Free Motion for Summary Judgment - District Court of Arizona - Arizona

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MATHEW & MATHEW, P.C. IVAN K. MATHEW (SBN: 011610) 3300 N. Central Avenue, Suite 1730 Phoenix, Arizona 85012 Tel: (602) 254-8088 Fax: (602) 254-2204 Attorneys for Defendants RICK AND BRENDA HANCOCK, RICK HANCOCK HOMES, INC. AND RLH DEVELOPMENT, INC. UNITED STATES DISTRICT COURT FOR THE DISTRICT OF ARIZONA Meritage Homes Corporation, a Maryland Corporation, formerly d/b/a Meritage Corporation, et al., Plaintiffs, v. Ricky Lee Hancock and Brenda Hancock, husband and wife; et al., Defendants. Assigned to the Honorable Roslyn O. Silver CASE NO. CV-04-0384-PHX-ROS DEFENDANTS RICK AND BRENDA HANCOCK, RICK HANCOCK HOMES, INC. AND RLH DEVELOPMENT, INC.'S RENEWED MOTION FOR SUMMARY JUDGMENT (Oral Argument Requested)

Pursuant to Rule 56, Defendants Rick and Brenda Hancock, Rick Hancock Homes, Inc. and RLH Development, Inc., respectfully move for Summary Judgment.1 Rick Hancock wants to use his name with a disclaimer in conjunction with his new company, Rick Hancock Homes, Inc. This is recognized as a good faith and legitimate basis for the use of a surname by the Ninth Circuit in trade mark disputes. Avery Dennison Corporation v. Sumpton, 189 F.3d at 877, 882 (9th Cir. 1999.) More importantly, he wants to use a name that Meritage does not want to use anyway. In Avery Dennison, the Ninth Circuit Court of Appeals reversed and vacated an injunction by the trial court when plaintiff Avery Dennison tried to protect the common
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Rick Hancock Homes, Inc. is the new homebuilding company of which Rick Hancock and Brenda Hancock are the primary shareholders. (S.O.F. No. 1.) For the purpose of this pleading, Rick and Brenda Hancock, Rick Hancock Homes, Inc. and RLH Development, Inc. are referred to collectively as "Rick Hancock Homes."
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surnames "Avery" and "Dennison." Avery Dennison Corp. v. Sumpton, 189 F.3d at 877. The Ninth Circuit also reversed a grant of summary judgment to the plaintiff and granted summary judgment to the defendants. The court also remanded the matter to the trial court for an award of attorneys' fees to the defendant. Id. at 882. I. FACTUAL BACKGROUND Rick Hancock has been in the homebuilding business for 20 years. (S.O.F No. 2.) Rick Hancock's father was a homebuilder. His brother, Gregory Hancock, was a homebuilder. (S.O.F. No. 3.) "Hancock Homes" is a federally registered trademark. (S.O.F. No. 4.) The name Hancock Homes is registered to Gregory Hancock; not Meritage; not its subsidiaries, Hancock MTH Builders, Inc. and Hancock MTH Communities, Inc. (S.O.F. No. 5.) On or about May 7, 2001, Gregory Hancock sold his companies, HC Builders and Hancock Communities, LLC to Meritage. (S.O.F. No. 6.) On May 30, 2001, Gregory Hancock entered into a License Agreement with Hancock MTH Builders, Inc. and Hancock MTH Communities, Inc., for the use of the "Hancock Communities" name (hereinafter "License Agreement".) (S.O.F. No. 7.) Greg Hancock retained the exclusive right, title and interest to the Hancock Communities name. (S.O.F. No. 8.) Hancock MTH Builders, Inc. and Hancock MTH Communities, Inc., have limited permissive use of the Hancock Communities name. (S.O.F. No. 9.) Meritage is not and never has been an owner of the Hancock Communities trademark. (S.O.F. No. 10.) The License Agreement provides the license is not transferable. (S.O.F. No. 11.) The License Agreement by its own terms expires in May, 2007 or upon termination. (S.O.F. No. 12.)2 The License Agreement allows Greg Hancock, as licensor, to terminate the License Agreement without notice for a breach of the Agreement. (S.O.F. No. 13.) The License Agreement was terminated on February 13, 2004. (S.O.F. No. 14.) After the acquisition of the assets the Hancock Communities on May 10, 2001, Greg Hancock joined the new company as President of the Hancock­MTH Communities, Inc. (S.O.F. No. 15.) Rick Hancock became Vice-President of the Hancock­MTH Communities, Even if the License Agreement was still in place, Rick Hancock would have the ability to use his own name in connection with his business. See, infra, pp. 4-12.
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Inc. (S.O.F. No. 15.) The relationship deteriorated in March 2003. Greg Hancock left Hancock-MTH Home, as the relationship had deteriorated. Greg Hancock and Hancock­ MTH Communities, Inc. parted ways in early 2003. (S.O.F. No. 16.) Although the License Agreement has been revoked, the licensee still continues to utilize the Hancock Communities name, thereby becoming a holdover licensee. (S.O.F. No. 17.) Rick Hancock and Greg Hancock entered into agreements with Hancock ­ MTH Communities, Inc. on May 30, 2001. (S.O.F. No. 18.) Greg Hancock also entered into an Agreement with Hancock - MTH Communities which specifically allowed him to perform land banking functions, and had a carve-out for the Buckeye/Sundance Project. (S.O.F. No. 19.) Land banking involves an investor who owns land and releases land to the homebuilder on a rolling option basis to finance the development of the subsidiaries. (S.O.F. No. 20.) In 2003, Rick Hancock continued to work at Meritage. (S.O.F. No. 21.) On December 2, 2003, when Rick Hancock and his wife were expecting a child, he was terminated by Steve Hilton, Co-CEO of the Meritage companies. (S.O.F. No. 22.)
A.

