ADT, LLC v. Capital Connect, Inc.
ADT, LLC v. CAPITAL CONNECT, INC.
Attorneys
Robert N. LeMay, Kane, Russell, Coleman & Logan, PC, Dallas, TX, Aaron K. Kirkland, Shook Hardy & Bacon, Kansas City, MO, Charles Sanders McNew, McNew P.A., Boca Raton, FL, Kali R. Backer, Richard G. Sander, Shook Hardy & Bacon LLP, Denver, CO, for Plaintiffs., Andres Correa, Christopher J. Schweg-mann, Jared Eisenberg, Lynn, Tillotson, Pinker & Cox, LLP, Lorin M. Subar,. Foster Reese, III, The Willis Law Group, Greg K. Winslett, Brent Lee, Quilling, Sel-ander, Lownds, Winslett & Moser, Jeffrey Daniel Shelton, Jacqueline Ellise Monteja-no, Holden & Carr, Dallas, TX, for Defendants. .
Full Opinion (html_with_citations)
MEMORANDUM OPINION AND ORDER
Before the court is the motion of the plaintiffs, ADT LLC and ADT U.S. Holdings, Inc. (together âADTâ), for a preliminary injunction. For the reasons stated below, the plaintiffsâ motion is granted.
I. BACKGROUND
A. Factual Background
ADT provides electronic security services and equipment to homes and businesses throughout the. United States. ADTâs Motion for Preliminary Injunction (âMotionâ) at 3 (docket entry 4). ADT has been providing alarm services for over a century and today provides monitoring services for nearly one quarter of American homes equipped with alarm systems. Id. In this case, ADT has sued Capital Connect, four, other, alarm-service sale companies, and five, individual alarm-service sales persons. Complaint (âComplaintâ) (docket entry 1). ADT alleges that Capital Connect and the other defendants sell alarm systems in unannounced door-to-door sales visits, during which the defendants âconfuse the homeowners into believing that the defendants are somehow affiliated with ADT.â Motion at 1-2. ADT contends that the defendantsâ sales tactics violate Section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a), and ADTâs rights against unfair competition at common law. Id. ADT seeks to enjoin Capital Connect âfrom continuing to use false sales pitches that are likely to confuse customers as to Capital Connectâs affiliation with ADT.â Motion at 1.
Capital Connect was established in 2008 in Tucson, Arizona. It sells the âlatest technology in security, automation and interactive services.â Capital Connectâs Response to ADTâs Motion for Preliminary Injunction (âResponseâ) at 3 (docket entry
ADT alleges that during Capital Connectâs sales pitches, Capital Connect solicits ADTâs current customers by âmaking false and deceptive statements that are intended to mislead (and are misleading) ADTâs customers into believing that [Capital Connect] represents] ADT, or that ADT has exited the market, or that ADTâs installed equipment is outdated and in need of an âupgrade.â â Motion at 3. ADT offers 68 customer declarations to support its claim that Capital Connectâs sales tactics confuse ADTâs customers. ADTâs Sur-reply to Capital Connectâs Sur-reply (âADTâs Sur-replyâ) at 5 (docket entry 77). ADTâs declarations, attached in support of its motion for preliminary injunction, cite interactions with Capital Connectâs sales associates from 2013 to the present. See ADTâs Appendix in Support of Motion for Preliminary Injunction (âADTâs Appendixâ), Exhibit 9, Declaration of Joan Hom-ann ¶4 (July 11, 2013) (docket entry 7); ADTâs Supplemental Appendix in Support of Motion for Preliminary Injunction (âADTâs Supp. Appendixâ), Exhibit 3, Declaration of Cathy Brion ¶ 4 (June 16, 2015) (docket entry 17). ADTâs litigation manager, who is in charge of its customer complaint department, cites an acceleration during 2015 in the number of customer complaints regarding interactions with Capital Connect. ADTâs Appendix, Exhibit 2. Declaration of Marcia Gold (âGold Deckâ) ¶ 5 (docket entry 7). (âThe overall numbers in 2015 have nearly tripled over the' same 'five-month period from last year â from 42 to 112 complaints. More troubling is the recent surge in reported misconduct by Capital Connect sales agents: 50 reports of false sales pitches occurring in May 2015 alone ... plus another 41 for the first three weeks of June 2015.â).
Capital Connect insists that it has adopted several measures âto ensure each interaction is professional and its reputation is well-regarded.â Johnson Decl. ¶¶ 7-14. Capital Connectâs sales training manual warns sales associates of the harm a single damaging story oh the local news covering its sales tactics could do to the company.
Despite these measures, ADTâs customers have reported, and continue to report, to ADT that Capital Connectâs sales force engages in the very behavior Capital Connect and the Lanham Act prohibit. ADT alleges that it has received additional customer complaints of false sales tactics by Capital Connectâs sales force: 70 complaints in June and -57 complaints in July, equaling 269 complaints in 2015.
B. Procedural Background
ADT filed this suit against Capital Connect, as well as several other defendants,
II. ANALYSIS
A. Preliminary Injunction Standard
Under 15 U.S.C. § 1116(a), this court has âpower to grant injunctions, according to the principles of equity and upon such terms as the court may deem reasonable, to prevent the violation of any right of the registrant of a mark registered in the Patent and Trademark office.â See also Fed. R. Civ. P. 65(a)(1).
To obtain a preliminary injunction, it is well established that a movant must show: (1) a substantial likelihood that the movant will ultimately prevail on the merits; (2) a substantial threat that the movant will suffer irreparable injury if the injunction is not granted; (3) that the threatened injury to the movant outweighs whatever damage the proposed injunction may cause the opposing party; and (4) that granting the injunction will not disserve the public interest. Paulsson Geophysical Services, Inc. v. Sigmar, 529 F.3d 303, 309 (5th Cir.2008); Speaks v. Kruse, 445 F.3d 396, 399-400 (5th Cir.2006); Mississippi Power & Light Co. v. United Gas Pipe Line Co., 760 F.2d 618, 621 (5th Cir.1985) (citing Canal Authority of State of Florida v. Callaway, 489 F.2d 567, 572 (5th Cir.1974)).
The decision to grant or deny a preliminary injunction is left to the sound discretion of the district court. Mississippi Power & Light, 760 F.2d at 621. A preliminary injunction is an extraordinary remedy which should only be granted if the movant has clearly carried his burden of persuasion oh all four factors. Id.; Mazurek v. Armstrong, 520 U.S. 968, 972, 117 S.Ct. 1865, 138 L.Ed.2d 162 (1997) (A preliminary injunction is a âdrastic remedyâ that âshould not be granted unless the movant, by a clear showing, carries the burden of persuasionâ) (citation .omitted) (emphasis in original); PCI Transportation, Inc. v. Fort Worth & Western Railroad Company, 418 F.3d 535, 546 (5th Cir.2005) (â[t]he plaintiff has the burden of introducing sufficient evidence to justify the grant of a preliminary injunctionâ). As a result, â[t]he decision to grant a preliminary injunction is to be treated as the exception rather than the rule.â Mississippi Power & Light, 760 F.2d at 621; House the Homeless, Inc. v. Widnall, 94 F.3d 176, 180 (5th Cir.1996).
B. Evidentiary Matters
Before addressing the merits of ADTâs motion for a preliminary injunction, the court turns to Capital Connectâs arguments regarding the admissibility Ăłf evidence and whether Capital Connect has created a factual dispute necessitating a hearing on ADTâs motion for a preliminary injunction. Response at 8, 13; Capital Connectâs _ Sur-reply at 1 (docket entry 75).
1. Sufficiency of Declaration Evidence to Support a Motion for Preliminary Injunction
Capital Connect first argues that the court should not give ADTâs declarations credence because those declarations are riddled with hearsay. Response at 8, 13 n.12 (âADTâs customer declarations are re-
The law is well-settled that because the procedures governing a preliminary injunction are generally less formal than those at trial, the court may rely upon otherwise inadmissible evidence when considering a preliminary injunction. University of Texas v. Camenisch, 451 U.S. 390, 395, 101 S.Ct. 1830, 68 L.Ed.2d 175 (1981) (â[A] preliminary injunction is customarily granted on the basis of procedures that are less formal and evidence that is less complete than in a trial on the merits.â); Sierra Club, Lone Star Chapter v. Federal Deposit Insurance Corporation, 992 F.2d 545, 551 (5th Cir.1993) (âat the preliminary injunction stage, the procedures in the district court are less formal, and the district court may rely on otherwise inadmissible evidence.â); Federal Savings & Loan Insurance Corporation v. Dixon, 835 F.2d 554, 558 (5th Cir.1987) (citing Camenisch for the proposition that âa preliminary injunction proceeding is not subject to jury trial proceduresâ); Texas Commerce Bank National Association v. State of Florida, No. 3:96-CV-2814-G, 1997 WL 181532, at *4 (N.D.Tex. Apr. 9, 1997) (Fish, J.) (in deciding whether to grant a preliminary injunction, âthe court may rely on hearsay evidence and may even give inadmissible evidence some weightâ), aff'd, 138 F.3d 179 (5th Cir.1998).
