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Servpro Intellectual Property, Inc. v. Stellar-Emarketing, Inc.

United States District Court, M.D. Tennessee, Nashville Division

November 28, 2016

SERVPRO INTELLECTUAL PROPERTY, INC., and SERVPRO INDUSTRIES, INC., Plaintiffs,
v.
STELLAR EMARKETING, INC., and DAN YORK, Defendants. STELLAR EMARKETING, INC., and DAN YORK, Third-Party Plaintiffs,
v.
OLIVE MILL, INC., d/b/a SERVPRO OF GILBERT AND CHANDLER SOUTH, and ANTHONY J. OLIVERIO, Individually, Third-Party Defendants.

          MEMORANDUM

          ALETA A. TRAUGER United States District Judge.

         Third-party defendant Olive Mill, Inc. (“Olive Mill”) has filed a Motion to Dismiss or In the Alternative to Compel Arbitration and Motion to Stay (Docket No. 76), and third-party defendant Anthony J. Oliverio has filed a Motion to Dismiss for Failure to State a Claim (Docket No. 74). Defendants/third-party plaintiffs Stellar Emarketing, Inc. (“Stellar”) and Dan York thereafter filed a Fourth Amended Answer and Counter complaint and Third Party Complaint (Docket No. 84, as well as a Response (Docket No. 89) to the third-party defendants' motions, asking the court to dismiss them as moot. Olive Mill, presumably in anticipation of a potential mootness holding, then filed a renewed Third Motion to Dismiss or In the Alternative to Compel Arbitration and Motion to Stay (Docket No. 92), and Oliverio likewise filed a Third Motion to Dismiss for Failure to State a Claim (Docket No. 90). Stellar and Dan York filed a combined Response (Docket No. 94.) Because they are now redundant and the complaint they challenged has been superseded, the two earlier-filed motions - Olive Mill's Motion to Dismiss or In the Alternative to Compel Arbitration and Motion to Stay and Oliverio's Motion to Dismiss for Failure to State a Claim - will be denied as moot. For the reasons discussed below, Olive Mill's Third Motion to Dismiss or In the Alternative to Compel Arbitration and Motion to Stay will be granted as to the request for a stay, and the claims against Olive Mill will be referred to arbitration. Oliverio's Motion to Dismiss will be granted and the claims against him, dismissed.

         BACKGROUND[1]

         Servpro Intellectual Property, Inc., and Servpro Industries, Inc., (collectively, “Servpro”) are Tennessee-based companies that provide cleanup and restoration services, including water damage restoration. Servpro's services are available through a nationwide network of franchisees operating under the Servpro brand. In connection with those services, Servpro is the holder of several federal trademark registrations, including registrations for the work mark SERVPRO.

         Anthony J. Oliverio is the president of Olive Mill, an Arizona franchisee doing business under the name “Servpro of Gilbert and Chandler South.” In 2013, Oliverio, unhappy with his company's level of prominence in search engine results, reached out to Stellar, a firm providing search engine optimization (“SEO”) services for water restoration companies. In December of 2013, Olive Mill and Stellar entered into a contract for Stellar to perform services “intended to provide the Customer with preferential positioning in selected search engines.” (Docket No 86-1 at 2.) As part of the contract, Olive Mill made the following representation:

Client represents to Company and unconditionally guarantees that any elements of text, graphics, photos, designs, trademarks, or other artwork furnished to Company are owned by Client, or that Client has permission from the rightful owner to use each of these elements, and will hold harmless, protect, and defend Company and its subcontractors from any claim or suit arising from the use of such elements furnished by Client.

(Id. at 4.) Olive Mill further agreed to indemnify Stellar for any “claim that [Stellar's] use of the Client Content infringes the intellectual property rights of a third party.” (Id. at 3.) Finally, the contract included the following clause governing disputes between Olive Mill and Stellar:

Client and Company agree to make a good-faith effort to resolve any disagreement arising out of, or in connection with, this Agreement through negotiation. Should the parties fail to resolve any such disagreement within thirty (30) days, any controversy or claim arising out of or relating to this Agreement, including, without limitation, the interpretation or breach thereof, shall be submitted by either party to arbitration in Davidson County, TN and in accordance with the Commercial Arbitration Rules of the American Arbitration Association.

(Id. at 5.) In addition to the contract, Oliverio signed a credit card billing authorization form and what appears to be a brochure generally outlining Stellar's services. (Docket No. 84-6.)

