Sharon M. Porcellio
The U.S. District Court for the Western District of New York is no stranger to clashes in the crowded beauty pageant arena, and this quarter U.S. Senior District Judge David G. Larimer applied the well-known preliminary injunction standards to determine whether a loss of social media followers amounts to irreparable harm. In addition, he had occasion to re-visit a case reported on last quarter in the environmental arena. This time he addressed a motion for leave to file an amended complaint, or in the alternative, for an order entering final judgment on claims that were previously dismissed.
In Mrs. United States Natl. Pageant v. Williams, 353 F. Supp. 3d 213 (W.D.N.Y. 2019), Mrs. United States National Pageant (plaintiff), sued its former licensee Stephanie L. Williams and two businesses she operated, Crown Garland (collectively, Williams and Crown Garland are referred to as defendants) and Cosmos International Pageants (Cosmos) alleging trademark infringement, misappropriation of trademarks, breach of contract, and tortious interference with business relations.
Plaintiff organizes and produces beauty pageants throughout the United States and holds nine federally registered trademarks relating to the pageants. With one exception, each trademark represents a different beauty pageant division in which contestants can compete annually at the local, state, and national levels. Williams had various roles with plaintiff from 2010 until July 2018, including that of national director for all of plaintiff’s pageant divisions.
On Nov. 17, 2016, the plaintiff and defendants entered into a licensing agreement, the 2016 Agreement. The 2016 Agreement granted defendants an exclusive, revocable, license for the right to promote, finance, and produce national pageants for divisions corresponding to most of plaintiff’s trademarks for a term of two years. About a year later they entered into the 2017 Agreement which granted defendants an exclusive, revocable, license for the right to promote, finance, and to also produce the 2018 Mrs. United States National Pageant. The 2017 Agreement was set to expire on July 8, 2018.
Together, these licensing agreements made Williams the national director for all of plaintiff’s pageant divisions. These agreements also required defendants to enter into separate contracts with individuals who would be responsible for conducting the state-level pageants (State Directors).
Thereafter, the business relationship between plaintiff and defendants soured. Williams alleged that when she began her role as national director, the national pageant was in bad shape and that the plaintiff’s owner advised Williams that she could keep this license as national director as long as she’d like. Dkt. #18-9 at ¶ 8. Meanwhile, however, Williams claims that the owner’s son was scheming to force her out of her role so he could take over after Williams had rebuilt the national pageant. Id. In addition to the foregoing allegations, Williams also stated that the production of these pageants was done solely at Crown Garland’s expense, time and resources and that plaintiff would simply collect monies owed under the terms of the licensing agreements while defendants did all of the work and took all of the risk. For example, Williams claims that when she began working as national director, plaintiff did not give or offer her any websites to use. As a result, defendants were forced to purchase domain names to field inquiries from contestants and to promote plaintiff’s pageants.
By May 2018, Williams notified plaintiff of her intent to terminate the 2016 Agreement at the same time the 2017 Agreement was set to expire. Williams cited “considerable” change in “working conditions,” and “irreconcilable differences” between herself and plaintiff’s personnel. In July 2018, Williams stopped working for plaintiff all together. Following her departure, Williams created Cosmos, a beauty pageant company which would go on to compete with plaintiff in an already crowded arena.
The circumstances surrounding her departure from plaintiff, including what she allegedly said to pageant contestants and State Directors during and after the 2018 National Pageant about their legal obligations to plaintiff or defendants, ownership of specific intellectual property, and information created during the terms of the licensing agreements, and her actions with Cosmos form the basis of this dispute.
Plaintiff’s Motion for Injunctive Relief
Plaintiff’s motion sought to enjoin defendants from using its trademarks, various websites containing plaintiff’s trademarks, social media accounts as an administrator or editor for all accounts which were originally created utilizing plaintiff’s trademarks, and the contestant rolls for all plaintiff’s 2018 beauty pageants divisions and from making disparaging remarks to plaintiff’s current and/or former State Directors and titleholders, or any statements regarding such persons’ legal obligations towards plaintiff. Plaintiff also sought an order directing defendants to return, transfer, or turn over to plaintiff a host of tangible and intangible items including administrative rights for all websites and social media at issue.
“To obtain a preliminary injunction the moving party must show, first, irreparable injury, and, second, either (a) likelihood of success on the merits, or (b) sufficiently serious questions going to the merits and a balance of hardships decidedly tipped in the movant’s favor.” Williams, 353 F. Supp. 3d at *217 (quoting Green Party of New York State v. New York State Bd. of Elections, 389 F.3d 411, 418 (2d Cir. 2004). The court elaborated on the first prong, stating that
to establish irreparable harm, a party seeking a preliminary injunction must show that there is a continuing harm which cannot be adequately redressed by final relief on the merits and for which money damages cannot provide adequate compensation. And irreparable harm must be shown to be actual and imminent, not remote or speculative.
Williams, 353 F. Supp. 3d at *217 (quoting Kamerling v. Massanari, 295 F.3d 206, 214 (2d Cir. 2002). If a party fails to establish irreparable harm (as is the case here), the court need not address the other factors of injunctive relief. Id. at *217-18 (internal citations omitted).
