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DiNardo v. Wow 1 Day Painting LLC

United States District Court, W.D. Washington, Seattle

January 23, 2018

VAL DINARDO, Plaintiff,
v.
WOW 1 DAY PAINTING, LLC, Defendant.

          ORDER ON MOTION FOR SUMMARY JUDGMENT AND ORDER TO SHOW CAUSE REGARDING COUNTERCLAIMS

          JAMES L. ROBART UNITED STATES DISTRICT JUDGE.

         I. INTRODUCTION

         Before the court is Defendant Wow 1 Day Painting, LLC's (“Wow”) motion for summary judgment. (MSJ (Dkt. # 35).) The court has reviewed the motion, Plaintiff Val DiNardo's responsive memorandum (Resp. (Dkt. # 38)), all other submissions filed in support of or in opposition to the motion, the relevant portions of the record, and the applicable law. Being fully advised, [1] the court GRANTS the motion. The court also ORDERS the parties to show cause why Wow's counterclaims should not be dismissed without prejudice, as more fully described below.

         II. BACKGROUND

         Pursuant to a licensing agreement between Wow and its parent corporation, Wow 1 Day Painting, Inc. (“Wow Corporate”), Wow has an exclusive right and license to market, sublicense, franchise, and distribute certain federally registered United States trademarks, including the registered trademarks bearing Registration No. 4, 143, 638 (May 15, 2012), Registration No. 4, 168, 698 (July 3, 2012), Registration No. 6, 644, 008 (November 25, 2014), and Registration No. 4, 644, 097 (November 25, 2014). (Alisch Decl. (Dkt. # 36) ¶ 2, 5, Exs 1, 4.) Wow attests that it, in turn, sublicensed the federally registered trademarks to certain franchisees, including Mr. DiNardo. (Id. ¶ 6.)

         Wow and Mr. DiNardo executed a franchise agreement on May 21, 2014, that was effective on May 17, 2014 (“the Franchise Agreement”). (Graff Decl. (Dkt. # 37) ¶ 3, Ex. 2 (“Franchise Agreement”).) The Franchise Agreement offers a system of providing interior and exterior painting services in one day “using confidential methods, procedures, and business techniques.” (Compl. (Dkt. # 1-1) ¶¶ 6-7.) Under the Franchise Agreement, Wow granted to DiNardo the right to use the registered United States trademarks-or “Marks” as defined in Recital B of the Agreement-“and related logos, designs, brands, and slogans as may be added or modified from time to time.” (Franchise Agreement at Recitals A-C, § 2.1.)

         The Franchise Agreement expressly states that the term “Mark” is defined in Recital B. (Id. § 2.1.) Recital B states:

The distinguishing characteristics of the System currently include, but are not limited to, the registered U.S. trademarks shown in Schedule A and related logos, designs, brands and slogans as may be added or modified from time to time (collectively the “Marks”) which are licensed to [Wow] by [Wow Corporate], . . . which [Wow] in turn licenses to [Mr. DiNardo] under the terms and conditions set forth herein.

(Id., Recital B.) Schedule A of the Agreement lists two Marks with registrations pending as of February 24, 2014, and February 25, 2014, respectively. (Id., Schedule A.) These two Marks were ultimately registered on November 25, 2014, bearing the Registration Nos. 4, 644, 088 and 4, 644, 097, respectively. (Alisch Decl. ¶ 5, Ex. 4 at 8-9.)

         The Agreement contains the following integration clause:

Entire Agreement. Unless acknowledged and agreed in writing by both parties, this Agreement, all Security Agreements, and all Guarantees set forth the entire agreement between Franchisor and Franchisee and contain all of the representations, warranties, terms, conditions, provisos, covenants, undertakings and conditions agreed upon by them with reference to the subject matter hereof. All other representations, warranties, terms, conditions, provisos, covenants, understandings and agreements, whether oral or written (including without limitation any letter of intent between the parties and other pre-contractual representations), are waived and are superseded by this Agreement. However, nothing in this Agreement or related agreements is intended to disclaim any representation made by Franchisor in the franchise disclosure document furnished to Franchisee as required prior to entering into this Agreement.

(Franchise Agreement § 21.8.)

         The Agreement also contains a choice of law provision:

Governing Law. This Agreement shall be construed and interpreted according to the laws of the state of Washington, except that no Washington statute or regulation shall apply or shall give rise to any right or claim unless the Territory is in the State of Washington and such statute or regulation would apply to this Agreement by its own terms in the absence of any choice of law provision. The King County Superior Court in Seattle or the U.S. District Court in Seattle, as appropriate, shall have exclusive jurisdiction to entertain any proceeding relating to or arising out of this Agreement, and Franchisee and Franchisor each consent to the jurisdiction of such Courts in all matters related to this Agreement; provided that Franchisor may obtain relief in such other jurisdictions as may be necessary or desirable to obtain declaratory, injunctive or other relief to enforce the provisions of this Agreement.

(Id. § 21.12.)

         Mr. DiNardo admits that he executed the Agreement. (Id. ¶ 2, Ex. 1 (“DiNardo Dep.”) at 56:7-57:1, 57:11-15; see also Compl. ¶ 14 (“[O]n May 21, 2014, [Mr. DiNardo] entered into a Franchise Agreement with [Wow] effective May 17, 2014.”).) Mr. DiNardo testified in his November 9, 2017, deposition that he did not read the Agreement before signing it. (Id. at 58:5-7.) When asked why he did not read the Agreement, he stated he “was probably too busy, at the time, to read it over, ” and he “didn't really want to be bothered with it at the time.” (Id. at 58:13-14, 18-19.)

