Free Reply - District Court of Arizona - Arizona

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MATHEW & ASSOCIATES IVAN K. MATHEW (SBN: 011610) 3300 N. Central Avenue, Suite 1730 Phoenix, Arizona 85012 Tel: (602) 254-8088 / Fax: (602) 254-2204 E-mail: [email protected] Attorneys for Defendants RICKY LEE HANCOCK, BRENDA HANCOCK, RICK HANCOCK HOMES, L.L.C. and RLH DEVELOPMENT, L.L.C. UNITED STATES DISTRICT COURT DISTRICT OF ARIZONA Meritage Homes Corporation, a Maryland Corporation, formerly d/b/a Meritage Corporation, Hancock-MTH Builders, Inc., an Arizona corporation, Hancock-MTH Communities, Inc., an Arizona corporation, and currently d/b/a Meritage Homes Construction, Inc., an Arizona corporation, and Meritage Homes of Arizona, Inc., an Arizona corporation, Plaintiffs, v. Ricky Lee Hancock and Brenda Hancock, husband and wife; Gregory S. Hancock and Linda Hancock, husband and wife, Rick Hancock Homes L.L.C., an Arizona limited liability company; RLH Development, L.L.C., an Arizona limited liability company; and J2H2, L.L.C., an Arizona limited liability company, Defendants. _________________________________________ Rick and Brenda Hancock, Defendants, Counterclaimants and Third-Party Plaintiffs, v. Meritage Homes Corporation, a Maryland 1
Case 2:04-cv-00384-ROS Document 476 Filed 04/20/2007 Page 1 of 10

CASE NO. CV-04-0384-PHX-ROS REPLY TO PLAINTIFFS' RESPONSE IN OPPOSITION TO DEFENDANTS RICK AND BRENDA HANCOCK, RICK HANCOCK HOMES, INC., AND RLH DEVELOPMENT, INC.'S RENEWED MOTION FOR SUMMARY JUDGMENT

(Assigned to the Hon. Roslyn O. Silver)

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Corporation, formerly d/b/a Meritage Corporation, Hancock-MTH Builders, Inc., an Arizona corporation, Hancock-MTH Communities, Inc., an Arizona corporation, and currently d/b/a Meritage Homes Construction, Inc., an Arizona corporation, and Meritage Homes of Arizona, Inc., an Arizona corporation; Steven J. Hilton and Suzanne Hilton, husband and wife; John R. Landon and Debi Landon, husband and wife; Scott Keeffe and Vicky Keeffe, husband and wife; Roger Zetah and Jane Doe Zetah, husband and wife; and James Arneson and Zane Arneson, husband and wife, Third-Party Defendants.

Defendants, Rick and Brenda Hancock, Rick Hancock Homes, Inc. and RLH Development, Inc. (collectively "Rick Hancock Defendants"), represented by Ivan K. Mathew, hereby replies to Plaintiffs' Response in Opposition to Rick Hancock Defendants' Renewed Motion for Summary Judgment. I. Plaintiff Cannot Create a Genuine Issue of Material Facts Simply By Making Assertions in its Legal Memoranda A party resisting a Motion for Summary Judgment may not rest upon mere allegations or denials of his or her pleadings. Rather, the opposing party must present admissible

evidence showing that there is a genuine issue for trial. Brinson v. Linda Rose Joint Venture, 53 F.3d 1044, 1049 (9th Cir. 1995). Plaintiff cannot create a genuine issue of material facts simply by making assertions in its legal memoranda. S.A. Empresa de Viacao Aerea Rio Grandense v. Walter Kidde & Co., 690 F.2d 1235 (9th Cir. 1980). The opposing party cannot sit back and wait for the moving party to negate claims or defenses raised by the opposing party. To avoid summary judgment, the opposing party must demonstrate a genuine issue of material fact on all matters as to which it has the burden of proof. Celotex Corp. v. Catrett, 477 U.S. 317, 324, 106 S. Ct. 2553 (1986). Self-serving statements will not avoid summary judgment. Mere allegations or denials do not meet the opposing party's burden of showing a genuine issue of material fact. Gasaway v. Northwestern Mut. Life Ins. Co., 26 F.3d 957, 960
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(9th Cir. 1994). The opposing party must come forth with specific facts with which to create a genuine issue of material fact. Triton Energy Corp. v. Square D Co., 68 F.3d 1216, 1222 (9th Cir. 1995). II. There is no "Hancock Homes" There can be no confusion with "Hancock Homes". The name "Hancock Homes" has never been used in conjunction with a business. Claiming that someone is confused with Hancock Homes is silly as there is nothing to confuse - there is no "Hancock Homes". Counter-Defendants offer the declaration of Mario Atkins. It is of no significance. One anecdotal claim of confusion is not sufficient to show probability of confusion. Nora Beverages, Inc. v. Perrier Group of America, Inc., 269 F.3d 114, 120 (2nd Cir. 2001.) This is because the probability of confusion means large number of consumers would likely be confused. Id. at 120. A de minimus number of anecdotal instances of actual confusion is not sufficient to raise a triable issue of actual likelihood of substantial confusion. Id. (Citation omitted.) Unfortunately for Plaintiffs, Mr. Atkins signed a disclaimer in which acknowledged that he was not confused. Furthermore, for some reason, they want to disregard the explicit language of the AntiCyber Squatting Consumer Protection Act. 15 U.S.C. § 1125(d)(1)(B)(II) which specifically provides that an individual may use his name in conjunction with his business and this is presumed to be in good faith. They further seek to distinguish Avery Dennison Corporation v. Sumpton, 189 F.3d 868, 877, 882 (9th Cir. 1999.) However, this misses the mark. Surnames enjoy special protection. Plaintiffs attempt to distinguish Avery Dennison is misplaced. Avery Dennison does not hold that the special protection accorded surnames only applies to noncompeting uses. A review of Avery Dennison states that "a long standing principle of