In large part, plaintiff’s motion boiled down to the following two contentions. First, despite the expiration of the licensing agreements, defendants continued to use plaintiff’s trademarks on social media and websites to carry out commercial activities for competing pageants. Second, a specific provision of the 2017 Agreement obligated the defendants to relinquish control to plaintiff of intellectual property defendants created throughout the terms of the licensing agreements (including all websites and social media relating to plaintiff’s brand or trademarks) at the conclusion of the 2017 Agreement and defendants failed to do so.
The court did not find plaintiff’s arguments persuasive. There was no evidence that injunctive relief was necessary with respect to the websites primarily because defendants stopped using the websites and removed all content from them when Williams stopped working for plaintiff. Likewise, plaintiff could not prove that injunctive relief was necessary with respect to the social media accounts because when Williams left her national director role, she either deactivated each of these accounts or removed content relating to plaintiff’s brand from the accounts, including all trademarked titles. To the extent that links and references remained on social media accounts controlled or administered by State Directors, there was no evidence that defendants had any control over those social media accounts. Further, defendants had instructed all persons within their control to remove any potentially infringing materials from their social media accounts. In any event, by the time of the instant motion, the plaintiff had already created its own new social media pages. Thus, plaintiff had not been harmed except by the need to spend the money, time and energy in creating new social media accounts. Ultimately, plaintiff’s allegations concerning the websites and social media accounts could be compensated by money damages and/or were speculative, which is not sufficient to show irreparable harm.
Based on its interpretation of the licensing agreements, plaintiff also sought to enjoin defendants from using and to require the return of, a host of other physical and electronic material created for plaintiff’s 2018 pageants. Further, plaintiff sought the contestant rolls for its 2018 pageants. Again, the court emphasized that plaintiff did not make a showing of irreparable harm as it relates to the materials and that contractual disputes must await further discovery and dispositive motions and/or trial. Furthermore, there was no proof that defendants made any improper use of the contestant rolls.
The remainder of plaintiff’s motion for injunctive relief concerned allegations of false and misleading communications defendants allegedly made to both current and/or former State Directors and at least one pageant titleholder. Based on these allegations, plaintiff claimed it was damaged, among other ways, by a loss of reputation and “substantial goodwill.” Yet, plaintiff provided only one conclusory line in a declaration in support of this claim. In denying injunctive relief, the court reminded litigants that a claim for loss of reputation and good will based upon a conclusory statement, without more, is insufficient to show irreparable harm.
Update on Prior Article
Court Examines Two Doctrines in Environmental Case, New York Law Journal (Jan. 24, 2019), described Judge David G. Larimer’s decision and order in Read v. Corning, 351 F. Supp. 3d 342 (W.D.N.Y. 2018). In that decision, Judge Larimer granted a motion to dismiss all but plaintiffs’ first cause of action seeking response costs under CERCLA and then stayed that cause of action based on the pendency of a remedial process taking place pursuant to administrative proceedings.
Recently, Judge Larimer issued another decision and order in the same case, Read v. Corning, No. 18-CV-6131L, 2019 U.S. Dist. LEXIS 62684 (W.D.N.Y. April 10, 2019), denying plaintiffs’ motion for leave to file an amended complaint, or in the alternative, for an order entering final judgment on the claims that were previously dismissed.
Plaintiffs proposed an amended complaint which would retain their CERCLA claim and restate and re-assert their negligence claim. In denying plaintiffs’ request, the court noted that the additional allegations added “little of substance” and did not correct the basic defect that existed prior. While acknowledging the relevant liberal pleading standard, the court reminded plaintiffs that “conjecture, based on a few scraps of information, or broad, conclusory allegations about what was generally known in the past” would not suffice. Id. at *6 (internal quotations omitted). In further support for its decision, the court observed that it is not an advisor to the parties and that “a dispositive motion is not a dry run for the nonmovant to wait and see what the district court will decide before requesting leave to amend.” Id. at *3 (quoting Kader v. Sarepta Therapeuticsa, 887 F.3d 48, 61 (1st Cir. 2018) (internal quotations omitted)).
The court also denied that part of the motion seeking an entry of final judgment on the claims previously dismissed. In doing so, it stressed that the court’s ability to enter a partial final judgment should be used “sparingly.” In fact, “many litigants who have received an unfavorable decision on fewer than all of their claims would like to take an immediate interlocutory appeal, in the hopes of obtaining a quick reversal or remand … but that is not the rule in federal court.” Id. at *12. To that end, the court echoed a statement it made in its previous decision, namely, that allowing plaintiffs to pursue these claims now, during the pendency of the remediation process “would accomplish little other than to dissect the case into piecemeal litigation, with consequent delay and multiplicitous appeals … “ Id. at *12 (quoting Corning, 351 F. Supp. 3d at 360).
Sharon M. Porcellio is a member of Bond, Schoeneck & King, representing businesses and institutions in commercial litigation and employment matters. She can be reached at firstname.lastname@example.org. Alyssa Jones, an associate with the Litigation Department of the firm, assisted with the preparation of this article.