F I L E D
United States Court of Appeals
Tenth Circuit
UNITED STATES COURT OF APPEALS
OCT 30 2001
TENTH CIRCUIT
PATRICK FISHER
Clerk
BAD ASS COFFEE COMPANY OF
HAWAII, a Utah corporation,
Plaintiff-Appellee,
v. Nos. 00-4045, 00-4077, 00-4179
(District of Utah)
BAD ASS COFFEE LIMITED (D.C. No. 99-CV-150-G)
PARTNERSHIP, a Nevada limited
partnership; ROBERT ALAN JONES,
a Nevada resident,
Defendants-Appellants.
ORDER AND JUDGMENT *
Before TACHA, ANDERSON, and MURPHY, Circuit Judges.
*
This order and judgment is not binding precedent, except under the
doctrines of law of the case, res judicata and collateral estoppel. The court
generally disfavors the citation of orders and judgments; nevertheless, an order
and judgment may be cited under the terms and conditions of 10th Cir. R. 36.3.
I. INTRODUCTION
Appellants Robert Alan Jones and Bad Ass Coffee Limited Partnership
(“BACLP”) 1 entered into numerous agreements with Appellee Bad Ass Coffee
Company of Hawaii, Inc. (“BACH”). These agreements governed, inter alia,
BACLP’s use of the Bad Ass Coffee Company trademark (the “Trademark”) in
the states of Hawaii and Nevada. BACH unilaterally terminated several of the
agreements thereby affecting BACLP’s continued right to use the Trademark.
After the federal district court entered a judgment confirming an arbitration award
relating to BACH’s termination of one agreement, BACH sought and was granted
preliminary injunctions enjoining BACLP from using the Trademark in Hawaii
and Nevada. BACLP appeals from the judgment confirming the arbitration
award 2 and from the two orders granting the preliminary injunctions. The three
cases were consolidated in this appeal. Exercising jurisdiction pursuant to 28
U.S.C. §§ 1291 and 1291(a)(1), this court affirms.
1
Although it appears that BACLP has changed its name, this court will
continue to refer to it as Bad Ass Coffee Limited Partnership. See Bad Ass Coffee
Co. of Haw., Inc. v. Bad Ass Coffee Ltd. P’ship, 95 F. Supp.2d 1252, 1252 n.1 (D.
Utah 2000).
2
See Fed. R. Civ. P. 54(b).
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II. FACTUAL BACKGROUND
The parties are well acquainted with the copious record in this case.
Consequently, this court includes only the background material necessary to fully
understand our holding.
Jones was formerly employed by Royal Aloha Coffee, Tea & Spice
Company, Inc. (“Royal Aloha”) d/b/a The Bad Ass Coffee Company. In
November 1997, Royal Aloha assigned all of its right, title, and interest in and to
the Trademark to BACH.
In February 1997, Jones and RAJ Limited, a Nevada corporation wholly
owned by Jones, brought a lawsuit in Nevada state court naming BACH and
several other entities and individuals as defendants. The parties resolved the
litigation by entering into a series of cross-referenced agreements: (1) a
Confidential Settlement Agreement and Mutual Release (the “Settlement
Agreement”); (2) an Asset Purchase and Sale Agreement (the “APSA”); (3) a
Master Distribution Agreement Hawaii (the “MDAH”); (4) a Master Distribution
Agreement Nevada (the “MDAN”); (5) a Territory Development Agreement
Hawaii (the “TDAH”); (6) a Territory Development Agreement Nevada (the
“TDAN”); and (7) an Installment Promissory Note (the “Promissory Note”).
These agreements governed, inter alia, the transfer and sale of certain assets from
BACH to BACLP. BACLP is a Nevada limited partnership in which Jones is the
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principal. BACH and BACLP also entered into a Franchise Agreement dated
January 1, 1999 (the “Franchise Agreement”). This agreement governed
BACLP’s operation of a Bad Ass Coffee Company retail store in Las Vegas,
Nevada.
