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Best Western International v. Prime Tech Development

April 20, 2007

BEST WESTERN INTERNATIONAL PLAINTIFF,
v.
PRIME TECH DEVELOPMENT, L.L.C., DEFENDANT.



The opinion of the court was delivered by: Michael M. Mihm United States District Judge

ORDER

Now before the Court is Defendant Prime Tech Development, L.L.C.'s Motion for Summary Judgment. For the reasons set forth below, the Motion [#20] is GRANTED IN PART and DENIED IN PART.

JURISDICTION

The Court has jurisdiction over this matter pursuant to 28 U.S.C. §§ 1331 and 1367, as some of the claims asserted in the Complaint present federal questions under the Lanham Act, 15 U.S.C. §§ 1051 et seq.

BACKGROUND

This is an action for breach of contract, federal trademark infringement, and unfair competition under the Lanham Act, 15 U.S.C. §§ 1501 et seq., and related common law and statutory causes of action. The facts giving rise to this case involve the business relationships and agreements among three companies: Plaintiff Best Western International ("Best Western"), Defendant Prime Tech Development, L.L.C. ("Prime Tech"), and Platinum Properties of the Quad Cities, Inc. ("Platinum Properties" or Platinum).

On or about October 18, 2001, Prime Tech and Platinum Properties entered into a written Agreement for Purchase concerning the construction of a seventy-five room hotel. The summarized terms of the agreement are as follows: Michael Shamsie and Stephen Owsley, two of the three members of Prime Tech, agreed to transfer a plot of real estate, which they owned as individuals, to Prime Tech; Prime Tech would obtain a construction and mortgage loan on the real estate and would build a seventy-room Best Western hotel on the real estate; Platinum Properties would purchase the completed hotel project from Prime Tech, through series of payments. It is undisputed that all parties to the agreement intended that Prime Tech would sell the project to Platinum Properties as a completed hotel project, including furniture and fixtures, as a "turnkey" operation, though the parties dispute who made the decision that the hotel would be a Best Western. The Agreement was executed by Shamsie and Owsley as individuals; Shamsie, Owsley and Lynn Fox, for Prime Tech; and Lynn Brewer, Gary L. Haytcher, and Betty

L. Haytcher, for Platinum Properties. Prime Tech's relationship with Platinum Properties was solely an Agreement for Purchase of the hotel and real estate.

After the Agreement's execution, construction of the hotel project commenced. On April 17, 2002, a Best Western International, Inc. Membership Application and Agreement was completed and signed by Russell Bentley for Platinum Properties, as Owner or Lessee, and Lynn Brewer for Platinum Properties, as Authorized Signer and Voting Member. Under the form's terms, the "Membership Agreement" portion would become operative only upon Best Western's written approval of the application. An application and membership fee were apparently submitted to Best Western around this time. Best Western conditionally accepted the Application on May 10, 2002.

In October 2002, financing for the project was completed. On or about January 15, 2004, an Agreement for Sale of Real Estate between Prime Tech, as seller, and Platinum Properties, as purchaser, was prepared and signed by Shamsie, for Prime Tech. It is not clear if it was ever executed by Platinum Properties. Shamsie testified that about this time, in early 2004, Prime Tech allotted funds in the escrow account for construction financing to obtain a Best Western membership.

Though the time frame is not clear in the record, at some point during construction phase of the hotel project, two Best Western signs were installed on the premises. Also during the construction phase, Shamsie met with Betty Haytcher regarding furnishings for the hotel rooms. Though there was no formal agreement between Prime Tech and Platinum Properties regarding furnishings and fixtures, Prime Tech was to pay for furnishings but members of Platinum Properties would be involved in the selection, as Platinum was to be the ultimate owner of the hotel. Shamsie met with Betty Haytcher to go over a design scheme that had been put together by an interior design firm from Georgia. Betty Haytcher ordered from the Georgia firm the majority of the fixtures, which were paid for from the construction escrow account. Shamsie testified that he eventually learned that the mattresses were ordered from Best Western, through the Membership Agreement. But, Shamsie did not know that this was being done; he assumed that the mattresses had been part of the order from the Georgia firm, since the firm pitched the furnishings scheme as "a whole package." Def.'s Ex. 4, Shamsie Dep., at 58. In its Motion for Summary Judgment, Prime Tech states that "[t]here are apparently charges that the Plaintiff is requesting relating to mattresses. This is upon information and belief because the Plaintiff has never itemized [the monetary damages it seeks in its Complaint]." Mtn for Summ. J., at 8 n.1.

