United States District Court, S.D. Indiana, Indianapolis Division
FINDINGS OF FACT AND CONCLUSIONS OF LAW FOLLOWING THE MARCH 2, 2015 DAMAGES HEARING
TANYA WALTON PRATT, District Judge.
This matter is before the Court for a decision on damages sought by Plaintiff Wine & Canvas Development LLC ("WNC") against Defaulted Defendants Theodore Weisser ("Weisser"), YN Canvas CA, LLC ("YN Canvas"), and Weisser Management Group, LLC ("Weisser Management") (collectively "Defaulted Defendants"). WNC's Amended Complaint alleged violations of the Lanham Act for trademark infringement and other violations, and requested Injunctive Relief and Damages. Following an entry of default, a hearing was held on March 2, 2015, wherein the parties were permitted to present evidence, make argument and submit proposed findings of fact and conclusions of law. The Court now finds as follows:
Although the procedural and factual backgrounds pertaining to this action have been set forth in previous orders, a summary in this Entry is warranted. The complaint in this matter was filed in state court in November 2011, and the action was removed to federal court on December 2, 2011. WNC filed an Amended Complaint on September 4, 2012 (Filing No. 36) against Weisser, Christopher Muylle ("Muylle"), YN Canvas and Weisser Management. WNC's Amended Complaint asserts the following claims: Count 1 - Trademark Infringement; Count 2 - False Designation of Origin; Count 3 - Trademark Dilution; Count 4 - Sales of Counterfeit Items; Count 5 - Unfair Competition; Count 6 - Bad Faith, Tortious Conduct, Abuse of Process, et al.; Count 7 - Civil Action Under the Indiana Crime Victims Act; Count 8 - Breach/Equitable Relief; and Count 9 - Fraud.
Initially, Weisser was represented by counsel, however, his attorneys withdrew their appearance on October 4, 2012, and the Court directed the Clerk to add Weisser as a pro se litigant (Filing No. 48). On October 22, 2012, Weisser filed an Answer to the Amended Complaint and asserted counterclaims against WNC for violation of California's franchise code and for cancellation of the WNC trademark registration (Filing No. 51). Thereafter, Weisser virtually abandoned this case. Throughout his self-representation, Weisser disregarded many court orders and procedures, and missed numerous deadlines.
In January 2013, Weisser's Co-Defendant, Christopher Muylle, filed an Amended Answer and asserted counterclaims against WNC and third party claims against Anthony Scott ("Scott"), Tamara McCracken ("Ms. McCracken"), and Donald McCracken ("Mr. McCracken") (Filing No. 66). The counterclaims and third party claims were two counts of violations of California's franchise code, cancellation of the WNC trademark registration, and abuse of process. WNC then filed third party counterclaims against Muylle, Weisser, YN Canvas, and Weisser Management on June 18, 2013 (Filing No. 101).
In September 2013, the Court granted WNC's motions to dismiss Muylle's two counts of violations of California's franchise code as well as Weisser's counterclaim for violation of California's franchise code (Filing No. 144; Filing No. 145 (adopted by Filing No. 179 and Filing No. 184)). On November 22, 2013, a Clerk's Entry of Default was entered against Weisser, YN Canvas, and Weisser Management in their capacity as third party counterclaim defendants and against YN Canvas and Weisser Management in their capacity as defendants for their failure to file responsive pleadings (Filing No. 210).
Then on August 15, 2014, in two separate Orders on summary judgment motions, the Court dismissed Muylle's and Weisser's claims to cancel the WNC trademark registration (Filing No. 341; Filing No. 342). In the summary judgment Order as to Muylle, the Court also dismissed all of the claims asserted by WNC against Muylle with the exception of the trademark infringement claim and the false designation of origin claim after November 18, 2011. Muylle's claim for abuse of process against WNC, Scott, Ms. McCracken, and Mr. McCracken also survived summary judgment (Filing No. 341).
The final pretrial conference was held on October 22, 2014, and Weisser chose not to participate. On November 10, 2014, one week prior to the jury trial of this matter, the Court found Weisser in default as to liability for the claims asserted against him in WNC's Amended Complaint because of his failure to participate in the litigation and to comply with numerous court orders (Filing No. 408).