Almost before the ink was dry on the agreements, disputes arose between
BACH and BACLP. In early 1999, BACH began sending default notices to
BACLP and eventually gave BACLP notice of the immediate termination of the
MDAH based on BACLP’s failure to submit monthly sales reports and pay
royalties. On March 9, 1999, BACH sent BACLP written notice that it was
terminating both the MDAN and the TDAN based on BACLP’s default under the
Promissory Note and the APSA. BACH also filed a lawsuit in federal district
court against BACLP and Jones.
An arbitration hearing to determine the propriety of BACH’s termination of
the MDAH commenced on August 4, 1999. On September 3, 1999, the arbitrator
issued a written award in favor of BACH, concluding that BACH was entitled to
terminate the MDAH. The arbitrator also awarded BACH administrative fees and
expenses in the amount of $5,800. BACLP filed a motion to vacate the
arbitration award in Third Judicial District Court, Salt Lake County, Utah. BACH
filed a motion to confirm the arbitration award in federal district court and a
notice to remove the Utah state action to federal court.
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On September 23, 1999, BACH gave BACLP written notice of the
termination of the Franchise Agreement. BACH then filed an amended complaint
in its federal suit against BACLP and Jones. The amended complaint contained,
inter alia, claims against BACLP alleging: (1) trademark infringement; (2) breach
of the APSA, the Promissory Note, and the Security Agreement; (3) breach of the
MDAH; (4) breach of the TDAH; (5) breach of the MDAN; (6) breach of the
TDAH; and (7) breach of the Franchise Agreement. BACH moved to consolidate
the federal suit and the application to confirm the arbitration award.
On November 4, 1999, the federal district court denied BACLP’s motion to
remand the matter to state court, granted BACH’s motion to consolidate, and
granted BACH’s motion to confirm the arbitration award. BACLP’s motion to
vacate the arbitration award was denied. BACH then filed a Motion for Award of
Attorney’s Fees in Connection With Confirmation of the Arbitration Award. This
motion was granted on April 13, 2000.
On February 24, 2000, the district court granted BACH’s motion for a
preliminary injunction prohibiting BACLP from (1) using or displaying the
Trademark in Hawaii, (2) interfering with BACH’s efforts to negotiate with
suppliers of its licensed products, and (3) purporting to authorize others to use the
Trademark in Hawaii. On October 11, 2000, the district court granted BACH a
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preliminary injunction enjoining BACLP from using the Trademark in Nevada or
purporting to authorize others to use the Trademark in Nevada.
BACLP appeals the judgment confirming the arbitration award and
awarding attorney’s fees to BACH. BACLP also appeals the grant of the
preliminary injunctions relating to the use of the Trademark in both Hawaii and
Nevada. The appeals were consolidated and all are properly before this court.
III. DISCUSSION
Appeal No. 00-4045
This court reviews the district court’s order confirming the arbitration
award using traditional standards. Findings of fact are accepted unless they are
clearly erroneous and legal questions are reviewed de novo. See First Options of
Chicago, Inc. v. Kaplan, 514 U.S. 938, 947-48 (1995). The review of an
arbitrator’s award, however, “is among the narrowest known to the law.” Litvak
Packing Co. v. United Food & Comm. Workers Local 7, 886 F.2d 275, 276 (10th
Cir. 1989).
BACLP first argues that the district court lacked jurisdiction to confirm the
arbitration award. Our resolution of the jurisdictional issue involves a two-step
inquiry. First, “‘there must be diversity of citizenship or some other independent
basis for federal jurisdiction.’” P & P Indus., Inc. v. Sutter Corp., 179 F.3d 861,
866 (10th Cir. 1999) (quoting Moses H. Cone Mem’l Hosp. v. Mercury Constr.
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Corp., 460 U.S. 1, 25 n.32 (1983)). Additionally, the parties must have “agreed,
explicitly or implicitly, that any eventual arbitration award shall be subject to
judicial confirmation.” Id. at 866-67.