Contrary to Capital Connectâs assertion, most of the declarantsâ out-of-court statements do not appear to be hearsay. The declarations attached to ADTâs filings include the customersâ out of court statements to show the customersâ state of mind, an exception to the rule against hearsay. Fed. R. Evid. 803(3); Armco, Inc. v. Armco Burglar Alarm Co., Inc., 693 F.2d 1155, 1160 n. 10 (5th Cir.1982); Mary Kay, Inc. v. Weber, 601 F.Supp.2d 839, 847 (N.D.Tex.2009) (Fish, J.). Additionally, most of the declarants cite Capital Connectâs sales associatesâ
Regardless, â[a]t the preliminary injunction stage, a district court may rely on affidavits and hearsay materials which would not be admissible evidence for a permanent injunction, if the evidence is âappropriate given the character and objectives of the injunctive proceeding.ââ Levi Strauss & Co. v. Sunrise International Trading Inc., 51 F.3d 982, 985 (11th Cir.1985); accord Dixon, 835 F.2d at 558; Sierra Club, Lone Star, 992 F.2d at 551 (â[T]he district court can accept evidence in the form of deposition transcripts and affidavits.â). The court accepts ADTâs and Capital Connectâs evidence in the form of declarations and exhibits for purposes of ruling on this motion for a preliminary injunction.
Next, Capital Connect âhotly disputesâ the facts at issue on this motion. Capital Connectâs Sur-reply at 1; Response at 18-20. Capital Connect argues that the court should not grant ADTâs motion for injunc-tive relief because it has disputed the facts ADT has alleged and the credibility of ADTâs declarations. Capital Connectâs Sur-reply at 1.
While the court may rely on otherwise inadmissible evidence at the preliminary injunction stage and may issue a preliminary injunction without the presentation of evidence, it can do so only when the facts are not disputed. Sierra Club, Lone Star, 992 F.2d at 551; Digital Generation, Inc. v. Boring, 869 F.Supp.2d 761, 777 (N.D.Tex.2012) (Lindsay, J.) (citing 13 Mooreâs Federal Practice ¶ 65.23) (âDeciding controverted issues of fact based on affidavit testimony, however, especially affidavits containing hearsay-within-hearsay, is discouraged.â).
Federal Rule of Civil Procedure 65(a)(1) provides that âa preliminary injunction [may issue] only on notice to the adverse party.â When parties have raised relevant factual disputes concerning the preliminary injunction, courts have interpreted Fed. R. Civ. P. 65(a)(1) to require âa fair opportunity and a meaningful hearing to present them differing versions of those facts before a preliminary injunction may be granted.â PCI Transportation, 418 F.3d at 546; Kaepa, Inc. v. Achilles Corporation, 76 F.3d 624, 628 (5th Cir.), cert. denied, 519 U.S. 821, 117 S.Ct. 77, 136 L.Ed.2d 36 (1996); Marshall Durbin Farms, Inc. v. National Farmers Organization, Inc., 446 F.2d 353, 358 (5th Cir.1971) (â[T]he courts are more cautious about invoking the extraordinary remedy of the preliminary injunction where critical facts are in dispute.â). The Third Circuit, in Sims v. Greene, criticized a district court for not holding an evidentiary hearing to resolve apparently conflicting evidence in the partiesâ submissions because it put the district court judge âin the position of preferring one piece of paper to another.â 161 F.2d 87, 88 (3d Cir.1947).
ADT, on the other hand, for the purposes of this motion admits Capital Connectâs presentation of the facts. ADTâs Sur-reply at 3. ADT argues that Capital Connect has tried to draw conflicting inferences from ADTâs proof but that Capital Connect does not dispute ADTâs evidence, which as ADT acknowledges, âwould require the Court to convene a hearing and make credibility determinations.â ADTâs Reply at 9.
This Circuit permits the district court to rule on a motion for preliminary injunction without a hearing where no factual disputes are involved. Kaepa, 76 F.3d at 628 (â[i]f no factual dispute is involved, .. no oral hearing is required; under such circumstances the parties need only be given âample opportunity to present their respective views of the legal issues involved.â â) (quoting Commerce Park at DFW Freeport v. Mardian Construction Co., 729 F.2d 334, 341 (5th Cir.1984)); see also PCI Transportation, 418 F.3d at 546; Anderson v. Jackson, 556 F.3d 351, 360 (5th Cir.2009). The cases in which the Fifth Circuit has criticized district courts for ruling on an application for preliminary injunction without a hearing fall into two categories. First, the Fifth Circuit has disapproved of ruling on a preliminary injunction where the parties were not given a âfair opportunityâ or did not receive sufficient notice before the court rendered its decision. See, e.g., Marshall Durbin Farms, 446 F.2d at-355-56 (finding inadequate notice in clear violation of Rule 65(a) after the district court scheduled a preliminary injunction hearing just days after the plaintiffs requested such relief); Parker v. Ryan, 960 F.2d 543, 544 (5th Cir.1992).
This case does not fall into either category. The Fifth Circuit approves of the resolution of preliminary injunctions without a hearing where the parties were given an opportunity to âpresent their differing versionsâ of the underlying facts and the district court determined that there were no disputes regarding the facts necessary to the resolution of the preliminary injunction. See PCI Transportation, 418 F.3d at 546 (district court resolved motion for a preliminary injunction without' a hearing where the plaintiff failed to put the underlying contract before the court); Commerce Park at DFW Freeport, 729 F.2d at 341; Esparza v. Board of Trustees, No. 98-CV-50907, 182 F.3d 915, 1999 WL 423109, at *3 (5th Cir. June 4, 1999) (â[J]ust because some facts are disputed, the court does not have to hold a hearing before ruling on a motion for a [preliminary injunction] unlessâthe parties show there are material facts in dispute.â); see also Dixon, 835 F.2d at 558-59 (affirming grant of preliminary injunction without a hearing where adverse party failed to point to any convincing factual disputes material to the decision).
Capital Connect attacks the credibility of twelve of ADTâs declarants by attaching transcripts of recorded quality assurance calls. Response at 6-8, 15; Capital Connectâs Sur-reply at 1-3. Capital Connect offers proof that eleven of ADTâs declar-ants, ten of whom were the same declar-ants who had recorded quality assurance calls and signed Alarm Upgrade Agreements in which the customer denies any confusion about whether Capital Connect is affiliated with ADT by initialing next to the line in the contract. Capital Connectâs Sur-reply at- 3. Capital Connect further attacks the credibility of ADTâs evidence by pointing out that two customer declar-ants corrected the typed declaration through hand-written notes. Id. Additionally,. Capital Connect seeks to discredit the customer declarants, who stated, that the sales associate at issue was wearing some Capital Connect gear. Id. Lastly, Capital Connect criticizes the viability of the evidence introduced through ADTâs litigation manager as speculative and conclusory. Id. at 4 â 5.
Capital.Connect, however, does not argue that its sales force has not (1) claimed to have been affiliated with ADT, (2) misrepresented the quality of ADTâs equipr ment.to gain favor of the customers, (3) claimed that Capital Connect has bought out or taken over ADT, (4) stated that Capital Connect has purchased the customerâs account from ADT, (5) misrepresented that ADT have either gone out of business or left the loeal market, or (6) made' other misrepresentations or false statements. Motion at 4. Capital Connectâs arguments surrounding these issues are entirely legal in nature. For example, Capital Connectâs argument that it did not make the statements because it did not authorize the sales associates to make the statements is a legal argument addressed in Section Il.C.l.e below. It is true that Capital Connect disputes certain facts at issue ip the case and has raised credibility issues regarding roughly thirteen of ADTâs declarants. Response at 6-8, 15; Capital Connectâs Sur-reply at 1-3. However, the court finds that Capital Connect has failed to present any evidence contradicting ADTâs allegations that are central to the courtâs resolution of the merits of ADTâs motion for preliminary injunction and has failed to attack the credibility of ADTâs remaining 55 declarants. Capital Connect does not aver that its sales associates did
In McDonaldâs Corporation v. Robertson, 147 F.3d 1301, 1308 (11th Cir.1998), the Eleventh Circuit provided guidance to the court in its resolution of a similar situation. In McDonaldâs, the plaintiff filed a motion for preliminary injunction- for trademark infringement claims against one of its franchisees.' Id. at 1302-03. The plaintiff submitted affidavit testimony. Id. at 1311-13. The defendant sought to contest plaintiffs evidence, but failed to actually refute or deny any of the underlying allegations, only criticizing the claims as âfabrications]â and âexaggerat[ions]sâ. Id. at 1308. The Eleventh Circuit affirmed the district courtâs granting of the preliminary injunction without a hearing, finding that the partiesâ briefing was sufficient because âmaterial facts are not in dispute, or the disputed facts are not material -to the preliminary injunction sought.â Id. at 1313.
