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JTH Tax, Inc. v. Gouneh

June 25, 2010

JTH TAX, INC., D/B/A LIBERTY TAX SERVICE, PLAINTIFF,
v.
MITRA GOUNEH AND UNCLE SAM'S TAXES, INC., DEFENDANTS.



The opinion of the court was delivered by: Gary L. Sharpe District Court Judge

MEMORANDUM-DECISION AND ORDER

I. Introduction

Plaintiff JTH Tax, Inc. brought this action against defendants Mitra Gouneh and Uncle Sam's Taxes, Inc. (UST), alleging trademark infringement and unfair competition under the Lantham Act*fn1 and New York common law, violations of New York General Business Law § 349, breach of an employment agreement, misappropriation of trade secrets, business interference, and unjust enrichment. (See Compl., Dkt. No. 1.) Pending are Gouneh and UST's motions to dismiss, for summary judgment, and for the court to reconsider its March 26, 2010 Order granting a Temporary Restraining Order and Preliminary Injunction. (Dkt. No. 39.) For the reasons that follow, Gouneh and UST's motion to dismiss is granted in part and denied in part. However, the motions for summary judgment and reconsideration are denied.

II. Background

A. Factual History

JTH Tax, Inc., doing business as Liberty Tax Service, is a corporation that advertises and promotes a system of tax preparation centers. (See Compl. ¶¶ 2, 9, Dkt. No. 1.) JTH also licenses to others the right to operate facilities under the name "Liberty Tax Service" and the right to use its federally registered marks, which include costumed mascots resembling Uncle Sam and Lady Liberty. (See id. at ¶¶ 10-11.) In advertising and promoting its system of tax preparation centers, JTH has spent considerable amounts of money featuring these marks. (See id. at ¶¶ 12-13.) In doing so, JTH alleges that its continuous use of these marks has made them prominent, famous, and culturally iconic, and has generated "a substantial amount of good will and an enviable national reputation among relevant consumers." (Id. at ¶¶ 13-14.) And according to JTH, because the marks are "inextricably intertwined" with JTH's methods, procedures, reputation, and high standards, the benefits of its continuous use of the marks are vital to its operations since licensees use Liberty's name and marks in connection with their tax preparation centers. (Id. at ¶¶ 15-17.)

Prior to June 2009, pursuant to a Franchise Agreement between JTH and Joseph Citone, Inc., Citone was authorized to use the Liberty name and marks in operating a group of Liberty Tax Service offices in the Schenectady County and Albany County area. (See id. at ¶ 18.) Among these offices was one located at 1714 Route 9, Clifton Park, and another located at 119 State Street, Schenectady. (See id. at ¶ 20.) During this time, Citone hired defendant Mitra Gouneh to work as a manager and tax preparer at the Clifton Park office. (See id. at ¶¶ 21, 23-24.) In connection with her employment, Gouneh allegedly signed an Employment Agreement that contained an express written promise of confidentiality regarding customer information. (See id. at ¶ 21.)

In June 2009, JTH bought the franchise back from Citone, including the Clifton Park and Schenectady offices. (See id. at ¶ 19.) Sometime thereafter, the Schenectady office was closed. (See id. at ¶ 27.) Gouneh remained employed by JTH at the Liberty Clifton Park Office. (See id. at ¶ 22.) Throughout her employment, Gouneh had access to confidential information concerning JTH's customers' names, addresses, and tax information. (See id. at ¶ 25.)

On August 4, 2009, while still allegedly employed by JTH, Gouneh incorporated Uncle Sam's Taxes, Inc. and subsequently opened a tax preparation business under the name "Uncle Sam's Taxes," with offices at two locations. (See id. at ¶¶ 26-27.) The first UST office was located at the same location as Liberty's Schenectady Office, 119 State Street. (See id. at ¶ 27.) The second office was opened at 1741 Route 9, Clifton Park, less than half a mile from Liberty's office. (See id. at ¶ 28.)

Over the next six months, UST began advertising and promoting its business in the Schenectady and Clifton Park area, which included the use of costumed mascots allegedly dressed like the mascots trademarked by JTH. (See id. at ¶ 29.) For instance, JTH alleges that on January 6, 2010, Katie Lovelace, an employee or agent of UST, was outside UST's Schenectady office dressed in a costume resembling Uncle Sam waving at passersby in an effort to advertise and promote UST's business. (See id. at ¶ 30.) In response, JTH sent a letter on January 15, 2010, to UST and Gouneh demanding that they cease and desist their use and consequent infringement on JTH's federally registered Uncle Sam mascot trademark. (See id. at ¶ 31.) On January 28, 2010, JTH sent a second cease and desist letter. (See id.) Nonetheless, according to JTH, from January to March 2010, UST continued to use the Uncle Sam costume in advertising and promoting its business. (See id. at ¶ 32.)

Also in January 2010, UST and Gouneh conducted a direct mailing campaign in which they sent out a postcard that read "Uncle Sam's Taxes WANTS YOU" on the front and "TO KNOW ... that Mitra Gouneh has moved" on the back. (Id. at ¶ 33.) According to JTH, this postcard was mailed to various individuals who were customers of Liberty during Citone's franchisement and without its permission and consent. (See id. at ¶ 34.)

As a result of these advertising methods, JTH contends that its customers have and will continue to incorrectly assume that Liberty and UST are affiliated, that the services being offered by UST are those of Liberty, and that Liberty has sponsored, endorsed, or approved of UST's operations. (See id. at ¶ 36.) In support of this contention, JTH alleges that it has received numerous inquiries into whether UST is the same office or organization as Liberty. (See id. at ¶ 35.)

B. Procedural History

On March 12, 2010, JTH commenced the present action against Gouneh and UST, asserting claims of trademark infringement, unfair competition, deceptive business practices, breach of employment agreement, misappropriation of trade secrets, business interference, and unjust enrichment. (See Compl., Dkt. No. 1.) In its prayer for relief, JTH sought treble and punitive damages and attorneys' fees. (See id. at 16.)

JTH also sought a temporary restraining order (TRO) and injunctive relief to compel Gouneh and UST to refrain from using the Uncle Sam costume and to stop using and return any customer lists and information removed from any Liberty office. (See id. at 15.) After JTH moved for an order to show cause on March 15, 2010, (see Dkt. No. 7), the court held a hearing on March 25 at which counsel for both parties were present. After evaluating the parties' written submissions and oral arguments, the court granted a preliminary injunction and TRO in favor of JTH. (See Dkt. No. 24.) The ...


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