On July 2, 2004, Best Western International sent a letter to Lynn Brewer informing her that the Best Western Membership was "being canceled immediately," for a failure to pay outstanding amounts due on the account. For reasons not in the record, Platinum Properties failed to complete purchase of the project from Prime Tech. Prime Tech has been in continuous possession of the hotel project since construction began, and that possession continues to this date.

On September 21, 2004, after learning that the Best Western Membership was not its name, Prime Tech applied for a Best Western Membership. Best Western gave Prime Tech the options of paying a new membership fee in addition to paying the balance of the indebtedness owed by Platinum Properties, or get Platinum Properties to assign its Membership to Prime Tech and pay a $5000 transfer fee and the outstanding balance of the indebtedness owed by Platinum Properties. On September 27, 2004, Prime Tech's counsel sent a letter to Betty Haytcher, providing notice that all purchase agreements with Prime Tech were officially deemed null and void. The letter also asks Haytcher to remove any personal property from the hotel premises and states "[W]e would expect that any and all documents relating to operations of the Best Western Deer View Run including: (1) Phone reservation system; (2) Franchise Agreement; and (3) Any and all other legal documents relating to the Best Western Deer View Run will be assigned to Prime Tech Development, L.L.C., immediately." Pl.'s Resp., Ex. 8.

Subsequently, Prime Tech declined to pursue a Best Western membership and applied for and received a Ramada Franchise for the hotel project. The hotel opened as a Ramada Franchisee in February 2005. The Best Western signs remained on the property, though they were "bagged" with Ramada plastic covers. The parties dispute whether the Best Western signs were actually disguised, and Best Western states that their marks were still visible to the public at night, despite the Ramada bags, when the signs were lighted. The two Best Western signs were removed on or about May 27, 2005, within 24 hours after Shamsie was told to remove them from the hotel premises.

The Best Western Membership Agreement includes a license to use the Best Western name and trademark and service marks in connection with the hotel. According to the Agreement, upon termination of the membership, the former members are required to cease use of the Best Western name and trademarks within fifteen days. Continued use of the Best Western name and trademarks beyond the fifteen days subjects the former member to certain liquidated damages set forth in the Agreement.

Best Western filed the Complaint and an accompanying Motion for Preliminary Injunction on May 25, 2005. On June 1, Best Western voluntarily withdrew its Motion for Preliminary Injunction because Prime Tech had taken down the Best Western signs (presumably upon notice of the Motion), and therefore had already fulfilled the primary relief Best Western sought in that Motion.

The first three Counts of the Amended Complaint, filed November 18, 2005, arise under the Membership Agreement. Best Western asserts that Platinum Properties and/or Lynn Brewer were acting for and on behalf of Prime Tech in executing the Best Western Membership Agreement. Counts I and III of the Amended Complaint assert that Prime Tech, as an undisclosed principal of Platinum and Brewer, is obligated under the membership agreement for payment of (1) the unpaid balance of the Best Western account for services and materials purchased for the hotel, and (2) for liquidated damages for continued use of the Best Western name and trademarks. In Count II, Best Western seeks payment for unpaid services and material furnished to the hotel under the terms of the Membership Agreement and retained by Prime Tech. Counts IV through VII seek damages for trademark infringement and unfair competition relating to Prime Tech's use of the Best Western trademarks in connection with the hotel.

On February 5, 2007, Prime Tech filed the instant Motion for Summary Judgment, arguing that it is entitled to judgment as a matter of law on all counts of the Complaint. Best Western filed a Response, and Prime Tech filed a Reply to that Response. The matter is now fully briefed, and this Order follows.

DISCUSSION

Summary judgment should be granted where "the pleadings, depositions, answers to interrogatories and admissions on file, together with the affidavits, if any, show there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c). The moving party has the responsibility of informing the Court of portions of the record or affidavits that demonstrate the absence of a triable issue. Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). The moving party may meet its burden of showing an absence of disputed material facts by demonstrating "that there is an absence of evidence to support the non-moving party's case." Id. at 325. Any doubt as to the existence of a genuine issue for trial is resolved against the moving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986); Cain v. Lane, 857 F.2d 1139, 1142 (7th Cir. 1988).

If the moving party meets its burden, the non-moving party then has the burden of presenting specific facts to show that there is a genuine issue of material fact. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586-87 (1986). Federal Rule of Civil Procedure 56(e) requires the non-moving party to go beyond the pleadings and produce evidence of a genuine issue for trial. Celotex, 477 U.S. at 324. Nevertheless, this Court must "view the record and all inferences drawn from it in the light most favorable to the [non-moving party]." Holland v. Jefferson Nat. Life Ins. Co., 883 F.2d 1307, 1312 (7th Cir. 1989). Summary judgment will be denied where a reasonable jury ...


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