Here, the parties have had sufficient opportunity to present their respective versions of the facts underlying this dispute. As of August 13, 2015, the parties had notice that unless the court determine[d] that a hearing is necessary to resolve conflicts in the evidence or to make credibility determinations, the court would determine the'plaintiffsâ request for a preliminary injunction on affidavits and/or deposition and without a hearing, in accordance with Fed. R. Civ. P. 43(c). Order of August 13, 2015 (docket entry 51). This practice was approved by the Fifth Circuit in Kaepa. In Kaepa, where the district court did ânot rely on any disputed facts,â no oral hearing was required and parties âneed[ed] only be given ample opportunity to present their respective views of the legal issues involved.â 76 F.3d at 628 (internal quotations omitted). Capital Connect and ADT have been given ample opportunity to- present their respective views of the -legal issues involved. Anderson, 556 F.3d at 361 (finding the requirements of Fed R. Civ. P. 65(a)(1) met-where the district court allowĂ©d extensive briefing without holding an evidentiary hearing); see Dixon, 835 F.2d at 558 (affirming district courtâs ruling on preliminary injunction without a hearing where it based its findings of fact on âextensive evidence in the form of affidavits, several thousand pages of documents, business records of earnings, sworn statements, [and] admissions of defendant'sâ); Dearmore v. City of Garland, 237 F.R.D. 573, 579 (N.D.Tex. 2006) (Lindsay, J.) (finding that ĂĄ hearing was not necessary where the issues were âstrictly legal in nature,â and commenting that the court âwould have not held a hearing, and would have decided the matter strictly on the written submissions of the partiesâ if it had been clear that there were no disputed facts), aff'd, 519 F.3d 517 (5th Cir.2008).
Therefore, the court will determine'the merits of the preliminary injunction without a hearing and will ânot rely on any disputed factsâ in its resolution of the motion basing its decision bn the record presented during the âextensive briefingâ on the preliminary injunction. Anderson, 556 F.3d at 361.
C. Application
1. Likelihood of Success on the Merits
Section 43(a)(1)(A) makes liable, â[a]ny "person who ... .uses in commerce any word, term, name, symbol, or device, ... which ... is likely to cause confusion, or to cause mistake ... as to
ADT argues that Capital Connect has caused not only the likelihood of confusion but also actual confusion among home security customers as to the âsource, affiliation, connection or sponsorship of its alarm services.â Motion at 14; Capital Connectâs sales tactics imply an association with ADT to procure business for another in a âbait-and-switchâ move that baffles consumers. ADT LLC v. Vision Security, LLC, No. 13-CV-81197, 2014 WL 3764152, at *5 (S.D.Fla. July 30, 2014). The Lanham Act protects consumers from being misled by the use of âunfair practices by an imitating competitor.â Moseley v. V Secret Catalogue, Inc., 537 U.S. 418, 428, 123 S.Ct. 1115, 155 L.Ed.2d 1 (2003) (internal quotations omitted). The language of Section 43(a) is broader than much of the Lanham Act in that it âprohibits actions like trademark infringement that deceive consumers and impair a producerâs goodwill.â Dastar Corporation v. Twentieth Century Fox Film Corporation, 539 U.S. 23, 32, 123 S.Ct. 2041, 156 L.Ed.2d 18 (2003); accord Texas Tech University v. Spiegelberg, 461 F.Supp.2d 510, 523 (N.D.Tex.2006) (Cummings, J.).
a. Likelihood of Confusion
' The- critical question is whether the Capital Connectâs sales practices suggest affiliation or endorsement or false association. Scott Fetzer Co. v. House of Vacuums Inc., 381 F.3d 477, 484 (5th Cir.2004). In determining whether a likelihood of confusion exists, courts consider the following non-exhaustive list of factors: â(1) the type of mark allegedly infringed; (2) the similarity between the two marks; (3) the similarity of the products or services; (4)-the identity of retail outlets and pur
In analyzing the âlikelihood of confusion,â a court should first-âconsider the application of each digit in light of the specific circumstances of the caseâ and next âconsider the marks in the context that a.customer perceives-them in the marketplace.â Scott Fetzer, 381 F.3d at 485. (quoting Elvis Presley, 141 F.3d at 197); accord Lyons Partnership v. Giannoulas, 179 F.3d 384, 389-90 (5th Cir.1999). The court finds that the digits of confusion weigh in favor of ADT.
b. Actual Confusion
Evidence of actual confusion is not necessary to a finding of a likelihood of confusion, but âit is nevertheless the best evidence of likelihood-of confusion.â Amstar Corporation, 615 F.2d at 263. To show actual confusion, a plaintiff may rely on anecdotal instances of consumer confusion, see Moore Business Forms, Inc. v. Ryu, 960 F.2d 486, 491 (5th Cir.1992), or consumer surveys, see Exxon Corporation v. Texas Motor Exchange of Houston, Inc., 628 F.2d 500, 506 (5th Cir.1980); Scott Fetzer, 381 F.3d at 486.
Capital Connect argues that ADT has not reported nearly enough instances of confusion given the size of the market. See Response at 14, 22-23 (citing Holland America Insurance Co. v. Succession of Roy, 777 F.2d 992, 997 (5th Cir.1985) (va-
Very little evidence, however, is required to establish the existence of the actual confusion factor. Jellibeans, Incorporated v. Skating Clubs of Georgia, Inc., 716 F.2d 833, 845 (11th Cir.1983); see also World Carpets, Inc. v. Dick Littrellâs New World Carpets, 438 F.2d 482, 489 (5th Cir.1971); AmBrit, Inc. v. Kraft, Inc., 812 F.2d 1531, 1544 (11th Cir.1986) (âIt is likely that many consumers who were confused never realized they had been confused and that many of those who did realize they had been confused chose not to spend the time to register a complaint with a faceless corporation ââ), cert. denied, 481 U.S. 1041, 107 S.Ct. 1983, 95 L.Ed.2d 822 (1987). Furthermore, âan almost overwhelming amount of proof would be necessary to refuteâ proof of actual confusion. Dick Littrellâs New World Carpets, 438 F.2d at 489 (â[R]eason tells us that ... very little proof of actual confusion would be necessary to prove the likelihood of confusion.â); Fuji Photo Film Co., Inc. v. Shinohara Shoji Kabushiki Kaisha; 754 F.2d 591, 597 (5th Cir.1985) (âIn no case have we sanctioned total disregard of evidence of actual confusion; there is- simply no precedent for such a view....â); Soweco, Inc. v. Shell Oil Company, 617 F.2d 1178, 1186 (5th Cir.1980), cert. denied, 450 U.S. 981, 101 S.Ct. 1516, 67 L.Ed.2d 816 (1981).
The evidence that ADT has submitted shows âmore than fleeting mix-up of names.â Xtreme Lashes, LLC v. Xtended Beauty, Inc., 576 F.3d 221, 230 (5th Cir.2009). The- confusion presented in -the affidavits shows actual confusion about what entity the -saleâs associate at the door represented, with what entity the sales associate was-'affiliated, how the sales associate came to arrive at the- door, and the purpose for which he/she was at the door. See ADTâs Appendix; ADTâs Supp. Appendix; ADTâs Second Supp. Appendix; ADTâs Third Supp. Appendix. Capital Connect argues that customer affidavits are not reliable because they are received by âinterested sourcesâ and there is no opportunity to.cross-examine the.confused individuals. Capital Copnectâs Sur-reply at 4 (citing A
Capital Connect argues that it has also called into question the credibility of roughly thirteen declarations with, its transcripts of telephone calls with the customer, signed upgrade agreements disclaiming association between ADT and Capital Connect, and questioning the customer handwritten edits on the declarations. See Response at 6-8, 15; Capital Connectâs Sur-reply at 1-3. For purposes of the preliminary injunction, the court will ignore those declarations to avoid a potential factual dispute. The court finds, however, that-the remaining 55 declarations, whose credibility has not been questioned, the four local news reports, and the 269 customer complaints cited by the ADT representative provide ample evidence to support a finding of actual confusion in the market. Second Gold Decl. ¶ 3; see Xtreme Lashes, 576 F.3d at 230 (âTo ignore this evidence as anecdotal or irrational tramples upon the province of the trier of fact.â); Half Price Books, Records, Magazines, Inc. v. Barnesandnoble.com, LLC, No. 3:02-CV-2518-G, 2003 WL 23175436, at *5 (N.D.Tex. Aug. 15, 2003) (Fish, Chief J.). Since there-is- actual-confusion, ADT has satisfied the âlikelihood of confusionâ element of the § 1125(a)(1)(A) preliminary-injunction analysis. Soweco, 617 F.2d at 1186 (âActual confusion is, however, strong proof-that the likelihood of confusion existsâ).
c. Reasonably Prudent Purchaser
Capital Connect argues that ĂDT has failed to prove that it has a substantial likelihood of success on the merits of this casĂ© because the confused customers in the declarations fail' to pass the reasonably prudent purchaser standard.
