Free Reply - District Court of Arizona - Arizona

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LAW OFFICES One Arizona Center, 400 E. Van Buren Phoenix, Arizona 85004-2202 (602) 382-6000

Dan W. Goldfine (#018788) Adam Lang (#022545) SNELL & WILMER L.L.P. One Arizona Center 400 East Van Buren Street Phoenix, AZ 85004-2202 Telephone: (602) 382-6000 Facsimile: (602) 382-6070 [email protected] [email protected] - and Grant Woods, Esq. (#006106) GRANT WOODS, P.C. 1726 North Seventh Street Phoenix, Arizona 85006 Telephone: (602) 258-2599 Facsimile: (602) 258-5070 [email protected] Attorneys for Plaintiffs IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF ARIZONA Meritage Homes Corporation, et al., Case No. CV-04-0384-PHX-ROS Plaintiffs, v. Ricky Lee Hancock, et al. Defendants. AND RELATED COUNTERCLAIMS AND THIRD PARTY CLAIMS I. MICHAEL JORDAN AND TWENTIETH CENTURY FOX ARE INAPPOSITE TO THE INSTANT CLAIMS Defendant Greg Hancock does not address the applicability of the holdings and reasoning of MJ & Partners Rest. Ltd. P'shp v. Zadikoff, 10 F. Supp. 2d 922, 928 (N.D. Ill. 1998) (hereinafter, "Michael Jordan") and Twentieth Century Fox Film Corp. v. Marvel Enters., Inc., 277 F.3d 253 (2d Cir. 2002). Instead he focuses on whether the evidence in this case is sufficient to meet the confusion element of the Lanham Act unfair competition claim. While Defendant Rick Hancock does address the Michael Jordan and Twentieth Century Fox holdings and reasoning, he does not compare those two cases with REPLY RE PLAINTIFFS' SUPPLEMENTAL BRIEF PER THE COURT'S APRIL 20, 2007 ORDER

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Document 482

Filed 05/04/2007

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the evidence here that establishes confusion associating Rick Hancock Homes as part of or affiliated with Meritage. As set forth in the Supplemental Brief and ignored by the Defendants, the Lanham Act prohibits (1) association confusion or "palming or passing off" not involving confusion as to the origin;1 (2) trade dress infringement that involves the similarity in the two businesses and more than just the use of a mark; and (3) false advertising through Defendants' promotional activities. These theories are simply not addressed in Michael Jordan and Twentieth Century Fox, and are supported by the evidence in the light most favorable to Meritage: · Defendants engaged in "palming off" Rick Hancock Homes at Sundance as associated or affiliated with Meritage's Hancock Communities at Sundance. See Plaintiffs' (1) Objections to Defendant Greg Hancock's Updated Statement of Facts and (2) Controverting Statement of Facts at CSOF ¶¶ 23, 117-125 (Feb. 23, 2007) (identifying facts focused on "association" theory). Defendants engaged in trade dress infringement by essentially putting a mirror operation, using a similar name, marketing and sales tactics and representations in marketing a substantially identical product as Meritage. See id. Rick Hancock's marketing presentations to customers contained misleading representations that Rick Hancock Homes was part of Meritage, as testified to by Sergeant Atkins and as reflected in the billboards and in the brochures, that amount to false advertising. See id.

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Unlike the plaintiffs in Michael Jordan and Twentieth Century Fox, Meritage is not claiming, and the Defendants agree, that the consumers at issue believe that they are buying a home from Greg Hancock. Rather, according to the evidence, Defendants caused a sufficient likelihood of confusion so that consumers believed they were buying a home from Meritage, and not Rick Hancock Homes, because they mistakenly believed that Rick Hancock Homes was associated and/or affiliated with Meritage. See E. & J. Gallo Winery v. Gallo Cattle Co., 967 F.2d 1280, 1289 (9th Cir. 1992) (likelihood of Section 43(a) is intended to foster fair competition "by prohibiting fraudulent representations about goods and services and the passing off ofnd person's goods or one services as those of another." S. Rep. No. 1333, 79th Congr., 2 Sess., 1946 USCCAN 1275.
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confusion established by the Sleekcraft factors ); Brookfield Comm'ns v. West Coast Ent't Corp., 174 F.3d 1036, 1062 (9th Cir. 1999) (initial interest confusion (that is, confusion as the consumer commences her search for homebuilders) is actionable. Defendants concede that the confusion is between Rick Hancock Homes and Meritage, and not Greg Hancock. Palming or passing off, trade dress infringement and/or false advertising are clearly coginizable under the language Section 43(a) of the Lanham Act: · "Any person who . . . uses . . . word [or] name [or] false or misleading representation of fact, which is likely to cause confusion . . . as to the affiliation, connection or association of such person with another person;" or Any person who, on or in connection with any goods or services . . . in commercial advertising or promotion, misrepresents the nature, [or] characteristics . . . of his or her or another person's goods, services, or commercial activities."

