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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] Attorneys for Plaintiffs and Counterdefendants and Third Party Defendants and
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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.
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 and Counterdefendants and Third Party Defendants
IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF ARIZONA Meritage Homes Corporation, a Maryland Corporation, formerly d/b/a Meritage Corporation, Case No. CV-04-0384-PHX-ROS Hancock-MTH Builders, Inc., an Arizona corporation, Hancock-MTH Communities, Inc., an STATEMENT OF FACTS IN Arizona corporation, and currently d/b/a Meritage SUPPORT OF (1) PLAINTIFFS' Homes Construction, Inc., an Arizona corporation, MOTION FOR PARTIAL and Meritage Homes of Arizona, Inc., an Arizona SUMMARY JUDGMENT AND corporation, (2) COUNTERDEFENDANTS' AND THIRD PARTY DEFENDANTS' Plaintiffs, MOTION FOR SUMMARY JUDGMENT ON RICK AND v. BRENDA HANCOCKS' COUNTER-CLAIMS AND THIRDRicky Lee Hancock and Brenda Hancock, PARTY CLAIMS husband and wife; Gregory S. Hancock and Linda Hancock, husband and wife, Rick (Assigned to the Hancock Homes L.L.C., an Arizona limited Honorable Roslyn O. Silver) liability company; RLH Development, L.L.C., an Arizona limited liability company; and J2H2, L.L.C., an Arizona limited liability company, Defendants.
Case 2:04-cv-00384-ROS
Document 412
Filed 12/15/2006
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Rick and Brenda Hancock, Defendants, Counter-Claimants, and Third Party Plaintiffs, v. 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, 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. Plaintiffs, Counterdefendants, and Third Party Defendants submit the following Statement of Facts in support of (1) Plaintiffs' Motion for Partial Summary Judgment and (2) Counterdefendants' and Third Party Defendants' Motion for Summary Judgment on Rick and Brenda Hancock's Counterclaims and Third Party Claims: 1. The License Agreement, the Master Transaction Agreement, and Greg
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Hancock's Employment Agreement are attached and incorporated herein as Exhibits 1, 2, and 3, respectively. 2. The License Agreement provides, in pertinent part: "Licensee undertakes and
agrees not to use the Licensed Marks in any manner whatsoever which, directly or indirectly, would derogate or detract from the Licensed Mark's repute, value, marketability, degree of public recognition or popularity." See Exhibit 1 at ¶ 4. 3. Meritage has sold more than $117 million of homes throughout metropolitan See
Phoenix under the name "Hancock" during the License Agreement period.
Declaration of Roger Zetah in Support of Meritage's Opposition to Greg Hancock's Motion for Stay and Request for Relief from Operation of Order, Exhibit 4 at ¶ 3.
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4.
On several occasions in March 2004, the Hancocks promised this Court that
they would maintain the "status quo" and not use the name "Hancock" in a homebuilding business that competed against Meritage. In reliance on the Hancocks' promise, this Court entered an Order denying Meritage's Application for a Temporary Restraining Order. See Order at 3:9-25 (March 10, 2004). The Court found: "Although the Court is not presaging its ruling, as guidance, the parties should know that, on the face of the papers filed the Court would deny the TRO, but with specific conditions. Those conditions are that the Hancocks must maintain the status quo, consistent with the assertions made in their respective Responses . . . that they will not use the trademarks during the pendency of this litigation." See id. 5. Greg Hancock's own expert concedes that during the period of time that Greg
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Hancock worked for the company, Meritage fully paid the earn-outs owed. See Expert Report of Eugene Cole on Greg Hancock Earn-Out Calculations, Exhibit 5 at 2; September 20, 2006 Deposition of Eugene Cole, Exhibit 6 at 126:18 to 128:19. 6. Paragraph 2 of the License Agreement states: "Licensor hereby grants to
Licensee a personal, exclusive, nontransferable, nonassignable license to use the Licensed Marks during term of this Agreement." There is no language in the License Agreement that subjected Meritage's use of the Hancock name to Greg Hancock's discretion. See Exhibit 1 at ¶ 2. 7. Furthermore, Rick Hancock admitted that he obtained his brother's
permission to use "Rick Hancock Homes." See October 25, 2004 Deposition of Rick Hancock, Exhibit 7 at 165:22-24. 8. Rick Hancock testified that defendants' goal was to usurp the goodwill that
Meritage purchased as part of its $88 million acquisition of the "Hancock Communities" and "Hancock Homes" business and trademarks. See Exhibit 7 at 49:2 to 50:20, 54:24 to 61:12, 68:4 to 71:20, 76:12 to 82:4, 102:20-24, and 181:1-22.
