Three Rivers Confections v. Christopher Warman , 660 F. App'x 103 ( 2016 )

NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
___________
No. 15-3436
___________
THREE RIVERS CONFECTIONS, LLC
v.
CHRISTOPHER M. WARMAN, TRADING AND DOING BUSINESS AS ART OF
FUDGE, TRADING AND DOING BUSINESS AS FUDGCO; FUDGETOPIA, LLC
Christopher M. Warman,
Appellant
____________________________________
On Appeal from the United States District Court
for the Western District of Pennsylvania
(D.C. Civil Action No. 2-12-cv-01089)
District Judge: Honorable Joy Flowers Conti
____________________________________
Submitted Pursuant to Third Circuit LAR 34.1(a)
September 22, 2016
Before: JORDAN, RESTREPO and BARRY, Circuit Judges
(Opinion filed: September 23, 2016)
___________
OPINION*
___________
PER CURIAM
*
This disposition is not an opinion of the full Court and pursuant to I.O.P. 5.7 does not
constitute binding precedent.
Appellee Three Rivers Confections, LLC (“TRC”), filed a complaint alleging
thirteen causes of action against Appellant Christopher M. Warman (t/d/b/a “Art of
Fudge” and “Fudgeco”) and Fudgetopia, Inc., for, inter alia, trademark infringement. The
suit arises out of the disputed ownership of the wordmarks “Fudgetopia” and “Fudgie
Wudgie,” and a related logo mark (collectively the “FW marks”). In an order entered
July 29, 2015, the District Court granted TRC’s motion for partial summary judgment on
its claim that it was the lawful and rightful owner of the FW marks.1 This appeal ensued.
For the following reasons, we will affirm the judgment.
I.
Because the parties are familiar with the facts, we only briefly summarize them
here. In 2009, Fudgie Wudgie, L.P. (FWLP), and its general partner, FW Chocolatier,
Inc. (FWC) (collectively the “FW entities”), applied for registration of the wordmark
“Fudgetopia” and a “Fudgie Wudgie” logo mark. In 2010, the FW entities applied for
registration of the wordmark “Fudgie Wudgie.” The United States Patent and Trademark
Office (PTO) assigned registration numbers to the FW marks. At the time of registration,
in 2011 and 2012, Warman was an officer of FWLP, and his then-wife, Christine Falvo,
was CEO of the FW entities.2
1
Previously, in an order entered September 24, 2014, the District Court entered default
judgment against Fudgetopia, Inc.
2
According to Warman’s deposition testimony, “for all intents and practical purposes
[he] was the CEO” of FWLP.
2
Beginning in 2009, FWLP, through FWC, executed a series of four loan
agreements, signed by Falvo and secured by FWLP’s “collateral,” including the FW
trademarks. The lenders filed timely UCC-13 financing statements with the Office of the
Secretary of State of Pennsylvania perfecting their interests in the collateral. TRC
subsequently purchased these loans and took assignment of the underlying security
interests. TRC re-filed UCC-1 financing statements reflecting its security interests in
FWLP and its assets, including the FW trademarks.
In May 2012, Falvo executed an agreement on behalf of the FW entities, through
which FWLP acknowledged (1) its liability to TRC in the amount of $2,224, 881.57,
stemming from its default on the four loans, and (2) that the amount was secured by the
collateral, as described in the UCC-1 financing statements, to which no third party had a
superior title. Pursuant to the agreement, FWLP signed a bill of sale conveying all its
rights, title, and interest in its collateral to TRC in partial satisfaction of the loans. In
June 2012, FWLP, through Falvo, executed a “Trademark Assignment” assigning its
rights and interest in the Fudgie Wudgie trademarks, the goodwill of the business, and the
right to sue “for any past, present or future infringement” of these rights.4
3
All references to the “UCC” are to the Pennsylvania Commercial Code, 13 Pa. Cons.
Stat. § 1101 et seq.
4
In November 2011, another creditor, Sysco Corporation and Sysco Pittsburgh, LLC,
obtained a default judgment against Falvo and the FW entities in the Court of Common
Pleas of Allegheny County. In August 2012, the FW entities’ collateral was sold at a
sheriff’s sale pursuant to a writ of execution obtained by Sysco. TRC was the highest
bidder at the sale and obtained a “Bill of Sale” listing the property, including “All Trade
names and trademarks.”