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(Emphasis added.) Both Defendants ignore actual language of Section 43(a), however, seeking to wrongfully pigeon-hole Meritage's evidence as a trademark infringement claim rather than an unfair competition claim related to palming-off Rick Hancock Homes as Meritage, misrepresenting that a home built by Rick Hancock Homes is a home built by Meritage, or that Rick Hancock Homes was affiliated with Meritage. In sum, the Michael Jordan and Twentieth Century Fox cases had a different posture and theory of unfair competition and are therefore inapposite. Here, the claims and evidence deal with "association" confusion between Rick Hancock Homes and Meritage; no one in this litigation has ever suggested that consumers of either entity were buying a home from Greg Hancock. See, e.g., In re Certain Alkaline Batteries, 225 U.S.P.Q. 823, 837, 1984 WL 63019, *12 (1984) ("We reject respondents' arguments that `origin' should be limited to [the] manufacturer" and includes "the distribution chain") and the cases cited in the Supplemental Brief that allow for claims beyond traditional origin confusion.2 It should be noted that Greg Hancock is only one of the licensees of the Hancock marks. See Exhibit 1 to Rick Hancock Response. Another licensee is Hancock Communities, LLC, which is the entity that Meritage acquired all of the assets, including rights for its marks. See id.
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II.

DEFENDANTS REARGUE THEIR "NO CONFUSION" SUMMARY JUDGMENT MOTIONS Both Defendants cherry-pick dicta from the Michael Jordan and Twentieth Century

