Trade Name | Late Fee | Attorney Stipulation

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Dilution Of Trade Name

Dilution Of Trade NameFor a business, the good-will associated with its name is oftentimes the business’s most valuable asset. So when a newly formed competitor attempts to misappropriate that good-will, by operating under a very similar or identical name, business owners must act fast to prevent damage to that reputation and good-will, which took so long to earn. This is exactly what the plaintiff did in Cold Spring Harbor Constr., Inc. v. Cold Spring Builders, Inc. There, the plaintiff, Cold Spring Harbor Construction brought an action seeking injunctive relief against defendant, Cold Spring Builders, seeking to enjoin the defendant from using the name Cold Spring Builders in any fashion in connection with its business − from making representations to suppliers or customers that it is associated with plaintiff or using the name in connection with any print, media, or online advertisements. 45 Misc.3d 1222(A) (Sup. Ct. Suffolk Cnty. 2014). Plaintiff believed that using the trade name “Cold Spring Builders” constituted trade name dilution and unfair competition.

As we have discussed in prior newsletters, to prevail on a motion for a preliminary injunction, the movant must “clearly demonstrate a likelihood of success on the merits, the prospect of irreparable harm or injury if the relief is withheld, and that a balance of equities favors the movant’s position.” Here, plaintiff’s cause of action was under, inter alia, New York’s “anti-dilution statute,” General Business Law § 360-l. That statute states:

A “[l]ikelihood of injury to business reputation or of dilution of the distinctive quality of a mark or trade name shall be a ground for injunctive relief in cases of infringement of a mark, registered or not registered, or in cases of unfair competition, notwithstanding the absence of competition between the parties or the absence of actual confusion as to the source of goods or services.

To succeed on such claim, the proponent thereof must establish the defendant’s use of the trademark is likely to cause confusion or mistake about the source of the allegedly infringing product. The proponent must further establish that it possesses a strong mark − one which has a distinctive quality or has acquired a secondary meaning” − such that “the trade name has become so associated in the public’s mind with the claimant that it identifies goods sold by that entity as distinguished from goods sold by others and a likelihood of dilution by either blurring or tarnishment.”

Here, plaintiff submitted proof that the defendant’s conduct in adopting the trade name similar to that of the plaintiff, and the use thereof, has caused public confusion and mistake. Plaintiff argued that defendant was causing injury to its business reputation, and the dilution of its trade name. The Court noted that while actual confusion is not necessary, it is the best evidence of a likelihood of confusion. Here, plaintiff submitted proof that the defendant had cashed a check payable to the plaintiff that was delivered or mis-delivered to defendant’s office. Thus, actual confusion was established.

As for the other two elements necessary to obtain a preliminary injunction, plaintiff established irreparable harm or injury by showing that plaintiff’s good-will is at risk, and that its control over the reputation of its trade name has or will be lost. Since the record contains due proof that actual public confusion and mistakes have occurred by reason of defendant’s use of its name, rather than mere likelihood of such confusion, the balancing of the equities also tipped in plaintiff’s favor.

As a result, plaintiff was granted a preliminary injunction, and for the time being, defendant was prohibited from using the name “Cold Spring Builders.” Plaintiff was required, however, to post a $25,000 undertaking, which will be held in Court. This ensures defendant that it will be adequately compensated in the event that plaintiff is ultimately unable to prove the elements of its claim.

365% Late Fee? Not So Fast!

365% Late Fee? Not So Fast!In 326 East 85 Realty LLC v. Hairy Monk Corp. d/b/a Johnny Foxes, a landlord recently prevailed against a tenant’s claim to an agreed $500 per day late fee for landlord’s failure to timely return a security deposit.

On November 26, 2013, the parties entered into a surrender agreement (the “Surrender Agreement”) for the tenant to surrender its lease to the landlord. The Surrender Agreement set forth the terms and conditions of the surrender of the leased property, including 2 payments of $475,000.00 by landlord to tenant. The first payment was to be made promptly, which landlord tendered in a timely manner. The second payment was to be deposited with an escrow agent and made to tenant upon its vacatur of the premises by July 31, 2014. In addition, landlord agreed to return the security deposit of $48,378.00 by December 31, 2013. The Surrender Agreement also provides that if the landlord fails to return the security deposit, it would be required to pay the sum of $500 per day as liquidated damages.