Courts recognize that â customers are more likely tĂł be confused whĂ©re the products or services are closely related. See Davis v. Walt Disney Co., 430 F.3d
Additionally in Better Business Bureau, 681 F.2d at 403, the Fifth Circuit noted that where one implies that he is âacting at the behestâ or âunder the directionâ of another, and this âimpression is reinforced by the context in which the representations were made,â there is a strong inference of endorsement and thereby confusion. Therefore, situations and phrases that may seem clear to observers in the abstract may nevertheless, in context, be confusing to a reasonably prudent consumer.
Despite the protective measures Capital Connect claims to have implemented, the declarants are actually confused by Capital Connectâs sales tactics and the law understands the reasonableness of consumer confusion in similar situations. Id. Therefore, the court finds that for the purposes of the motion for a preliminary injunction, ADT has sufficiently shown actual confusion of reasonably prudent purchasers.
d Initial Interest Confusion
In its response and sur-reply to ADTâs motion for preliminary injunction, Capital Connect submits proof that it notified roughly a dozen customers, through disclaimers in its agreement and a telephone call, that it is not affiliated in any way with ADT. Response at 6, 8, and 21. In its reply, ADT cites cases that discuss the âinitial interest confusionâ doctrine. ADTâs Reply at 5. The initial interest confusion doctrine applies when âthe Lanham Act forbids a competitor from luring potential customers away from a producer by initially passing off its goods as those of the producerâs, even if confusion as to the source of the goods is dispelled by the time any sales are consummated.â Dorr-Oliver, Inc. v. Fluid-Quip, Inc., 94 F.3d 376, 382 (7th Cir.1996). This âbait and switchâ technique allows competitors to get a foot in the door and engage the customer by using the goodwill established by the senior user to break the ice. Id.; Grotrian, Helfferich, Schulz, Th. Steinweg Nachf. v. Steinway & Sons, 523 F.2d 1331, 1342 (2d Cir.1975).
In its sur-reply, Capital Connect argues, inter alia, (1) that the initial interest confusion doctrine does not apply here; (2) that if it does apply, it is a de minimis factor; and (3) that âa recent Supreme Court decision brings into serious question the continued viability of initial confusion as a theory of liability.â Capital Connectâs Sur-reply at 5-10. Some scholars have criticized the âinitial interest confusionâ doctrine because they argue the senior user has not suffered any economic harm if the confusion is dispelled by the time of the transaction ends. See, e.g., Deborah R. Gerhardt, Lexmark and the Death of Initial Interest Confusion, 7 Landslide 22, 27 (2014); Jennifer E. Rothman, Initial Interest Confusion: Standing at the Crossroads of Trademark Law, 27 Cardozo L. Rev.
Today, the initial interest doctrine most often appears in Lanham Act disputes based on Internet browsing, metatags, and how well websites are labeled when a user is moving from one website to another. See, e.g., Network Automation, Inc. v. Advanced Systems Concepts, Inc., 638 F.3d 1137, 1147 (9th Cir.2011); Playboy Enterprises, Inc. v. Netscape Communications Corporation, 354 F.3d 1020, 1027 (9th Cir.2004)).
The Fifth Circuit still recognizes the doctrine, although it has not faced the question of whether it is still valid after Lexmark. Elvis Presley, 141 F.3d at 204 (âInfringement can be based upon confusion that creates initial consumer interest, even though no actual sale is finally completed as a result of the confusion.â); National Business Forms & Printing, Inc. v. Ford Motor Company, 671 F.3d 526, 532 (5th Cir.2012) (âActual confusion that is later dissipated by further inspection of the goods, services, or premises, as well as post-sale confusion, is relevant to a determination of a likelihood of confusion.â); John Crane Production Solutions, Inc. v. R2R and D, LLC, 861 F.Supp.2d 792, 799-800 (N.D.Tex.2012) (Fitzwater, Chief J.).
The court concludes that initial interest confusion still appears to be a valid theory under Fifth Circuit law, and that the Supreme Courtâs analysis in Lexmark did not abrogate the theory. Here, however, the court does not base its âlikelihood of confusionâ analysis on the viability of the initial interest confusion doctrine, although ADTâs consumersâ âinitial interest confusionâ is relevant to the courtâs determination of a likelihood of confusion. Elvis Presley, 141 F.3d at 204. The court concludes that ADT has carried its burden of proving âlikelihood of confusionâ by producing sufficient evidence that Capital Connectâs false sales pitches actually confuse customers into thinking there is some affiliation with ADT or that ADTâs equipment is faulty. See Elvis Presley, 141 F.3d at 204; Ford Motor Company, 671 F.3d at 532.
e. Vicarious Liability
Capital Connect argues that it is not âliable for the unauthorized conduct of independent contractors.â Response at 18-20. Capital Connectâs argument is that the sales force that is going door-to-door selling its services consists of independent contractors, not employees. Id. Therefore, according to Capital Connect, it is not liable unless ADT can prove that Capital Connect authorized its independent contractors to act in the manner ADT has alleged. Id. Moreover, Capital Connect of
ADT argues that Capital' Connect is liable for the conduct of its sales force, whether classified as employees or independent contractors, because the sales force consists of agents under Capital Connectâs control as principal. ADTâs Reply at 10-11.
âThe essential element of an agency relationship is the right of control.â In re Carotin Paxson Advertising, Inc., 938 F.2d 595, 598 (5th Cir.1991). As ADT argues, Capital Connectâs briefing establishes that Capital Connect exerts control over its sales force. Response at 4-6, 18-20. Capital Connect offers proof that (a) it requires its sales force to wear Capital Connect gear (Clackamas Gastroenterology Associates, P.C. v. Wells, 538 U.S. 440, 449-50, 123 S.Ct. 1673, 155 L.Ed.2d 615 (2003) (holding that whether an organization can hire or fire or set the rules and regulations of the, individualâs work is relevant to whether one is an employee); (b) it requires its sales force to complete, training (Mares v. Marsh, 777 F.2d 1066, 1068 (5th Cir.1985) (finding that training. suggests an employment relationship); (c) it requires its sales force to sign a Code of Conduct (Wells, 538 U.S. at 449-50, 123 S.Ct. 1673); (d) it requires its sales force to wear a Capital Connect badge (id.); (e) it requires its sales force to obey its sales rules (id.); and (f) it punishes its sales force if it violates any of these provisions (id.). Response at 4-6, 18-20. Thus, whether the sales force be labeled independent contractors or employees for purposes of this motion for preliminary injunction, the evidence before the court clearly shows that Capital Connect has the right to control its sales force. Hopkins v. Cornerstone America, 545 F.3d 338, 347-48 (5th Cir.2008), cert. denied, 556 U.S. 1129, 129 S.Ct. 1635, 173 L.Ed.2d 998 (2009); Brock v. Mr. W Fireworks, 814 F.2d 1042, 1049 (5th Cir.) (âsubjective beliefs cannot transmogrify objective economic realitiesâ), cert. denied, 484 U.S. 924, 108 S.Ct. 286, 98 L.Ed.2d 246 (1987); In re Carolin Paxson, 938 F.2d at 598.
Anything that occurs during the sales pitch of the sales associate is clearly within the scope of the agency, as it is the central purpose of the principal-agency relationship here. Celtic Life Insurance Company v. Coats, 885 S.W.2d 96, 99 (Tex.1994) (holding that a principal cannot escape liability by claiming that it did not authorize misrepresentations occurring before a sale and that such , misrepresentation occurred within the scope of agency); Morrow v. Daniel, 367 S.W.2d 715, 718 (Tex.Civ.App.-Dallas 1963, no writ) (same).
