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Century 21 Real Estate LLC, A Delaware Limited Liability Company v. All Professional Realty

August 7, 2012

CENTURY 21 REAL ESTATE LLC, A DELAWARE LIMITED LIABILITY COMPANY FORMERLY KNOWN AS CENTURY 21 REAL ESTATE CORPORATION,
PLAINTIFF,
v.
ALL PROFESSIONAL REALTY, INC., A CALIFORNIA CORPORATION DOING BUSINESS AS CENTURY 21 ALL PROFESSIONAL; STEVEN M. WRIGHT, AN INDIVIDUAL; AND CAROL WRIGHT, AN INDIVIDUAL, DEFENDANTS.



CONSOLIDATED MEMORANDUM & ORDER RE: CENTURY 21'S MOTION FOR SUMMARY ADJUDICATION

Century 21 Real Estate LLC ("Century 21") filed an action against All Professional Realty, Inc. ("All Professional"), Steven M. Wright, and Carol Wright arising from All Professional's continued use of Century 21's trademarks following the terminations of real estate brokerage franchise agreements for unpaid fees. (No. 2:10-2751.) Steve Wright,*fn1 Carol Wright, and All Professional filed a related action against Century 21 arising from the franchise agreements. (No. 2:10-2846.) Century 21 filed a third action against All Professional Hawaii Realty Inc. ("All Professional Hawaii"), John Sherman, Steve Wright, and Carol Wright arising from All Professional Hawaii's allegedly wrongful use of Century 21's trademarks following the termination of another real estate brokerage franchise agreement. (No. 2:11-2497.) All three of these cases have been consolidated. Presently before the court is Century 21's motion for summary adjudication pursuant to Federal Rule of Civil Procedure 56.

I. Factual and Procedural Background In 1994, Steve and Carol Wright formed All

Professional, a real estate brokerage company. (Compendium of Exhibits Ex. 42 ("Steve Wright Dep. I") at 12:13-22 (Docket No. 106)*fn2 ; Steve Wright Decl. in Opp'n to Century 21's Mot. for Prelim. Injunction ("Steve Wright Decl.") ¶ 2 (Docket No. 18-2).) All Professional signed its first franchise agreement with Century 21 in 1995, which allowed it to operate an office under the name "Century 21 All Professional." (Steve Wright Dep. I at 20:3-23; Steve Wright Decl. ¶ 3.) Century 21 is a franchisor of real estate brokerages. (Bertet Decl. ¶ 3 (Docket No. 88-4).)

A. Franchise Agreements

All Professional*fn3 operates multiple offices and each office is governed by a separate franchise agreement with Century 21. In November of 2005, All Professional signed three ten-year franchise agreements with Century 21 for two offices in Sacramento*fn4 and one office in Folsom, California, with an effective date of December 1, 2005, for each franchise agreement. (Bertet Decl. Exs. A-C §§ 1.5, 1.7.) The Wrights also signed a personal guaranty of All Professional's obligations under the three California franchise agreements. (Id. Exs. A-C at 43-44.)

Shortly after signing the franchise agreements for the California franchises, the Wrights and their business partner John Sherman, on behalf of All Professional Hawaii, signed a ten-year franchise agreement with Century 21 for the operation of an office in Honolulu, Hawaii. (Id. ¶ 6, Ex. D.) The Wrights, together with Sherman, again signed a personal guaranty for All Professional Hawaii's obligations under the Hawaii franchise agreement. (Id. Ex. D at 43-44.)

All four franchise agreements include the same relevant language. Section 4.1 of the franchise agreements granted All Professional a nonexclusive license to use Century 21's "Marks" and "System." (Id. Exs. A-D § 4.1.) "Marks" meant Century 21's trademarks, service marks, and trade dress. (Id. Exs. A-D § 3.1.8.) "System" meant, inter alia, "policies, procedures, and techniques designed to enable [] offices to compete more effectively in the real estate sales market." (Id. Exs. A-D § 3.1.14.) Century 21's "system" also included "common use and promotion of certain Marks, copyrights, trade secrets, centralized advertising programs, recruiting programs, referral programs and sales management training programs." (Id.)