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9.
Rick Hancock concedes that Meritage has signs for its "Hancock
Communities" all around the Sundance Community and in the near vicinity of the land in which Defendants seek to use the "Hancock" mark to sell similar homes. See Exhibit 7 at 118:10 to 120:13. In other words, Defendants want to use a similar name, Rick Hancock Homes, in the same market for the same product in which Meritage is using the marks "Hancock Homes" and "Hancock Communities." See id. 10. Defendants advertise its confusingly similar name in the same ways that Meritage advertises its marks. See id. at 114:22 to 115:22 and 118:3-21. Defendants and Meritage are both marketing the same type of goods and services--namely single family homes, to the same consumers--single family homebuyers. See Declaration of Larry Seay in Support of Renewed Application for Temporary Restraining Order with Notice Against Rick Hancock, Exhibit 8 at ¶¶ 3 and 16. 11. Meritage's employees use email addresses (i.e., [employee name]@hancockcommunities.com) to communicate with subcontractors, lenders, and potential consumers. See Declaration of Larry Seay in Support of Meritage's Response to Defendant Rick Hancock and Rick Hancock Home L.L.C.'s Motion for Summary Judgment, Exhibit 9 at ¶ 2. Defendants and their employees are emailing subcontractors (and possibly lenders and potential consumers) using the [employee name]@hancockhomesaz.com domain address and causing confusion. See Exhibit 7 at 214:14 to 217:15. 12. Defendants concede that the defendants' employees do not use the disclaimer on all uses of the "Hancock" mark with respect to marketing new homes in the Sundance community. Exhibit 7 at 216:22 to 217:15. 13. Defendants do not use disclaimers when it answers its main phone number. See November 18, 2004 Deposition of Jim Arneson (Volume 2), Exhibit 10 at 9:3 to 10:22.
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14. Even when a disclaimer is used, it is written in a small font that is extremely difficult to read from the adjacent highway hundreds of feet away (which is where both Defendants' and Meritage's target customers are located). See September 7, 2004 Deposition of Larry Seay, Exhibit 11 at 133:21 to 134:3. 15. The disclaimer only disclaims an affiliation with "Meritage Homes/Hancock Communities;" it is silent as to any affiliation with "Hancock Homes," a mark for which Meritage is also an exclusive licensee. See Exhibit 7 at 180:5-7. 16. Meritage has been using the name "Hancock" in association with one of its product lines the Hancock series homes in Buckeye and elsewhere in the Phoenix metropolitan area, and "Hancock Communities" new homes built at the Sundance community in Buckeye and elsewhere in the Phoenix metropolitan area. See Exhibit 7 at 161:15 to 162:4. 17. Meritage has extensively advertised and conducted sales of homes operating under the Hancock Communities mark. See Exhibit 8 at ¶ 7. 18. All of the subdivision-related paperwork for these sales employed the Hancock Communities name. See id. at ¶ 9. 19. Meritage had signs for its "Hancock Communities" all around the Sundance Community and in the near vicinity of the land that defendant Rick Hancock Homes used the "Hancock" mark to sell tens of millions of dollars of similar homes and earn about $4.4 millions in net income profits through July 2006. See Exhibit 7 at 118:10 to 120:13; Exhibit 6 at 54:15 to 55:23. 20. During the finalization of the release and severance on January 13, 2004, Rick Hancock wrote and expressly stated that he knew that the Madrid contract had been cancelled. See January 13, 2004 letter from R. Hancock to S. Hilton, Exhibit 12. Specifically, in that letter, Rick Hancock wrote: "My release dated December 22, 2003 covers my proposed purchase contract on the home in the Madrid project. To be more specific, I agree that the contract has been cancelled and my deposit returned, and that