The Unauthorized Extinguishment of Hancock Communities Mark

On September 8, 2003, Steve Hilton and John Landon agreed that they would take steps to stop using the Hancock name, three months prior to the termination of the License Agreement. (S.O.F. No. 81.) Meritage implemented, without Greg Hancock's permission, a re-branding program of the Hancock Communities as Meritage, effective in 2004. (S.O.F. No. 23.) This was publicly announced at Meritage's Christmas party. (S.O.F. No. 27.) During December 2003, Jim Arneson, a Senior Executive of the Homebuilding Division of Meritage, announced to all employees that Meritage planned to abandon the use of the Hancock Communities name. (S.O.F. No. 27.) Meritage informed its vendors/trade subcontractors that the "Hancock Communities" name would be changed to the Meritage brand name. (S.O.F. No. 28.) On December 8, 2004, Greg Hancock terminated the License Agreement thereby precluding Meritage from using the Hancock Communities name. (S.O.F. No. 101.) During 2004, Meritage ran full page ads on a regular basis in the Arizona Republic announcing the
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name change from the Hancock Communities to Meritage. (S.O.F. No. 29.) On or about June 25, 2004, Meritage informed its customers that they were changing the name of the Hancock Communities to Meritage. (S.O.F. No. 30.) In 2005, the Hancock name was dropped

completely. (S.O.F. No. 82.) However, MTH Hancock Communities specifically undertook and agreed not to use the License Marks in any manner whatsoever which, directly or indirectly, would derogate or detract from the Licensed Marks repute, value, marketability, degree of public recognition or popularity. (S.O.F. No. 24.) The purpose of the name change was so that people would recognize that Meritage Homes are being built by a large national homebuilder. (S.O.F. No. 25.) In an attempt to cubbie-hole the name, the Hancock name was used in advertising in the Eastern most subdivision and the Western most subdivision. (S.O.F. No. 98.) After changing all of the communities from Hancock to Meritage, a decision was made to change back the Eastern most and Western subdivisions back to Hancock. (S.O.F. No. 82). When asked at her deposition under oath, about the appropriateness, Missy Vallirie stated "my personal opinion, no, I didn't think that was the right thing to do." (S.O.F. No. 102.) II. DISCLAIMER PRECLUDES CONFUSION AND IS THE PREFERRED REMEDY IN
THE NINTH CIRCUIT

The use of disclaimers is another method allowing a person to use his surname name in connection with a business. See, Spring Mills v. Ultra Cashmere House, 724 F.2d 352, 353 (2d Cir. 1983.) (Court allowed use of contested name with disclaimer as follows: "Ultra Cashmere is not associated with Ultra Suede".) Plaintiff simply cannot preclude defendant from using his last name "Hancock" in connection with his business. Although not being obligated to do so, Rick Hancock has been using a disclaimer. The disclaimer states: "Not affiliated with "Meritage Homes/Hancock Communities." (S.O.F. No. 31.) Meritage acknowledges that Rick Hancock has disclaimers on its billboard. (S.O.F. No. 32.) Meritage also acknowledges that Rick Hancock has disclaimers on phone recordings used to receive customer inquiries from the billboard. (S.O.F. No. 33.) Purchasers must sign and acknowledge a disclaimer which states "Buyer hereby acknowledges and understands that
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Seller, Rick Hancock Homes, is not affiliated with Meritage and/or Hancock Communities." (S.O.F. No. 99.) To prevail on a Lanham Act claim, plaintiff must show (1) that it has a valid mark that is entitled to protection, and (2) that defendant's actions are likely to cause confusion between plaintiff's and defendant's services. Likelihood of confusion means a probability of

