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Burger King Corporation v. John Q. Huynh

December 5, 2011

BURGER KING CORPORATION, PLAINTIFF,
v.
JOHN Q. HUYNH, ET AL., DEFENDANTS.



The opinion of the court was delivered by: Cecilia M. Altonaga United States District Judge

ORDER

THIS CAUSE came before the Court upon the Plaintiff, Burger King Corporation's ("BKC['s]") Motion for Default Final Judgment Against Defendants ("Motion") [ECF No. 23], filed on October 26, 2011. A Clerk's Default [ECF No. 11] was entered against Defendants, John Q. Huynh ("Huynh"), Parvez M. Sheikh ("Sheikh"), and Ahoa Group, Inc. ("Ahoa") (collectively "Defendants"), on September 12, 2011, as they failed to appear, answer, or otherwise respond to the Complaint [ECF No. 1], despite having been served. (See Clerk's Default; Affs. of Serv. [ECF Nos. 5, 6, 8]). The Court has carefully considered the Motion, the record and the applicable law.

I. BACKGROUND*fn1

This case involves claims of federal and Florida common law trademark infringement, federal false designations, Florida common law unfair competition, and breaches of the following contracts: (a) franchise agreements; (b) personal guaranty agreements; and (c) a limited license agreement.

Plaintiff, a Florida corporation, operates and franchises restaurants throughout the world. (See Compl. ¶¶ 2, 6). For many years, "BKC has extensively employed, caused to be advertised and publicized throughout the United States certain distinctive symbols as trademarks and service marks" ("BKC Marks"). (Id. ¶ 17). BKC operates and franchises its restaurants using the Marks "on signs, menu boards, posters, translights, uniforms, plates, cups, tray liners and other items and in advertising to the public through television, radio and print media and the internet." (Id. ¶ 18).

The following is an abbreviated listing of the BKC Marks registered in the United States Patent and Trademark Office:

Trademark Registration No. Registration Year

HOME OF THE WHOPPER 0782990 1965 (renewed through 2015) BURGER KING 0869775 1969 (renewed through 2019) WHOPPER 0899775 1970 (renewed through 2020) BURGER KING logo 0901311 1970 (renewed through 2020) BURGER KING logo 1057250 1977 (renewed through 2017) WHOPPER JR. 1062368 1977 (renewed through 2017) BURGER KING 1076177 1977 (renewed through 2017) HAVE IT YOUR WAY 1081348 1978 (renewed through 2018) CROISSAN'WICH 1550398 1989 (renewed through 2019) CHICKEN TENDERS 1785694 1993 (renewed through 2013) BURGER KING Crescent Logo 2428846 2001 (renewed through 2021) "The registrations of the BKC Marks are currently in full force and effect and BKC has given notice to the public of the registration" of these Marks. (Id. ¶ 20). BKC grants its franchisees, including Defendants, a limited license and authority to use and display the BKC Marks, subject to express authorization by BKC. (See id. ¶ 21).

Defendant Ahoa, a California corporation, owned and operated the following two Burger King restaurants: (1) Restaurant No. 4961, located at 1908 Avenida De Los Arboles, Thousand Oaks, California 91362; and (2) Restaurant No. 10205, located at 245 N. Moorpark Road, Suite B, Thousand Oaks, California 91360. (See id. ¶¶ 30--31). Each restaurant is governed by a Franchise Agreement (collectively the "Franchise Agreements"). (See id. ¶ 30). The Franchise Agreements required Ahoa "to make monthly payments to BKC for royalties, advertising and other fees." (Id. ¶ 32). In particular, Ahoa was obligated to pay BKC a certain percentage of gross sales for the preceding calendar month. (See id.). Per the Franchise Agreements, all royalty and advertising payments were to be payable to BKC in Miami, Florida. (See id.). Consequently, "failure to make such payments constitutes an act of default under the Franchise Agreements." (Id.). In addition, Defendants Huynh and Sheikh "jointly and severally, unconditionally and irrevocably personally guarantied to BKC the performance of each and every obligation of Ahoa." (Id. ¶ 33).

The Franchise Agreements contain provisions establishing the parties' rights and obligations in the event of default. (See id. ¶ 34). "[F]ailure to comply with any provision of the Franchise Agreements is a default of the Franchise Agreements." (Id. ¶ 35). Defendants are given an opportunity to cure the default. (See id.). Nonetheless, per the Franchise Agreements, "if an act of default occurs and Defendants fail to cure the default after any required notice and within the cure period applicable, BKC may, at its option and without prejudice to any other rights or remedies . . . terminate the Franchise Agreements." (Id.).

In April 2008, BKC required that Defendants "purchase and install certain POS Systems by December 31, 2009." *fn2 (Id. ¶ 39). The POS Systems "provide a consistent base of information allowing for better product sales analysis and more effective product and promotion activities." (Id.). Defendants did not install the required POS Systems by December 31, 2009. (See id. ¶ 40). Thus, Defendants were not using equipment approved by BKC, as required by the Franchise Agreements. (See id.).

On January 13, 2010, BKC informed Defendants "that they were in default of their obligations" and demanded that Defendants cure the defaults within the applicable time period detailed in the Franchise Agreements. (Id. ¶ 41; Mot. ¶ 23). Defendants never cured the defaults. (See Compl. ¶ 42).

