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R/C Theatres Management Corp. v. Metro Movies, LLC

United States District Court, D. Maryland

September 4, 2014

R/C THEATRES MANAGEMENT CORPORATION,
v.
METRO MOVIES, LLC

For R/C Theatre Management Corporation, Plaintiff: Steven K Fedder, Fedder & Janofsky LLC, Baltimore, MD.

For Metro Movies LLC, Defendant: JoAnna M Esty, Majesty Law Group, Middle River, MD; Joseph Michael Selba, Karen H Moore, Lori S Simpson, Law Office of Lori Simpson, LLC, Baltimore, MD.

For Metro Movies LLC, Counter Claimant: Joseph Michael Selba, Karen H Moore, Lori S Simpson, Law Office of Lori Simpson, LLC, Baltimore, MD.

For R/C Theatre Management Corporation, Counter Defendant: Thomas J Althauser, Eccleston and Wolf PC, Hanover, MD; Steven K Fedder, Fedder & Janofsky LLC, Baltimore, MD.

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MEMORANDUM

J. Frederick Motz, United States District Judge.

Plaintiff/Counter-defendant R/C Theatres Management Corp. brings this lawsuit against Defendant/Counter-plaintiff Metro Movies, LLC, under Connecticut law and the Lanham Act, 15 U.S.C. § 1114(1)(a)-(b), § 1125(a), alleging breach of contract, trademark infringement, false designation of origin, and unfair competition. (ECF No. 1). Metro has filed seven counterclaims. (ECF No. 4). Discovery has been completed. Now pending are two cross-motions for partial summary judgment, filed by Metro on June 19, 2014 and by R/C on July 21, 2014. (ECF Nos. 37, 40).

No oral argument is necessary. See Local Rule 105.6. For the reasons set forth below, the court denies Metro's motion for partial summary judgment and grants R/C's motion for partial summary

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judgment in part, as to its Counts II and IIa.

BACKGROUND

R/C provides services to movie theaters by managing the day-to-day operations. Metro owns a movie theater (" theater" ) located at 140 Main Street, Middletown, Connecticut that is the subject of this dispute. (R/C Compl., ECF No. 1 ¶ 7). The parties entered into a Management Agreement contract on June 12, 2012, in which Metro appointed R/C to " manage" the theater for five years commencing on July 1, 2012. (ECF No. 40-4). The Management Agreement assigned several specific responsibilities to R/C in return for six percent of the theater's gross receipts. ( Id. ¶ 6).

Either party reserved the right to terminate the contract with 180 days' notice. ( Id. ¶ 10.A & B). Moreover, either party could also terminate upon default of the other party, with ten days' notice and opportunity to cure for monetary defaults, and thirty days' notice and opportunity to cure for non-monetary defaults. ( Id. 10.C).

During R/C's management of the theater, R/C affixed its label to various marketing and operations materials, including the paper stock used for tickets sold to patrons. (Phillips Dep., ECF No. 40-14).[1] R/C Vice President Brian Phillips oversaw R/C's management of the theater, and set up the R/C branded items for the theater. ( Id. at 142:18-20). Phillips stated that it was his understanding at the time that Metro and R/C had agreed to use R/C's logo to provide the theater with " a new brand identity," and that R/C's logo would be used on Metro materials while R/C was managing the theater. ( Id. at 141-43). Phillips did not recall Metro asking him to remove R/C's logo while R/C managed the theater. ( Id. at 162:9-12).

Almost seven months later, Metro President Lawrence Goichman informed R/C President Scott Cohen via a January 28, 2013 letter that Metro was " exercising [its] right to terminate pursuant to Section 10 (A)," and provided Metro with 90 days' notice. (ECF No. 40-5; Goichman Dep., 40-12 at 15:1-8). Cohen responded on January 31, 2013, referencing a discussion with Goichman and accepting Goichman's intent to terminate, but reminded Goichman of the 180 day notice requirement in the Management Agreement. (ECF No. 40-6).[2]

Goichman also sent Cohen a two-page letter on January 31 that referenced seven R/C defaults and demanded that R/C cure them within 10 days. (ECF No. 40-7; Cohen Dep., ECF No. 40-8 at 179:3-181:19).[3] Moreover, and allegedly unbeknownst

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to R/C, Metro mailed a letter also dated January 31 to film distribution companies informing them that Metro had " changed management companies and will no longer be using RC Theatre Management Corp." (ECF No. 40-10). Goichman stated that this letter had been sent only after R/C had " replaced themselves" as manager of the theater. (Goichman Dep., ECF No. 40-12 at 17:21-18:19).

R/C's counsel sent Goichman a response on February 1, 2013 that refuted R/C's alleged seven defaults and informed Goichman that R/C considered Metro in material breach for " seeking to improperly terminate the Management Agreement with less notice than prescribed in the Agreement." (ECF No. 40-9). The letter stated R/C's willingness to consider " an amicable resolution" to the brewing dispute. Id.

Metro began managing and operating the theater itself in early February 2013, and R/C requested that Metro remove R/C's logo from any remaining materials. (Phillips Dep., ECF No. 40-14 at 162-63). Metro agrees that it continued to use paper stock branded with the R/C logo on which it printed tickets for a period of time after it terminated the Management Agreement, but " used commercially reasonable best efforts to remove R/C's mark from all aspects of the operation . . . as quickly as possible" and had " timely ceased all use of the R/C ticket stock" even though it was not required to do so because it had paid for the stock itself. (ECF No. 43 at p. 4) (characterizing R/C's argument as about " simply the use of the existing Metro-owned and R/C branded items after the relationship terminated" ).[4] Metro continued to use the R/C logo through at least April, however, as evidenced by a ticket stub dated April 6, 2013 that clearly contains the R/C logo. (Cohen Dep., ECF No. 40-8 at 130:15-21; ECF No. 40-19).

A. R/C's complaint and Metro's counterclaims.

R/C filed a complaint against Metro on April 2, 2013, claiming that Metro had committed: breach of contract (Count I), trademark infringement (Count II), false designation of origin (Count IIa), and unfair competition (Count III).[5] The essence of R/C's complaint is that Metro wanted to terminate the Management Agreement without providing the 180 days' notice and accordingly came up with various alleged defaults that would permit it to trigger the shorter ten or thirty day termination option. Moreover, R/C claims that Metro committed trademark infringement by continuing to use the R/C logo without its permission.

Metro answered on April 19, 2013, listing seven affirmative defenses and also filing seven counterclaims against R/C: breach of contract (Count I), conversion (Count II), and mismanagement (Count III).[6] Metro's essential contention is that

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R/C had violated the Management Agreement by failing to properly perform its accounting duties and by taking unilateral ...


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