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Lenox Corp. v. Blackshear

United States District Court, E.D. Pennsylvania

December 22, 2016

LENOX CORPORATION, Plaintiff,
v.
THOMAS BLACKSHEAR, ROGER W. RAWLS, BLACKSHEAR ENTERPRISES INC., and KEEPSAKES AND COLLECTABLES, LLC., Defendants.

          MEMORANDUM

          ANITA B. BRODY, J.

         Plaintiff Lenox Corporation (“Lenox”) brings suit against Defendants Thomas Blackshear, Roger W. Rawls, Blackshear Enterprises, Inc., and Keepsakes and Collectables, LLC[1] alleging trademark infringement, unfair competition, and false advertising in violation of the Lanham Act, 15 U.S.C. § 1051 et seq. Lenox also brings several state law claims. Subsequent to Lenox filing the Complaint, Blackshear initiated an arbitration action in California alleging similar causes of action. Blackshear moves to stay this action pending the outcome of arbitration. Lenox moves to enjoin the arbitration to allow this litigation to proceed. I exercise jurisdiction over this dispute pursuant to federal question jurisdiction, 28 U.S.C. §§ 1331 and 1338, and supplemental jurisdiction, 28 U.S.C. § 1367.

         I. BACKGROUND

         Thomas Blackshear is a celebrated American artist whose art depicts African American themes and characters. He conducts business through Blackshear Enterprises, Inc., a Colorado corporation with its principal place of business in Colorado Springs, Colorado. Blackshear works with Roger W. Rawls, a Georgia resident who sells products through Keepsakes and Collectables, LLC, a limited liability company operating in Georgia.

         Sometime in the 1990s, Blackshear first contracted to sell his figurine designs to Willitts Designs International (“Willitts”).[2] Willitts and Blackshear engaged in a productive business relationship in which Blackshear provided designs and artwork to Willitts, who in turn produced and sold figurines and other collectible items based upon those designs. As part of that relationship, Blackshear served as representative of a product line entitled “Thomas Blackshear's Ebony Visions, ” signed collectible figurines from the line, attended product events, and collected royalties from the sale of Willitts' products.

         In June 1999, in furtherance of their arrangement and pursuant to the trademark registration process, Blackshear entered into a “Consent to Use and Registration of Name” agreement (the “Consent Agreement”) with Willitts. In this agreement, Blackshear assented to the use and registration by Willitts of his name as a trademark in connection with the sale of figurines and other items. Thereafter, Willitts registered the mark, “Thomas Blackshear's Ebony Visions, ” (the “Ebony Visions Mark”) with the United States Patent and Trademark Office (“USPTO”). The Consent Agreement was appended to each of two trademark applications.[3]Blackshear continued to contract with Willitts, providing design services to Willitts and its sculptors for the “Thomas Blackshear's Ebony Visions” line of products. Willitts subsequently marketed and sold these products under the trademark.

         In 2004, [4] Blackshear and Willitts' relationship was memorialized in an Amended and Restated Design Services and Compensation Agreement (“DSA”). DSA, attached as Ex. A to Defs.' Mot. to Stay, ECF No. 9. Under the DSA, Blackshear agreed to provide concepts for and facilitate the design of figurines, accessories, jewelry, dolls, collectors' plates, and ornaments based on his artwork. He agreed these designs would become products, made by Willitts, to be sold under the “Thomas Blackshear's Ebony Visions” trademarks.[5] The DSA confirmed Willitts' rights in the Ebony Visions Mark:

Designer[6] shall acknowledge Company's[7] exclusive rights in the Property and the Trademarks and acknowledges that the Property and/or Trademark are owned by Company. Designer shall not dispute or contest, directly or indirectly Company's exclusive right and title to the Property and/or Trademarks or the validity thereof.

DSA § 9.C.

         The DSA contains a “Jurisdiction and Disputes” section. This section states:

All disputes arising out of this Agreement shall be submitted to mediation in accordance with the rules of Arts Arbitration and Mediation Services [“AAMS”], a program of California Lawyers for the Arts. If mediation is not successful is [sic] resolving the entire dispute, any outstanding issues shall be submitted to final and binding arbitration in accordance with the rules of that program. The arbitrator's award shall be final, and judgement may be entered upon it by any court having jurisdiction thereof. If any party hereto is required to institute arbitration to enforce its rights under this Agreement, or to have the meaning of any of its terms and provision over which there is a dispute declared and determined by arbitration, the prevailing party shall be entitled to reasonable attorney's fees as awarded by the arbitrator in addition to all other recoverable costs and damages.

