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Cottman Transmissions Systems, LLC v. Michael Gano

March 6, 2013

COTTMAN TRANSMISSIONS SYSTEMS, LLC
v.
MICHAEL GANO, ET AL.



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

MEMORANDUM

On September 12, 2012, Cottman Transmissions Systems, LLC ("Cottman") brought suit against Michael Gano ("Gano") and 412 Automotive, L.P. ("412 Automotive") (collectively, the "Defendants"), alleging trademark infringement, unfair competition, fraud and deceit,*fn1 and breach of contract. Cottman moved for a preliminary injunction on September 19, 2012, asking the court to enjoin the Defendants from using the Cottman name in the performance of any of its services, and to enforce a non-compete clause under the License Agreement. When Gano failed to answer Cottman's complaint, Cottman moved for a default judgment pursuant to Federal Rule of Civil Procedure 55. On January 28, 2013, I held a hearing for Cottman's request for a final injunction and to assess damages. Gano again failed to appear to defend. Having considered Cottman's testimony and exhibits offered into evidence, as well as its written submissions, I make the following findings of fact and conclusions of law pursuant to Federal Rule of Civil Procedure 52.

I. FINDINGS OF FACT

A. Service of Process

1. Michael Gano is an adult individual who was personally served in connection with this matter on two separate occasions by the same process server, Dennis Heath, Jr. On October 4, 2012, Gano was served with the Summons and Complaint in this matter at his place of business: 4518 State Route 136, Greensburg, Pennsylvania 15601. (Aff. of Serv., Oct. 4, 2012, ECF No. 6.) On November 18, 2012, Gano was personally served at his residence located at 357 Elm Dr., Greensburg, Pennsylvania 15601, with the court's Order of September 19, 2012, which stayed Cottman's motion for a preliminary injunction until service was effected, along with Cottman's motion for a preliminary injunction. (Aff. of Serv., Nov. 18, 2012, ECF No. 11.)

2. On October 4, 2012, 412 Automotive was served with the Summons and Complaint by Heath at 4518 State Route 136, Greensburg, Pennsylvania 15601. (Aff. of Serv., Oct. 4, 2012, ECF No. 7.) On November 5, 2010, it was served with the court's Order of September 19, 2012, and Cottman's motion for a preliminary injunction at the same address. (Aff. of Serv., Nov. 5, 2012, ECF No. 12.)

3. Though he failed to answer the complaint or appear in court to defend the allegations against him, Gano was fully aware of this suit and the court's proceedings. (Decl. of William B. Johnson, ECF No. 14-1.)

B. Cottman Trade Name and Trademarks

4. Since 1963, Cottman has continually used the name "Cottman" as its trade name, trademark, and service mark in connection with the operation of its transmission and automotive repair centers. (Pl.'s Ex. P-1 ¶ 3; Wright Test.)

5. Cottman is the owner of said marks, which are registered on the principal register of the United States Patent and Trademark Office. (Pl.'s Ex. P-1 ¶ 4; Wright Test.)

6. Cottman is engaged in interstate commerce through its business of franchising and licensing other entities to use the mark and "Cottman" name in the operation of transmission repair centers throughout the United States. (Pl.'s Ex. P-1 ¶ 5; Wright Test.)

7. The "Cottman" trade name and trademark have become universally associated with the repair of motor vehicle transmissions and the operation of transmission repair centers. (Pl.'s Ex. P-1 ¶ 6; Wright Test.)

8. Cottman has a vital interest in protecting its trade name and trademarks, and the preservation and protection thereof are essential to the maintenance of Cottman's quality transmission repair centers and the goodwill and reputation associated therewith. (Pl.'s Ex. P-1 ¶ 10; Wright Test.)

C. License Agreement

9. On December 16, 2008, Cottman and Gano entered into a License Agreement, pursuant to which Gano was authorized to use the name and mark "Cottman" in connection with the operation of an automotive repair center (the "Center") located at 4518 State Route 136, Greensburg, PA 15601. (Pl.'s Ex. P-2; Wright Test.)

10. Gano executed a Transfer of License with Cottman, whereby the License Agreement was assigned to 412 Automotive, which agreed to assume and become liable for the obligations of Gano. (Pl.'s Ex. P-2, p. 24.) The Transfer of License provides that notwithstanding the transfer to 412 Automotive, Gano shall remain "personally liable in all respects under the License Agreement" to Cottman.(Id.; Wright Test.)

11. As provided under the License Agreement, Cottman shared with the Defendants its proprietary systems and manuals, customer lists, software, and trade secrets for operating a successful automotive repair business. (Pl.'s Ex. P-1 ¶¶ 16-17; Wright Test.)

12. In the spring of 2010, Cottman audited the Defendants' Center and discovered that they were underreporting sales to Cottman in order to escape payment of license fees due and owing to Cottman. (Pl.'s Ex. P-1 ¶ 18; Wright Test.) Defendants were also issuing nonCottman repair orders to customers. (Pl.'s Ex. P-1 ¶ 19; Wright Test.)

13. On February 23, 2012, Cottman performed another audit of the Defendants' Center and again discovered that Defendants continued to underreport sales and underpay franchise fees. (Pl.'s Ex. P-1 ¶ 22; Wright Test.)

14. In a letter dated March 20, 2012, Cottman notified the Defendants that they were in material breach of the License Agreement and must pay all sums due and owing to Cottman within ten days. (Pl.'s Ex. P-3; Wright Test.) Defendants failed to comply with Cottman's demand for payment. (Pl.'s Ex. P-1 ¶ 28; Wright Test.)

15. In a letter dated April 30, 2012, Cottman terminated the License Agreement for the Defendants' failure to pay sums due and owing to Cottman. (Pl.'s Ex. P-4; Wright Test.)

16. Pursuant to the License Agreement, upon termination "for any reason" the Defendants were to pay all amounts owed to Cottman; discontinue the use of all Cottman names, marks, forms of advertising, signage, and structures; return to Cottman all proprietary information, including manuals and software; and make no representations that the Defendants are or continue to be approved, endorsed, or licensed by or associated with Cottman. (Pl.'s Ex. P-2, p. 17.)

17. The License Agreement also states with particularity the terms of the "Covenant Not to Compete." Specifically, upon termination of the License Agreement, the Defendants agreed not to begin or engage in any business the same, similar to, or in competition with the business of the Center for a period of two years within a specified geographical range. The specified range was within a ten-mile radius of the Defendants' former Center and a three-mile radius of any other Cottman center in existence at the time of the License Agreement termination. (Pl.'s Ex. P-2, p. 18.) The License Agreement also states that if the Defendants do not obey the terms of the non-compete agreement upon termination of the License Agreement, thus forcing Cottman seek equitable relief through the judicial system, then the non-compete agreement will remain in effect for a period of two years from the date that such relief is granted. (Pl.'s Ex. P-2, p. 19.)

18. As of January 28, 2013, Defendants had neither paid Cottman the sums owed pursuant to the License Agreement, nor discontinued their use of the Cottman marks, proprietary information and manuals, ...


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