3
In August 2012, TRC filed this trademark infringement suit. It moved for partial
summary judgment on its claim that it was the “lawful and rightful owner of the Fudgie
Wudgie Marks,” that Warman and Fudgetopia have “no property or other rights” in the
marks, and that transfers of the marks were “lawful, valid and proper.” TRC argued that
it acquired ownership of the FW marks either by operation of the UCC or as a result of
the 2012 sheriff’s sale. In response, Warman maintained that he was the owner of the
FW marks, that he never assigned them to the FW entities, and, therefore, TRC could not
have acquired the rights to the marks. The District Court granted summary judgment on
TRC’s declaratory judgment claim, holding that the trademarks were lawfully transferred
to TRC, and that Warman had no property or other rights in them.5 Warman filed a
notice of appeal, and, subsequently, TRC filed a stipulation of dismissal of the remaining
claims. II.
We exercise appellate jurisdiction pursuant to 28 U.S.C. § 1291.6 We review de
novo a grant of summary judgment. Groman v. Township of Manalapan, 47 F.3d 628,
633 (3d Cir. 1995). Summary judgment is proper where there is no genuine issue of
material fact and the moving party is entitled to judgment as a matter of law. Fed. R. Civ.
5
In the same order, the District Court denied Warman’s motion for leave to amend his
answer and to file a crossclaim.
6
Although Warman’s notice of appeal was premature, it ripened when TRC stipulated to
dismissal of the remaining claims and the District Court entered its final order. See Cape
May Greene, Inc. v. Warren, 698 F.2d 179, 184–85 (3d Cir. 1983) (holding that a Court
of Appeals may decide a premature appeal from a non-final order if an order which is
final is entered before an adjudication on the merits).
4
P. 56; Kaucher v. County of Bucks, 455 F.3d 418, 422-23 (3d Cir. 2006). We “view the
facts and draw inferences in the light most favorable to the nonmoving party,” and, as
Warman proceeds pro se, we must liberally construe his filings. Ray v. Township of
Warren, 626 F.3d 170, 173 (3d Cir. 2010); Renchenski v. Williams, 622 F.3d 315, 337
(3d Cir. 2010).
Under the Lanham Act, 15 U.S.C. § 1115(a), federal registration of a trademark is
prima facie evidence “of the mark’s validity, the registrant’s ownership of the mark, and
its exclusive right to use the mark in commerce.” Lucent Info. Mgmt., Inc., v. Lucent
Tech., Inc., 186 F.3d 311, 315 (3d Cir. 1999). TRC provided records from the PTO’s
online database indicating that it was the current owner of the registered FW marks.7 We
agree with the District Court that Warman did not overcome this presumption because he
failed to show that the marks were wrongfully registered. See Door Sys., Inc. v. Pro–
Line Door Sys., Inc., 83 F.3d 169, 172 (7th Cir. 1996) (“The presumption of validity that
federal registration confers . . . evaporates as soon as evidence of invalidity is
presented.”). Warman first maintained that the Fudgetopia trademark was not used as
stated in the registration. However, FWLP had filed an intent-to-use application pursuant
to 15 U.S.C. § 1051(b), which neither relies on nor requires any prior use of the mark.
Rather, within six months of filing (absent an extension), FWLP was required to show
that the mark was being used in commerce. 15 U.S.C. § 1051(d)(1); see Zazu Designs v.
7
In addition to the PTO records, TRC provided documents evidencing its assignment of
the loans and its security interests in the FW entities’ collateral, including the August
5
L'Oreal, S.A., 979 F.2d 499, 503 (7th Cir. 1992). The PTO approved the registration
showing a first use date of December 1, 2011. As the District Court noted, trademark
registration creates “a rebuttable presumption of use as of the filing date.” Id. at 504.
On appeal, Warman argues that TRC never provided proof to rebut his statements that
Fudgetopia was not used as registered. But it was TRC which had the presumption of use
by virtue of its registration, and Warman wholly failed to present evidence to rebut it.
Warman’s contention that Falvo “confirm[ed] factually that the Fudgetopia mark was not
used by the FW Entities” is not born out by Falvo’s declaration8, which does not even
reference the FW entities’ use of the FW trademarks.
Warman also attacked the validity of the Fudgie Wudgie wordmark (“FW
wordmark”) and logo, asserting that their registration was procured through fraud. A
trademark infringement claim is subject to the affirmative defense of fraud. 15 U.S.C. §
1115(b)(1); see also L.D. Kichler Co. v. Davoil, Inc., 192 F.3d 1349, 1351 (Fed. Cir.
1999) (“Fraud in procuring a . . . mark occurs when an applicant knowingly makes false,
material representations of fact in connection with an application.”). For substantially the
reasons provided by the District Court, we agree with its conclusion that Warman failed
to create a material dispute of fact with respect to his claim that the registrations
2012 Bill of Sale.
8
Warman submitted two declarations by Falvo. The first “declaration of fact” was
properly disregarded by the District Court as it did not state it was made “under penalty
of perjury” as required by 28 U.S.C. § 1746. The District Court properly considered the
second declaration – which included all of the information in the first – to the extent that
it met the requirements of Fed. R. Civ. P. 56(c).