         Mr. DiNardo alleges that Wow made certain misrepresentations to him. (See Compl. ¶ 22.) During the discovery phase of the litigation, Wow asked Mr. DiNardo to identify “each and every false statement, omission, or representation” that underpinned his misrepresentation claim. (Graff Decl. ¶ 4, Ex. 3 (DiNardo's Responses to Wow's Interrogatories and Requests for Production) at 2-3 (Answer to Interrogatory No. 3).) In response to Wow's interrogatory, Mr. DiNardo stated:

DiNardo should expect to make $300, 000 in sales the first year and $400, 000 in sales the second year. The margins include 10% for materials, 50% for labor, 11% for the franchise, with a goal of 30% as net profit. 2% would go to the National Ad Fund, which was supposed to fund national advertising. Lee Adler admitted that the money was used for the back office expense and not for advertising.
[Wow] represented that it was offering a revolutionary system with trade secrets about how to paint a project in one day and would provide support services to generate significant business for DiNardo, to as much as $3 million per year.
[Wow] represented that the new franchise would be significantly marketed by Wow 1 Day Painting, LLC in the State of Connecticut, and such marketing efforts would include use of their call center operations and internet operations, resulting in new business opportunities based on its innovative business concept.
[Wow] represented that it would be dramatically expanding its presence in the Northeastern United of States, to include the State Connecticut.

(Id.) Mr. DiNardo did not list any other alleged misrepresentations. (See id.) During his November 9, 2017, deposition, Mr. DiNardo admitted that Wow made each of the foregoing alleged misrepresentations after Mr. DiNardo had entered into the Agreement. (DiNardo Dep. at 114:23-122:10.)

         In response to Wow's motion for summary judgment, Mr. DiNardo filed an affidavit in which he testifies that he relied on misrepresentations in the Agreement itself “when deciding to enter into the . . . Agreement.” (DiNardo Aff. (Dkt. # 39) ¶ 18.) Mr. DiNardo also testifies in his affidavit that Wow's representatives made alleged misrepresentations prior to his execution of the Agreement and that he relied on those misrepresentations. (See Id. ¶¶ 11-17.) He also states that “Wow . . . never discussed with [him] any Marks beyond those listed in Schedule A [of the Agreement], ” and “never granted the right to use any of the registered trademarks claimed held or licensed to [Wow] . . . at or after the signing of the . . . Agreement.” (Id. ¶¶ 43-44.)

         Mr. DiNardo stopped operating his franchise in October or November 2015. (DiNardo Aff. ¶ 45.) In May 2016, Mr. DiNardo filed suit against Wow. (See generally Compl.) Wow removed Mr. DiNardo's suit to federal court (Not. of Removal (Dkt. # 1)), and the federal district court in Connecticut subsequently transferred the suit to this district (see Dkt. # 18).

         Mr. DiNardo asserts claims against Wow in state court in Connecticut for (1) intentional misrepresentation (see Compl. ¶ 22[2]), (2) violation of Connecticut's Unfair Trade Practices Act (“UTPA”), Conn. Gen. Stat. §§ 42-110b(a) (see Compl. ¶ 20), and (3) violations of Connecticut's Business Opportunity Investment Act (“BOIA”), Conn. Gen. Stat. §§ 36b-60, 36b-74(a) (see Compl. ¶ 22[3]). Wow countersued bringing claims against Mr. DiNardo for breach of contract and payment of accounts receivable. (Ans. & Counterclaims (Dkt. # 21) at 5-9.) Wow seeks both damages and an injunction prohibiting Mr. DiNardo from further alleged violations of the non-competition provisions of the Agreement. (See id.)

         III. ANALYSIS

         Wow moves for summary judgment on all of Mr. DiNardo's claims. (See MSJ; Reply (Dkt. # 41).) The court now considers Wow's motion.

         A. Standard for Summary Judgment

         Summary judgment is appropriate if the evidence shows “that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a); see Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986); Galen v. Cty. of L.A., 477 F.3d 652, 658 (9th Cir. 2007). A fact is “material” if it might affect the outcome of the case. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A factual dispute is “‘genuine' only if there is sufficient evidence for a reasonable fact finder to find for the non-moving party.” Far Out Prods., Inc. v. Oskar, 247 F.3d 986, 992 (9th Cir. 2001) (citing Anderson, 477 U.S. at 248-49).

         The moving party bears the initial burden of showing there is no genuine dispute of material fact and that it is entitled to prevail as a matter of law. Celotex, 477 U.S. at 323. If, like Wow, the moving party does not bear the ultimate burden of persuasion at trial, it can show the absence of such a dispute in two ways: (1) by producing evidence negating an essential element of the nonmoving party's case, or (2) by showing that the nonmoving party lacks evidence of an essential element of its claim or defense. See Nissan Fire & Marine Ins. Co. v. Fritz Cos., 210 F.3d 1099, 1106 (9th Cir. 2000). If the moving party meets its burden of production, the burden then shifts to the nonmoving party to identify specific facts from which a fact finder could reasonably find in the nonmoving party's favor. Celotex, 477 U.S. at 324; Anderson, 477 U.S. at 252.

         The court is “required to view the facts and draw reasonable inferences in the light most favorable to the [nonmoving] party.” Scott v. Harris, 550 U.S. 372, 378 (2007). The court may not weigh evidence or make credibility determinations in analyzing a motion for summary judgment because those are “jury functions, not those of a judge.” Anderson, 477 U.S. at 249-50. Nevertheless, the nonmoving party “must do more than simply show that there is some metaphysical doubt as to the material facts . . . . Where the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party, there is no genuine issue for trial.” Scott, 550 U.S. at 380 (internal quotation marks omitted) (quoting Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586-87 (1986)).

         B. ...


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