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Delaware Valley Financial Group, Inc. v. Principal Life Insurance Co.

June 1, 2009


The opinion of the court was delivered by: Joyner, J.


This case has been brought before the Court on Motion of the Plaintiffs for Preliminary Injunction.*fn1 Following two full days of hearings in this matter on December 15 and 16, 2008 and numerous submissions by the parties, we find this matter now properly postured for adjudication and we thus make the following:


1. Plaintiff Delaware Valley Financial Group, Inc., ("DVFG, Inc.") is a Pennsylvania corporation which was formed in 1978 and is in the business of acting as an insurance brokerage firm. As of September 24, 2008, DVFG had a registered office address at 3200 Horizon Drive, King of Prussia, Pennsylvania, 19406. (Exhibit P-6; N.T. 12/15/08, 17; Verified Seconded Amended Complaint and Answer thereto, ¶2).

2. Plaintiff Delaware Valley Financial Group, LLC ('DVFG, LLC"), is a Pennsylvania Limited Liability Company formed in 2007 with registered office address as of September 24, 2008 at 3200 Horizon Drive, King of Prussia, Pennsylvania, 19406. DVFG, LLC is in the business of marketing and selling property and casualty insurance. (Exhibit P-7; N.T. 12/15/08, 17, 124; Verified Second Amended Complaint, ¶3).

3. Plaintiff DVFG Advisors LLC is a Pennsylvania limited liability company which is in the business of acting as a marketing and sales vehicle for use by individual agents/producers*fn2 in selling financial services and insurance products offered by insurers and/or financial service companies. (Verified Second Amended Complaint and Answer thereto, ¶4).

4. Plaintiffs Michael Feinman, Howard Soloway and David Bleznak are individual producers residing in Newtown Square and Maple Glen, Pennsylvania who are and have been affiliated with one or more of the DVFG entities and since 2002, were registered representatives for Defendant Princor in connection with the marketing and sale of Princor's securities products and services. Since that same time, Messrs. Bleznak, Feinman and Soloway have also been authorized agents for Defendant Principal Life Insurance Company in connection with the sale of life insurance policies underwritten and sold by Principal. In addition to selling Principal and Princor's insurance and financial products, Plaintiffs Feinman, Soloway and Bleznak also sold insurance and financial products of other companies. (Verified Second Amended Complaint and Answer thereto, ¶s 5, 6 and 7).

5. In 2007, the DVFG entities moved their principal place of business from King of Prussia, Pennsylvania to Conshohocken, Pennsylvania. (N.T. 12/16/08, 45).

6. Defendant Principal Life Insurance Company ("Principal") is an Iowa corporation with its primary offices at 711 High Street, Des Moines, Iowa, 50392. Principal is in the business of underwriting and issuing life insurance policies for marketing and sale by its authorized agents and brokers. (Verified Second Amended Complaint and Answer thereto, ¶8).

7. Defendant Princor Financial Services Corporation ("Princor") is an Iowa corporation with its principal offices at 711 High Street, Des Moines, Iowa, 50392. Princor is a subsidiary of Principal Services Trust Company, which also has its principal offices at 711 High Street, Des Moines, Iowa, 50392. (Verified Second Amended Complaint and Answer thereto, ¶9).

8. Prior to 1983, the Philadelphia area agency affiliated with Provident Mutual Life Insurance Company was run by Leo Riley and Rudy Meyers and was known as Riley-Meyers Brokerage Services, Inc. In 1986, they formally changed the name of the agency to Delaware Valley Financial Group, Inc. and also began doing business for other companies in addition to Provident Mutual. (Cronin Dep. 71-72; Exhibit P-4). In 1984, DVFG, Inc. registered as a foreign corporation to do business in New Jersey. (N.T. 12/16/08, 41; Exhibit P-5).

9. In 1992, Thomas Schirmer purchased Delaware Valley Financial Group, Inc. from Rudy Meyers for $25,000. At that time, DVFG, Inc. had three offices in Philadelphia and Wayne, Pennsylvania and in Cherry Hill, New Jersey. Although it was then affiliated with Provident Mutual, it also sold insurance and financial products for some 15 to 18 other major companies, including annuities, life and disability insurance and represented a broker-dealer in selling registered products such as mutual funds. (N.T. 12/15/08, 17-21; Cronin Dep., 73-74).

10. When Thomas Schirmer purchased DVFG in 1992, there were 28 employees, 20 of whom were agents. Previously, the agency had as many as 80 agents. Because the agency was saddled with an expensive, long-term lease on office space in Center City Philadelphia where parking and the city wage tax were problematic, Schirmer arranged to move it out of the city and out into the suburbs as soon as possible. Once he was able to move from the city, Schirmer was able to recruit more agents and make the agency successful again. (Cronin Dep., 84-86).

