Arborjet, Inc. v. Rainbow Treecare Scientific

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
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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]
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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
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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.
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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
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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
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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.
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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
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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
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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
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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.
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