As a result of the Entries of Default and Orders on the Motions to Dismiss and Motions for Summary Judgment, the only claims remaining for trial were WNC's trademark infringement claim and false designation of origin claim against Muylle after November 18, 2011, and Muylle's counterclaim for abuse of process against WNC, Scott, Ms. McCracken, and Mr. McCracken. The Court informed the parties that a separate hearing after the trial would be held to determine damages as to the Defaulted Defendants (Filing No. 411).
From November 17 through November 20, 2014, the Court conducted a jury trial on WNC's trademark claims against Muylle and Muylle's counterclaim for abuse of process against WNC, Scott, Ms. McCracken, and Mr. McCracken. The jury returned a verdict in favor of Muylle on WNC's claims for trademark infringement and false designation of origin. The jury also returned a verdict for Muylle on his counterclaim and third party claim for abuse of process, awarding Muylle $81, 000.00 against WNC, $81, 000.00 against Scott, $81, 000.00 against Ms. McCracken, and $27, 000.00 against Mr. McCracken (Filing No. 444).
After the jury trial, Weisser hired an attorney and filed a Motion to Set Aside the Judgment of Default that had been entered against him (Filing No. 449), and that Motion was denied (Filing No. 464). The Court set a hearing to determine damages as to the Defaulted Defendants. The damages hearing was held on March 2, 2015. Having considered testimony, arguments and evidence, the Court now makes the following findings of fact and conclusions of law pursuant to Federal Rule of Civil Procedure 52.
II. FINDINGS OF FACT
Prior to this lawsuit and the events that led up to it, Scott and Weisser had been friends since childhood, for almost 24 years. Scott is an Indiana resident, a founder of WNC, and the president of WNC. Scott's business and life partner, Ms. McCracken, is also an Indiana resident, a founder of WNC, and the art director of WNC. Her father, third party defendant Mr. McCracken, is an Indiana resident, a founder of WNC, and the sole owner of WNC. Weisser is now a resident of California but was a resident of Alabama before he moved to California with Muylle to help open a San Francisco location for WNC's expansion.
WNC is a limited liability company organized and existing under the laws of Indiana with its principal office located in Hamilton County, Indiana. WNC is a widely popular venture that offers artistic instruction and entertainment combined with alcoholic beverages offered in a variety of venues, including public and private settings, corporate events, special occasions, and classroom settings. WNC has acquired substantial goodwill among consumers, and as a result of extensive sales and advertising-especially through social media marketing-the WNC mark is recognized.
In January 2011, Scott and WNC hired Weisser, through his company Weisser Management, as a consultant to develop franchise, license, partnership, confidentiality, noncompete, membership interest, and other business documents for WNC's business expansion. Although Weisser is not a lawyer, Scott asked him to assist in WNC's franchise and business development efforts, which Weisser did from approximately January to August 2011. In March 2011, under the direction of WNC, Weisser assisted in developing a licensing package to offer to potential partners of WNC. The full licensing package consisted of (1) an LLC Membership Interest Purchase Agreement (Tr. Ex. 400), (2) an Option to Purchase Ownership Interest (Tr. Ex. 401), (3) an Operating Agreement (Tr. Ex. 402), (4) a Subscription to Membership Interest (Tr. Ex. 403), (5) a Membership Redemption Agreement and Covenant Not to Compete (Tr. Ex. 404), and (6) an Intellectual Property License Agreement (Tr. Ex. 411).
After Weisser had worked on developing WNC's licensing package, in April 2011, discussions ensued between WNC and Weisser about the expansion of WNC to San Francisco, California. In July 2011, Weisser discussed with WNC that a mutual friend, Muylle, would be his partner in opening a WNC location in San Francisco. On July 5, 2011, Weisser and Muylle formed YN Canvas to operate the to-be-licensed WNC location in San Francisco.
YN Canvas is a limited liability company organized and existing under the laws of Nevada, and it is managed by Weisser and Muylle. YN Canvas was organized to offer artistic instruction and entertainment as licensed by WNC. Weisser Management is a limited liability company organized and existing under the laws of Alabama. Weisser Management is operated by its sole member, Theodore Weisser, to, among other things, help manage YN Canvas.
Throughout July 2011, WNC and Weisser continued discussing the business arrangement for the San Francisco operation, but no mutual agreement was reached regarding the structure of the business relationship. Meanwhile, Weisser and Muylle continued to make preparations to move to San Francisco and start a WNC operation in California. WNC repeatedly asked Weisser and Muylle for a signed written agreement to govern their business arrangement.