confusion; it is not sufficient if confusion is merely possible. 3 J. McCarthy, McCarthy on Trademarks and Unfair Competition, § 23:2 at 23-10 to 11 (1996.) "A `likelihood' of

confusion requires the Court to find that confusion is `probable, not simply possible.'" Murray v. Cable Natl. Broadcasting Co., 86 F.3d 858, 861 (9th Cir. 1966.) Thus, the law requires a "showing that the allegedly infringing conduct carries with it a likelihood of confounding an appreciable number of reasonably prudent purchasers exercising ordinary care." International Association of Machinists and Aerospace worker; AFL-CIO v. Winship Green Nursing Center, 103 F.3d 196, 201 (1st Cir. 1996.) The Ninth Circuit's use of the multifactor Sleek Craft Boats test as set forth in AMF, Inc. v. Sleek Craft Boats, 599 F.2d 341, 348 ­ 49 (9th Cir. 1979) for confusion is neither exhaustive nor exclusive. J. Gallo Winery v. Gallo Cattle Co., 967 F.2d 1280, 1290 (9th Cir. 1992.) Probability of confusion means large

numbers of consumers will likely be confused. Nora Beverages, Inc. v. Perrier Group of America, Inc., 269 F.3d 114, 120 (2nd Cir. 2001.) The Ninth Circuit expressly stated its preference for the use of disclaimers. Use of a disclaimer is especially appropriate where there is an allegation of trademark infringement and the trademark utilized involves a defendant's own name. Adray v. Adry-Mart, Inc., 716 F.3d 984, 990-991 (9th Cir. 1995); Taylor Wine Co. v. Bully Hill Vineyards, Inc., 569 F2d. 731, 735-36 (2nd Cir. 1978); Friend v. H.A. Friend & Company, 416 F.2d 526, 534 (9th Cir. 1969) (use allowed provided first name and disclaimer utilized); See, Everston Chang's, Inc. v. E&J Manufacturing Company, 263 F.2d 254, 260-61 (9th Cir. 1958) (finding that the District Court had erred in issuing absolute injunction where defendant had built a mark in good faith.) Congress and the Ninth Circuit recognize the right of a person to use their own name. Avery

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Dennison, 189 F.3d 868, 877 (9th Cir.1999.). This principle is not limited to "diluted claims." 15 U.S.C. §1052(e) and (f) (1994.) The following factors show no probability of confusion: Hancock is using a disclaimer in marketing channels and telephone contacts. A home is a high-dollar purchase and the degree of care likely to be exercised by reasonably prudent consumer is very high. It is not an impulse purchase. Hancock's intent in selecting mark is that it is his own name and that of his family. (S.O.F. No. 103.) Meritage has provided no evidence regarding the strength of the mark. Indeed, Meritage is changing the name Hancock Communities to Meritage to obtain more name recognition for Meritage and the Hancock Communities name is now diminished. The disclaimer is effective in this case. Michael Frakes testified that he saw the Rick Hancock Homes billboard and knew there was a disclaimer. (S.O.F. No. 84.) One would

have to be an "idiot" to not know the difference between Rick Hancock Homes and Meritage Homes. (S.O.F. No. 100.) (no chance of customer confusion.)
A.

Widespread Utilization of the "Hancock" Name

According to the U.S. Census Bureau, the name Hancock is the 546th most common surname in America. (S.O.F. No. 34.) The name Hancock was on the Declaration of

Independence. Many companies in Arizona use the Hancock name in conjunction with real estate or development ventures. (S.O.F. No. 36); Mark Hancock Development Corporation, Hancock Building Company, Inc., Trevor Hancock Realty, Inc., Hancock Contracting, Inc., Hancock Materials, Inc., Charlie Hancock Building, Inc., John Hancock Real Estate Finance, Inc., John Hancock Realty Equities, Inc., John Hancock Leasing Corporation, R.J. Hancock Construction, LLC, Hancock High Country Homes, LLC, and Trevor Hancock Construction. (S.O.F. No. 37-48.) This list does not include unincorporated businesses using the Hancock name, nor does it include the list of businesses in the other 49 states using the Hancock name as part of its business; nor Canada; nor Europe. The use of the name "Hancock" is in the internet domain names of other homebuilding companies. (See, www.HancockBuilders.com, www.HancockHomesInc.com and www.Hancock1.com.) (S.O.F. No. 49-51.) The internet domain name Hancock1.com is utilized by an Arizona builder (S.O.F. No. 52.)
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The use of a common name such as "Hancock" in the construction industry in connection with the Internet is material to this Court's analysis. Avery Dennison Corp. v. Sumpton, 189 F.3d at 877-78 (9th Cir. 1999.); See, Cello Holdings, LLC and Cello Music v. Film Systems, Inc., 89 F.Supp.2d 464, 473 (S.D.N.Y. 2000.) Meritage, like Cello, cannot claim it has a superior right to the use of a common name already being used by other people in connection with home building industry. Meritage's claim that a third-party sent an e-mail to the wrong e-mail address is inadmissible and insufficient. Power Beverages, Inc. v. Perrier Group of America, Inc., 269 F.3d 114, 124 (2nd Cir. 2001); See, Columbia University v. Columbia/HCA Healthcare, 964 F.Supp. 733, 746 (S.D.N.Y. 1977) (holding that monetary confusion with a small number of non-purchasers constituted de minimus showing of actual confusion.
B.

