The opinion of the court was delivered by: John F. Keenan, United States District Judge
Plaintiff Dress for Success Worldwide ("Worldwide") moves for a preliminary injunction against Defendant Dress 4 Success ("D4S"). Worldwide alleges trademark infringement and asks the Court to enjoin D4S from using the DRESS 4 SUCCESS mark and the www.dress4success.org website. D4S cross-moves for a preliminary injunction, alleging trademark infringement and unfair competition. D4S seeks to enjoin Worldwide from using the DRESS FOR SUCCESS mark in the Los Angeles area.
For the reasons discussed below, the Court grants Worldwide's motion and denies D4S's motion.
Unless noted otherwise, the following facts are undisputed.
Plaintiff Worldwide is a nonprofit organization that provides disadvantaged women with business attire and career support services. It is international in scope, with seventy affiliates in the United States and seventeen in Canada, Europe, and New Zealand. Since at least September 1996, Worldwide has owned and continuously used the trade name and service mark DRESS FOR SUCCESS. On January 26, 1999, Worldwide registered this trade name with the U.S. Patent and Trademark Office.
Like Worldwide, Defendant D4S is a nonprofit organization that provides professional attire and career services to disadvantaged women and (unlike Worldwide) men. Founded by Janet Lavender ("Lavender") in 1996, D4S is organized under California law and operates exclusively in the Los Angeles area. It has used the trade name and service mark DRESS 4 SUCCESS since the fall of 1996.
B. Early Interactions and Affiliation
In or around late 1998 or early 1999, Worldwide began using the DRESS FOR SUCCESS mark in the Los Angeles area through an affiliate. Shortly thereafter, D4S contacted Worldwide and demanded that it cease using this mark in and around Los Angeles, claiming that Worldwide was infringing D4S's common law trademark rights. According to D4S, Worldwide and its affiliate complied with this demand.
On January 18, 2001, D4S entered a membership agreement and a trademark licensing agreement (the "Agreements") with Worldwide and began operating as DRESS FOR SUCCESS LOS ANGELES, a Worldwide affiliate (the Court refers to this period as "Affiliation"). Under the Agreements, Worldwide granted D4S a license to use the DRESS FOR SUCCESS mark for seven years. D4S claims that Worldwide induced D4S to enter the Agreements by promising to share donations and proposing a joint fundraising event.
After affiliating with Worldwide, D4S amended its articles of incorporation, officially changing its name to DRESS FOR SUCCESS LOS ANGELES. (Gordon Decl. Ex. 8.) Subsequent to this change, in several news stories and interviews, the organization referred to itself as its new mark, DRESS FOR SUCCESS LOS ANGELES. D4S contends that it still used its DRESS 4 SUCCESS mark for certain matters during Affiliation. Specifically, D4S claims that it used the mark on the signs outside of its places of business and on its company checks. D4S avers that Worldwide and its officers were aware of the mark's continued use and further avers that the Agreements permitted such use. (Lavender Decl. ¶¶ 22-27.) Worldwide explicitly acknowledged D4S's use of the DRESS 4 SUCCESS mark in a memo, dated March 1, 2006, from Joi Gordon ("Gordon"), Worldwide's chief executive officer, to Lavender, in which Gordon instructed D4S to "separat[e] out contributions to the men's organization, Dress 4 Success." (Id. Ex. H.)
Worldwide disputes that it was aware of D4S's continued use of the DRESS 4 SUCCESS mark. It also questions whether the mark was in fact used during Affiliation. Gordon stated that, on her visits to D4S's places of business during Affiliation, she only came across a DRESS 4 SUCCESS sign once, and Lavender assured her that it would be replaced with a DRESS FOR SUCCESS sign. (Gordon Reply Decl. ¶¶ 4-8, 10-13.)