DSA § 17.B. Section 17.C adds: “Both parties shall have the right to seek assistance with disputes arising solely out of this Agreement using binding arbitration and/or mediation.” DSA § 17.C. The DSA also contains a choice of law provision that states that it is “governed in accordance with the laws of the State of California.” DSA § 17.A.

         In March 2009, Lenox, a Delaware corporation with its principal place of business in Bristol, Pennsylvania, acquired Willitts' assets through an Asset Purchase Agreement, pursuant to an order of the Bankruptcy Court in the Southern District of New York. The assets Lenox purchased included the Ebony Visions Mark and the Design Services Agreement with Blackshear. According to that order, Lenox acquired full title to the assets it purchased, free and clear of any and all liens, claims, interests, and encumbrances in the assets, including the Ebony Visions Mark. See Order ¶ R, attached as Ex. 1 to Resp. to Mot. to Dismiss or Stay Pending Arbitration, ECF No. 14. Lenox has been listed as the registered owner of the Ebony Visions Mark since the 2009 asset purchase, and is the current owner of the Mark. See Trademark Registration and Assignment Information from USPTO, attached as Exs. C and D to Pl. Lenox Corp.'s Mot. to Enjoin Arbitration, ECF No. 19; Am. Compl. ¶ 33.

         In 2013, Blackshear and Lenox decided to discontinue their relationship. On June 30, 2013, the DSA terminated. While Blackshear is no longer obliged to provide designs to Lenox, Lenox continues to sell existing and new products under the Ebony Visions Mark. Lenox claims that prior to and since the expiration of the DSA, Blackshear has taken various actions that have diluted the Ebony Visions trademark and disrupted its commercial relationships. Lenox alleges that beginning in 2012, Defendant Roger W. Rawls and his company, Defendant Keepsakes and Collectibles, LLC, purchased 4, 200 products from Lenox, the majority of which are from the “Thomas Blackshear's Ebony Visions” product line. Defendants together began selling these products on their website, BlackshearOnline.com, without Lenox's permission and without identifying them as “Thomas Blackshear's Ebony Visions” products. Lenox alleges that in March 2014, Blackshear published a statement to the relevant market-retailers, collectors, and other target consumers of the Ebony Visions line-noting that the “19-year run of Ebony Visions by Thomas Blackshear comes to an end.” Lenox alleges this statement directed customers to contact Rawls via email at roger@blackshearonline.com if they need “figurines to complete [their] Ebony Visions collection.” Am. Compl. ¶ 62, ECF No. 7.

         Lenox further alleges that in July 2014, Blackshear issued a statement to customers stating that he “did not participate in or approve [Lenox's] redesigns and will not participate in or approve future redesigns of his past Ebony Visions releases.” Lenox claims Blackshear stated that he was not signing any Lenox items bearing the Ebony Visions name and that signatures on certain products may not be genuine. Am. Compl. ¶ 75, ECF No. 7. Finally, Lenox alleges that in late 2014 and early 2015, Blackshear designed and marketed two angel figurines through the website https://www.blackgifts.com: (1) “The Sound of Victory” and (2) “Ready for Battle.” Lenox asserts that these products are derivatives of a figurine designed for Lenox, “Sentinel Angel, ” and therefore interfere with Lenox's marketing of “Sentinel Angel.” Am. Compl. ¶ 100-103, ECF No. 7

         Lenox alleges that Defendants' actions have created confusion in the marketplace and diluted Lenox's trademark. Lenox asserts that Defendants, by representing Lenox's trademarked goods as their own and inviting customers to purchase these products from the Blackshearonline website, have engaged in reverse passing off by selling Lenox's trademarked products as their own. On November 5, 2015, Lenox filed a complaint in this Court asserting ten claims: (1) Unfair Competition in violation of 15 U.S.C. § 1125(a); (2) Unfair Competition in violation of 73 P.S. §201-2(4); (3) Trademark Infringement in violation of 15 U.S.C. §1125; (4) False Advertising in violation of 15 U.S.C. §1125; (5) False Advertising in violation of Pennsylvania common law; (6) Unfair Competition in violation of Pennsylvania common law; (7) Unjust Enrichment requiring an accounting in violation of Pennsylvania common law; (8) Tortious Interference with business relationships in violation of Pennsylvania common law; (9) Conspiracy to tortuously interfere with business relationships in violation of Pennsylvania common law; and (10) Trade Libel in violation of Pennsylvania common law. ECF No. 1. The Complaint was amended on March 17, 2016. ECF No. 7.