11. In 1996, Provident Mutual approached Schirmer about taking over their office in Wilmington, Delaware, as it was not meeting their production requirements. After conducting an evaluation of that office, which was then known as the Wilmington Financial Group, Schirmer and Delaware Valley Financial Group, Inc. acquired it and agreed to assume the responsibility for operating that agency. (N.T. 12/15/08, 21-22; Exhibit P-106).

12. "DBA" stands for "doing business as" and in the financial services industry, it is common for independent agents/producers to use a DBA as a means of marketing themselves to clients and/or prospective clients and, while some producers elect to use an individual DBA, others prefer to use one that shows that they are part of a group. (N.T. 12/16/08, 111, 208-210). Given how complex the financial services industry has grown with the proliferation of such products as load and no-load mutual and exchange-traded funds, index annuities and life insurance, it is beneficial for a producer to be affiliated with a group such as DVFG if for no other reason than the back-up and support which it provides. (N.T. 12/15/08, 117-118). Prior to using a chosen DBA, the agent must first obtain written approval from both the broker-dealer with whom he or she is affiliated and from FINRA, the Financial Industry Regulatory Authority, which is the largest independent regulator for all securities firms in the United States. (N.T. 12/15/08, 32, 42;

13. Prior to also using letterhead, business cards and other advertising materials, an agent and/or agency must first obtain written approval of those materials from the broker-dealer with whom they are affiliated and from FINRA. (N.T. 12/15/08, 28).

14. Although immediately after the merger, the producers in the Wilmington office continued to use the "Wilmington Financial Group" as their DBA, approximately six months later, they changed their DBA and began using the name, "Delaware Valley Financial Group" as their DBA as well. (N.T. 12/15/08, 23-24). At the time he acquired the Wilmington Financial Group, Thomas Schirmer also purchased the Wilmington Financial Group DBA for some $10,000. Included with that was the logo, which included the tree that is now part of DVFG's current logo. (Cronin Dep., 94-95).

15. Beginning in late 2001, DVFG began looking for another life insurance and broker-dealer company to affiliate with, having encountered difficulties with Provident Mutual Life Insurance Company after Provident was merged with Nationwide Insurance Company. In or about January, 2002, Messrs. Duncan and Cecere, acting on behalf of Principal, began "courting" Schirmer and DVFG with the result that in October, 2002, DVFG ceased its affiliation with Provident and became affiliated with Principal. (N.T. 12/15/08, 33).

16. Principal assisted DVFG in its efforts to dis-associate with Provident by building out new office space, acquiring files and getting all of its letters, documents and stationary approved before they moved. (N.T. 12/15/08, 34).

17. When the agents that were affiliated with DVFG left Provident and moved to Principal, they brought all of their clients with them. Provident only took issue with them taking the insurance policy customers of the agency that had been with Provident prior to DVFG's departure. (N.T. 12/15/08, 34).

18. In addition to owning its DBA, DVFG also owned its own domain,, and had its own website at beginning in or around 1997. (N.T. 12/15/08, 35-36). Because its producers sold products of other companies and because it had some independent agents associated with it, DVFG needed its own DBA. (N.T. 12/15/08, 76).

19. Although Principal and its legal department wanted DVFG to use the Principal name to market all their products in their offices, it was very important to Plaintiffs and their producers that they be permitted to continue to use their DVFG DBA and their domain for their website and their e-mail because they had worked very hard at branding their company and they believed they had gained significant name recognition in the Delaware Valley area using that name. This was the subject of numerous discussions and negotiations and had Principal not agreed to let them continue to use the DBA and the domain, Plaintiffs would not have agreed to affiliate with Principal. (N.T. 12/15/08, 37-38; Exhibit P-38).

20. At the time that DVFG joined with Principal, Principal had associations with over 30 other agencies. DVFG was the only agency that Principal permitted to use its own DBA and domain and its own signage. (N.T. 12/15/08, 38-42, 50; Exhibits P-30, P-93). Throughout its relationship with Principal, the prominent signage in the DVFG offices were large initials that said "DVFG" with small diamond periods between the letters on the fourth floor of the highest part of the building, and a large DVFG sign with the tree logo on the front door to the offices. In keeping with FINRA requirements, Princor signs also appeared in the offices, as it was the broker-dealer. (N.T. 12/15/08, 41).

21. DVFG negotiated additional concessions when it entered into its affiliation with Principal. For one, the Principal-Princor payout grid was generally capped at 80% of gross dealer concession but because DVFG had an 85% payout with its former broker-dealer, Principal/Princor agreed to change its payout grid from 80% to 85%. Principal also amended its agent contract in such a fashion as to immediately vest DVFG's producers in their contracts so that should they elect to leave, they would be entitled to their renewals on the business which they brought with them to Principal. (N.T. 12/15/08, 43-44).