trademark law is the right of a person to use his or her name in connection with the business." Avery Dennison at 877. The Ninth Circuit noted that this principle was incorporated into the Lanham Act, which states that a mark that is primarily merely a surname is not protectable unless it acquires secondary meaning, 15 U.S.C. § 1052 (d)(4), (f) (1994). Id.
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Finally, the Plaintiffs' reliance on John R. Thomson Co., v. Holloway, 366 F2d. 108 (5th Cir. 1966) is not helpful to Plaintiff. More importantly, Avery Dennison, a Ninth Circuit case is controlling not the Fifth Circuit and secondly, the Fifth Circuit upheld the denial of relief sought by Plaintiff for trademark infringement. Plaintiffs offered no evidence that the Hancock Communities has been in business for 50 years. The years referred to in Rick Hancock's deposition refers to his father's separate homebuilding business. (Transcript of Rick Hancock, p. 23, ll. 12-14, p. 25, ll. 2-7, attached as Exhibit "A".) Meritage has no claim whatsoever as to any goodwill created by Rick Hancock's father as the father was not involved in the Hancock Communities business. It would be absurd to say that Meritage acquired the goodwill of Greg and Rick Hancock's father's business ­ a business unrelated to Hancock Communities. The license agreement provided that there will be no diminution in the public recognition of the Hancock Communities. This indeed has occurred. There has been no controverting evidence to media expert Barbara Sorget-Stanton's declaration in this matter that there has been a diminution in public recognition. The agreement was a license for use of the name. Meritage did not own the license. By Meritage's own admission, they stated that it has been terminated. Plaintiffs do not dispute that the license agreement provides that Greg Hancock may terminate the license agreement. Meritage valiantly attempts to explain away the problematic "go dark" memorandum between Steve Hilton and John Landon. This is interesting considering that while they claim that they had $50 million in goodwill in the trade name, Hilton and Landon had decided to extinguish the Hancock Communities name (go dark) in 2003.1 There is intent to abandon the name. (1) There was a "go dark" memorandum dated September 8, 2003; (2) Next, there

was an announcement at the Christmas party that Meritage would no longer use the Hancock Communities name; (3) There is action. Notices of the change of name from Hancock Communities to Meritage were sent to customers; (4) Notices of the change of name from This is yet another example of Meritage talking out of both sides of their mouth.
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Hancock Communities to Meritage were sent to vendors; and (5) Notice to the general public of the change of name from Hancock Communities to Meritage were given through ads taken out in the newspaper (Hancock Communities is now Meritage). Finally, the names of the Hancock Communities were changed to Meritage. The attempt to distinguish the IntraWest case is also silly. Meritage claims that

IntraWest, unlike Meritage, did not take out ads regarding the name change. This fact is not helpful to Meritage, i.e., Meritage went further than what IntraWest did. Once again, this is another fact that would signify abandonment of the name. Contrary to the musings of