The Diminution in the Public Awareness of Hancock Communities.

There has been a diminution in the public awareness of Hancock Communities. In 2003 and earlier, the name "Hancock" was previously used in connection with the marketing of the Hancock Communities. (S.O.F. No. 86.) On July 1, 2004, "Hancock Communities" changed to Meritage. (S.O.F. No. 87.) The License Agreement provides that the use of the Hancock names shall not be diminished in any capacity. (S.O.F. No. 89.) At the deposition of Steve Hilton, Co-Chief Executive Officer of the Meritage Corporation, Mr. Hilton admitted that Meritage stopped using the Hancock name without the permission of Greg Hancock. (S.O.F. No. 90.) He also admitted the cessation of the use of the Hancock Communities name resulted in diminution of the public recognition of the name of Hancock Communities. (S.O.F. No. 91.) The letter terminating the License Agreement stated, "Further, in view of your client's repeated breaches of the Master Transaction Agreement, pursuant to Section 7.3 of the License Agreement dated May 30, 2001, your client's license to use the "Licensed Marks," "Hancock Homes" and "Hancock Communities" is hereby terminated immediately. (S.O.F. No. 92.) Demand is further made, pursuant to Section 8.1 of the License Agreement, that your client transfer and assign to my client any right, title and interest to the Licensed Marks which your client may
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have acquired as a result of its activities under the License Agreement." (S.O.F. 92.) As the License Agreement was terminated, Meritage cannot win at trial.
C.

There is no Evidence of Confusion by Consumers for the Purpose of this Lawsuit.

The purchase of a home is a significant purchase. People buy homes based upon location, floor plans, amenities and price. (S.O.F. No. 13.) Meritage admitted that no lenders were confused. (S.O.F. No. 63.) Meritage admits that no subcontractors were confused. (S.O.F. No. 64.) Thomas Wing, a subcontractor, stated that he knows Rick Hancock Homes is different than Meritage and the Hancock Communities. (S.O.F. No. 65.) Commercial lenders know the difference between Meritage/the Hancock Communities and Rick Hancock Homes. (S.O.F. No. 66.) Mortgage lenders know the difference between the Meritage/Hancock Title companies know the

Communities and Rick Hancock Homes. (S.O.F. No. 67.)

difference between the Meritage Hancock Communities and Rick Hancock Homes. (S.O.F. No. 68.) III. THE STANDARDS ESTABLISHED FOR SUMMARY JUDGMENT ARE WELL

Summary judgment is appropriate if there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law. Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 2552 (1986); Fed.R.Civ.P. 56(c). In such cases, the moving party is entitled to a summary judgment as a matter of law. Once the moving party meets its initial burden, the nonmoving party must go beyond the pleadings and present specific facts showing there is a genuine issue for trial. Id. Mere conclusive allegations are not sufficient. Id. IV. CLAIM NO. ONE ­ LANHAM ACT In Claim One, plaintiff alleges Rick Hancock violated the Lanham Act (11 U.S.C. 1125(a).)

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A.

Congress and the Ninth Circuit Acknowledge the Special Right of People to Use Their Surname Name in Connection With Their Business

In this Circuit, actions seeking to preclude the use of a surname are not favored. Avery Dennison Corporation v. Sumpton, 189 F.3d at 877, 882 (9th Cir. 1999.) There is a longstanding principle of trademark law that there is a right of a person to use his or her name in connection with a business. Avery Dennison Corporation v. Sumpton, 189 F.3d at 877 (9th Cir. 1999.) This principle is incorporated into the Lanham Act. 15 U.S.C. § 1052(e)(4) and (f) (1994); Avery Dennison, 189 F.3d at 877. The Ninth Circuit noted that the Senate

Judiciary Committee emphasized: "The committee intended to give special protection to individual's ability to use his or her name in good faith. Id. at 877. The Ninth Circuit will give effect to Congress' intent that people have a right to be able to use their own name in connection with their business. Avery Dennison Corporation v. Sumpton, 189 F.3d 868, 877, 882 (9th Cir. 1999.) The Ninth Circuit will not allow one business to high jack a common surname to absolutely preclude use by someone who has the same last name. Avery Dennison, 189 F.3d at 878. "Hancock" is a common name. The name cannot be cubbie-holed solely by plaintiff.
B.