When the security deposit was returned 212 days late, the tenant sought from the landlord $106,000 in accordance with the liquidated damages clause in the agreement. However, the landlord argued that the $500 per day late fee is in essence a penalty and is not enforceable.

The Court agreed, reasoning: “A contractual provision fixing damages in the event of breach will be sustained if the amount liquidated bears a reasonable proportion to the probable loss, and the amount of actual loss is incapable or difficult of precise estimation. If, however, the amount fixed is plainly or grossly disproportionate to the probable loss, the provision calls for a penalty and will not be enforced.” The Court further reasoned that although the landlord “failed to prove that at the time the parties entered into the Surrender Agreement the losses were fixed or easily ascertainable, on its face, an effective interest rate greater than 365 percent per annum is certainly grossly disproportionate to the probable loss associated with not having possession of these funds, is not a reasonable measure of the anticipated probable harm and is not enforceable. The amount stipulated to as liquidated damages, of $500 per day, does not bear a reasonable relation to the actual amount of probable damage that respondent would have had in the event of petitioner’s default and, thus, it constitutes a penalty.”

The Court concluded that where a liquidated damages clause is found to be a penalty, “the recovery is limited to actual damages proven.” However, because the tenant failed to prove any damages that it sustained by not timely getting the security deposit back, the tenant was not entitled to any damages for the delay.

Attorney’s Stipulation Is Binding On Client

Attorney’s Stipulation Is Binding On Client

You can’t just claim your attorney wasn’t authorized. In 208 Avenue A Associates v. Calanni, the Appellate Term recently reversed an order of the Civil Court of the City of New York which granted the respondent-tenant’s motion to vacate a stipulation of settlement and consent final judgment in a holdover summary proceeding.

The respondent-tenant argued that his attorney lacked authority to enter into the two-attorney, so-ordered stipulation settling the underlying holdover proceeding. However, in New York, stipulations of settlement are favored by the courts and not lightly cast aside. Strict enforcement not only serves the interest of efficient dispute resolution, but also is essential to the management of court calendars and integrity of the litigation process. Courts have routinely held that only where there is sufficient cause to invalidate a contract, such as fraud, collusion, mutual mistake, or accident, will a party be relieved from the consequences of the stipulation made during litigation.

This rule is so important to the judicial system that actual authority is not even necessary. When a person claims his attorney did not have the power to bind him to the settlement, Court’s will enforce the stipulation when the attorney had “apparent authority.” The highest Court in the State has held that essential to the creation of apparent authority are words or conduct of the principal, communicated to a third party, that give rise to the appearance and belief that the agent possesses authority to enter into a transaction on behalf of the principal. The agent cannot by his own acts imbue himself with apparent authority. Rather, the existence of “apparent authority” depends upon a factual showing that the third party relied upon the misrepresentation of the agent because of some misleading conduct on the part of the principal — not the agent. A third party with whom the agent deals may rely on an appearance of authority only to the extent that such reliance is reasonable.

Here, the Court found apparent authority, reasoning:

“Assuming, arguendo, that [respondent’s attorney] lacked the real authority to do so, as a matter of law, [he was] certainly clothed with apparent authority and the [petitioner] reasonably relied upon that appearance of authority” (1420 Concourse Corp. v. Cruz, 175 A.D.2d 747, 749 (1991), citing Hallock v. State of New York, 64 N.Y.2d 224, 231 (1984). Tenant was actively represented by counsel who negotiated the stipulation’s provisions in open court, and tenant readily admitted that he spoke with counsel over the telephone and discussed the terms of a potential settlement.

The Court also noted that there was no persuasive showing that the stipulation was tainted by mistake, fraud, or any other basis for voiding a contract, or that it would be inequitable to hold the parties to their bargain.

The consent final judgment and warrant of eviction issued pursuant to the stipulation were reinstated, and execution of the warrant of eviction was stayed for 30 days from service of a copy of the Court’s order.

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