6
fraudulently listed the wrong “first use” date or the wrong owner. In particular, Warman
failed to provide sufficient evidentiary support for his claim that he had priority as the
“senior user” of the FW wordmark and that his name should have been listed on the
registration.9 See Williams v. Borough of West Chester, 891 F.2d 458, 460 (3d Cir.
1989) (nonmoving party cannot simply assert factually unsupported allegations to meet
burden at summary judgment).
A “‘senior user’ is the first to adopt and use a mark anywhere in the country.”
Lucent Info. Mgmt., 186 F.3d at 316. Generally, under common law, the senior user’s
trademark rights prevail over a subsequent user’s rights to the same mark in the same
geographical area. See Hanover Star Milling Co. v. Metcalf, 240 U.S. 403, 415 (1916)
(holding that “[i]n the ordinary case of parties competing under the same mark in the
same market, it is correct to say that prior appropriation settles the question.”). To
establish ownership as the senior user of the FW wordmark, Warman had to show “not
only that at some date in the past [he] used the mark, but that such use has continued to
the present.” 2 J. Thomas McCarthy, McCarthy on Trademarks and Unfair Competition
§ 16:9 (4th ed. 2016). In particular, he was required to show significant “market
penetration” and a “clear entitlement” to protection of the FW wordmark in a particular
9
We reject TRC’s assertion on appeal that this argument should be deemed waived. See
Tri-M Grp., LLC v. Sharp, 638 F.3d 406, 416 (3d Cir. 2011) (“It is axiomatic that
arguments asserted for the first time on appeal are deemed to be waived and consequently
are not susceptible to review in this Court absent exceptional circumstances.”) (quotation
marks omitted). In his summary judgment response, Warman argued that he was the
owner of the mark based on prior and continuous use, and the District Court’s
7
market. Nat. Footwear Ltd. v. Hart, Schaffner & Marx, 760 F.2d 1383, 1397 (3d Cir.
1985).
Warman asserted that he created the mark Fudgie Wudgie in 1989, that he has
used and controlled the mark since then, and that he has never assigned the goodwill or
rights he had in it to the FW Entities. But his evidence in support of this claim is lacking.
He claimed generally that he “used the name for many years” prior to 2006, at which
point he and Falvo created a corporate entity − the name of which he could not recall (“It
may have been FW Chocolatier LLC.”) − which used the mark.10 In addition to being
vague, this statement undermines his claim that he alone had ownership of the FW
wordmark. The claim is further undermined by the record evidence, including a joint
application for registration of the FW logo mark, filed in 2006, listing Warman and Falvo
as co-owners of the logomark, and Warman’s deposition testimony, in which he admitted
that he filed the 2006 application as “50/50 joint owner” of the mark with Falvo, but that
later “somehow some way the trademark was registered under the Fudgie Wudgie name
instead of [his] name and [Falvo’s].”
Memorandum Opinion (at pgs. 21-25) specifically addressed it.
10
Falvo stated in her affidavit that, “to the best of [her] knowledge,” Warman was using
the FW wordmark “as part of his product line and marketing” as early as 1989. As the
District Court noted, however, this conditional statement is insufficient to satisfy the
“personal knowledge” requirement of 28 U.S.C. § 1746. See Lopez–Carrasquillo v.
Rubianes, 230 F.3d 409, 414 (1st Cir. 2000) (holding that affidavit submitted in
opposition to motion for summary judgment which stated that “‘it is correct in all its parts
to the best of my knowledge’” was “insufficient as a proffer of evidence because
affidavits submitted in opposition to a motion for summary judgment must be based on
the affiant's personal knowledge”).
8
The only documentary evidence Warman provided in support of his senior user
claim was a copy of the Pennsylvania Department of State listing for “Fudgie Wudgie
Junior,” a business created in 2006 and owned by Jeremy Gabriel. Warman asserted that
in 2003, he licensed Gabriel to use the FW wordmark, and, in 2006, he licensed Fudgie
Wudgie Junior to Gabriel. Falvo also stated that Warman “allowed use of the Fudgie
Wudgie name and trademark” to Gabriel in 2006. Notably absent from the record is any
evidence tying Gabriel’s Fudgie Wudgie Junior business directly to Warman, such as a
licensing agreement. As the nonmoving party, Warman had to raise more than a mere
“scintilla of evidence” in his favor. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252
(1986). Absent further evidence of ownership, such as market penetration, from which a
reasonable jury could conclude that Warman owned the FW wordmark and logo as a
senior user, summary judgment for TRC was warranted.11
Warman argued alternatively that the Fudgetopia trademark was abandoned. To
establish abandonment, he had to show non-use and intent to abandon. 15 U.S.C. § 1127;
U.S. Jaycees v. Phila. Jaycees, 639 F.2d 134, 139 (3d Cir. 1981) (“abandonment, being in
the nature of a forfeiture, must be strictly proved”). Warman failed to provide evidence
11
Even assuming Warman could establish common law rights to these marks, it is
unclear whether they would have merged with those of the FW entities. See Metro
Traffic Control, Inc. v. Shadow Network Inc., 104 F.3d 336, 340 (Fed. Cir. 1997) (noting
that companies which operate as one entity may be treated as such for trademark
purposes). Indeed, Warman stated in his response to the summary judgment motion that
the 2006 corporate entity, which he co-owned with Falvo, “was ultimately merged into
FW entities.” As the District Court noted, then, it is possible that the FW entities were
owners of the marks under a predecessor in title theory. See 15 U.S.C. § 1127.