C. Termination of Affiliation
In a letter dated February 19, 2008, Worldwide notified D4S that it intended to recommend to its board that D4S's membership be terminated. D4S did not contest the termination, which was effected at a board meeting on March 6, 2008. According to Worldwide, D4S's membership was terminated for "poor performance, failure to adhere to proper standards for a non-profit organization, actions that harmed the reputation of Dress for Success, and other inappropriate behavior." (Mem. of Law in Support of Pl.'s Motion for Prelim. Inj. ("Pl.'s Mem.") 7.) Specifically, Worldwide alleges the following:
* "Defendant frequently failed to be available or responsive to actual and prospective donors, sponsors, and volunteers, many of whom complained to [Worldwide] about Defendant." (Id.)
* "Defendant cashed a $10,000.00 check from a corporate sponsor of [Worldwide] that was payable to and intended for [Worldwide] and did not honor repeated requests by the corporate sponsor for repayment." (Id.)
* "Defendant recognized donations (including one donation of 25,429 pairs of shoes valued at $890,015.00) with improper tax receipts and failed to respond to donor requests for tax receipts." (Id.)
* "Defendant received the lowest rating on five of the six categories reported on [Worldwide's] 2007 annual survey. In a single year, from 2005 to 2006, Defendant's total 'suitings' declined from 2,700 to 550; second suitings declined from 800 to zero; active volunteers declined from 78 to 20; total funds raised declined from $75,602.00 to $47,180.00; and [Professional Women's Group] members declined from 75 to 40." (Id.)
* "Defendant experienced sharp declines in the funds it raised and the number of clients served, with fundraising falling from $80,000.00 in 2002 to $47,180 in 2006, and the number of clients served falling from 3,500 in 2002 to 550 in 2006. By contrast, a [Worldwide] affiliate in the smaller market of Houston, Texas raised $921,951.06 and served over 2,251 clients in 2006." (Id.)
* "Defendant's profit and loss statement for the first two quarters of 2007 showed that Ms. Lavender spent $4,748.18 (approximated %18 of Defendant's revenue for that period) on an automobile lease, and that Defendant's net operating income for that period was only $1,029.01." (Id. at 7-8.)
* "Defendant failed to submit required information on time or at all." (Id. at 8.)
* "Defendant elected not to participate in events that would have enhanced Defendant's relationship with national sponsors of [Worldwide] and harmed [Worldwide's] reputation with sponsors by Ms. Lavender's inappropriate behavior." (Id.)
D4S characterizes the termination of its membership as the culmination of a campaign of inequitable conduct by Worldwide. D4S alleges that Worldwide began acting in bad faith when, shortly after Affiliation, Worldwide failed to hold the promised joint fundraising event and refused to share proceeds raised from Los Angeles--area donors. D4S also chafed under the "intrusive requirements" of Worldwide's communications, policy, and accountability guidelines (the "Guidelines"). (Def.'s Mem. of Law in Opp'n to Pl.'s Motion for a Prelim. Inj. ("Def.'s Response") 4.) D4S argues that the Guidelines so closely regulated operations that they threatened to make D4S a part of an "unauthorized and illegal franchise system." (Id.) D4S further alleges that, after it sought temporary financial assistance from Worldwide in late 2005 and early 2006, Worldwide placed it on probation. D4S complains that the probation's terms heavily restricted its operations, all but guaranteeing its poor performance in 2006.
According to D4S, this campaign of inequitable conduct continued in 2007, when Worldwide suggested that it had found a potential donor -- a "fairy godmother," in Defendant's words -- that could provide substantial support to D4S. D4S alleges that Worldwide made this claim in order to discourage D4S from seeking a different organization with which to affiliate. Purportedly, Worldwide only later revealed that, in order to receive the "fairy godmother's" support, D4S would have to restructure and then marginalize Lavender. When D4S refused, Worldwide allegedly announced its intention to open an affiliate in Hollywood, California, only to recant later.
D4S claims Worldwide then "set out to create a 'record' that it could use as a basis for terminating" D4S's membership. (Id. at 6.) First, Worldwide sent two letters to D4S detailing D4S's negative feedback. Then Worldwide supposedly interfered with D4S's efforts to resolve a donation dispute with a sponsor so that Worldwide could use the misunderstanding to portray D4S in a bad light.