BACH asserts that 28 U.S.C. § 1332 provides the basis for federal
jurisdiction because the parties are citizens of different states and the amount in
controversy exceeds $75,000. BACLP argues that the amount in controversy is
only $5,800; the amount awarded in administrative fees and expenses by the
arbitrator. To determine the amount in controversy we must look to “the
pecuniary effect an adverse declaration will have on either party to the lawsuit.”
City of Moore v. Atchison, Topeka & Santa Fe Ry. Co., 699 F.2d 507, 509 (10th
Cir. 1983). The arbitrator concluded that BACH properly terminated the MDAH,
the agreement which gave BACLP the right to distribute Bad Ass Coffee
Company products in Hawaii. In the memorandum it filed in support of its
motion to vacate the arbitration award, BACLP represented to the district court
that it had acquired this right for $100,000. BACLP’s argument that the amount
in controversy does not exceed $75,000 is disingenuous.
BACLP’s position that the parties did not agree to judicial confirmation in
federal court is also meritless. The MDAH provides that judgment upon any
arbitration award “may be entered in any Court of competent jurisdiction” but
does not identify any specific court. When no court is specified in the parties’
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agreement, the Federal Arbitration Act provides that judgment may be entered in
“the United States court in and for the district within which such award was
made.” 9 U.S.C. § 9. The arbitration award was made in Salt Lake County, Utah.
Thus, the parties implicitly agreed that judgment on the arbitration award could be
entered by the United States District Court for the District of Utah.
BACLP next argues that the arbitrator erroneously limited the scope of the
arbitration when he refused to allow it to introduce evidence it characterizes as
“affirmative defenses material to the controversy” between the parties. BACLP
further asserts that the arbitrator’s refusal to hear this evidence was contrary to
the arbitrator’s own order regarding the scope of discovery. An arbitrator “must
grant the parties a fundamentally fair hearing.” Bowles Fin. Group, Inc. v. Stiffel,
Nicolaus & Co., 22 F.3d 1010, 1012 (10th Cir. 1994). “[A] fundamentally fair
hearing requires only notice, opportunity to be heard and to present relevant and
material evidence and argument before the decision makers, and that the
decisionmakers are not infected with bias.” Id. at 1013. Even if the arbitrator
erroneously excluded material evidence, we will not vacate the award unless the
error deprived a party of a fundamentally fair hearing. See 9 U.S.C. § 10(a)(3)
(requiring vacatur only when the arbitrator’s refusal to hear pertinent and material
evidence constitutes misconduct).
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BACLP has failed to show that the arbitrator’s refusal to consider the
proffered evidence constituted misconduct on the part of the arbitrator or deprived
it of a fundamentally fair hearing. In fact, BACLP admits in its appellate brief
that the arbitrator allowed it to present evidence “directly connected to payments
made against royalties earned by royalty sales.” Additionally, in its Memorandum
Concerning Scope and Effect of Arbitration Award, BACLP represented to the
district court that one of its counterclaims, evidence relating to which it now
asserts should have been admitted by the arbitrator, was properly excluded from
the arbitration proceedings. See Appellants’ App. at 330 (“This is a claim which
was not allowed by the Arbitrator in the Arbitration Proceedings as either a
counterclaim, or as an affirmative defense to BACH’s claims in the arbitration.
BACH argued in the arbitration that this should be litigated in the federal district
court and is not included in matters covered by the arbitration provisions of the
[MDAH]. BACLP agrees with this position . . . .” (emphasis added)).
The record completely belies BACLP’s specious assertion that the
arbitrator’s decision to exclude the proffered evidence constituted misconduct.
BACLP’s contention that it was denied a fundamentally fair hearing is baseless.
BACLP next argues that the district court erred when it failed to make
written findings of fact supporting its judgment confirming the arbitration award.