22. At the time that DVFG affiliated with Principal, its producers had more than 25,000 clients. (N.T. 12/15/08, 44). Not all of its producers were affiliated with an insurance company and not all of its producers had contracts with Principal. (N.T. 12/15/08, 76-77).

23. At the time that DVFG affiliated with Principal, Principal had offices in Pittsburgh, Mechanicsburg and Radnor, Pennsylvania and Bethesda, Maryland. In addition, it had some agents who had their own offices in the greater Philadelphia area. (N.T. 12/16/08, 120-121; 239-240). Throughout the period that DVFG was affiliated with Principal, Principal referred to the three DVFG offices in the greater Philadelphia region - King of Prussia/Conshohocken, PA, Wilmington, DE and Marlton, NJ, as the "Delaware Valley Business Center." (N.T. 12/16/08, 123).

24. Subsequent to their affiliation with Principal/Princor, Schirmer, Smith and DVFG were also given responsibility for management of Principal and Princor's agencies in Bethesda, Maryland and Pittsburgh, Pennsylvania. (N.T. 12/15/08, 48, 141).

The producers in the Bethesda and Pittsburgh offices never wanted to and never did use any of the DVFG entity names as a DBA. They only wanted to use the Principal name. (N.T. 12/15/08, 142-144).

25. In the nearly six years that DVFG was affiliated with Principal, it was one of Principal's largest revenue generating firms. In 2007, DVFG had between 120 and 130 producers with between $5 and $6 billion in assets under management generating over $30 million in commissions. (N.T. 12/15/08, 33, 75-76).

26. Shortly after purchasing the Delaware Valley Financial Group in 1992, Thomas Schirmer became actively involved in a number of community groups and charitable organizations such as the Committee to Benefit Children, dedicated to raising funds to help children with cancer, the Leukemia Society of New Jersey, Meals on Wheels and Make a Wish Foundation, among others. In support of these organizations, DVFG would buy advertising and provide financial support at benefit golf tournaments and other similar fundraising events. In so doing, DVFG was building its name recognition and good will and supporting its individual producers. (N.T. 12/15/08, 77-79).

27. In addition to promoting itself and its producers through charitable support, DVFG also did much of its own advertising while it was affiliated with both Provident and Principal, primarily in the form of radio spot ads, business cards, brochures, fliers, letter mailings and client appreciation events. It also employed a Director of Marketing, whose primary function was to help producers develop marketing plans to penetrate the markets, at a cost of some $140,000 per year. (N.T. 12/15/08, 81-82, 90, 12/16/08, 220-221; Exhibits P-11, P-12, P-18, P-19A, P-20, P21A, P-29C and P-29D).

28. The DVFG entities additionally marketed themselves to prospective new producers through brochures, letters and other mailings and by, inter alia , participating in area job fairs and Chamber of Commerce events, visiting colleges, giving seminars, and advertising in publications of the Society of Professional Advisors and the Estate Planning Council. (N.T. 12/15/08, 84-86; Exhibits P-19B, P-43, P-44).

29. On or about August 28, 2007*fn3 , the plaintiffs filed an application (Serial # 77265731) with the United States Patent and Trademark Office ("USPTO") seeking to register the "Delaware Valley Financial Group, LLC" as a trademark for use in commerce in connection with financing services. In the application, the mark was described as "...consist[ing] of standard characters, without claim to any particular font, style, size or color." (Plaintiff's Exhibit 3; N.T. 12/15/08, 161-162, 164).

30. The trademark registration application was initially rejected by the USPTO on December 6, 2007 "because the proposed mark is primarily geographically descriptive of the origin of applicant's goods and/or services." It was noted, however, that "[i]f applicant amends the application to seek registration on the Principal Register under Section 2(f) or on the Supplemental Register, applicant must disclaim 'FINANCIAL GROUP, LLC,' because such wording appears to be generic in the context of applicant's goods and/or services." (Plaintiffs' Exhibit 3. TM 1087-TM 1088; N.T. 12/15/08, 164-165).

31. Thereafter, on June 2, 2008, Plaintiffs responded to the PTO action by disclaiming the right to exclusively use "Financial Group, LLC" apart from the mark as shown, i.e. , apart from the words "Delaware Valley," and by asserting that the proposed mark had become distinctive of the goods and services offered by Plaintiffs inasmuch as "Delaware Valley Financial Group" had been continuously and exclusively used in commerce since 1978. (Exhibit P-3, TM 1084, TM 1089; N.T. 12/15/08, 166).

32. On June 18, 2008, the USPTO issued its NOTICE OF PUBLICATION UNDER 12(a), noting that as modified, the proposed mark "appears to be entitled to registration," that it would be published in the Official Gazette on July 8, 2008, and that if no opposition was filed within the time specified by Section 13(a) of the statute, a certificate of registration would issue.

(Exhibit P-3. TM 1122). It is unclear from the record whether there has been any opposition to the ...

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