Counter-Defendants, there has been intent to abandon the name - a memo of Landon, an announcement at a Meritage party, the free action to initiate such a change, letters to customers, letters to vendors, taking out ads in the newspaper and finally there is the actual changing of the name from Hancock Communities to Meritage. III. The Ploy to Keep the Hancock Communities Name Counter-Defendants acknowledged the feigned attempt to keep the name in two subdivisions. Counter-Defendants acknowledge that there were only two communities using the Hancock Communities name after the name change took effect. One is Rancho Bella Vista, the far east valley and the other one was in Buckeye, the far west valley. When the name change took effect, all of the communities dropped the Hancock Communities name. Indeed, the name of the community at Buckeye was named Sundial, not Hancock Communities, prior to the name change. After completing the rebranding of Hancock Communities to Meritage, John Landon, the Co-CEO, decided that he would utilize the name Hancock Communities in (1) the far east valley and (2) the far west valley. He would change a community not using the Hancock Communities name to now using it. This is not a bona fide use of a trademark, i.e., not for legitimate business purposes. As noted in Exxon Corp. v. Humble Exploration

Company, Inc., 695 F.2d 96, 100 (5th Cir. 1983), this type of feigned use is a ploy. IntraWest at 958-959. It is a sham which causes confusion. IntraWest Financial Corp. v. Western National Bank of Denver, 610 F.Supp. 950, 956-959 (D. Co. 1995).
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Missy Vallirie

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specifically stated that this was done not for marketing purposes.

She testified it is

inconsistent with the national rebranding program, rather this was a sham to pigeon-hole the use of the name and perpetuate a lawsuit. This is exactly what IntraWest was meant to preclude. A trademark cannot be cubby-holed or pigeon-holed so it cannot be used in the market place. This very act diminishes the value of the trademark. Exxon at 98-99. Plaintiffs also ignored the cases of Iowa Health System v. Trinity Health Corp., 177 F.Supp.2d 897, 918 (ND Iowa 2001) and Major League Baseball v. Sed Non Olet Denarius, 817 F.Supp. 1103, 1129 (SDNY 1993.) Defendants claim that the position regarding the right to use a disclaimer is not supported by a single case. Counter-Defendants overlook the cases of Spring Mills v. Ultra Cashmere House, 724 F.2d 352, 353 (2d Cir. 1983) and Adray v. Adry-Mart, Inc., 716 F.3d 984, 990-991 (9th Cir. 1995) which was in the Defendants' Motion for Summary Judgment. They stated there is no special surname privilege. preferred. In Ninth Circuit, disclaimers are a Meritage

Adray v. Adry-Mart, Inc., 716 F.3d 984, 990-991 (9th Cir. 1995)

repeatedly disregards the fact that a disclaimer is used in this case. They again disregard Ninth Circuit law. See, Avery Dennison Corporation. This misconstrues the fact that a surname can be used with a disclaimer. Defendants pleadings admits that the license agreement was terminated. They cannot have it both ways where they want no agreement in some of the pleadings and then they want an agreement in other pleadings. They are judicially estopped from making such an assertion. IV. Unfair Competition Now the Defendants claim that they were wronged by Rick Hancock as he was pawning off the homes as Hancock Communities. They disregard the disclaimers.

Furthermore, Larry Seay signed the verified complaint. He offered no evidence that anything had been unfairly usurped. The Anti-Cyber Squatting Act also specifically provides that a person can use his name in connection with the internet and there is a presumption of good faith.
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15 U.S.C. §

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1125(d)(1)(B)(II). Conversely, "bad faith" means an attempt to extort or blackmail the one with the trade name. Cello Holdings, LLC and Cello Music v. Film Systems, Inc., 89

F.Supp.2d 464, 473 (S.D.N.Y. 2000.) Plaintiffs do not distinguish Cello. V. Fiduciary Duties Rick Hancock is no longer an officer of the company. Indeed, he is a competitor. Mr. Hancock has no duty to protect Meritage's purported interests. In the marketplace, Rick Hancock is privileged to place his own interests ahead of that of his previous employer. Miller v. Hehlen, 209 Ariz. 462, 471, 104 P.3d 193, 202 (Div. 2 2005.) This is the law of competition. Ironically, Meritage had a contract duty to protect the trademark which it failed to do. They abandoned it. Meritage changed the name without Greg Hancock's permission. This is one fact which resulted in the contract being terminated. Plaintiffs do not address the seminal case of Miller v. Hehlen, 209 Ariz. 462, 471, 104 P.3d 193, 202 (Div. 2 2005.) VI. Trade Secret Laws Mr. Seay was asked point blank which trade secret was taken away from Meritage. He said that he was not aware of any. Meritage amazingly claims that Rick Hancock is twisting Larry Seay's testimony. How can this be twisting of anything. Meritage has failed to identify any pricing strategies, marketing strategies, land development strategies, house plans, advertising strategies, customer lists and files, employee compensation, or any other confidential and proprietary information taken by Rick Hancock. These types of amorphous arguments were specifically rejected in the case of Miller v. Hehlen, supra. Meritage has not come forward with any evidence that Rick Hancock used any proprietary and confidential or trade secret information. Meritage has failed to identify a true trade secret. Homebuilding has been going on for centuries. It is not rocket science. More importantly, there has been no showing that Rick Hancock used any trade secret or that he has disclosed any trade secret, even if there was one.