Fox cases to reargue that the evidence is insufficient to show consumer confusion under the Lanham Act. In rearguing their motions for summary judgment, Defendants misstate the law and the posture of their motion. Because the substantive issue of confusion has been thoroughly briefed already, Meritage will only address these misstatements. Defendants wrongly presuppose that the law turns on proof of actual confusion, indeed, proof of actual confusion of the entire general public. As explained in detail in the Responses to Defendants' Summary Judgment Motions and above, that is simply not the case. The law only requires proof of the likelihood of confusion of potential consumers (i.e., the initial interest doctrine), and evidence of some actual confusion ­ like Sergeant Atkins testimony ­ is merely one of the Sleekcraft factors employed by the courts. See, e.g., E. & J. Gallo Winery, 967 F.2d at 1289; Brookfield Comm'ns, 174 F.3d at 1062. Defendants also ignore that the likelihood of confusion between Rick Hancock Homes and Meritage's Hancock Communities is a question of fact and that the evidence, and reasonable inferences therefrom, must be viewed in the light most favorable to Meritage. In this light, Defendants' credibility attacks on Sergeant Atkins and pejorative descriptions of the evidence are meaningless and will not be addressed here in the context of Defendants' Motions for Summary Judgment. III. TRADE DRESS AND FALSE ADVERTISING Both Defendants concede that trade dress and false advertising are separate claims ­ different from a trademark infringement as to origin like the claims in Michael Jordan and Twentieth Century Fox ­ and are actionable under Section 43(a) of the Lanham Act. See Greg Hancock Response at 2:21 to 3:11; Rick Hancock Response at 6:10 to 8:6.3 Meritage will not respond to Defendants' interpretation of the facts in light of the limited scope of the Court's April 20, 2007 Order, other than to point out that Defendants simply As a result, on this issue, defendants' reliance on trademark infringement cases such as KP Permanent Make-Up, Inc. v. Lasting Impression I, Inc., 543 U.S. 111 (2004). is misplaced.
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create questions of fact ­ an ineffectual position on their motions for summary judgment. IV. STATE UNFAIR COMPETITION CLAIM Greg Hancock concedes that Fairway Constructors v. Ahern, 193 Ariz. 122, 124, 970 P.2d 954, 956 (App. 1998) is broader than the Lanham Act (as interpreted by the Michael Jordan and Twentieth Century Fox courts). Greg Hancock Response at 4:14-15.4 Relying on a couple of Ninth Circuit cases interpreting California law,5 Rick Hancock disagrees, but he does not read Fairway Constructors fairly or accurately. The only claim that the Fairway Constructors Court held was preempted by federal law was the misappropriation claim in the copyright context; however, the Court stated that "palming or passing off" claim was not preempted. Id. at 125, 970 P.2d at 957.6 Its reasoning is illuminating and gives a strong signal as to what its view of Michael Jordan and Twentieth Century Fox would be: Fairway's proposed amended complaint did not seek a labeling requirement or other injunctive relief, and it made no allegations that Ahern was deceiving the public, or that the public was buying Ahern homes in reliance on Ludwig or Fairway's reputation. The gist of both the original and the proposed amended complaint was that Fairway was damaged by Ahern's misappropriation of the Ludwig design. . . . If Fairway stated a valid "passing off" claim regarding the Ludwig design, it could prosecute that action even though it held only a nonexclusive license to use that design. See Quabaug Rubber Co. v. Fabiano Shoe Co., 567 F.2d 154, 159-63 (1st Cir. 1977) (affirming award of injunctive relief in favor of non-exclusive licensee on common law unfair competition claim) . . . . But Fairway's proposed amended complaint did not state a valid "passing off" claim; it stated a misappropriation claim, which is preempted. Id. at 125, 970 P.2d at 957. At the same time and to avoid the effects of this concession, Greg Hancock miscites Denbicare USA, Inc. v. Toys "R" Us, 1988 U.S. Dist. LEXIS 15948, 4-7 (D. Cal. 1988), which while applying California law holds that a broader state law claim survives rejection of a Lanham Act claim). Notwithstanding Defendants' citation to cases interpreting California law, there is no Arizona case holding that Arizona unfair competition law is congruent with federal law and the dicta in Fairway Constructors is to the contrary. See also Kaibab Shop v. Desert Son, Inc., 135 Ariz. 487, 662 P.2d 452 (App. 1983) (while holding that the evidence was not sufficient, the Court acknowledged that "palming off" was actionable under Arizona law).
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DATED this 4th day of May, 2007. SNELL & WILMER L.L.P.

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LAW OFFICES One Arizona Center, 400 E. Van Buren Phoenix, Arizona 85004-2202 (602) 382-6000

By s/ Dan W. Goldfine Dan W. Goldfine Adam Lang One Arizona Center Phoenix, AZ 85004-2202 Attorneys for Plaintiffs and

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By s/ Grant Woods Grant Woods GRANT WOODS, P.C. 1726 North Seventh Street Phoenix, AZ 85006 Attorneys for Plaintiffs

CERTIFICATE OF SERVICE I hereby certify that on May 4, 2007, I electronically transmitted the foregoing document to the Clerk's Office using the CM/ECF System for filing and transmittal of a Notice of Electronic Filing to the following CM/ECF registrants: Ivan K. Mathew Mathew & Mathew, P.C. 3300 North Central Avenue, Suite 1730 Phoenix, Arizona 85012 Attorneys for Defendants Rick Hancock, Brenda Hancock, Rick Hancock Homes, L.L.C., and RLH Development, L.L.C. Robert M. Frisbee Frisbee & Bostock, PLC 1747 East Morton Avenue Suite 108 Phoenix AZ 85020 Attorneys for Defendant Greg Hancock

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Kenneth J. Sherk Timothy J. Burke Fennemore Craig, P.C. 3003 N. Central Ave. Suite 2600 Phoenix, AZ 85012-2913 Attorneys for Defendant Snell & Wilmer, L.L.P. in State Court Action s/ JESSICA ARAUJO
29323.0078\GOLDFID\PHX\1989796

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LAW OFFICES One Arizona Center, 400 E. Van Buren Phoenix, Arizona 85004-2202 (602) 382-6000

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Snell & Wilmer L.L.P.