BACLP contends that this constitutes a wrongful failure to adhere to Utah
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arbitration law. BACLP not only fails to cite any case law supporting its
argument, it fails to even identify the Utah law it claims the district court
violated. We deem the issue waived. See Rapid Transit Lines, Inc., v. Wichita
Developers, Inc., 435 F.2d 850, 852 (10th Cir. 1970). (“[Appellant’s] citation of
but one authority, and that of no pertinence, suggests either that there is no
authority to sustain its position or that it expects the court to do its research.”).
Finally, BACLP argues that the district court erred when it awarded
$8,668.75 in attorney’s fees to BACH. These fees were incurred in connection
with the confirmation of the arbitration award, not in connection with the
arbitration proceeding itself. The Utah Arbitration Act provides that attorney’s
fees relating to the confirmation of arbitration award may be awarded by the court
unless precluded by the arbitration agreement. See Utah Code Ann. § 78-31a-16;
see also Buzas Baseball, Inc. v. Salt Lake Trappers, Inc., 925 P.2d 941, 953
(Utah 1996) (holding that the attorney’s fee provision in the Utah Arbitration Act
does not conflict with federal law). The parties argue over whether the terms of
the MDAH prohibit an award of attorney’s fees relating to the confirmation of an
arbitration award. The interpretation of a contract is a legal question reviewed de
novo by this court. See Bank of Okla. v. Muscogee (Creek) Nation, 972 F.2d
1166, 1171 (10th Cir. 1992).
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The MDAH contains, inter alia, two provisions relating to the payment of
attorney’s fees. Article 17.03 is captioned, “Disputes and Arbitration” and states,
“[t]he prevailing Party in any arbitration suit or action to enforce this Agreement,
shall be entitled to recover the administrative costs of the arbitration proceeding
and the fee for the arbitrators, but not attorney’s fees.” Article 17.06 is
captioned, “Costs and Attorney’s Fees” and states, in part, “if Company or
Distributor is required to enforce this Agreement in litigation, the party prevailing
in such proceeding shall be entitled to reimbursement of its costs and expenses,
including reasonable accounting and legal fees.” If we accept BACLP’s argument
and interpret Article 17.03 to prohibit an award of attorney’s fees in both
arbitration proceedings themselves and all subsequent actions seeking to enforce
the arbitration award in litigation, the provision conflicts with Article 17.06
which permits attorney’s fees to be awarded when a party is required to enforce
the MDAH in litigation. We decline to adopt BACLP’s construction of the
MDAH because it would diminish the effect of Article 17.06. If possible, this
court should adopt a reasonable interpretation of a contract that gives effect to all
its provisions. 3 Such a reasonable interpretation is possible in this case. We can
3
This well-settled rule of contract construction is applicable whether this
court interprets the MDAH pursuant to Utah law or Hawaii law. See Plateau
Mining Co. v. Utah Div. of State Lands & Forestry, 802 P.2d 720, 725 (Utah
1990); Globe Indem. Co. v. Teixeira, 230 F. Supp. 451, 455 (D. Haw. 1964).
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resolve any potential conflict between Article 17.03 and Article 17.06 by
construing the phrase “arbitration suit or action,” as used in Article 17.03, to
mean only the arbitration proceeding itself and not any subsequent litigation
involving the arbitration award. This construction is supported by the wording of
Article 17.03. The relevant sentence in 17.03 allows a party to recover only the
“administrative costs of the arbitration proceeding and the fee for the arbitrators.”
These expenses would be incurred only in the underlying arbitration proceeding
and not in any subsequent litigation involving the arbitration award. Thus, it is
reasonable to construe Article 17.03 to likewise apply only to attorney’s fees
incurred in the arbitration proceeding.
Confirmation of an arbitration award is a judicial proceeding; though
related, it is separate from the underlying arbitration proceeding. Thus, BACH’s
motion seeking confirmation of the arbitration award is more appropriately
viewed as an action seeking to enforce the MDAH in litigation than an arbitration
proceeding. Additionally, BACH filed its motion to confirm the arbitration only
after BACLP first filed a motion to vacate the arbitration award in Utah state
court. Thus, BACH was “required to enforce [the MDAH] in litigation.”