Capital Connectâs argument that it escapes liability unless ADT proved that Capital Connect authorized the misleading or false representations fails because it is clear that Capital Connect has the right to control the actions of its sales force, whether the sales personnel are classified as employees or independent contractors. See Meyer v. Holley, 537 U.S. 280, 285-86, 123 S.Ct. 824, 154 L.Ed.2d 753 (2003); see also Potomac Conference Corporation of Seventh-day Adventists v. Takoma Academy Alumni Association, Inc., 2 F.Supp.3d 758, 770-71 (D.Md.2014) (finding a president of an association liable for the actions of the association in Lanham Act context where the president exercised control and guidance for the associationâs actions). Capital Connect is hable for the actions of its sales, associates, who are its agents, operating within the scope of that agency. See Playboy Enterprises, Inc. v. Webbworld, Inc., 991 F.Supp. 543, 553-54 (N.D.Tex.1997) (Sanders, J.) (holding an employer liable for an employeeâs infringe
f. Misleading Use of âUpgradeâ and âUpdateâ
ADT alleges that Capital Connect misleads customers, among other'tactics, by falsely associating itself, with ADT through the use of the terms âupgradeâ and âupdate.â Motion at 3-4. ADT claims that Capital Connectâs sales force comes to their customersâ homes and-asserts their systems need to be âupdatedâ or âupgradedâ. Id. Customers report that this practice confused them, as they inferred this meant the sales associate was affiliated with ADT. Id.; see, e.g., ADTâs Third Supp. Appendix, Exhibit 1C, Appendix_000018-20, Declaration of Florence Allen ¶ 5 (âHe told me he was at my home to upgrade my alarm equipment.â); ADTâs Third Supp. Appendix, Exhibit 10, Appendix_000071-73, Declaration of Jose Aviles ¶6 (âThe representative told me that Capital was an ADT affiliate there to upgrade my alarm panel for free.â); ADTâs Third Supp. Appendix, Exhibit 1AA, Appendix_000106-108, Declaration of Pauline Pedroza ¶ 6 (âThe representative stated that he was there to upgrade my keypad.â).
Capital Connect contends that the terms âupgradeâ and âupdateâ are not misleading or false and that the use of them during a sales pitch is not a violation of the Lanham Act.- Response at 23-24. In Stokely-Van Camp, Inc. v. Coca-Cola Company, 646 F.Supp.2d 510, 529 (S.D.N.Y.2009), a- district judge in the Southern District of New York' held that Poweradeâs use' of the phrase âUpgrade your formula. Upgrade your Gameâ on its labels was not âliterally falseâ or âfalse by necessary implicationâ because reasonable consumers could interpret the phrase- to compare Powerade to Gatorade, or could compare this new Powerade drink to older Powerade drinks. On the other hand, in Volkswagenwerk Aktiengesellschaft v. Church, 411 F.2d 350, 352 (9th Cir.1969), supplemented, 413 F.2d 1126 (9th Cir.1969); the Ninth Circuit noted that a Volkswagen repair specialist could use the VW mark in1 his advertisements, but he âmust not do so in a manner which is likely to suggest to his prospective customers that he is part of Volkswagenâs organization of franchised' dealers and repairmen.â The key analysis is whether the use of any term, or any protected mark leads to a âlikelihood of confusionâ surrounding the context of the alleged misleading use. Better Business Bureau, 681 F.2d at 403 (holding that the false impression' âis reinforced by the context inâ which the representations were madeâ). Here, Capital Connectâs sales associates approach a door, mention âupgradeâ or âupdate,â and refer to the security alarm system already installed, implying a relationship with ADT. See Mary Kay, Inc. v. Weber, 661 F.Supp.2d 632, 644 (N.D.Tex.2009) (concluding that by using language that suggests that the defendants act as an âoutletâ for Mary Kay independent beauty consultants, they imply a relationship between the defendants and those Mary Kay consultants). Showing a knowledge of the- pre-existing security alarm system and referencing the alarm system as needing an upgrade leads a rational person to conclude that the salesperson is in some way affiliated with the pre-exist-ing alarm service provider. As in Volks-wagenwerk or Better Business Bureau, the context of the verbal exchange âreinforce[s]â the false inference made by the consumer. Better Business Bureau, 681 F.2d at 403; Volkswagenwerk, 411 F.2d at 352.
No matter whether the statements at issue are-ambiguous or true but misleading, the plaintiff must present evidence of actual deception. See Pizza Hut, Inc. v. Papa Johnâs International, Inc., 227 F.3d
To recapitulate, for purposes of the present motion, ADT has offered sufficient evidence of actual confusion resulting from Capital Connectâs use of the terms âupgradeâ and âupdateâ in the context of door-to-door sales pitches to warrant the suspension of the practice pending a resolution of the case on the merits. ADT has satisfied the court that there is substantial likelihood that [it] will ultimately prevail on the merits. See Paulsson, 529 F.3d at 309.
2. Irreparable Harm
The analysis for determining whether harm is irreparable encapsulates the purpose of a preliminary injunction. An injury is generally considered to be irreparable if the injury cannot be undone through ihonetary relief. Enterprise International, Inc. v. Corporacion Estatal Pe-trolera Ecuatoriana, 762 F.2d 464, 472-73 (5th Cir.1985) (stating the âpossibility that adequate compensatory or other corrective relief will be available at a later date, in the ordinary course of litigation, weigh[s] heavily against a claim of irreparable harmâ). An injunction is appropriate only if the anticipated injury is imminent and irreparable. Chacon v. Granata, 515 F.2d 922, 925 (5th Cir.), cert. denied, 423 U.S. 930, 96 S.Ct. 279, 46 L.Ed.2d 258 (1975).
If âdetermining the amount of damage would be extremely difficult, the court can consider the harm irreparable. ICEE Distributors, Inc. v. J & J Snack Foods Corporation, 325 F.3d 586, 597 (5th Cir.2003); Wilkinson v. Manpower, Inc., 531 F.2d 712, 714 (5th Cir.1976). To be considered irreparable, the injury in question must imminent and cannot be speculative. Watson v. Federal Emergency Management Agency, 437 F.Supp.2d 638, 648 (S.D.Tex.2006), vacated, 2006 WL 3420613 (5th Cir.2006).
a. Presumption
ADT argues that for âthe purposes of awarding a preliminary injunction in a Lanham Act case, irreparable injury is presumed once the plaintiff has shown a likelihood of confusion.â Motion at 15 (citing Abraham v. Alpha Chi Omega, 708 F.3d 614, 627 (5th Cir.), cert. denied, â U.S. â, 134 S.Ct. 88, 187 L.Ed.2d 254 (2013); accord, e.g., S & H Industries, Inc. v. Selander, 932 F.Supp.2d 754, 765 (N.D.Tex.2013) (Lynn, J.); Mary Kay, 661 F.Supp.2d at 640; Hawkins Pro-Cuts v. DJT Hair, No. 3:96-CV-1728-R, 1997 WL 446458, at *7 (N.D.Tex. July 25, 1997) (Buchmeyer, Chief J.); see also Clearline Technologies Limited v. Cooper B-Line, Inc., 948 F.Supp.2d 691, 715 (S.D.Tex.2013) (presumption of irreparable harm
Capital Connect responds that there is no presumption ofâą irreparable harm. Response at 11, 14 (citing Ellipse Communications, Inc. v. Caven, No. 3:07-CV-1922-0, 2009 WL 497268, at *1 (N.D.Tex. Feb. 26, 2009) (OâConnor, J.) (âthe Fifth Circuit has avoided expressly adopting a presumption of irreparable injury.â)).
Historically, upon a showing of likelihood of confusion in Lanham Act preliminary injunction suits, âą courts have presumed a showing of irreparable harm. See, e.g., Camel Hair and Cashmere Institute of America, Inc. v. Associated Dry Goods Corporation, 799 F.2d 6, 14 (1st Cir.1986); McNeil-PPC, Inc. v. Pfizer Inc., 351 F.Supp.2d 226, 250 (S.D.N.Y.2005). However, three recent United States Supreme Court cases, one of which involved a Lan-ham Act claim, have counseled against presuming an irreparable injury on a motion for a preliminary injunction. eBay Inc. v. MercExchange, LLC, 547 U.S. 388, 393, 126 S.Ct. 1837, 164 L.Ed.2d 641 (2006) (rejecting a perceived âcategoricalâ rule under Federal Circuit precedent that where a patent had been infringed, ĂĄn injunction would issue presuming irreparable harm); Winter v. Natural Resources Defense Council, Inc., 555 U.S. 7, 22, 129 S.Ct. 365, 172 L.Ed.2d 249 (2008) (holding that a possibility of irreparable harm was âtoo lenientâ and that the âplaintiffs seeking preliminary relief [must] demonstrate that irreparable injury is likely in the absence of an injunctionâ) (emphasis in original); Lexmark, 134 S.Ct. at 1395 (stating that while the plaintiff alleged enough to proceed under § 1125(a), it could not obtain relief âwithout evidence of injury proximately caused by Lexmarkâs alleged misrepresentationsâ) (emphasis in original). Following those decisions, many circuits have abandoned the presumption of irreparable harm in suits seeking a preliminary injunction under the Lanham Act. See, e.g., Time Warner Cable, Inc. v. DIRECTV, Inc., 497 F.3d 144, 161 (2d Cir.2007); PBM Products, LLC v. Mead Johnson & Co., 639 F.3d 111, 126-27 (4th Cir.2011); Herb Reed Enterprises, LLC v.. Florida Entertainment Management, Inc., 736 F.3d 1239, 1249-51 (9th Cir.2013); Axiom Worldwide, Inc., 522 F.3d at 1227.