Thereafter, BKC notified Defendants via letter that the Franchise Agreements were terminated, effective as of 11:59 p.m. on February 16, 2010. (See id. ¶ 43). Notwithstanding the termination letter, BKC and Defendants entered into a Limited License Agreement, dated March 9, 2010, allowing Defendants to continue operating the restaurants for a brief time while attempting to sell them. (See id. ¶ 44). In the Limited License Agreement, Defendants acknowledged, agreed and confirmed the Franchise Agreements were terminated effective February 16, 2010. (See id. ¶ 45). The Limited License Agreement terminated on March 31, 2011. (See id. ¶ 47).

Defendants did not timely sell the two Burger King restaurants. (See id. ¶ 49). In fact, they failed to close the restaurants and comply with post-termination obligations*fn3 under the Franchise Agreements. (See id.). To date, Defendants have not paid BKC past-due amounts under the Franchise Agreements and the Limited License Agreement. (See id. ¶ 50). Nor have they returned their OPS Manual and other operational manuals, as required by the Franchise Agreements. (See id. ¶ 53).

Plaintiff claims Defendants' continued use of the BKC Marks "has caused or is likely to cause mistake, confusion, or deception in the minds of the public." (Id. ¶ 55). Moreover, BKC no longer sponsors or endorses the restaurants, or the products and services provided therein. (See id. ¶ 56). As a result, "BKC has suffered damages, in an amount presently unknown yet substantial." (Id.). In addition, because the restaurants are no longer under BKC's control and supervision, BKC contends it will suffer immediate and irreparable harm, notably in terms of goodwill and reputation, if Defendants' use of the BKC Marks is not immediately enjoined. (See id. ¶ 58). Furthermore, "Defendants' sale of products and services under the BKC Marks at the Restaurants poses an immediate threat to the distinct, exclusive image BKC has created at great expense for its franchisees." (Id. ¶ 59).

In the present Motion, Plaintiff asks the Court to enter a judgment by default and a permanent injunction, and grant equitable relief and the award of attorneys' fees in favor of Plaintiff and against Defendants. (See Mot. p. 18).

II. LEGAL STANDARD

Pursuant to Federal Rule of Civil Procedure 55(b)(2), the Court is authorized to enter a final judgment of default against a party who has failed to plead in response to a complaint. "'[A] defendant's default does not in itself warrant the court entering a default judgment.'" DIRECTV, Inc. v. Huynh, 318 F. Supp. 2d 1122, 1127 (M.D. Ala. 2004) (quoting Nishimatsu Constr., 515 F.2d at 1206). Granting a motion for default judgment is within the trial court's discretion. See Nishimatsu, 515 F.2d at 1206. Because the defendant is not held to admit facts that are not well-pleaded or to admit conclusions of law, the court must first determine whether there is a sufficient basis in the pleading for the judgment to be entered. See id.; see also Buchanan v. Bowman, 820 F.2d 359, 361 (11th Cir. 1987) ("[L]iability is well-pled in the complaint, and is therefore established by the entry of default . . . .").

III. ANALYSIS

Plaintiff's Complaint contains seven claims for relief, all of which are alleged against Defendants. The Court will first consider Defendants' liability under each claim, and with any surviving claims, discuss what relief Plaintiff is afforded.

A. Liability

1. Count I - Lanham Act Infringement

Under the Lanham Act, a defendant is liable for trademark infringement if, without consent, he "use[s] in commerce any reproduction, counterfeit, copy, or colorable imitation of a registered mark in connection with the sale, offering for sale, distribution, or advertising of any goods or services" which "is likely to cause confusion, or to cause mistake, or to deceive." 15 U.S.C. § 1114(1)(a). Accordingly, to prevail on a trademark infringement claim, a plaintiff must demonstrate: (1) plaintiff's mark has priority; (2) defendant used plaintiff's mark in commerce; and (3) defendant's mark is likely to cause consumer confusion. See Lone Star Steakhouse & Saloon, Inc. v. Longhorn Steaks, Inc., 122 F.3d 1379, 1382 (11th Cir. 1997); Davidoff & CIE, S.A. v. PLD Int'l Corp., 263 F.3d 1297, 1300--01 (11th Cir. 2001). Here, Plaintiff's allegations satisfy these three elements and therefore establish Defendants' liability for federal trademark infringement.

First, Plaintiff's Marks have priority as Plaintiff has used the BKC Marks for decades and has federal registration rights in those Marks. (See Compl. ¶¶ 19--20). The BKC Marks have become identifiers of Plaintiff and its business throughout the United States. (See id. ¶ 17). In contrast, Defendants began using Plaintiff's marks in 2006.*fn4 (See id. ¶ 31).

Second, Defendants have used the BKC Marks in commerce in connection with their two Burger King restaurants. It is well-known that BKC's products bearing the BKC Marks are sold in interstate commerce. (See id. ¶ 22). Under the terms of the Franchise Agreements, BKC allows its franchisees, such as Defendants, to use and display the BKC Marks in connection with its restaurants. (See id. ¶ 21). But "[i]n no event is a franchisee authorized to use the BKC Marks after the expiration or termination of its franchise." (Id.). Here, BKC alleges Defendants are using the BKC Marks in ...


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