Accordingly, we conclude that Article 17.03 of the MDAH does not apply to the
attorney’s fees awarded by the district court to BACH and that those fees were
allowable under Article 17.06.
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Because BACLP does not challenge the reasonableness of the fees awarded
by the district court and has not identified any provision in the MDAH that
prohibits an award of attorney’s fees relating to the confirmation of an arbitration
award, we conclude that the fees awarded by the district court were proper.
Appeal No. 00-4077
BACLP raises several arguments relating to the district court’s grant of the
preliminary injunction enjoining BACLP from using the Trademark and
associated rights in Hawaii. This court reviews the grant of a preliminary
injunction for abuse of discretion. See United States v. Power Eng’g Co., 191
F.3d 1224, 1230 (10th Cir. 1999). Underlying legal issues are reviewed de novo
and findings of fact are reviewed for clear error. See id.; Oil, Chem. & Atomic
Workers Int’l Union, Local 2-286 v. Amoco Oil Co., 85 F.2d 697, 703 (10th Cir.
1989).
BACLP first argues that the district court made erroneous factual findings
and then relied on those findings when it granted the preliminary injunction.
BACLP claims the court erroneously found that there were no existing licenses or
franchises being operated by BACLP at the time of the execution of the MDAH.
BACLP asserts it had been a joint owner and operator of a Bad Ass Coffee
Company location in Hawaii since April 1996. To support this assertion, BACLP
has identified in the record a signed license agreement entered into between Royal
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Aloha, as licensor, and Hawaiian Islands Brewing Company, as licensee, on
February 1, 1996. BACLP, however, has not submitted any record evidence
detailing its relationship with Hawaiian Islands Brewing Company, or any
evidence that the license agreement was in effect on the date the MDAH was
executed. Although BACLP has included in the record disjointed, incomplete
excerpts from the transcript of the preliminary injunction hearing that appear to
relate to this license agreement, that testimony does not directly link BACLP to
the licensee named in the license agreement. BACLP has thus failed to
demonstrate that the district court’s factual finding is erroneous. See Naimie v.
Cytozyme Labs., Inc., 174 F.3d 1104, 1113 (10th Cir. 1999) (“If the appellant
intends to urge on appeal that a finding or conclusion is unsupported by the
evidence or is contrary to the evidence, the appellant shall include in the record a
transcript of all evidence relevant to such finding or conclusion, and, if the
appellant fails to do so, the court is under no obligation to remedy any failure of
counsel to fulfill that responsibility.” (quotations omitted)).
BACLP also claims that the district court erroneously relied on the TDAH
to support the grant of the preliminary injunction. BACLP contends that the
TDAH was invalid at its inception because BACH was not registered to do
business in Hawaii when the TDAH was executed. Even assuming that BACLP’s
argument is relevant, BACLP did not raise it before the district court and thus we
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do not address it. See Crow v. Shalala, 40 F.3d 323, 324 (10th Cir. 1994)
(“Absent compelling reasons, we do not consider arguments that were not
presented to the district court.”)
BACLP next challenges the district court’s determination that all of
BACLP’s rights to use the Trademark in Hawaii terminated at the time the APSA,
the MDAH, and the TDAH terminated. The district court concluded that the
APSA, the MDAH, and the TDAH encompassed and defined all the rights and
obligations of BACLP and BACH with respect to the Trademark and that any and
all rights BACLP had to use the Trademark in Hawaii were contingent upon the
continued validity of those documents. The court concluded that BACLP failed to
demonstrate that it possessed any rights, separate from the rights created under
the terms of the APSA, the MDAH, and the TDAH, to use the Trademark in
Hawaii.
In its order granting the preliminary injunction, the district court set forth
the following language from the MDAH:
12.01 Upon the expiration or termination of this Agreement for any
reason other than as set forth above, [BACLP] will:
....