Some Fifth Circuit rulings continue to recognize the presumption. Abraham, 708 F.3d at 626-27 (â[a]ll that must be proven to establish liability and the need for an injunction against infringement is the likelihood of confusion â injury is presumedâ); Clearline Technologies, 948 F.Supp.2d at 707-08; Southern Snow Manufacturing Co., Inc. v. SnoWizard Holdings, Inc., No. 06-CV-9170, 2014 WL 1652436, at *9 (E.D.La. Apr. 24, 2014). Other courts have avoided âexpressly adopting this presumption of irreparable injury.â Paulsson, 529 F.3d at 312; BuzzBallz, LLC v. JEM Beverage Company, LLC, No. 3:15-CV-0588-L, 2015 WL 3948757, at *6 (N.D.Tex. June 26, 2015) (Lindsay, J.); T-Mobile US, Inc. v. AIO Wireless LLC, 991 F.Supp.2d 888, 927-29 (S.D.Tex.2014). A recent Fifth Circuit case affirmed a Western District of Texas decision that had abandoned the presumption. Eastman Chemical Company v. PlastiPure, Inc., 969 F.Supp.2d 756, 767-68 (W.D.Tex.2013), aff'd, 775 F.3d 230 (5th Cir.2014). Finally, the Southern District of Texas recently held that the presumption of irreparability of harm still exists under a Lanham Act claim based âon alleged comparative misrepresentationsâ by a competitor. Greater Houston Transportation Company v. Uber Technologies, Inc., No. 4:14-CV-094l, 2015 WL 1034254, at *21 (S.D.Tex. Mar. 10, 2015).
One court in this circuit aptly labeled the state of the presumption of irreparable harm for preliminary injunctions brought under the Lanham Act as âsomewhere be
b. Irreparable Harm
ADT alleges that it is irreparably harmed by Capital Connectâs sales tactics because Capital Connect (a) confuses its customers as well as the. market generally (Gold Deck ¶ 13); (b) disrupts ADTâs relationships with its customers, using false pretenses to induce customers to uninstall their ADT equipment, install defendantsâ equipment, terminate their contracts, and execute new contracts for security services with defendants (id. ¶ 15);. (c) damages ADTâs goodwill. , and reputation (id. ¶16); (d) unfairly exploits ADTâs enormous investments of money and effort for over a century (id. ¶ 18); (e) injures customers who are misled (id. ¶ 18); (f) diminishes customer confidence in ADTâs goods and services (id. ¶¶ 15-18); and (g) interferes with ADTâs business relations and contracts with its own customers. See T-Mobile USA, Inc. v. Ataricom, Inc., No. 3:09âCV-1542-K, 2009 WL 3233542, at *2 (ND.Tex. Sept. 14, 2009) (Kinkeade, J.) (concluding that âtortious interference with business relationships,â as well as âloss of goodwill and damage to its reputation,â prove irreparable injury to plaintiff in Lanham Act case).
Capital Connect rejoins that ADT submitted no proof of any damage to ADTâs reputation or goodwill, as shown by most ADTâs declarants who âtestify about their happiness with ADTâ and its products and services. Capital Connectâs Sur-reply at 2. ADT offers evidence that Capital Connect continues to disparage the quality of ADTâs equipment/serviee and ' misleads customers into thinking Capital Connected is associated with ADT. .Motion at 3-4; ADTâs Reply at 3-4. The harm from Capital Connectâs âcasting aspersionsâ on ADT âflows directly from the audienceâs beliefâ in the denigrations and misrepresentations. Lexmark, 134- S.Ct. at 1393. Courts recognize that even where products or services continue to enjoy strong reputations in the market, those products or services would suffer irreparable harm in the absence of an injunction; preventing a competitor from continuing to make disputed advertising claims challenged as false under the Lanham Act. See Groupe SEB USA, Inc. v. Euro-Pro Operating LLC, 774 F.3d 192, 204-05 (3d Cir.2014).
ADT has shown that Capital Connectâs sales force, continues to mislead and confuse its customers as it continues to receive more customer complaints. Motion at 3-4;. ADTâs Reply at 3-4. If Capital Connect continues sales .tactics that mis-present the nature of its relationship to ADT, ADT has lost control of its brand. Paulsson, 529 F.3d at 313 (holding that where misrepresenting party continued âto use the markâ the senior user âhad lost control of the quality of the technology that was being associated with its markâ); ICEE Distributors, 325 F.3d at 596-97 (accord). As this court and others have recognized, âif one trademark user cannot control the quality of the unauthorized userâs goods and services, he can suffer irreparable harm.â Mary Kay, 661 F.Supp.2d at 640 (citing Hawkins Pro-Cuts, Inc., 1997 WL 446458, at *7). Capital Connect operates its business in a manner that leaves ADT âpowerless to controlâ its reputation and place in the market, and without an injunction, ADT will suffer irreparable harm, Mary Kay, 661 F.Supp.2d at 640; see also (Groupe SEB, 774 F.3d at 205 (concluding that harm to brand reputa
In making this determination, the court is hot presuming harm but is âdrawing fair inferences from the facts in the record.â Groupe SEB USA 774 F.3d at 205. Capital Connect has âunfairly exploitedâ ADTâs âtime, effort, and expense exerted to create and define its brand.â T-Mobile, 991 F.Supp.2d at 929 (finding that this exploitation led to âT-Mobileâs loss of future goodwill or customer loyallyâ); EDO Seidman LLP v. Alliantgroup, L.P., No. 08-CV-905, 2009 WL 1322555, at *8 (SD.Tex. May 11, 2009) (same). ADTâs lack of control over its reputation in the marketplace caused by Capital Connectâs misrepresentations to ADTâs customers, Capital Connectâs continuing practice of disrupting ADTâs customer relations through misleading sale pitches, and Capital Connectâs continuing exploitation of ADTâs goodwill and reputation lead this court to conclude that ADT has proven irreparable harm sufficient to satisfy the second element of its motion for preliminary injunction,
c. Adequacy of Money Damages
While courts are willing to consider a loss of customers or goodwill as a harm, the movant must come forward with evidence that such an injury is irreparable by showing that the loss cannot be measured in money damages. See Millennium Restaurants Group, Inc. v. City of Dallas, 181 F.Supp.2d 659, 666 (N.D.Tex.2001) (Fish, J.); Digital Generation, 869 F.Supp.2d at 778. Capital Connect argues that ADT has failed to prove that monetary damages would not adequately remedy the harm it alleges Capital Connect has caused. Response at 16-17; see Paulsson, 529 F.3d at 312 (â[A]n- injury is irreparable only if it cannot be undone through monetary remedies.â).
A party sufficiently proves that monetary damages are not adequate when it brings forward evidence, in the form of affidavits, declarations, or any other support, that shows imminent harm that is difficult to quantify. Brinkâs Inc. v. Patrick, No. 3:14-CV-0775-B, 2014 WL 2931824, at *8 (ND.Tex. June 27, 2014) (Boyle, J.). ADT has-shown that Capital Connect is disparaging its brand and is continuing to use ADTâs reputation and good will to mislead ADTâs customers' into buying Capital Connectâs services. Motion at 3-4; ADTâs Reply at 3-4. Courts agree that the damage caused by this sort of Lanham Act violation is difficult to quantify. See Paulsson, 529 F.3d at 313 (holding that damage due to lack of control of its brand and exploitation of its reputation âcould not be quantifiedâ); see also, Better Business Bureau, 681 F.2d at 403; Groupe SEB USA 774 F.3d at 205 (holding that harm to brand reputation and goodwill âis impossible to quantifyâ); Brinkâs, 2014 WL 2931824, at *8.
d. Imminence
To be considered irreparable, the injury in question must be imminent. Chacon, 515 F.2d at 925; Watson, 437 F.Supp.2d at 648. Capital Connect argues that ADTâs alleged irreparable injury is not imminent because ADTâs customer declarations date from 2013 to earlier this year. Response at 11-12; Capital Connectâs Sur-reply at 2 n.3.
The classic example of when an injunction is not appropriate due to lack of imminent need is in Seven-Up Co. v. Coca-Cola Co., âwhere the defendant had not used the challenged presentations in five years and the presentations were outdated and essentially useless at the time the injunction was requested.â Eastman Chemical
Here, ADT has not only shown a possibility that Capital Connect might repeat its sales tactics but it has also shown that Capital Connect continues to use those sales tactics, as evidenced through the recent complaints ADT has received. ADTâs Reply at 3-4. Capital Connectâs continued use of these tactics is strong evidence that ADT will be irreparably harmed if an injunction is not issued to stop this imminent threat of misrepresentation. Travelhost, Inc. v. Modglin, No. 3:11-CV-0456-G, 2012 WL 2049321, at *5-6 (N.D.Tex. June 6, 2012) (Fish, J.) (holding that defendants continuing behavior in violation of a non-compete clause led the court to reconsider the.need for a preliminary injunction, and on reconsideration grant the preliminary injunction); General Motors Corporation v. Phat Cat Carts, Inc., 504 F.Supp.2d 1278 1287-88 (M.D.Fla.2006) (accord).
