will be limited to the duration of the
    present litigation.
    - 9 -
    III.
    Rainbow challenges a second term of the injunction, not
    yet discussed:
    [Rainbow] and those acting in concert with it
    shall    properly     attribute    Arborjet's
    trademarks "Arborjet" and "TREE-age" by
    appending the ® symbol to those marks and a
    footnote stating "Registered Trademark of
    Arborjet, Inc."
    Rainbow objects that ordering proper attribution of "Arborjet" and
    "TREE-age" was improper given the district court's rulings on the
    Lanham Act claims.
    Here we agree with Rainbow.   This provision apparently
    responded to Arborjet's claim of "false designation of origin"
    under the Lanham Act. 
    15 U.S.C. § 1125
    (a)(1)(A). Arborjet alleged
    that Rainbow failed to attribute Arborjet trademarks properly in
    Rainbow communications, that failure of proper attribution was
    likely to cause consumer confusion, and that such likelihood of
    confusion demonstrated Rainbow's violation of § 1125(a)(1)(A).
    Rainbow's opposition papers disputed that any improper attribution
    would cause consumer confusion.   Thus, according to the district
    court filings, it would appear that the grant of preliminary
    injunctive relief, so far as ordering Rainbow to attribute Arborjet
    - 10 -
    trademarks properly, responded to the allegedly false designation
    of origin.
    The    problem,   however,   is   that    the   district   court
    concluded that Arborjet was not likely to succeed on this claim.
    Indeed, it said that the evidence on this point "weigh[ed] against
    a finding of a likelihood of confusion."              This was fatal to the
    request for an injunctive order for trademark designation.                In
    this circuit, proving likelihood of success on the merits is the
    "sine qua non" of a preliminary injunction.              New Comm Wireless
    Servs., Inc. v. SprintCom, Inc., 
    287 F.3d 1
    , 9 (1st Cir. 2002).
    "[I]f the moving party cannot demonstrate that he is likely to
    succeed in his quest, the remaining factors become matters of idle
    curiosity.”    
    Id.
    In its effort to defend this portion of the preliminary
    injunction, Arborjet contends that the district court did not grant
    such relief under the Lanham Act claim but rather to give effect
    to a binding stipulation made by Rainbow in the course of the
    proceedings.       The record is otherwise, however.
    As mentioned earlier, Arborjet's complaint contained
    many claims.       To support its false advertising claims, it alleged
    that Rainbow's representations of ArborMectin as "improved TREE-
    age" may mislead customers into thinking that ArborMectin was
    - 11 -
    produced by Arborjet.       At the November 2014 preliminary injunction
    hearing, the district court appeared to share that concern, and it
    ended the hearing by strongly encouraging the parties to "come to
    some mutual middle ground."        Shortly after, Rainbow submitted a
    letter indicating that it had "made an offer to Arborjet that [it]
    will not make future advertising or marketing statements that
    ArborMectin is 'improved TREE-age'" and that, even though the case
    had not settled, Rainbow "agree[d] to voluntarily comply with its
    proposal."        The district court treated that submission as a
    "binding stipulation."
    As    this   procedural    recounting    demonstrates,   the
    stipulation does not support the preliminary injunction.              The
    stipulation appears to relate to the false advertising claim,         and
    it was in the false advertising portion of its findings that the
    district court mentioned the agreement and spoke of it as a binding
    stipulation.        The   preliminary   injunction,   however,   probably
    relates to the false designation of origin claim, for the reasons
    explained earlier.        Yet, even as to the false advertising claim,
    the court made no finding of likelihood of success, stipulation or
    no stipulation.       What is more, even if we were to look to the
    stipulation as authority for this provision of the injunction, the
    support would come up short, for the stipulation is limited to the
    - 12 -
    use of a two-word phrase in marketing materials, whereas the
    preliminary injunction mandates Rainbow's attribution of Arborjet
    trademarks across the board.        Hence, we do not believe this term
    of   the   preliminary      injunction     merely   effectuates   Rainbow's
    stipulation.       The upshot is that this portion of the order must be
    vacated, being unsupported by a finding of likely success on a
    relevant claim.       New Comm Wireless Servs., 287 F.3d at 9.
    IV.
    The    order   comprising   the   preliminary   injunction   is
    affirmed in part, and reversed in part.         Each party shall bear its
    own costs.
    - 13 -
    

Document Info

Docket Number: 14-2324

Citation Numbers: 794 F.3d 168, 115 U.S.P.Q. 2d (BNA) 1677, 2015 U.S. App. LEXIS 12300, 2015 WL 4366624

Judges: Selya, Souter, Lipez

Filed Date: 7/16/2015

Precedential Status: Precedential

Modified Date: 11/5/2024