Century 21 has numerous registered trademarks. (See Iuliano Decl. ¶ 3, Ex. A (Docket No. 88-3).) According to Century 21, it uses the trademarks on goods and in advertisements, education, training manuals, newsletters, global computer networks, and residential, commercial, and mortgage brokerage services. (Id. ¶ 5.) The trademarks have become well recognized because of advertisements and promotions of goods and services offered by Century 21. (Id.)

In exchange for the rights granted under the franchise agreements, All Professional agreed to pay royalty fees of six percent of gross revenue, with an initial monthly minimum fee of $500.00. (Bertet Decl. Exs. A-D §§ 7-8.) All Professional also agreed to pay two percent of its gross revenue to a National Advertising Fund ("NAF") for advertising expenses, with an initial monthly minimum fee of $562.00.

Section 16.2.3 of the franchise agreements provided that Century 21 could terminate the agreement for good cause, including curable and non-curable defaults by All Professional. (Id. Exs. A-D § 16.2.3.) Section 16.2.4, governing termination for curable defaults, provided that Century 21 could terminate the agreement with 30 days notice of the "proposed termination and the opportunity to cure the breach during the entire notice period, or such longer or shorter notice as is required or permitted by the law of the state where the Office is located," if the curable breach was the failure to pay financial obligations. (Id. Exs. A-D § 16.2.4.) Section 16.2.5 provided that Century 21 could terminate the agreement without notice if termination was based on any non-curable defects. (Id. Exs. A-D § 16.2.5.) Non-curable defects included abandonment of an office demonstrated by, among other things, a franchisee's failure to operate at an approved location for five consecutive business days. (Id. Exs. A-D § 16.2.5.4.)

The agreements also contained language stating that they were integrated agreements and that the franchisee should not sign the agreement if any representative of Century 21 promised something that was not part of the agreement, an attached addendum, or the offering circular. (Id. Exs. A-D § 22.15.) The agreements further stated that the success of the franchise was dependant on the efforts of the franchise owners and that neither Century 21 nor any other person "guaranteed or warranted that you will succeed in the operation of the Franchise, or has provided any sales or income projections of any kind to you." (Id. Exs. A-D § 23.9.) Finally, the agreements provided that Century 21 would "have no right to regulate or participate in the recruitment, selection, engagement, retention, discipline or termination of your sales associates or employees, except as may be necessary to protect the Marks and goodwill" and that defendants were "solely responsible for the conduct of the Business operated under this Agreement according to [their] own judgment, and in accordance with the provisions of this Agreement and the P&P Manual . . . ." (Id. Exs. A-D § 21.2.)

B. Development Advance Promissory Note

In addition to entering into the California franchise agreements in November of 2005, All Professional borrowed $75,000.00 from Century 21 pursuant to a Development Advance Promissory Note ("DAN" or "Note") for which the Wrights signed a personal guaranty. (Bertet Decl. Ex. D.) The Note provided for a long-term, annual repayment plan and provided that if All Professional was not in breach of its franchise agreements, the yearly amount due would be forgiven if All Professional reached certain gross revenue annual thresholds. (Id.) If the revenue thresholds were not met, the Note stated that "an amount of Principal equal to the Yearly Principal shall become due and payable." (Id.) In the event that All Professional terminated its business or defaulted on "any other agreement or note" between the parties, the DAN provided for an acceleration of the unpaid principal. (Id.) In addition to the Note, All Professional and the Wrights signed a Security Agreement in which they granted Century 21, as security for the prompt payment of the Note, a security interest in certain specifically described collateral. (Id. ¶ 20, Ex. F.)

The Wrights state that they executed the Note relying on statements by Dale Omer, Century 21's Western Regional Vice President, that "everything would be wonderful." (Steve Wright Dep. I at 62:1-6.) According to the Wrights, Omer told them "not to worry" about repaying the DAN because the new "tools and systems" that Century 21 would provide would "revolutionize [Century 21] offices compared to the competition" and make All Professional more profitable. (Id. at 59:19-60:2; 62:13-15.) Despite these representations, Steve Wright concedes that he does not "believe they ever said that we would be profitable. They said we would be more productive and sell more houses." (Id. at 67:11-15.)