(b) Immediately cease and desist from using or
displaying the name Bad Ass Coffee or other name or
Mark except with respect to the franchises or licenses
owned and operated by [BACLP] or its affiliates.
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(c) Immediately cease and desist from using or
displaying any of the Marks and forms of advertising
indicative of the Business, products or operations except
with respect to the franchises/licenses owned and
operated by [BACLP] in accordance with the signed
Agreements.
....
12.02 So long as [BACLP] is not in default under the terms and
conditions of its individual location Agreements, [BACLP] may
continue as Licensee/Franchisee of Company for its individual
locations pursuant to the terms and conditions of the respective
Agreements.
BACLP argues that when it entered into the APSA, it was granted “vested rights
to open locations under licenses already granted, or under a franchise system if it
was approved” and that these rights survived the termination of the MDAH. We
have reviewed the provisions in the APSA referenced by BACLP and they do not,
standing alone, grant BACLP any independent right to use the Trademark. At
most, the provisions leave open the possibility that BACLP could acquire such
rights under separate agreements with BACH. BACLP, however, has failed to
produce any such agreement. BACLP further argues, however, that it purchased
three Bad Ass Coffee Company retail stores in Hawaii pursuant to the referenced
provisions in the APSA and the sale included the transfer of the goodwill of those
businesses. BACLP claims that the trade name of a business is automatically
transferred with the goodwill and, thus, it also acquired the right to use the
Trademark when it purchased the three retail locations.
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When an agreement transferring an entire business, including goodwill, is
silent as to the transfer of the business’ trademark, this court has held that a buyer
who continues to operate the business under the same trademark acquires
ownership of the trademark. See Okla. Beverage Co. v. Dr. Pepper Love Bottling
Co., 565 F.2d 629, 632 (10th Cir. 1977). In this case, however, BACLP only
purchased three retail locations from BACH pursuant to the terms of the APSA
and Bills of Sale 4 executed several months later; BACLP did not acquire BACH’s
entire business. Additionally, the APSA is not silent as to the transfer of the
Trademark, but specifically provides that the only right to the Trademark
transferred pursuant to the terms of the APSA is an “exclusive license contained
in the [MDAH] and rights thereunder subject to [BACH’s] on-going rights
including ownership to trademarks, service marks, tradenames and applications
therefore for the state of Hawaii . . . .” Thus, any right BACLP acquired to use
the Trademark pursuant to the terms of the APSA was clearly subject to BACH’s
ongoing ownership of the Trademark. BACLP’s argument that it acquired a
vested right to use the Trademark pursuant to the terms of the APSA or the Bills
of Sale is meritless.
BACLP next challenges the district court’s finding that the lawyer for the
bankruptcy trustee in the Royal Aloha bankruptcy proceedings informed all Bad
4
BACLP has included only one Bill of Sale in the record.
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Ass Coffee Company licensees that the executory contracts between them and
Royal Aloha had been rejected. BACLP argues that the rejection of the executory
contracts did not affect its right to use the Trademark because the Trademark and
all encumbrances thereon were transferred to BACH prior to the initiation of
Royal Aloha’s bankruptcy proceedings. Thus, the rejection of the Royal Aloha
agreements did not affect the licensees’ rights to use the Trademark. Even
assuming that the rejection of the executory contracts had no effect on a
licensee’s right to use the Trademark, we must reject BACLP’s argument simply
because it has failed to demonstrate that it was ever a party to any signed license
agreement with Royal Aloha.