Courts Will Not Assist Trade Name Squatters

Courts will not hesitate to declare that an abandonment of a mark occurs whenever it can be shown that there is no intent to resume the use of the mark. 15 U.S.C. § 1127; IntraWest Financial Corp. v. Western National Bank of Denver, 610 F.Supp. 950, 956 (D. Co. 1995); Chere Amie Inc. v. Windstar Apparel Corp., 191 F.Supp.2d, 348 (S.D.N.Y. 2001.) The court can infer intent of abandonment by looking at the various actions of the parties, as well as objective intent not to resume use of the mark. IntraWest, 610 F.Supp. at 958; Chere, 191 F.Supp. 2d. at 348. In a case directly on point, IntraWest, the plaintiff switched all existing branches from First Bank of Denver to IntraWest Bank of Denver. IntraWest then informed existing customers of the planned name change. They advertised weekly in newspapers that "The First National Bank of Denver is now IntraWest Bank of Denver. The court held this was sufficient evidence of IntraWest's abandonment of the "First Bank of Denver" mark. IntraWest, 610 F.Supp. at 953 and 958. One cannot change a name and then have a few
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limited uses for that name. Id. at 958. This act, in and of itself, destroys valuable good will of the old name and the name association the public may have with the mark. Exxon Corp. v. Humble Exploration Company, Inc., 695 F.2d 96, 98-99 (5th Cir. 1983), Iowa Health System v. Trinity Health Corp., 177 F.Supp.2d 897, 918 (ND Iowa 2001); Major League Baseball v. Sed Non Olet Denarius, 817 F.Supp. 1103, 1129 (SDNY 1993.) An attempt to hoard or warehouse a known mark precludes others from using it and is not sufficient to overcome a claim of abandonment. Iowa Health, 177 F.Supp. 2d at 919; Exxon 695 F.2d 96; IntraWest, 610 F.Supp. 950. Missy Vallirie testified that the purpose of using the name was to try to prevent the Hancocks from using the name. Attempts to hoard a mark is itself deceptive. Id. at 960. It is merely a ploy to prevent others from being able to use a mark. IntraWest, 610 F.Supp. at 958-959. (Emphasis added.) Trade name squatters would only serve to further ruin and destroy the good will associated with the mark to the detriment of the public and others who wish to use it. 3 The limited use of a trade name under the name of the larger corporation, constitutes a sham attempt to confuse the public and prevent others from using the mark. Exxon, 695 F.2d at 100. (Limited use of "Humble" mark on a limited basis on Exxon products did not constitute a bona fide use of the mark.) Plaintiff's actions are identical to the IntraWest case. In this particular case, Meritage, the large New York Stock Exchange company, wants to ditch the Hancock Communities name and utilize the Hancock Communities names in only two subdivisions. It is also inconsistent with the purported goal of plaintiff, as testified to by Larry Seay, CFO of Meritage, in trying to create the impression that Meritage homes are built by a large national homebuilder as opposed to a local builder. Meritage placed numerous full-page newspaper advertisements in the Arizona Republic which announced the re-branding of Hancock communities to Meritage. They did so weekly over many weeks. Meritage informed current customers by a letter that as part of a company wide branding program, Hancock Communities will now be known as

Meritage's purported claim is even weaker. Meritage is not a trade name holder. Prior to the terminations, they were only a mere licensee.
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Meritage. (S.O.F. No. 69.) They informed employees and vendors that they would be changing their name from Hancock to Meritage. Such actions dilute the mark. Subsequently, after his deposition, after he realized that the name had been abandoned, he started to use the name Hancock again. (S.O.F. No. 97.)
C.

The Use of The Marks by Third Parties

The use of the mark in question by third parties is a factor used by the Ninth Circuit to preclude relief sought by a plaintiff in a trade name dispute. Avery Dennison Corp. v. Sumpton, 189 F.3d at 878. Discussion, supra, at p. 6.)
D.

The "Hancock" name is used by many businesses.