C. Addenda to Franchise Agreements and Waiver of Claims

All Professional signed an addendum to the River Park franchise agreement, effective January 3, 2006, which amended the franchise agreement to include section 25.4 pertaining to the DAN. (Bertet Decl. ¶ 22, Ex. G § 25.4.) The addendum provided that "in the event of any termination of this agreement for any reason prior to the expiration of the Term . . . any and all sums due and owing (and/or not otherwise previously forgiven) under the Development Advance Note may be accelerated (at Franchisor's discretion) and shall be immediately payable." (Id.)

All Professional also signed addenda to the other two California franchise agreements that did not relate to the DAN. All three addenda contained a limited waiver of claims from which All Professional and the Wrights agreed to expressly release Century 21 from, and forever waive and relinquish, any and all claims they might have against Century 21, as well as a waiver of All Professional and the Wrights' rights under section 1542 of the California Civil Code. (Id. ¶ 22, Ex. G at 115.) All Professional and the Wrights also signed an addendum to the Hawaii franchise, effective February 1, 2006, which contains a similar waiver of claims. (Id. ¶ 24, Ex. H at § 5.)

D. Improper Recruiting Practices

Beginning in late 2006, All Professional argues that Century 21 All Islands, another Century 21 franchise office located in Hawaii, was engaged in an aggressive campaign to recruit All Professional Hawaii's agents in violation of Century 21's "Code of Conduct."*fn5 Steve Wright informed Sandy Persky, Century 21's Regional Director assigned to Hawaii, about All Islands' recruiting violations in an email dated December 19, 2006. (Compendium of Exhibits Ex. 16 at CENT002539 (Docket No. 104).)*fn6 On July 20, 2007, Steve Wright sent a second email to Persky, Omer, and Bob Popp at Century 21 complaining about All Islands' recruiting practices.*fn7 (Id. Ex. 16 at CENT002538.) This second email specified that All Professional did not expect Century 21 to take any actions based on the complaint. (Id.) The email chain following Steve Wright's second complaint suggests that as of July 25, 2007, Century 21 had not done anything regarding All Islands' alleged recruiting violations. (Id.)

On April 18, 2008, Steve Wright sent Persky an additional email with attachments documenting All Islands' recruitment efforts. (Id. Ex. 17.) Persky forwarded the email to Popp. (Id.) Popp contacted the All Islands broker and suggested that he stop recruiting All Professional Hawaii's agents. (Compendium of Exhibits Ex. 46 ("Popp Dep. I") at 59:9-60:18 (Docket No. 108).) On May 7, 2008, Steve Wright notified Persky and Popp that he was resigning from the Hawaii Broker Counsel because of All Islands' recruitment practices. (Compendium of Exhibits Ex. 18 (Docket No. 104).)

Beginning in 2008, a number of All Professional's agents from its California franchises left to work at Century 21 Select. (Steve Wright Dep. I at 142:21-143:14.) Based on conversations with the agents, Steve Wright believed that Select was improperly recruiting his agents, in part by offering them commissions that would result in a net loss to Select. (Id. at 146:11-147:18; see also Compendium of Exhibits Ex. 40 (agent compensation information from Century 21 Select).) Steve Wright also claims that at least two of All Professional's former agents stole commission checks from All Professional and cashed them after they transferred to Select. (Steve Wright Dep. I at 155:5-16, 157:5-22.) Steve Wright informed Century 21 that other franchisees were "openly competing with All Professional and stealing its business and employees" in violation of Century 21's "Code of Conduct." (Steve Wright Decl. ¶ 9.) Popp acknowledges receipt of an email from All Professional complaining about stolen commissions, but did not take any action regarding the complaint. (Popp Dep. I at 72:16-73:3.)