On July 29, 2011, Weisser and Muylle signed a license agreement on behalf of YN Canvas and delivered the signed license agreement to WNC (Tr. Ex. 3). Weisser and Muylle then departed for California. The executed license agreement that was delivered to WNC was substantially similar to the Intellectual Property License Agreement (Tr. Ex. 411) that Weisser had drafted for WNC to use with other WNC locations; however, the executed agreement had some revisions to suit YN Canvas's view of the business arrangement. WNC, however, found some of the terms of the license agreement unacceptable and did not execute the agreement.
Upon their arrival in California, Weisser and Muylle opened a San Francisco WNC location. YN Canvas's first event, operating as Wine and Canvas of San Francisco, was held on August 10, 2011. Weisser presumed that the signed license agreement that he had provided to WNC was acceptable and permitted him to operate the WNC location in San Francisco. WNC acted as though the parties had agreed to a business arrangement consistent with the full licensing package developed by WNC and Weisser and that it simply needed to obtain executed documents.
Scott and Ms. McCracken traveled to San Francisco on behalf of WNC to provide assistance to YN Canvas as it launched its first WNC event. Ms. McCracken instructed the painting at the launch event and otherwise assisted. While Scott and Ms. McCracken were in California, additional discussions ensued between WNC, Weisser, and Muylle regarding the need to execute an acceptable agreement, consistent with the full licensing package for the business operations in San Francisco. Unfortunately, the parties were unable to agree on terms, and no agreement acceptable to all the parties was ever signed. After assisting YN Canvas with the first WNC event in San Francisco on August 10, 2011, Ms. McCracken and Scott returned to Indianapolis.
The parties had some long-distance communications about executing an agreement throughout the following months, but the relationship between them rapidly deteriorated. In October 2011, WNC sent a written agreement for Weisser and Muylle to execute on behalf of YN Canvas. This agreement called for payment of a $10, 000 initial start-up fee, WNC's 51% ownership interest in the San Francisco operation, payment of a royalty fee, and inclusion of a non-compete provision (Filing No. 499 at 207 line 12 to 208 line 11); (Filing No. 498 at 238, lines 13-17). YN Canvas did not agree to WNC's proposed terms.
Between August 10 and November 18, 2011, WNC, as well as Scott and Ms. McCracken, consented to the use of its trademark by YN Canvas, Muylle, and Weisser. During this time period the WNC trademark did not make any profit but instead incurred a loss (Filing No. 502 at 41, lines 16-20).
On November 18, 2011, YN Canvas terminated the license agreement which it had executed and delivered to WNC. Thereafter, YN Canvas discontinued using anything that had the WNC logo or name, including aprons, shirts, an A-frame sign, and other marketing collateral. (Filing No. 498 at 244, lines 12-19).
Also on November 18, 2011, YN Canvas, which had been operating as Wine and Canvas of San Francisco, informed its customer base via an email that it no longer was operating as Wine and Canvas of San Francisco and instead was changing its name to Art Uncorked (Tr. Ex. 473). YN Canvas notified its customer base that if they were contacted by anyone representing themselves as WNC, they would be dealing with a different company. The email also explained that Art Uncorked would continue to provide painting and wine events in the San Francisco area, and it would honor any vouchers that had been purchased through social media marketing such as Living Social, Groupon, or PopSugar, for events of Wine and Canvas of San Francisco. A new website, YELP account, and Facebook page were created for Art Uncorked. Through approximately May 2012, the WNC mark would appear in Art Uncorked's internet source code. However, after WNC sent a notice that Wine and Canvas was still mentioned in the source code, Muylle and Weisser contacted their "web guy" and said, "...if there's any reference at all, make sure you remove it..." (Filing No. 500 at 86, lines 16-22).
A purportedly negative YELP review was posted by a customer identified as "Natalie G." (Filing No. 502 at 10, lines 12-18), to which Muylle responded on his Facebook page in a manner which implied that WNC had hosted the party rather than Art Uncorked. Weisser, however, did not participate in the YELP review communication.
After November 18, 2011, Weisser asserts that any use of the WNC name was unintentional, and he did not deliberately attempt to cause ...