         Stellar used a website at the URL http://www.water-damage-phoenix-az.com to perform at least some of its services for Olive Mill. By letter dated October 6, 2014, Servpro senior corporate counsel Joel W. Brasfield informed Oliverio that the website placed Olive Mill in violation of its Servpro franchise agreement because the site (1) listed a service area including cities outside Olive Mill's franchise territory and (2) was not hosted by a Servpro-approved hosting service. (Docket No. 84-3.) Shortly thereafter, Olive Mill informed Stellar of Servpro's complaints and ceased using Stellar's services.

         In late October and early November of 2015, Oliverio and Brasfield had an email exchange in which Oliverio complained about the prominence of other parties in search results for “servpro” in Arizona. Among the search engine results Oliverio identified was the website then located at the http://www.water-damage-phoenix-az.com URL, which apparently continued to appear in search results despite Olive Mill and Stellar having severed their relationship the prior year. (Docket No. 84-5 at 10.)

         On November 17, 2015, Servpro sued Stellar for trademark infringement and unfair competition arising out of its alleged use of SEO tactics to attract consumers searching for the word “servpro” to its websites, including http://www.water-damage-phoenix-az.com. (Docket No. 1.) On February 11, 2016, Stellar answered the Complaint and pled third-party claims against Olive Mill and Oliverio “under a theory of indemnity and/or hold harmless.” (Docket No. 18 at 9.) Oliverio and Olive Mill were served with the Third-Party Complaint on February 17 and 18, 2016. (Docket Nos. 23 & 24.) On March 14, 2016, Olive Mill and Oliverio requested an additional twenty days in which to file a responsive pleading on the ground that Oliverio was out of the country. Counsel for Stellar had been consulted about the request and did not object. (Docket No. 26 at 1-2.) The court granted the extension (Docket No. 27), and on April 10, 2016, Olive Mill and Oliverio filed separate motions to dismiss. (Docket Nos. 31 & 33.) In its motion, Olive Mill cited the dispute resolution clause in the parties' contract and asked the court to dismiss the Complaint or, in the alternative, stay proceedings and compel arbitration. (Docket No. 31 at 1-2.)

         Stellar responded by filing a First Amended Answer and Countercomplaint and Third Party Complaint (Docket No. 36) pursuant to Rule 15(a)(1)(B), leading to the court's denial of the then pending motions to dismiss as moot. (Docket Nos. 39 & 40.) Shortly after the court denied the third-party defendants' motions as moot, Stellar filed an Unopposed Motion for Judicial Settlement Conference, noting that all parties had agreed to participate. (Docket No. 45.) The court granted the motion (Docket No. 46), but in the meantime Olive Mill and Oliverio filed renewed Motions to Dismiss (Docket Nos. 48 & 50), in which Olive Mill again sought to enforce the arbitration requirement of its contract with Stellar (Docket No. 50 at 1-2.) Stellar again amended its third-party complaint (Docket No. 53), and Olive Mill and Oliverio again filed renewed motions (Docket No. 56 & 58). Stellar amended yet again (Docket No. 60), and Olive Mill and Oliverio's motions were again denied as moot. (Docket No. 72.) The settlement conference was held but did not result in resolution of the case. (Docket No. 71.)

         Olive Mill and Oliverio filed a new set of motions to dismiss, which remain pending before the Court. (Docket Nos. 74 & 76.) Stellar amended its Thirty-Party Complaint once more. (Docket No. 84.) In this most recent version of the third-party complaint, Stellar pleads five counts: (I) request for declaratory judgment that Olive Mill and Oliverio must defend and protect Stellar; (II) request for declaratory judgment that Olive Mill and Oliverio must indemnify Stellar; (III) breach of the covenant of good faith and fair dealing; (IV) breach of contract; and (V) fraudulent inducement to contract. (Id. at 21-25.) Olive Mill and Oliverio filed renewed motions a final time, raising substantially the same arguments they have been pursuing since April of 2016. (Docket Nos. 90 & 92.)

         ANALYSIS

         I. Oliverio's Motions to Dismiss

         Oliverio argues that the court should dismiss Stellar's claim against him because Olive Mill, not Oliverio, is the party to the contract with Stellar and that he signed the contract and took all other actions relating to Stellar purely in his professional capacity as a representative of Olive Mill.[2] Stellar responds that Oliverio's representation that he owned or was authorized to grant usage rights to the SERVPRO trademark amounted to fraud and ...


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