(See,

The Use of One's Name in an Internet Domain Name is Protected by an Act of Congress

Meritage complains that Rick Hancock and Rick Hancock Homes is using the internet domain name RickHancockHomesAZ.com. (Second Amended Complaint, ¶¶ 55 and 56.) Rick Hancock is entitled as a matter of law to use his name as his domain name by an act of Congress signed by the President. 15 U.S.C. § 1125(d)(1)(B)(II.) The use of internet domain names is governed by the Anti-Cyber Squatting Consumer Protection Act ("ACPA") (15 U.S.C. § 1125(d).) The main purpose of the ACPA is to eliminate a practice which has become known as "cyber squatting" or "cyber piracy" by individuals seeking extortion or profits by reserving internet domain names that are similar or identical to trademark names with no intention of using the names in commerce themselves. Hartog and Co. v. Swix, 36 F.Supp.2d at 531, 536 (E.D. Virginia (2001).) (Emphasis in original.) Congress specifically provided that use of one's own name in an internet domain name is prima facie evidence that it is not utilized in bad faith. 15 U.S.C. § 1125(d)(1)(B)(II.) Before there is any cause of

action with the use of a domain name, there must be a "bad faith" use of the name, 15 U.S.C. § 1125(d)(1)(A.). "Bad faith" means the use of a domain name with an attempt to blackmail or extort the one with a trade name. Cello Holdings, LLC and Cello Music v. Film Systems, Inc., 89 F.Supp.2d 464, 473. (S.D.N.Y. 2000) Courts considering claims similar to ones made by Meritage regarding the trade name and internet addresses have been rejected. HQM, Ltd. v. Hatfield, 71 F.Supp.2d 500, 506 (D.
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Md. 1999) (citation omitted.) There is no reason for Meritage's internet address to have the name "Hancock" in it as it is re-branding the Hancock Community with the Meritage name. Plaintiffs are actually involved in reverse cyber squatting whereby they seek to hold the "Hancock" name hostage from use. The use of the "Hancock" name in connection with websites is fairly common. (See, Google, "Hancock".) The genie is out of the bottle. The analysis of the Cello court is compelling: "Plaintiff has not demonstrated why he has any greater right to `Cello.com' than any other of a dozen companies that have registered 'Cello' alone or utilized `Cello' in their domain name. Cello, 89 F.Supp.2d t 464. `Cello' is a common noun. Id. Many companies use Cello in their name, and since other companies have been using the name longer than Cello has been using the mark, the court declined to award the domain name to the plaintiff. Id. at 474. This is also the law of the Ninth Circuit. Avery Dennison Corporation v. Sumpton, 189 F.3d 878. There simply is no bad faith intent under the ACPA when someone uses their own name in conjunction with their business internet address. Hartog and Co. v. Swix, 36 F.Supp.2d at 531, 536 at 540-541. The use of the Hancock name by Rick Hancock is a good faith use of his own name and cannot be used against Rick Hancock, as it is clearly allowed by law. Avery Dennison, 189 F.3d at 881; Hartog and Co. v. Swix, 36 F.Supp.2d at 542. See, also, Bruce Springsteen v. Jeff Burgar; Bruce Springsteen Club. WIPO Case No. D2000-1532 (2001.) (Even "The Boss" could not preclude the Bruce Springsteen Club from using domain name brucespringsteen.com.)
E.

Meritage Has No Standing

Greg Hancock terminated the license agreement with MTH­Homes on February 13, 2004. (Second Amended Complaint, p. 2, ¶ 3.) Plaintiff is not even a licensee at this point in time. Meritage has no standing to contest Rick Hancock's contemplated use of his own name. S&R Corp. v. Jiffy Lube International, Inc., 968 F.2d 371 (3d Cir. 1992); McDonald's Corp. v. Robertson, 147 F.3d 1301 (11th Cir. 1998.) (Holding that termination of the License Agreement precludes enforcement of trademark by licensee, i.e., holdover licensee.)

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V.

CLAIM NO. TWO - UNFAIR COMPETITION AND INFRINGEMENT UNDER ARIZONA COMMON LAW

TRADEMARK

In Arizona, common names cannot be plucked from the English language kept for one business' sole use. Ramada Inns, Inc. v. Marriott Corporation, 16 Ariz. App. 459, 463, 494 P.2d 64, 68 (1972.) The signer of the Verified Complaint, Larry Seay, admitted there is no unfair competition or trademark infringement as noted below. Q. "Do you have any personal knowledge that Rick Hancock has made any

misrepresentations of facts to intentionally and unfairly compete with Meritage's trademark?" A. "Today I can't think of any." (S.O.F. No. 72.)