On August 4, 2008, Steve Wright informed Century 21 that he would no longer participate in Broker Council activities for the Sacramento area due to Century 21's "policy of allowing Select, All Islands, Homefinders to recruit our agents/staff . . . ." (Compendium of Exhibits Ex. 19 (Docket No. 104).)

E. Protection of Century 21 Trademark

All Professional also argues that Century 21 allowed other businesses to dilute the Century 21 trademark in All Professional's area when two real estate offices not affiliated with Century 21, moved into the Folsom area operating as "21st Century Realty" and "First Century." (Steve Wright Dep. I at 116:6-117:16, 234:14-235:23.) Steve Wright states that he petitioned Popp to have Corporate take action against the trademark infringement in 2004 or 2005.*fn8 (Id. at 235:13-25.) Steve Wright reports that Popp responded that "there was nothing he was going to be able to do, that we just had to deal with it." (Id. 116:17-23.)

All Professional argues that Century 21 took no substantive action on the trademark issue until after All Professional moved out of the Folsom office and Century 21 Select moved into the office. (Steve Wright Dep. I at 235:2-12.) After All Professional's franchise was terminated on October 8, 2010, Century 21's legal counsel sent Henry Ung from 21st Century Network, one of the non-affiliated offices, written notification that 21st Century Network was in violation of Century 21's trademark and demanded that it cease using the marks or face further legal action. (Compendium of Exhibits Ex. 39 (Docket No. 105).)

F. Folsom Office

In late August 2009, All Professional ceased doing business out of its Folsom office. (Steve Wright Dep. I at 201:6-11.) The office closure occurred after the building was foreclosed upon, either due to a partnership break-up between All Professional and a separate entity, (Steve Wright Dep. II at 27:14-29:5), or because All Professional was struggling financially after agents left and its income dropped, (Steve Wright Dep. I at 201:12-21). All Professional did not seek approval from Century 21 prior to closing the Folsom office. (Id. at 201:22-202:2.)

On October 27, 2009, Century 21 inquired as to the status of All Professional's Folsom office. (Compendium of Exhibits Ex. 24 (Docket No. 104).) All Professional responded that it was relocating the Folsom office and "expect to be fully operational the first of the year." (Id.) All Professional also stated that it would advise Century 21 when the new address was finalized. (Id.)

In February 2010, Mike Bainbridge, a Century 21 business consultant, suggested that All Professional merge its Folsom office with its Sacramento office in order to avoid paying minimum monthly fees on the Folsom office that was not currently operating. (Compendium of Exhibits Ex. 48 ("Bainbridge Dep.") at 106:16-107:8 (Docket No. 110); Steve Wright Dep. I at 203:19-204:13.) All Professional did not elect to consolidate the offices.

On February 5, 2010, Dan Jacuzzi, the owner of Century 21 Select, emailed Marc Fischman at Century 21 about opening up a Century 21 Folsom office at the same location that All Professional had abandoned. (Compendium of Exhibits Ex. 25 at CENT004385 (Docket No. 104).) Before opening up a Folsom location, however, Jacuzzi wanted to "insure [sic] that the prior (now closed) franchise of All Professional be terminated." (Id.) On February 11, 2010, Bainbridge sent Jacuzzi an application for the new Folsom office and stated that he was "working on the other half of the request and will keep you posted as to how that progresses." (Id. at CENT004275.)

On May 24, 2010, Century 21 sent All Professional notice that it had terminated All Professional's Folsom office on the grounds of abandonment. (Compendium of Exhibits Ex. 31 (Docket No. 105).) On May 26, 2010, Century 21 approved Jacuzzi's application to open an office in Folsom using the building that All Professional had vacated. (Compendium of Exhibits Ex. 47 ("Popp Dep. III") at 13:24-14:15, 22:5-10 (Docket No. 109).) All Professional argues that Century 21's termination of its Folsom office was the result of Century 21 favoring Select over All Professional.

G. Failure to Pay Century 21 Franchise Fees

Beginning in May of 2009, All Professional stopped paying many of its franchise fees. (Bertet Decl. ¶ 25.) All Professional was aware that it had failed to pay the fees. Century 21's online system provides its franchisees with "detailed summaries of their account balances owed to Century 21, including specific information detailing the amounts owed by that franchisee, when the amounts are due, and the type of amount due (i.e., royalty fee, national advertising fee fund fee, Development Advance Note, etc.)[.]" (Id. ¶ 30.)