Finally, BACLP argues that the district court abused its discretion because
the grant of the preliminary injunction altered the status quo. “To obtain a
preliminary injunction, the party requesting such an extraordinary equitable
remedy bears the burden of showing: (1) a substantial likelihood of prevailing on
the merits; (2) irreparable harm unless the injunction is issued; (3) the threatened
injury outweighs the harm that the preliminary injunction may cause the opposing
party; and (4) the injunction, if issued, will not adversely affect the public
interest.” Fed. Lands Legal Consortium v. United States, 195 F.3d 1190, 1194
(10th Cir. 1999). When the issuance of a preliminary injunction will alter the
status quo between the two parties, the movant must show that “that on balance,
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the traditional four factors weigh heavily and compellingly in favor of granting
the injunction.” SCFC ILC, Inc. v. Visa USA, 936 F.2d 1096, 1097 (10th Cir.
1991). The district court was clearly aware of BACLP’s argument that an
injunction prohibiting BACLP from using the Trademark at the three retail
locations identified in the APSA would upset the status quo. See Bad Ass Coffee
Co. of Haw., Inc. v. Bad Ass Coffee Ltd. P’ship, No. 2:99-cv-00150, slip op. at 11
(D. Utah Feb. 23, 2000) (“To the extent BACH seeks to disrupt the status quo by
enjoining defendants from selling Bad Ass Coffee Company coffee and products
from their retail stores, this court applies the higher standard to its analysis of the
preliminary injunction.”). Accordingly, the district court’s order contains a
comprehensive analysis of the four factors and an explanation of how they
weighed heavily in favor of BACH. We can find no reversible error in the district
court’s analysis and affirm the grant of the preliminary injunction for
substantially those reasons stated by the district court.
Appeal No. 00-4179
BACLP also appeals from the grant of the preliminary injunction enjoining
it from using the Trademark in the state of Nevada. BACLP argues that the
termination of the MDAN and the TDAN did not affect its rights to use the
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Trademark in connection with the retail store located in Las Vegas. 5 BACLP
contends that those rights were contained in the Franchise Agreement and that the
Franchise Agreement did not terminate upon the termination of the MDAN and
the TDAN.
BACLP’s Nevada distribution and territorial development rights were
detailed in the MDAN and the TDAN, two of the agreements executed
contemporaneously with the APSA. In addition, BACLP acquired the right to
operate the Las Vegas store pursuant to the terms of the Franchise Agreement.
Subject to a fifteen-day cure period, BACH retained, inter alia, the power to
terminate the Franchise Agreement if BACLP “fail[ed] to pay for any Product, or
any fees, purchase price, advertising fees, transfer fees, renewal fees or other
amounts due to [BACH] . . . .” BACH also retained the right to terminate the
Franchise Agreement without allowing BACLP the opportunity to cure if
“[BACLP] makes any material misrepresentations relating to the acquisition of
the franchise or [BACLP] engages in conduct which reflects materially upon the
operations and/or reputation of the BACH franchise business or the franchise
System in an adverse manner.”
5
BACLP does not argue on appeal that the district court improperly
enjoined it from using the Trademark pursuant to the terms of either the MDAN
or the TDAN. This appears to be a concession that BACH properly terminated
the MDAN and the TDAN, resulting in the termination of any rights BACLP had
to use the Trademark in Nevada contained solely in those agreements.
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Several months after BACH sent BACLP written notice that it was
terminating the MDAN and the TDAN, BACH sent BACLP written notice that it
was also terminating the Franchise Agreement. BACH justified the termination,
in part, on BACLP’s alleged unauthorized use of the Trademark in Hawaii.