9
of either requirement. In support, Warman referred to a meeting during which Falvo
allegedly stated that the “Fudgetopia mark was [Warman’s] and that she didn’t care about
it, that [Warman] had created it. Fudgie Wudgie was not using the mark and had no
intent to use the mark . . .” Although he asserted that these statements were
memorialized in a document, he failed to make the document part of the record. The
District Court determined that Warman’s account of these statements is insufficient under
Rule 56(c) because it is based on inadmissible hearsay. On appeal, Warman argues that
because Falvo made the statements while CEO of the FW entities, the District Court
should have considered them admissible as admissions by a party-opponent under Fed. R.
Evid. 801(d)(2)(A). However, statements made by a predecessor in interest or employees
of a predecessor are not admissible under Rule 801(d)(2)(A). See Calhoun v. Baylor, 646
F.2d 1158, 1162-63 (6th Cir. 1981); Huff v. White Motor Corp., 609 F.2d 286, 290-91
(7th Cir. 1979). Accordingly, the District Court properly declined to consider the
statements as evidence.
Warman also averred generally that he could establish presumptive abandonment
based on TRC’s alleged non-use of the trademarks. Falvo stated in her February 2015
declaration that, “to the best of her knowledge,” TRC was no longer producing fudge or
any other product in Pittsburgh, and had terminated almost all of its staff as of December
2014. As noted, supra, a statement conditioned as such is insufficient under 28 U.S.C.
§ 1746. Moreover, even assuming it could be considered, at best it was evidence of
10
recent non-use, and far short of the three consecutive years of non-use required to show
abandonment. See 15 U.S.C. § 1127.
Finally, Warman’s allegation that the Fudgetopia trademark was “orally assigned”
to him failed on two fronts. First, “the Lanham Act requires that assignments of federally
registered marks . . . be in writing.” 3 McCarthy on Trademarks and Unfair Competition
§ 18:43 (4th ed. 2016); see also Beauty Time, Inc. v. VU Skin Sys., Inc., 118 F.3d 140,
150 (3d Cir. 1997) (explaining that trademark which was orally assigned, rather than
acquired in connection with the sale of a business or otherwise transferred with the
goodwill associated with the trademark, constitutes an invalid assignment in gross).
Moreover, as the District Court noted, the evidence in support of this claim was lacking.
Falvo stated in her declaration that she had emailed corporate counsel to transfer
ownership of the Fudgetopia trademark to Warman. In the email, which was made part
of the record, Falvo merely advised counsel that she “would like to transfer the
ownership of the trademarks for Fudgetopia” to Warman. There is no evidence to
suggest that any steps were taken, beyond this email, to effectuate the transfer of the
trademark. Accordingly, TRC was entitled to summary judgment.
III.
We now turn to Warman’s argument that the District Court erred in denying his
motion for leave to file an amended answer and a counterclaim. We review a District
Court’s refusal to grant leave to amend a pleading for abuse of discretion. Lake v.
Arnold, 232 F.3d 360, 373 (3d Cir. 2000).
11
After a responsive pleading has been filed, a party may amend its pleading only by
leave of court or by written consent of the adverse party, and leave shall be “freely
give[n] when justice so requires.” Fed. R. Civ. P. 15(a). Denial of leave may be justified
where there has been undue delay or where amendment would be futile. See Foman v.
Davis, 371 U.S. 178, 182 (1962).
Warman’s motion to amend was filed after discovery had closed, after TRC’s
motion for partial summary judgment was briefed, and after he had been granted two
extensions of time to file his summary judgment response. Warman failed to provide any
explanation for the delay. And, as the District Court noted, his proposed counterclaims,
which were presented, in part, as arguments against summary judgment, are without
merit. Under these circumstances, we find no abuse of discretion.
For the foregoing reasons, we will affirm the judgment of the District Court.
12