During and prior to this period, All Professional also failed to meet its annual thresholds requirement and thus annual DAN payments for 2007, 2008, and 2009 were not forgiven. When Century 21 approached All Professional regarding payment of the DAN fees, Century 21 offered to waive the payment in exchange for a one-year extension of each franchise agreement and a general release of claims. (Compendium of Exhibits Ex. 23 (Docket No. 104).) All Professional rejected Century 21's proposal and instead offered a counterproposal of a 15-day extension of the franchise agreement. (Id.) Steve Wright later also proposed that Century 21 have "Select fire the 8 agents he [Jacuzzi] has bought and Homefinders fire the 5 agents they have allowed John Sherman to recruit." (Id.) Century 21 rejected the counteroffers. (Id.) Thereafter, All Professional failed to make any payments on the Note.

H. Termination of Franchises

In four separate letters dated April 5, 2010, Century 21 notified All Professional of its intent to terminate the four franchise agreements and of All Professional's opportunity to cure. (Bertet Decl. Exs. I-L.) The notice pertaining to the River Park Drive office stated in pertinent part:

Century 21 has advised you on numerous occasions that you are delinquent in the payment of your account. Upon review, we have determined that you are in default of the above-referenced Agreement for failing to pay fees when due. Your default constitutes a material breach of the Agreement, for which Century 21 may terminate the franchise.

As of February 24, 2010, your account balance for this office was $59,327.41.

In order to avoid termination, you must pay the balance in full no later than May 10, 2010. (Id. Ex. I.) The notice also provided contact information for Jacqueline Bertet, Century 21's Senior Director of Financial Services, and informed All Professional that failure to pay the balance would result in immediate termination of the franchise, which would require All Professional to pay the amount past due at the time of termination, sums assessed in a post-termination audit, the remaining balance of the Note, and lost profits. (Id.) The notice pertaining to the Florin Road, Sacramento, office contained similar language and stated that the balance was $23,492.69 as of February 24, 2010. (Id. Ex. K.) The notice pertaining to the Folsom office contained similar language and stated that the balance was $13,274.34 as of February 24, 2010. (Id. Ex. J.) The notice pertaining to the Honolulu office contained similar language and stated that the balance was $14,813.76. (Id. Ex. L.) All four notices required payment by May 10, 2010.

In the month following receipt of the April 5, 2010, notices, neither Steve nor Carol Wright called representatives of Century 21. Carol Wright initially called Shalina Rodriguez, a Director of Financial Services for Century 21, on May 6, 2010. (Compendium of Exhibits Ex. 44 ("Carol Wright Dep.") at 201:22-203:21, 206:4-16 (Docket No. 107).) Carol Wright states that in the telephone call she asked for an accounting and "disputed certain discrepancies I saw in the notices of default." (Carol Wright Decl. ¶ 12.) Carol Wright "specifically asked what would be required to resolve the claimed default":

[Rodriguez] informed me that we would need to pay $124,432.20 and that Corporate would want a promissory note since the figure was greater than $100,000. Our discussion revealed that Corporate was including the outstanding amount allegedly owed under [the Note], even though payment was not required under any of the Franchise Agreements. The pay-off amount included the Hawaii office even though that franchise was owned by a separate entity. (Suppl. Carol Wright Decl. in Supp. Of Pls.' Mot. for P.I. ("Suppl. Carol Wright Decl.") ¶ 4 (No. 2:10-2846, Docket No. 13).)