After its membership in Worldwide was terminated, D4S resumed operating under the DRESS 4 SUCCESS mark. On February 28, 2008 -- after Worldwide informed D4S that it was going to recommend to its board that D4S's membership be terminated but before termination became official -- D4S registered the Internet domain name www.dress4success.org. The website allegedly copies text verbatim from Worldwide's site, www.dressforsuccess.org.
Worldwide accuses D4S of exploiting confusion over the organizations' marks after its membership was terminated. According to Worldwide, on March 10, 2008, D4S accepted a donation from one of Worldwide's sponsors intended for Worldwide's Los Angeles affiliate. Worldwide further alleges that Lavender told a Worldwide donor that D4S was accepting suit donations as a part of a national suit drive conducted by Worldwide. Finally, Worldwide claims that the website of another organization that Lavender founded, Go Green 4 Success, refers to D4S as a "national organization" even though it is Worldwide, and not D4S, that operates nationally. (Pl.'s Mem. 8.)
On May 20, 2008, Worldwide sent D4S a letter demanding that D4S refrain from any current or future use of the DRESS 4 SUCCESS mark. D4S responded that it would not voluntarily comply. Worldwide now moves to preliminarily enjoin D4S from using the DRESS 4 SUCCESS mark and www.dress4success.org website. D4S cross-moves to preliminarily enjoin Worldwide from using the DRESS FOR SUCCESS mark in the Los Angeles area.
As a preliminary matter, the Court explains why it did not conduct an evidentiary hearing before ruling on the instant motions. "[O]n a motion for a preliminary injunction, where essential facts are in dispute, there must be [an evidentiary] hearing . . . and appropriate findings of fact must be made." Fengler v. Numismatic Americana, Inc., 832 F.2d 745, 747 (2d Cir. 1987) (internal quotation marks omitted). However, "[t]here is no hard and fast rule in this circuit that oral testimony must be taken on a motion for a preliminary injunction or that the court can in no circumstances dispose of the motion on the papers before it." Consol. Gold Fields PLC v. Minorco, S.A., 871 F.2d 252, 256 (2d Cir. 1989). Notably, a party can waive the right to an evidentiary hearing. Id. ("[Defendant], having been content to rest on affidavits submitted to the District Court, waived its right to an evidentiary hearing.")
Defendant D4S expressly waived its right to an evidentiary hearing on two separate occasions. In a letter to the Court dated November 13, 2008, counsel for D4S wrote the following:
We ask the Court to consider proceeding without an evidentiary hearing. We have a significant practical reason for the request, in addition to believing that an evidentiary hearing is not necessary. We recently learned, and promptly informed plaintiff's counsel that the founder and executive director of [D4S], who would be defendant's sole witness, has an injured hip that will prevent her from taking a cross-country flight.
Later in the same letter, after listing the parties' disputes, defense counsel concluded, "it does not appear that an evidentiary hearing is necessary or would provide facts any more determinative than what is already in the record."
Defense counsel reiterated this position at Oral Argument on November 19, 2008:
The Court: . . . I just want to confirm for the record that[, defense counsel,] in your letter of November 13 -- which I received on November 13 -- you point out twice in the letter on paragraph -- excuse me -- in paragraph 3, on page 1, an evidentiary hearing is not necessary. And then you say again on page 2 in the first full paragraph it does not appear that there are any material facts in dispute that would be outcome determinative. Then later on in the same paragraph you say it does not appear that an evidentiary hearing is necessary. I just want to make sure that's your position, right?
[Defense Counsel]: Yes, your honor.
The Court: Ok. Thank you. All right. (Oral Argument Tr. 2:23-3:9.) Therefore, D4S, which was content to rest on its paper submissions, waived its right to an evidentiary hearing. This waiver does not impair the Court's ability to decide the instant motions due to the parties' voluminous paper ...