A dismissal of the Lanham Act claim will also preclude a claim of unfair competition based upon state law. Cleary v. News Corp. 30 F.3d 1255, 1262-1263 (9th Cir. 1994); Antelecom, Inc. v. Japan Telecom America, Inc., 287 F.3d 866, 875 (9th Cir. 2002.) (Plaintiff's California unfair competition claim failed because "its related Lanham Act claim failed".) Federal preemption of state law pursuant to the Supremacy Clause may be either expressed or implied and is compelled whether congress' command is explicitly stated in the state statute or complicity contained in a structure and purpose. U.S. Constitution. Art. 6, Cl.2; Freightliner Corp. v. Myrick, 514 U.S. 280, 287, 115 S.Ct. 1483 (1995). VI. CLAIM NO. THREE - BREACH OF FIDUCIARY DUTY A fiduciary duty requires a special relationship. McAllister v. Citibank, 171 Ariz. 207, 212; 829 P.2d 1253, 1258 (1992.) See also, Miller v. Hehlen, 209 Ariz. 462, 471 104 P.3d 193, 202 (App. Div. 2 2005). (No fiduciary duty to comply by former employee). Rick Hancock was terminated on December 2, 2003. Finally, Meritage admits there has been no breach of fiduciary duty by Rick Hancock, as noted below. Q. A. "So which fiduciary duty did he breach? How did he breach a fiduciary duty." "I can't tell you for certain he was breaching any specific fiduciary duty."

(S.O.F. No. 73.) There is no fiduciary duty owed by Rick Hancock to Meritage.

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VII.

CLAIM NO. FOUR - MISAPPROPRIATION OF TRADE SECRETS IN VIOLATION OF ARIZONA TRADE SECRETS ACT Rick Hancock did not acquire property by improper means, including theft,

impropriety, misrepresentation, breach or inducement or breach of a duty to maintain secrecy or espionage through electronics or other means. A.R.S. § 44-401(1.) (Arizona Trade Secrets Act.) Trade secret means information including a formula, pattern, compilation, program, device, method, technique or process that both: (a) derives independent economic value, actual or potential, from not being generally known to and not being readily ascernible by proper means by other persons who can obtain economic value from this disclosure or use and is the subject of efforts that are reasonable under the circumstances to maintain secrecy. Id. There is nothing inherently secret about building a home. (S.O.F. No. 70.) It must be done to Government Code. (S.O.F. No. 71.) Meritage admits there has been no misappropriation of trade secrets. Q. A. Q. "Okay. What trade secrets were misappropriated by Rick Hancock?" "I don't know." (S.O.F. No. 74.) "Would you agree with me that Rick Hancock can engage in the homebuilding

business without having to appropriate trade secrets from Meritage?" A. "Yes, he could." (S.O.F. No. 75.)

See, Miller v. Hehlen, 209 Ariz. at 471, 202. (No claim for misappropriation without specific misappropriated items identified and claim even more tenuous when Defendant is no longer employed by Plaintiff.) VIII. CLAIM NO. FIVE ­ INTENTIONAL INTERFERENCE WITH PROSPECTIVE CONTRACTUAL ADVANTAGE A fundamental foundation of American capitalism is competition. Rick Hancock is privileged to seek customers to buy his homes. Meritage may lose a customer to Rick Hancock Homes, as it may lose a customer to D.R. Horton Homes, as it may lose a customer to Pulte Homes. The customer has a choice of where to go for his or her castle. As a fellow homebuilder, Mr. Hancock is privileged to compete for customers. Hill v. Peterson, 201 Ariz. 363, 366, 35 P.2d 417, 420 (2001).
Case 2:04-cv-00384-ROS

Rick Hancock is privileged to use his own name in
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Document 417

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connection with his business even if a valid License Agreement was in place. Avery Dennison Corporation v. Sumpton, 189 F.3d at 877, 882 (9th Cir. 1999.) To establish a prima facie case of intentional interference with contractual relations, a plaintiff must prove the existence of a valid contractual relationship or business expectancy; the interferer's knowledge of the relationship or expectancy; intentional interference inducing or causing a breach or termination of the relationship or expectancy; and resultant damage to the party whose relationship or expectancy has been disrupted. Wallace v. Casa Grande Union High School Dist. No. 82 Bd. of Governors, 184 Ariz. 419, 426, 909 P.2d 486 (493 App. 1995.) Furthermore, the interference must be "improper as to motive or means" before liability will attach. Wagenseller v. Scottsdale Mem'l Hosp., 147 Ariz. 370, 388, 710 P.2d 1025, 1043 (1985.) Someone who interferes with the prospective contractual rights of another "for a legitimate competitive reason does not become a tortfeasor simply because he may also bear ill will toward his competitor." Bar J Bar Cattle Co., Inc. v. Pace, 158 Ariz. 481, 485, 763 P.2d 545, 549 (App.1988); see, also Restatement (Second) of Torts § 768(1)(d) (1979.) The following shows Rick Hancock has not interfered with Meritage's customers: Q. "Are you aware of any contracts that Rick Hancock has usurped between

Meritage and a potential consumer of Meritage?" A. "No." (S.O.F. No. 76.)