Further, Capital Connect argues that ADT unreasonably waited âat least eight monthsâ to seek emergency injunctive relief, and therefore this court cannot grant ADT relief because ADT has failed to prove imminent need. Response at 11-12; Capital Connectâs Sur-reply at 2 n.3 âAbsent a good explanation, a substantial period of delay militates against the issuance of a preliminary injunction by demonstrating that there is no apparent urgency to the request for injunctive relief.â Gonannies, Inc. v. Goupair.Com, Inc., 464 F.Supp.2d 603, 609 (N.D.Tex. 2006) (Lindsay, J.) (internal quotations omitted); Citibank, N.A. v. Citytrust, 756 F.2d 273, 276 (2d Cir.1985). Where parties fail to explain or justify the delay between the facts underlying the need for the preliminary injunction and the motion for the injunction, courts readily decline motions to enjoin for lack of urgency. Ellipse Communications, 2009 WL 497268, at *1-2 (N.D.Tex. Feb 26, 2009) (OâConnor, J.) (no explanation provided); Gonannies, 464 F.Supp.2d at 609 (no irreparable injury where plaintiff waited six months after discovering allegedly infringing use before seeking injunction and provided no explanation); Innovation Ventures, LLC v. Ultimate Lifestyles, LLC, No. 4:08-CV-232, 2009 WL 1490588, at *3 (E.D.Tex. May 27, 2009) (no irreparable injury where plaintiff waited nine months after learning of infringing sale and provided no explanation).
ADT argues that it has not unreasonably delayed because it was investigating the claims, wanted to ensure that it had enough representation of confused customers to support a claim of likelihood of confusion in the marketplace, and did not anticipate the recent increase in complaints about Capital Connect. ADTâs Reply at 12-13 (citing Tough Traveler, Limited v. Outbound Products, 60 F.3d 964, 968 (2d Cir.1995); accord BP Chemicals Limited v. Formosa Chemical & Fibre Corporation, 229 F.3d 254, 264 (3d Cir.2000) (âa delay caused by a plaintiffs good faith efforts to investigate an infringement or to determine how serious an infringement is does not preclude a finding of irreparable harmâ); 6 McCarthy on Trademarks § 31:32 (4th ed.2015)).
While there has been a delay from the time when ADT first learned of Capital Connectâs sales tactics through a customer complaint
e. Safeguards
Capital Connectâs last argument as to why ADT has not suffered an irreparable injury is that Capital Connect has implemented âsafeguardsâ to prevent its sales force from engaging in the conduct at issue here. Response at 14-15. This argument is supported primarily by an unreported District of Utah opinion applying Utah state law. Vivint, Inc. v. Elite Security Services, Inc., No. 2:12-CV-692, 2012 WL 6596855, at *2 (D.Utah Dec. 18, 2012) (denying preliminary injunction after defendant described safeguards taken against inappropriate sales practices and noting that plaintiff âfailed to present any additional actions or procedures that it contends [defendant] should or could adopt to stop such occasional errant behavior.â). This case is not binding on this court, and that court did not analyze the Lanham Act violation, but focused on principles of Utah common law. Id.
The only other case Capital Connect cites for the proposition that its safeguards prevent a-finding of irreparable harm is Federal Express Corporation v. Robrad, LLC, No. 3:14-CV-2152-B, 2014 WL 3880806, at *3 (N.D.Tex. Aug. 7, 2014) (Boyle, J.). This case is distinguishable from Federal Express. In Federal Express, there was no evidence that the defendant continued to use the allegedly infringing material, and the potential use of the allegedly harmful material was speculative. Id. Here, there is strong evidence that Capital Connect is continuing to misrepresent its affiliation with ADT and is continuing to confuse ADTâs customers. ADTâs Reply at 3-4.
The court can see no further relevance of Capital Connectâs safeguards to ADTâs claims that Capital Connectâs sales tactics continue to cause ADT irreparable harm. Regardless of the safeguards Capital Connect claims to have implemented, its sale force is still causing irreparable harm to ADT through its misrepresentations. Motion at 3-4; ADTâs Reply at 3-4.
3. Capital Connectâs Lawful Interests
Capital Connect argues that its lawful interests will be adversely affected by an injunction because an injunction will âstymie competition,â harm its standing in communities it serves, dictate the speech of its sale force, and would be impossible to monitor. Response at 24 n.15. First, the injunction will not stymie competition where it only prevents illegal unfair competition. See, e.g., C.E. Services, Inc. v.
Lastly, preventing oneâs agents from breaking federal law is not impossible, to monitor and accepting that argument would be against public policy. T-Mdbile, 991 F.Supp.2d at 929 (concluding that the balance of hardships favored granting injunction where defendant argued that changes were too costly); Osmose, Inc. v. Viance, LLC, 612 F.3d 1298, 1321 (11th Cir.2010) (balance of hardships favored granting injunction where effect of injunction only prohibited defendant from using false statements and did not prohibit defendant from using the contested study in its entirety).
Additionally, the court has. not granted ADT as wide and broad a preliminary injunction as it requested. The narrow scope of the injunction that solely prevents Capital Connect from continuing to violate the Lanham Act and continuing to compete unfairly âreduces the impactâ of any lawful interests Capital Connect may have through the issuance of this injunction. See T-Mobile, 991 F.Supp.2d at 929.
ADTâs interest in obtaining this preliminary injunction far outweighs Capital Connectâs interest in continuing to violate the Lanham Act. Chevron Chemical Company v. Voluntary Purchasing Groups, Inc., 659 F.2d 695, 705 (5th Cir.1981) (holding that a violator of the Lanham Act should be required to keep a safe distance from the line between legal and illegal conduct), cert. denied, 457 U.S. 1126, 102 S.Ct. 2947, 73 L.Ed.2d 1342 (1982).
L Public Interest
âThe public interest is always served by requiring compliance with Congressional statutes such as the Lanham Act and by enjoining the use of infringing marks.â S & H Industries, 932 F.Supp.2d at 765 (quoting Quantum Fitness Corporation v. Quantum LifeStyle Centers, LLC, 83 F.Supp.2d 810, 832 (S.D.Tex.1999)). â[T]he public has an interest in not being deceived.â New York City Triathlon, LLC v. NYC Triathlon Club, Inc., 704 F.Supp.2d 305, 344-45 (S.D.N.Y.2010) (cit
The fourth element weighs in-favor , of granting the preliminary injunction to prevent further violations of the Lanham Act.
All four factors weigh in favor of a preliminary injunction. The court therefore grants ADTâs motion. All that remains is to determine the scope of that injunction.
D. Preliminary Injunction
â[C]ourts in trademark cases have a responsibility to tailor the relief to the violation, a responsibility that includes consideration of disclaimers.â Westchester, 214 F.3d at 674. âAs with injunctive relief generally, an equitable remedy for trademark infringement should be no broader than necessary to prevent the deception.â Id. at 671 (citing Soltex Polymer Corporation v. Fortex Industries, Inc., 832 F.2d 1325, 1329 (2d Cir.1987); Better Business Bureau, 681 F.2d at 405).
The Fifth Circuit has stated that' a âcompetitive business once convicted of unfair competition ... should thereafter be required to keep a safe distance away from the margin line even if that requirement involves a handicap as compared with those who have not disqualified themselves.â Voluntary Purchasing, 659 F.2d at 705. The law forbids Capital Connect from engaging in any activity that suggests endorsement by, sponsorship by, or affiliation with ADT, and the court will preliminarily enjoin the behavior that Capital Connect currently exhibits in violation of the Lanham Act and principles of unfair competition. Mary Kay, 661 F.Supp.2d at 644 (broadly enjoining the Lanham Act defendants from violating the law).
' The court has modified and narrowed the scope of ADTâs proposed preliminary injunction (docket entry 7, Exhibit 1, Proposed Injunction). First, the court has stricken the word âoutdatedâ from paragraph 1 because preventing a competitor from discussing the age of equipment unduly restrains Capital Connectâs speech in its sales pitches.
Next, the court has stricken paragraph 2 in its entirety.
Additionally, the court has stricken âdirectly or by its agentsâ in the beginning of paragraph (3), finding it. redundant in light of the definition of Enjoined Parties. The court has stricken the second half of sub-paragraph (3)(g) as too broad. Lastly, the court has narrowed the scope of subpara-graph (3)(i) to ensure Capital Connectâs
III. CONCLUSION
For the reasons detailed above, the plaintiffsâ motion for preliminary injunction is GRANTED. A separate order of preliminary injunction, in conformity with this memorandum opinion and order, will be entered forthwith.
SO ORDERED.