         Subsequent to the filing of Lenox's complaint, Blackshear concluded he was also aggrieved by their arrangement. He claims he was not paid royalties owed to him under the DSA. He seeks to remedy this, as well as establish his ownership of the “Thomas Blackshear's Ebony Visions” trademark. On March 31, 2016, in conjunction with a motion to dismiss, Blackshear and Defendants moved to stay this matter pending arbitration. ECF No. 9. Pursuant to Section 17.B of the DSA, they argue that this dispute arises out of that agreement and is therefore subject to the arbitration provision. Next, on April 14, 2016, while the Motion to Stay was pending, Blackshear initiated the arbitration proceeding before the Arts Arbitration and Mediation Service (“AAMS”) in California. He asserted nine claims against Lenox: (1) Breach of Contract; (2) Trademark Infringement under the Lanham Act; (3) False Endorsement under the Lanham Act; (4) Unfair competition under Cal. Bus. & Prof. Code §17200; (5) False Advertising under Cal. Bus. & Prof. Code §17500; (6) Unfair Competition under California common law; (7) Violation of California Civil Code § 3344; (8) Violation of California common law right of publicity; and (9) Declaration of Non-Liability to Respondent under Declaratory Judgment Act. See Demand for Arbitration, attached as Ex. A to Pl. Lenox Corp.'s Mot. to Enjoin Arbitration, ECF No. 19. Lenox moves to enjoin this ongoing arbitration. ECF No. 19.

         II. LEGAL STANDARD

         The Federal Arbitration Act, 9 U.S.C. § 1 et seq., (“FAA”), “creates a body of federal substantive law establishing and governing the duty to honor agreements to arbitrate disputes.” Century Indem. Co. v. Certain Underwriters at Lloyd's, London, 584 F.3d 513, 522 (3d Cir. 2009). “Congress designed the FAA to overrule the judiciary's longstanding reluctance to enforce agreements to arbitrate and its refusal to put such agreements on the same footing as other contracts, and in the FAA expressed a strong federal policy in favor of resolving disputes through arbitration.” Id. (citations omitted). “In particular, the FAA provides that as a matter of federal law ‘[a] written provision' in a maritime or commercial contract showing an agreement to settle disputes by arbitration ‘shall be valid, irrevocable, and enforceable, save upon such grounds as exist in law or in equity for the revocation of any contract.'” Id. (quoting 9 U.S.C. § 2).

         Section 3 of the FAA states that when a suit is brought upon a claim subject to arbitration, a district court must stay the litigation to allow the arbitration to proceed. The statue provides:

If any suit or proceeding be brought in any of the courts of the United States upon any issue referable to arbitration under an agreement in writing for such arbitration, the court in which such suit is pending, upon being satisfied that the issue involved in such suit or proceeding is referable to arbitration under such an agreement, shall on application of one of the parties stay the trial of the action until such arbitration has been had in accordance with the terms of the agreement, providing the applicant for the stay is not in default in proceeding with such arbitration.

9 U.S.C. § 3.

         Resolving a motion to stay under Section 3 calls for a two-step inquiry. “[A] court asked to stay proceedings pending arbitration must determine [1] whether there is a valid agreement to arbitrate and, if so, [2] whether the specific dispute falls within the substantive scope of that agreement . . . .Medtronic AVE, Inc. v. Advanced Cardiovascular Sys., Inc., 247 F.3d 44, 54-55 (3d Cir. 2001). A court asked to enjoin an ongoing arbitration must undertake the same inquiry. See PaineWebber, Inc. v. Hartmann, 921 F.2d 507, 511 (3d Cir. 1990) (“If a court determines that a valid arbitration agreement does not exist or that the matter at issue clearly falls outside of the substantive scope of the agreement, it is obliged to enjoin arbitration.”).

         The FAA creates a presumption in favor of arbitration. This presumption, however, “does not apply” to step one of our inquiry, namely, “to the determination of whether there is a valid agreement to arbitrate between the parties.” Kirleis v. Dickie, McCamey & Chilcote, P.C., 560 F.3d 156, 160 (3d Cir. 2009) (quotations omitted). “The strong federal policy favoring arbitration . . . does not lead automatically to the ...


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