The day after the phone conversation, Carol Wright emailed a letter to Rodriguez identifying the following "items we need to address before proceeding": (1) removing minimum royalty and NAF fees from the Folsom office account balance because it had been closed since August 31, 2009; (2) determining the cutoff date for "final payment calculations," with a possible date of March 31, 2010;*fn9 (3) "handling" the Hawaii office separately; (4) removing minimum royalty and NAF fees from January, February, and March of 2010; (5) separating the Note amount owed because of a "separate issue" as to why All Professional was not paying it; and (6) crediting $304.50 because of a Century 21 error. (Compendium of Exhibits Ex. 29 (Docket No. 104).) Lastly, Carol Wright stated that the "totals will obviously have to be recalculated before we can talk about payment arrangements," and said that she would make payments on "April 2010 transactions to start anew."*fn10 (Id.)

Century 21 accounting guidelines allowed for account managers and directors to arrange alternative payment plans with Century 21 franchisees who were behind on their payments. (Compendium of Exhibits Ex. 45 ("Bertet Dep.") at 26:17-28:14 (Docket No. 108).) Under these guidelines, franchises with less than $100,000 in debt could be offered a deal point agreement (a type of note) and franchises with over $100,000 in debt could be offered an interest bearing note to help them pay off their debts. (Id. at 26:17-28:25.) Based on their course of dealings with Century 21, the Wrights believed that they would be offered a payment plan to cure their default. (Carol Wright Dep. at 200:7-201:4.)

On June 16, 2010, the Wrights participated in a conference call with account managers Rodriguez and Shawn Holland. (Id. at 22:4-14.) During the call, the parties discussed changing the official closing date for the Folsom office in order to reduce minimum fees during that period. (Id. at 222:5-8.) In an email dated June 17, 2010, Holland reported that during the call "we managed to resolve her dispute except for the DAN money. We are hoping to resolve that matter soon and prepare 2 separate Deal Point Agreements (one for the Hawaii office)." (Compendium of Exhibits Ex. 32 (Docket No. 105).) An agreement on DAN payments was never reached and Deal Point Agreements were not issued.

In letters dated July 7, 2010, Century 21 terminated the franchise agreements governing the two Sacramento offices and the Hawaii office, effective July 9, 2010.*fn11 (Bertet Decl. Exs. N-P.) The letter regarding the River Park Drive office stated that the account balance was $72,407.97 as of July 6, 2010, an additional $41,667.00 was owed under the Note, and an additional $250,029.34 was owed for lost profits, pursuant to calculations prescribed by the franchise agreement. (Id. Ex. N.) The letter regarding the Florin Road office stated that the account balance was $33,934.30 as of July 6, 2010, and an additional $155,671.48 was owed for lost profits. (Id. Ex. O.) The letter regarding the Hawaii office stated that the account balance was $21,898.08 as of July 6, 2010, and an additional $80,541.98 was owed for lost profits. (Id. Ex. P.) All Professional was instructed to follow post-termination procedures and cease using Century 21's trademarks. (See id. Exs. N-P.) The procedures were more fully described in section 16.4 of the franchise agreements.*fn12 Upon termination of the franchise agreements, Century 21 denied All Professional access to Century 21's server, email accounts, databases, and the Preferred Client Club. (Steve Wright Decl. ¶ 14; Carol Wright Decl. ¶ 13.)

The Wrights claim not to have anticipated the terminations. Carol Wright states that, based on her communications with Rodriguez and Holland of Century 21:

I was lead [sic] to believe that we would receive an accounting of the actual amounts owed and that we would be able to work out a payment plan. I was ready to cure any default once we were provided with a proper accounting. I waited for this accounting. However, I never received an accounting or an adjustment of the amounts owed as I had requested. (Carol Wright Decl. ¶ 13.) Steve Wright claims that they were prepared to pay off their debts with Century 21 as soon as a number was finalized. (Steve Wright Dep. at 222:10-223:7.) The Wrights' willingness to pay off their account balance appears limited to their willingness to sign a new promissory note with Century 21. (See, e.g., id. at 222:14 ("We were prepared to sign a Note.").) During the court's January 11, 2011, evidentiary hearing on a preliminary injunction for this matter, both Carol and Steve Wright stated that they did not have the cash on hand to pay off their account balance. (See, e.g., Jan. 11, 2011, Tr. at 61:1-3, 70:11-14 ("THE COURT: And the reason you didn't pay for those earlier months is because you didn't have that kind of money, right? THE WITNESS: Not in that volume, no sir."), 80:10- 81:17.) All Professional now presents bank statements suggesting that it had approximately $150,000 in its bank accounts in May 2010. (Compendium of Exhibits Ex. 30 (Docket No. 104).)