BACH also alleged that BACLP “published to prospective franchisees in the state
of Hawaii certain defamatory statements reflecting materially upon the operations
and reputation of the BACH franchise business in an adverse manner.” 6
BACH then filed a motion seeking a preliminary injunction enjoining
BACLP from using the Trademark in Nevada. In support of its motion, BACH
relied on testimony presented in the preliminary injunction hearing relating to the
use of the Trademark in Hawaii and an affidavit signed by BACH’s president,
Mike Bilanzich, stating that BACLP had not made any royalty payments or
delivered monthly accountings pursuant to the Franchise Agreement since August
31, 1999. BACLP filed a memorandum in support of its opposition to BACLP’s
motion, arguing, inter alia, that it submitted all franchise reports and royalty
6
This allegation arose in connection with a letter signed by Jones and sent
by BACLP to Bad Ass Coffee Company licensees in Hawaii which stated, “Our
partnership owns the trademark in Hawaii, no amount of lies or unsigned lawyers
[sic] letters will change that. We will never provide you with counterfeit coffee
at high prices as Mike Bilanzich as done in the past, and we will not run out on
100s of creditors and millions of dollars in debts as Mike as done. We will not
fail to register or pay our Hawaii GET taxes, forget to become qualified to do
business in Hawaii, or sell franchises in violation of Hawaii laws.” This letter
was part of the record from the Hawaii preliminary injunction hearing.
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payments in a timely manner until August 31, 1999. It then argued, without any
citation to authority, that it was relieved of any responsibility to continue
tendering payments because BACH had improperly rejected some payments in an
attempt to cause a breach of the Franchise Agreement. BACLP did not present
any argument regarding BACH’s allegation that BACLP had published
defamatory statements that damaged the BACH franchise system.
The district court concluded that: (1) BACH would suffer irreparable harm
unless BACLP was enjoined, (2) the balance of harms weighed in favor of
granting the injunction, and (3) the injunction would not adversely affect the
public interest. The court granted the injunction after further concluding that the
evidence presented by BACH “raised questions going to the merits so serious,
substantial, difficult and doubtful, as to make them a fair ground for litigation and
thus for more deliberate investigation.” Bad Ass Coffee Co. of Haw., Inc. v. Bad
Ass Coffee Ltd. P’ship, No. 2:99-cv-00150, slip op. at 4 (D. Utah October 11,
2000); see also Fed. Lands Legal Consortium, 195 F.3d at 1194-95. The court
stated, “[BACH] has presented evidence of several defaults by defendants under
each of the relevant Nevada agreements.”
On appeal, BACLP renews the argument it made before the district court
that BACH improperly terminated the Franchise Agreement because BACLP was
not in default. BACLP asserts that was justified in failing to tender royalty
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payments after August 31, 1999 because BACH’s rejection of earlier royalty
payments was improper. BACLP also argues, for the first time in this appeal, that
the termination of the Franchise Agreement cannot be based on the letter sent to
the Hawaii franchisees because the letter did not mention BACH and was not
defamatory because the allegations made therein were true. Finally, BACLP
argues that the district court erred when it concluded that trademark infringement
constitutes an irreparable harm.
We assume, without deciding, that the Franchise Agreement survived the
termination of the MDAN and the TDAN and that the Franchise Agreement
conferred on BACLP rights to use the Trademark in connection with its operation
of the retail store in Las Vegas. We have considered each of BACLP’s remaining
arguments and conclude that they are either unsupported by the record or relevant
case law, or are waived because they were not presented to the district court. 7 The
record amply supports the district court’s finding that BACH presented
“substantial and largely uncontroverted evidence that all of [BACLP’s] rights to
use the Trademark in Nevada have been lawfully terminated.” BACLP has
presented absolutely no evidence indicating that the district court’s findings were
clearly erroneous and has not shown that the district court committed any legal
7
The argument section of BACLP’s memorandum in support of its
opposition to BACH’s motion seeking the Nevada injunction was less than two
pages long and did not contain a single citation.
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error that would necessitate a reversal of the grant of the preliminary injunction.
Accordingly, finding no reversible error in the district court’s analysis, we affirm
the grant of the preliminary injunction for substantially those reasons stated by the
district court in its order dated October 11, 2000.
IV. CONCLUSION
We affirm the confirmation of the arbitration award and the grant of
attorney’s fees to BACH, affirm the grant of the preliminary injunction enjoining
BACLP from using the Trademark in Hawaii, and affirm the grant of the
preliminary injunction enjoining BACLP from using the Trademark in Nevada.
ENTERED FOR THE COURT
Michael R. Murphy
Circuit Judge
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