The use of Rick Hancock's own name is also preempted by federal law. IX. CLAIM NO. SIX ­ UNJUST ENRICHMENT The theory of unjust enrichment is to capture situations where there has been no contract and the defendant is the beneficiary of unintended largess. Rick Hancock is allowed to compete for customers. Hill v. Peterson, 201 Ariz. at 366, 35 P.2d at 420 (2001.) . In Arizona, five elements must be proved to make a case of unjust enrichment: (1) an enrichment; (2) an impoverishment; (3) a connection between the enrichment and the impoverishment; (4) absence of justification for the enrichment and the impoverishment; and (5) an absence of a remedy provided by law. City of Sierra Vista v. Cochise Enter., Inc., 144 Ariz. 375, 381, 697 P.2d 1125, 1131 (App. 1984); Stapley v. American Bathtub Liners, Inc.,
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162 Ariz. 564, 568, 785 P.2d 84, 88 (App. 1989.) The existence of a contract specifically governing the rights and obligations of each party will also preclude recovery for unjust enrichment. Brooks v. Valley Nat'l Bank, 113 Ariz. 169, 548 P.2d 1166 (1976); Johnson v. American Nat'l Ins. Co., 126 Ariz. 219, 223, 613 P.2d 1275, 1279 (App. 1980.) Rick Hancock wants to use his name with his new business. This is the same thing many others are doing. (See, supra, p. 6.) There is a remedy at law for violations of trade names: The Lanham Act and the Arizona Trademark Act. (A.R.S. 44-1451, et seq.) As there is a remedy at law, this precludes a claim of unjust enrichment. demonstrated below by questions to the signer of the Verified Complaint. Q. "What facts can you tell me that you have that would support an allegation that So do the facts, as

Rick Hancock has been unjustly enriched A. X. "I don't know." (S.O.F. No. 77.)

CLAIM NO. SEVEN ­ CONVERSION Defendant is using his name in connection with his business. He uses a disclaimer. He

is allowed to do this as a matter of law. Autovile v. Friedman, 20 Ariz.App. 89, 510, P.2d (App.Div.I, 1973.) Conversion is not available as a cause of action in this case. The signer of the Verified Complaint admitted this. Q. "What confidential information do you believe that Rick Hancock has taken so

as to constitute conversion?" A. XI. "I do not know." (S.O.F. No. 78.)

CLAIM NO. EIGHT ­ BREACH OF CONTRACT Breach is an essential element of action for breach of contract and proof of such is

plaintiff's burden. Spratt v. Northern Automotive Corp., 958 F.Supp. 456, 460 (D.Ariz. 1996.) Meritage admits there has been no breach of contract by Rick Hancock, as clearly demonstrated below: Q. "Recapture some of my thoughts here and maybe your testimony, but you're not

saying here today that Rick Hancock has breached any contracts, are you?"

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1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 XII.

A.

"I'm trying to recollect. I don't believe he has breached any contracts with us,

no." (S.O.F. No. 79.) Q. A. "'Us' meaning Meritage?" "With Meritage or its subsidiaries." (Larry Seay Deposition, p.130, ln.11.)

(S.O.F. No. 80.) Rick Hancock is entitled to summary judgment. CLAIM NO. NINE ­ BREACH OF IMPLIED COVENANT OF GOOD FAITH AND FAIR DEALING Every contract contains implied covenants of good faith and fair dealing. Norman v. State Farm Mutual Home Ins., 33 P.3d 530; 201 Ariz. 196 (App. Div. I, 2001.) However a contract which contains implied covenant of good faith and fair dealing, presume the existence of a valid contract. Id. Plaintiff admits no contracts were breached. (See, Discussion, See XII, above.) Plaintiff terminated Rick Hancock. He went ahead and started his own business building homes. The Ninth Circuit recognizes that he can do this with his name. Avery Dennison Corporation v. Sumpton, 189 F.3d at 877, 882 (9th Cir. 1999.) There is no breach of the covenant of good faith and fair dealing. XIII. CLAIM NO. ELEVEN ­ INTENTIONAL INTERFERENCE WITH THE LICENSE AGREEMENT Rick Hancock is using his own name. His right to use his name exists independent of the License Agreement. See, Avery Dennison. He utilizes a disclaimer. The right to use one's own name is recognized by Congress and the Ninth Circuit. (See, Discussion, supra at pp. 4-11.) Moreover, Greg Hancock, the licensee holder, terminated the License Agreement. There is no evidence that Rick Hancock had anything to do with the termination of the License Agreement. XIV. CONCLUSION Based upon the above authorities and analysis, Defendants' Renewed Motion for Summary Judgment should be granted. RESPECTFULLY SUBMITTED this 20th day of December, 2006.
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1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Dan W. Goldfine Richard G. Erickson 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

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

CERTIFICATE OF SERVICE
Meritage v. Hancock, et al. Case No. CV 04 00384 ROS I hereby certify that on December 20, 2006, 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: 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

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