. Capital Connect labels its sales force as "independent contractors,â while ADT argues that Capital Connectâs sales associates are employees. This disagreement is discussed below in Section Il.C.l.e, For consistency, the court will refer to Capital Connectâs sales group as the "sales forceâ or individually as "sales associates.â
. "Neither ADT nor Monitronics makes alarm equipment. Instead, a few companies such as GE Security, Honeywell, and 2GIG supply alarm panels and sensors to all sellers of alarm systems in the United States,â Complaint ¶ 22,
. A month and a half after ADT filed its motion for preliminary injunction, ADT reported that it "received 269 reports of false sales pitches by Capital Connect agentsâ in 2015 alone, ADTâs Third Supplemental Appendix in Support of its Motion for Preliminary Injunction ("ADTâs Third Supp. Appendixâ), Exhibit 1, Second Declaration of Marcia Gold ("Second Gold Deckâ) ¶ 3 (docket entry 56).
. Even though summer has ended, ADT has presented enough evidence of. continuing use of illegal sales tactics to warrant a preliminary injunction. ADT cited Capital Connectâs hiring of college students and the fear of an
. All declarations cited in this paragraph are located in ADTâs Third Supp. Appendix.
. In fact, there have been at least four local news stories covering Capital Connect's behavior in Florida and Texas. Motion at 2 n.l (citing Chris Bonanno, Police Warn of Aggressive Solicitors in Rockledge, Cocoa, FLORIDA TODAY (June 25, 2015), http://www. floridatoday.com/stoty/news/2015/06/23/. police-warn-of-aggressive-solicitors-inrocldedge-cocoa/29178225/ (last accessed Sept. 16, 2Q15); Vanessa Welch and Bob Op-sahl, Action 9 Investigates Home Alarm Hustle, WFTV.COM (June 18, 2015), http://www. wftv.com/news/news/action-9-investigates-home-alarm-hustle/nmgQP/# federated= 1 (last accessed Sept. 16, 2015)), Second Gold Deck 117 (citing Walt Maciborski, Police Warn of Suspicious Solicitors in Austin and Round Rock, KEYETV News (June 22, 2015), http;// www.keyetv.com/news/features/top-stories/ stories/police-*warn~suspicious-solicitors-austin-round-rock-26601.shtml (last accessed
. Citing academic studies, ADT argues that these complaints - represent only a fraction of the instances in which Capital Connect has used these sales tactics because "fewer than five percent of customers takes the time to report such practices to ADT.â Motion at 9-10. The court will 'not comment on the viability of this evidence to support a finding of likelihood of confusion, nor does, it rely on this evidence to support its granting of ADTâs motion for a preliminary injunction.
. Power Home Technologies, LLC, Security Investments LLC, Alliance Security, In'câ Maximum Security Alarm, Inc., John Lee, John Backus, Victor Vega, Trevor McAlees, and Anthony Bonardi are the other defendants ADT has sued in this case.
. ADT's motion for preliminary injunction (July 7, 2015) (docket entry 4); Capital Connectâs response to ADTâs motion for preliminary injunction (August 7, 2015) (docket entry 46); ADTâs reply in further support of the motion for preliminary injunction (August 19, 2015) (docket entry 55); . Capital âą Connectâs sur-reply (August 31, 2015) (dockĂ©t entry 75); ADTâs sur-reply in response to Capital Connectâs sur-reply (September 2, 2015) (docket entry 77).
. In Section II.C.1.e, the court concludes that Capital Connectâs sale associates are likely employees but certainly agents; accordingly, their statements would qualify as opposing partyâs statements for purposes of Fed. R. Evid. 801(d)(2). See United States v. Pena, 527 F.2d 1356, 1361 (5th Cir.1976).
. The court will address Capital Connect's arguments with regard to the reliability, sufficiency, and credibility of the individual de-clarants in the sections below.
. Capital Connect argues that the test for a false association claim is the five prong test in King v. Ames, 179 F.3d 370, 373-74 (5th Cir.1999). Response at 17. The five factor test quoted in King is the test for trademark infringement claims under § 1125(a)(1)(B), not § 1125(a)(1)(A). See MCW, Inc. v. Badbusinessbureau.com, LLC, No, 3:02-CV-2727-G, 2004 WL 833595, at *15 nn.13-14 (N.D.Tex. Apr. 19, 2004) (Fish, Chief J.), for an in-depth discussion why the five factor test is the wrong standard, and why the Texas state law claim for unfair competition shares the analysis for unfair competition under § 1125(a)(1)(A). See also Galvotec Alloys, Inc. v. Gaus Anodes International, LLC, No. 7:13â CV-664, 2014 WL 6805458, at *5 (S.D.Tex. Dec. 2, 2014); Horseshoe Bay Resort Sales Co. v. Lake Lyndon B. Johnson Improvement Corporation, 53 S.W.3d 799, 806 n. 3 (Tex.App.Austin 2001, pet. denied).
. See also Amazing Spaces, Inc. v. Metro Mini Storage, 608 F.3d 225, 236 (5th Cir.2010) (âWe note that Amazing Spaces brought claimsâunder the Lanham Act and Texas law. The analysis with respect to Amazing Spacesâs claims under the Lanham Act will be dispositive of its corresponding claims under Texas law as well.â) (citing Horseshoe Bay Resort, 53 S.W.3d at 806 n. 3).
. (1) The type of mark allegedly infringed is the use of ADTâs trademark company name. (2) The similarity between the two marks likely weighs in favor of confusion since ADT has alleged that Capital Connect used ADTâs âą mark, not that it infringed upon ADTâs mark through use of a similar mark. (3) ADT monitors home alarm security systems.- Motion at 3. Capital Connect sells the monitoring of home alarm security systems for Monitronics. Id. ADT and Capital Connect sell the same service. (4) The identity of retail outlets and purchasers is not relevant here. (5) There is no media used, only face to face interactions. Thus, this element is not relevant here. (6) ADT claims Capital Connect intentionally seeks to confuse customers and intentionally violates § 1125(a)(1)(A). Id. at 3, 11-12; ADTâs Reply at 2-3. Capital Connectâs sales tactics appear to deliberately adopt ADTâs name âwith a view to obtain somĂ© advantage from the good will, good name and good trade which [ADT] has built up.â Better Business Bureau of Metropolitan Houston, Inc. v. Medical Directors, Inc., 509 F.Supp. 811, 814 (S.D.Tex.1981) affâd as modified, 681 F.2d 397 (5th Cir.1982). This tactic leads the court to weigh the intent digit in favor of ADT as "the very act of [Capital Connect] ... indicated] that [it] expect[ed] confusion and resultant profit.â Id.) (7) Evidence of actual confusion is analyzed in Section II.C.l.b. Lastly, (8) the degree of care exercised by potential customers is considered in Section II.C.l.c.
.- The court recognizes that the news reports contain hearsay, if at a trial the court were to -admit the out- of court statements for the truth of the matters asserted. However, under the less rigorous preliminary injunction evidentia-ry standards, the court has considered the news reports to support its finding that ADT has proven actual confusion. Further, the hearsay evidence rule does not bar the admissibility of news reports that "show public perceptionsâ of Capital Connectâs conduct. See Mariani v. United States, 80 F.Supp.2d 352, 362 (M.D.Pa.1999) ("The hearsay evidence'rale does not bar ... the admissibility . of .. ..'authenticated news reports when used to show public perceptions of corruption, rather than corruption in fact.â) (citing Democratic Party v. National Conservative Political Action Committee, 578 F.Supp. 797, 829 (E.D.Pa.1983), aff'd in part, rev'd in part, 470 U.S. 480, 105. S.Ct. 1459, 84 L.Ed.2d 455 (1985)), certified question answered, 212 F.3d 761 (3d Cir.), cert. denied, 531 U.S. 1010, 121 S.Ct. 564, 148 L.Ed.2d 484 (2000).
. ADT maintains that the Fifth Circuit does not utilize the reasonably prudent consumer standard. ADT's Reply at 7-8 (citing Source, Inc. v. SourceOne, Inc., No. 3:05-CV-1414-G, 2006 WL 2381594, at *6 (N.D.Tex. Aug. 16, 2006) (Fish, Chief J.), following Fuji Photo Film Company, 754 F.2d at 597 ("While trademarks seek to protect the ultimate consumer from confusion, the identity of the person confused is essentially a non-factor in the likelihood of confusion analysis.â). -The Fifth Circuit does not appear to have explicitly addressed whether the reasonably prudent consumer standard applies under § 1125(a)(1)(A). Therefore, this court considers Capital Connectâs argument to be that the confused consumers are not reasonable, but the court concludes that the consumers have passed the reasonable consumer standard regardless of its application."
. See Section II.C. 1 .a.
. One of ADTâs customer declarants, Joan Homann, described her confusion resulting from a door-to-door exchange with Capital Connect on July 11, 2013. ADTâs Appendix in Support of Motion for Preliminary Injunction,
. Since the court deleted the entirety of paragraph 2 from ADTâs proposed preliminary injunction, paragraph 3 from ADTâs proposed preliminary injunction is paragraph 2 in this courtâs preliminary injunction' order.