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The Harry and Jeanette Weinberg Foundation, Inc. v. St. Marks Avenue, LLC

United States District Court, D. Maryland

May 16, 2016

The Harry and Jeanette Weinberg Foundation, Inc.
v.
St. Marks Avenue, LLC, et al.

Dear Parties:

Pending before the Court are Defendants’, St. Marks Avenue, LLC and William Spivey (collectively “St. Marks”), Motion to Dismiss Complaint (ECF No. 8) and Plaintiff’s, The Harry and Jeanette Weinberg Foundation, Inc. (the “Foundation”), Motions for Default Judgment (ECF Nos. 14, 15, 16, 17). The Court, having reviewed the Motions and supporting documents, finds no hearing necessary pursuant to Local Rule 105.6 (D.Md. 2014). For the reasons outlined below, the Court will deny St. Marks’s Motion in part and stay it in part and deny the Foundation’s Motions without prejudice.

The Foundation is a private Maryland organization that provides grants to organizations that offer direct services to disadvantaged and vulnerable individuals in Maryland and worldwide. On February 7, 1996, the Foundation entered into an agreement with the Communities Organized to Improve Life (“COIL”) to develop property located at 1200 West Baltimore Street, Baltimore, Maryland (the “Property”). The Foundation granted COIL $675, 000, which was thirty percent of the overall $2, 268, 000 cost to develop the Property. The agreement requires that: (1) once COIL completed the development of the Property, the Property could only be used as an adult education center providing programs and services for illiterate adults (the “Project”), (2) COIL had to operate as a not-for-profit corporation within the Property, and (3) COIL could not sell or transfer the Property without the Foundation’s prior consent. Also, the agreement granted COIL the right to display “The Harry & Jeanette Weinberg” (the “display”) on the Property upon completion of construction. Lastly, the agreement stated that if COIL dissolved or sold the Property with the Foundation’s consent, the Property and all funds not yet spent on the Project were to be distributed to a not-for-profit entity with a similar purpose or placed in a trust.

On April 3, 2013, COIL sold the Property to St. Marks, a New York company, for $1, 000, 000 without the Foundation’s consent. On November 13, 2014, the Foundation sent a letter to Defendant Stacy Smith, the Chief Executive Officer and registered agent of COIL, and Defendant Spivey, the sole member of St. Marks, stating that it was ceasing any further engagement with COIL and requesting the display be removed from the exterior of the property. St. Mark’s registered agent offered to remove the display if the Foundation paid St. Marks $50, 000.

On November 19, 2015, the Foundation filed a Complaint alleging a claim for false endorsement in violation of Section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a) (2012) (Count I); breach of contract (Count II); civil conspiracy (Count III); and accounting as to COIL and Smith (Count IV). (ECF No. 1). On February 4, 2016, St. Marks filed a Motion to Dismiss. (ECF No. 8). On February 16, 2016, the Foundation filed an Opposition to the Motion to Dismiss. (ECF No. 12). On March 11, 2016, the Foundation filed Motions for Default Judgment as to Defendants Delores A. Long-Coleman, Paul Archibald, Smith, and COIL. (ECF Nos. 14, 15, 16, 17). On March 29, 2016, Smith filed a Motion to Dismiss Default Judgment (ECF No. 19), which the Court will construe as an opposition. On April 11, 2016, the Foundation filed a Reply to Smith’s opposition. (ECF No. 20).

Motion to Dismiss[1]

A complaint fails to state a claim if it does not contain “a short and plain statement of the claim showing that the pleader is entitled to relief, ” Fed.R.Civ.P. 8(a)(2), or does not state “a plausible claim for relief.” Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009) (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)). A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged. Id. at 678 (citing Twombly, 550 U.S. at 555). “Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.” Id. (citing Twombly, 550 U.S. at 555). Though the plaintiff is not required to forecast evidence to prove the elements of the claim, the complaint must allege sufficient facts to establish each element. Goss v. Bank of Am., N.A., 917 F.Supp.2d 445, 449 (D.Md. 2013) (quoting Walters v. McMahen, 684 F.3d 435, 439 (4th Cir. 2012)), aff’d sub nom., Goss v. Bank of Am., NA, 546 F.App’x 165 (4th Cir. 2013). In considering a Federal Rule of Civil Procedure 12(b)(6) motion, the court must construe the complaint in the light most favorable to the plaintiff, read the complaint as a whole, and take the facts asserted therein as true. See Harrison v. Westinghouse Savannah River Co., 176 F.3d 776, 783 (4th Cir. 1999) (citing Mylan Labs., Inc. v. Matkari, 7 F.3d 1130, 1134 (4th Cir. 1993)).