All Professional also argues that the termination of its franchises took Century 21 employees by surprise. A July 12, 2010, email from Popp states that he "thought we were getting close on a deal." (Compendium of Exhibits Ex. 34 (Docket No. 105).) In response, however, Bainbridge replied, "We're only close on a deal if we're willing to forgive the DAN payments due because he lost those agents to Select." (Id.)

Following receipt of the July 7, 2010, termination letters, the Wrights sent Century 21 a letter dated July 16, 2010, asking that Century 21 reconsider the termination. The letter stated "It was never our intention not to pay Century 21 the royalty fees and NAF fees due. The only part that was in contention was the repayment of the Development Advance Note. And it was at that point that communications failed." (Id. Ex. 35.) Century 21 subsequently denied All Professional's request for reinstatement in a letter dated July 29, 2010. (Id. Ex. 38.) In an August 2, 2010, letter, the Wrights wrote that they were "perplexed" by the denial of their request for reinstatement and were "curious as to what this denial of [their] reinstatement was based on since our message to [Rodriguez] was that we were willing to pay what was due Century 21 and that we were willing to sign [Century 21's] note." (Steve Wright Decl. Ex. 5.)

I. Continuing Use of Century 21 Trademarks

In late August, Century 21 conducted inspections of the Sacramento offices to determine whether All Professional had complied with what it believed were All Professional's post-termination obligations under the franchise agreements. The reports indicated that All Professional continued to use Century 21's trademarks. (Bertet Decl. Exs. V-X.) In a September 17, 2010, letter, Century 21's counsel informed Steve and Carol Wright of the results of the post-termination inspections and demanded that they comply with the post-termination franchise agreement obligations, (Steve Wright Decl. Ex. 6), to which the Wrights responded with a September 21, 2010, letter, proposing terms under which All Professional would continue to be a franchisee of Century 21. (Id. Ex. 7.)

All Professional continued to use Century 21's trade dress until after the court issued its preliminary injunction order on January 24, 2011. On February 11, 2011, All Professional filed a Notice of Appeal of the court's order. (Docket No. 34.) On February 23, 2011, the court denied All Professional's Request for Stay and in open court encouraged the parties to agree to a time table for All Professional to de-mark its offices. (Docket No. 41.) In a stipulation dated March 8, 2011, the parties agreed that All Professional would have until April 1, 2011, to cease using Century 21's marks on buildings and would cover up Century 21's marks on yard signs by May 1, 2011. (Compendium of Exhibits Ex. 41 (Docket No. 105).)

J. Present Litigation

On September 30, 2010, Steve Wright, Carol Wright, and All Professional filed an action in state court against Century 21 for violation of a termination provision of the California Franchise Relations Act ("CFRA"), Cal. Bus. & Prof. Code § 20020, violation of California's Unfair Competition Law ("UCL"), Cal. Bus. & Prof. Code §§ 17200-17210, intentional interference with business advantage, breach of contract, breach of the implied covenant of good faith and fair dealing, fraud, negligent interference with business advantage, and interference with contract. (Notice of Removal Ex. A (No. 2:10-2846, Docket No. 1).) On October 6, 2010, the state court denied Steve Wright, Carol Wright, and All Professional's ex parte application for a temporary restraining order. (Id. Ex. J.) With a pending motion for a preliminary injunction against it, Century 21 removed the action to federal court on October 21, 2010.

On October 12, 2010, Century 21 filed a separate action in this court against All Professional, Steve Wright, and Carol Wright for claims of federal trademark infringement, 15 U.S.C. § 1114, common law trademark infringement, federal unfair competition, 14 U.S.C. § 1125, California statutory trademark infringement, Cal. Bus. & Prof. Code § 14340, violation of the UCL, breach of contract, breach of guaranty, breach of promissory note, account stated, quantum meruit, and accounting. (Docket No. 1.)