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neither of us have any further liability to the other in respect of this contract." See id. 21. Meritage's employee handbook did not create contract rights for its employees and expressly permitted Meritage to change its discounting policy without any notice. See Portions of November 2002 Employee Handbook, Exhibit 13 at 1-2. The employee handbook provided: No existing or past practice or procedure, and no representation, written or oral, express or implied, including, without limitation, those contained in this employee handbook are intended to create a contract between you and Meritage so as to alter the at will character of your employment. The provisions of the handbook have been developed at the discretion of management and except for its policy of employment "at will", may be amended or canceled at any time at Meritage's sole discretion. * * *
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The guidelines set forth in this handbook are for informational purposes only. Since our employment policies, procedures, and benefits are subject to change by Meritage Corporation from time to time, with or without notice, due to economic or other consideration, they cannot be considered or otherwise relied upon as an employment contract. See id. (emphasis in original). 22. The Madrid home remained publicly available for sale until March 10, 2004, which is more than three months after Meritage terminated Rick Hancock's employment. See Declaration of Scott Keeffe in Support of Opposition to Rick Hancock's Motion for Leave to File Counterclaim, Add Claims Against Existing Third Party Defendants, and Add Third Parties, Exhibit 14 at ¶ 7. 23. The Hancocks concede that they took no steps to acquire the Madrid home after learning that Meritage would not abide by the Madrid contract with the 10% discount. See September 8, 2006 Deposition of Brenda Hancock, Exhibit 15 at 97:8 to 99:15. Brenda and Rick Hancock's home in the Grayhawk neighborhood of North Scottsdale that they remained in has appreciated hundreds of thousands of dollars since deciding not to pursue a home in the Madrid subdivision. See id. at 103:1 to 104:9.
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24. On February 13, 2004, Greg Hancock, through his attorney, wrote Meritage's attorney terminating the License Agreement and instructing Meritage to remove the "Hancock" name from all of Meritage's advertising. See February 13, 2004 Letter from J. Titus to S. Pidgeon, Exhibit 16 at 2. 25. In June 2004, defendants opened Rick Hancock Homes and its homebuilding business right in the same subdivision as Meritage's Hancock Communities, thereby deliberately violating this Court's Order and breaching the promise the Hancocks made to this Court. See Exhibit 7 at 118:10 to 120:13; Order at 3:9-25 (March 10, 2004). 26. Unlike defendant Rick Hancock's intent in choosing the mark Rick Hancock Homes, there is no evidence in the record that the third parties intended to confuse and free-ride on Meritage's goodwill and in selecting their similar marks. See Exhibit 7 at 49:2 to 50:20, 54:24 to 61:12, 68:4 to 71:20, 76:12 to 82:4, 102:20-24, and 181:1-22. 27. While acknowledging that work was stressful, Greg Hancock testified under oath that his then-wife's conduct was so intolerable that it caused him to quit. See September 30, 2003 Deposition of Greg Hancock in Hancock v. Hancock, No. 2002001002, Exhibit 17 at 8:22 to 13:24. 28. Greg Hancock also testified that he quit because Meritage was not paying him enough. See id. at 30:2-21. DATED this 15th day of December, 2006. SNELL & WILMER L.L.P.
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By s/ Dan W. Goldfine Dan W. Goldfine Adam Lang One Arizona Center Phoenix, AZ 85004-2202 Attorneys for Plaintiffs and Third Party Defendants and
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LAW OFFICES One Arizona Center, 400 E. Van Buren Phoenix, Arizona 85004-2202 (602) 382-6000
By s/ Grant Woods Grant Woods GRANT WOODS, P.C. 1726 North Seventh Street Phoenix, AZ 85006 Attorneys for Plaintiffs and Third Party Defendants CERTIFICATE OF SERVICE I hereby certify that on December 15th, 2006, 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. 3000 N. Central Avenue, Suite 1730 Phoenix, Arizona 85004 Attorneys for Defendant Rick Hancock Robert M. Frisbee Frisbee & Bostock, PLC 1747 East Morton Avenue Suite 108 Phoenix AZ 85020 Attorneys for Defendant Greg Hancock 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
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s/ Adam E. Lang
1926530
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