First, St. Marks argues the Foundation fails to allege a false endorsement claim because the Foundation consented to use of the display on the Property in the agreement. Section 43(a) of the Lanham Act provides that:

[a]ny person who, or in connection with any goods or services . . . uses in commerce any word, term [or] name ... or any false designation of origin . . . which . . . is likely to cause confusion, or cause mistake, or to deceive as to the affiliation, connection or association of such person with another person, or as to the origin, sponsorship, or approval of his or her goods, services, or commercial activities by another person . . . shall be liable . . . .

15 U.S.C. § 1125(a)(1)(A).

“Courts have recognized a § 43(a) injury ‘where the plaintiffs’ . . . names were used in such a way as to deceive the public into believing that they endorsed, sponsored, or approved of the defendant’s product.’” Comins v. Discovery Commc’ns, Inc., 200 F.Supp.2d 512, 522 (D.Md. 2002) (quoting Advanced Res. Int’l, Inc. v. Tri-Star Petroleum Co., 4 F.3d 327, 334 (4th Cir. 1993)). “False endorsement occurs when a person’s [or company’s] identity is connected with a product or service in such a way that consumers are likely to be misled about the person’s [or company’s] sponsorship or approval of the product or service.” AvePoint, Inc. v. Power Tools, Inc., 981 F.Supp.2d 496, 517 (W.D.Va. 2013) (quoting Maremont v. Susan Fredman Design Grp., Ltd., 772 F.Supp.2d 967, 971 (N.D.Ill. 2011)). To prove a claim for false endorsement, the plaintiff must also demonstrate “the likelihood of consumer confusion as to the origin, approval or endorsement of the product.” Comins, 200 F.Supp.2d at 522.

The Foundation sufficiently alleges St. Marks’s continued use of the display on the Property will cause confusion because the public will mistakenly believe the Foundation endorses St. Marks. Though the agreement states the display shall be prominently and permanently displayed on the Property (ECF No. 1-1), St. Marks is not a party to the agreement. To the extent St. Marks argues it is a third-party beneficiary to the agreement, “[a]n individual is a third-party beneficiary to a contract if the contract was intended for his or her benefit and it clearly appears that the parties intended to recognize him or her as the primary party in interest and as privy to the promise.” CR-RSC Tower I, LLC v. RSC Tower I, LLC, 56 A.3d 170, 212 (Md. 2012) (quoting 120 W. Fayette St., LLLP v. Mayor of Balt., 43 A.3d 355, 368 (Md. 2012)). Upon consideration of the agreement, the Court does not find that the Foundation and COIL clearly intended to confer a direct benefit to St. Marks. The Court, therefore, concludes St. Marks cannot benefit from the terms of the agreement. See id. (“It is not enough that the contract merely operates to an individual’s benefit: An incidental beneficiary acquires by virtue of the promise no right against the promisor or the promisee.” (quoting 120 W. Fayette St., 43 A.3d at 368)).

St. Marks further argues the Foundation’s false endorsement claim is moot because St. Marks offered a settlement allowing the Foundation to remove the display. “[A]n unaccepted settlement offer or offer of judgment does not moot a plaintiff’s case.” Campbell-Ewald Co. v. Gomez, 136 S.Ct. 663, 672 (2016). Because the Foundation has not accepted St. Marks’s settlement offer, the Court finds the claim is not moot and this Court retains jurisdiction to adjudicate the claim.[2] As such, the Court will deny St. Mark’s Motion as to Count I.[3]

Next, St. Marks argues the Foundation fails to allege a civil conspiracy claim. “Civil conspiracy requires ‘(1) a confederation of two or more persons by agreement or understanding; (2) some unlawful or tortious act done in furtherance of the conspiracy or use of unlawful or tortious means to accomplish an act not itself illegal; and (3) actual legal damage resulting to the plaintiff.’” Great Am. Ins. Co. v. Nextday Network Hardware Corp., 73 F.Supp.3d 636, 643 (D.Md. 2014) (quoting Lloyd v. Gen. Motors Corp., 916 A.2d 257, 284 (Md. 2007)). “A civil conspiracy can be established ‘by inferences drawn from the nature of the acts complained of, the individual and collective interests of the alleged conspirators, the situation and relation of the ...


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