On December 22, 2010, Century 21 filed an additional action against Steve Wright, Carol Wright, and All Professional Hawaii in Morris County, New Jersey, for claims of trademark infringement, 15 U.S.C. § 1114, false designation of origin/ false advertising, 15 U.S.C. § 1125(a), trademark dilution, 15 U.S.C. § 1125(c), common law unfair competition, breach of contract, breach of guaranty, accounting, and unjust enrichment. (No. 11-2497, Docket No. 1-1.) All Professional removed the action to federal court on the basis of diversity jurisdiction and Century 21 later stipulated to transferring the matter to this court. The court consolidated all three actions in orders issued on April 6, 2011, and October 11, 2011. (See No. Docket Nos. 49, 62.)

On November 1, 2010, Century 21 filed a motion for a preliminary injunction requesting that the court enforce All Professional's post-termination obligations under the franchise agreements. (Docket No. 8.) Prior to issuing a ruling on the preliminary injunction motion, the court held an evidentiary hearing in which it heard testimony from the parties on January 11, 2011. On January 24, 2011, the court granted Century 21's motion for preliminary injunction and enjoined All Professional from further unauthorized use of Century 21's marks. (Docket No. 28.)

Presently before the court is Century 21's motion for summary judgment on its trademark infringement/unfair competition, breach of contract, and breach of guaranty claims, as well as all of All Professional's claims.*fn13

II. Requests for Judicial Notice/Evidentiary

Objections Century 21 requests that the court take judicial notice of a number of documents previously filed in this case as well as the transcript from the court's January 11, 2011, evidentiary hearing. All Professional additionally requests that the court take judicial notice of a filed stipulation and agreement in the California Department of Real Estate matter In re: Idalia Lizzette Lombera & Franki Halloran, No. H-5325 SAC, and its notice of appeal from the court's order granting Century 21's preliminary injunction motion. Because this is a motion for summary judgment, the court may consider these documents without taking judicial notice of them.

On a motion for summary judgment, "[a] party may object that the material cited to support or dispute a fact cannot be presented in a form that would be admissible in evidence." Fed. R. Civ. P. 56(c)(2). "[T]o survive summary judgment, a party does not necessarily have to produce evidence in a form that would be admissible at trial, as long as the party satisfies the requirements of Federal Rules of Civil Procedure 56." Fraser v. Goodale, 342 F.3d 1032, 1036-37 (9th Cir. 2003) (quoting Block v. City of Los Angeles, 253 F.3d 410, 418-19 (9th Cir. 2001)) (internal quotation marks omitted). Even if the non-moving party's evidence is presented in a form that is currently inadmissible, such evidence may be evaluated on a motion for summary judgment so long as the moving party's objections could be cured at trial. See Burch v. Regents of the Univ. of Cal., 433 F. Supp. 2d 1110, 1119-20 (E.D. Cal. 2006).

All Professional raises eight objections to portions of two declarations submitted by Century 21 on the grounds of lack of personal knowledge, improper opinion testimony, lack of foundation, improper legal conclusions, and inadmissible hearsay. Century 21 raises eleven objections to portions of Steve Wright's Declaration, (Docket No. 112-3), and twenty objections to portions of All Professional's Statement of Additional Material Facts, (Docket No. 112-2), on the grounds of lack of foundation, relevance, speculation, lack of personal knowledge, inadmissible hearsay, and that the statements are conclusory.

Objections to evidence on the ground that the evidence is irrelevant, speculative, argumentative, vague and ambiguous, or constitutes an improper legal conclusion are all duplicative of the summary judgment standard itself. See Burch, 433 F. Supp. 2d at 1119-20. A court can award summary judgment only when there is no genuine dispute of material fact. It cannot rely on irrelevant facts, and thus relevance objections are redundant. Instead of objecting, parties should argue that certain facts are not material. Similarly, statements based on speculation, improper legal conclusions, personal knowledge, or argumentative statements are not facts and can only be considered as arguments, not as facts, on a motion for summary judgment. ...


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