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Meritage has not identified a valid contract that Rick Hancock is interfering with. They have failed to identify one single valid contract that has been interfered with. Meritage merely claim Defendants usurped business opportunities and goodwill belonging to Meritage with current and prospective customers and business expectancies. This is yet another self-serving conclusory statement. They have failed to come forward with specific facts to support their claim. More importantly as a competitor, Rick Hancock is privilege to compete for the consumer. Meritage does not have captive customers. VII. Unjust Enrichment Counter-Defendants' argument again regarding unjust enrichment is meritless. Unjust enrichment is not applicable where there is no other remedy. However, Plaintiffs have sued on the basis of ten other claims. Unjust enrichment is simply not available in this case. Meritage claims that Rick Hancock has solicited and engaged at least nine former Meritage employees to work for Rick Hancock Homes, a competitor of Meritage, in violation of the non-solicitation provision. The opposition brief contains no reference to an agreement prohibiting this. There is no identity of time period. There is no identity of who was solicited. There is no basis of why people cannot leave Meritage to go work for Rick Hancock. They state that he has disclosed Meritage's proprietary information, yet they do not identify what the alleged proprietary information that was disclosed. Customers' lists, even if one existed, are not even germane to a homebuilder in the low income home market. People who buy low income starter homes do not buy multiple low income homes. They have a hard enough time buying their first home. VIII. Contract There is no license agreement. Meritage has admitted that there is no contract.

Meritage cannot have it both ways. In some places, they want a contract and in some places they do not want a contract. Now Meritage is precluded from arguing that there is a valid license agreement.

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IX.

Covenant of Good Faith and Fair Dealing. In addition, there is no specific facts submitted in the Response which would show that

there is breach of the implied covenant of good faith and fair dealing - only, once again, a conclusion. Indeed, under the Anti-Cyber Squatting Act, Mr. Hancock is presumed to be using his name in good faith. He is privilege to compete for business. Plaintiff overlooks two important holdings of the Ninth Circuit applicable to this case. (1) the use of surnames is given more protection than other trade names, Avery Dennison Corporation v. Sumpton, 189 F.3d 868 (9th Cir. 1999) and (2) the use of disclaimers is a preferred remedy to avoid trademark confusion. Adray v. Adry-Mart, Inc., 716 F.3d 984, 990991 (9th Cir. 1995); Spring Mills v. Ultra Cashmere House, 724 F.2d 352, 353 (2d Cir. 1983). In addition, probability of confusion means large amounts of customers being potential confused. Nora Beverages, Inc. v. Perrier Group of America, Inc., 269 F.3d 114, 120 (2nd Cir. 2001.) Defendants fail to meet the burden of showing a genuine issue of material triable fact. CONCLUSION Based upon the above information, the Motion for Summary Judgment should be granted or in the alternative partial summary judgment should be granted. RESPECTFULLY SUBMITTED this 20th day of April, 2007. MATHEW & ASSOCIATES

By: /s/Ivan K. Mathew Ivan K. Mathew, Attorneys for Ricky Lee Hancock, Brenda Hancock, Rick Hancock Homes, L.L.C. and RLH Development, L.L.C.

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CERTIFICATE OF SERVICE Meritage v. Hancock, et al. Case No. CV 04 00384 ROS

I hereby certify that on April 20, 2007, I electronically transmitted the attached 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: Dan W. Goldfine Richard G. Erickson Adam Lang Snell & Wilmer, LLP One Arizona Center 400 E. Van Buren Phoenix, AZ 85004-2202 e-mail: [email protected] Attorneys for Plaintiffs and Counterdefendants and Third Party Defendants Steve Hilton and John Landon Timothy J. Burke Fennemore & Craig, P.C. 3003 N. Central Avenue, Suite 2600 Phoenix, AZ 85012 e-mail: [email protected] Attorneys for Third Party Defendant, Snell & Wilmer, LLP Robert M. Frisbee Frisbee & Bostock 1747 E. Morten Avenue, Suite 108 Phoenix, AZ 85020 e-mail: [email protected] Attorneys for Defendant Gregory Hancock

Grant Woods Grant Woods, P.C. 1726 N. Seventh Street Phoenix, AZ 85006 e-mail: [email protected] Attorneys for Plaintiffs and Counterdefendants and Third Party Defendants Steve Hilton and John Landon

s/Karen Gawel