Opinion
Civil Action No. 3:02-CV-2199-D
March 20, 2003
MEMORANDUM OPINION AND ORDER
The court grants plaintiff's March 17, 2003 motion for entry of judgment by default and request for injunctive relief and attorney's fees. Accordingly, the court has filed a final default judgment today, supported by the following findings of fact and conclusions of law.
Plaintiff Appraisal Institute sues defendants Lyle F. Gallagher ("Gallagher") and Gallagher Appraisal Company ("GAC") alleging claims of trademark infringement and unfair competition under the federal Trademark Act and Texas common and statutory law. The claims arise out of defendants' unauthorized use of plaintiff's SRA designation and trademarks in connection with providing real estate appraisal services. Appraisal Institute seeks a permanent injunction against defendants' use of plaintiff's SRA designation and trademarks as well as attorney's fees based on the willful, egregious, and continuous nature of defendants' trademark infringement.
On October 10, 2002 plaintiff served the summons and complaint on defendants by personal service via hand delivery with the return of service filed on October 15, 2002. Under Fed.R.Civ.P. 12(a)(1)(a), defendants' response to plaintiff's complaint was due October 30, 2002. Defendants neither filed an answer nor challenged plaintiffs complaint by an appropriate motion. Nor did defendants otherwise respond to the complaint. On December 4, 2002 plaintiff filed a request for entry of default against defendants for defendants' failure to answer or otherwise respond to plaintiffs complaint. On December 4, 2002 the clerk of court entered a default. Following the entry of default, defendants have not filed an appearance, answered plaintiff's complaint, or otherwise responded in this action. Accordingly, the court finds as follows:
1. The Appraisal Institute is a not-for-profit organization dedicated to educating and promoting the interests of real estate appraisers. The Appraisal Institute publishes the leading real estate appraisal treatise, The Appraisal of Real Estate (12th Edition). The Appraisal Institute also publishes and distributes newsletters, booklets, audio tapes, pamphlets, guides, and brochures that provide real estate appraisers with up-to-date information and education relating to theory and practice in the field of real estate appraisal. The Appraisal Institute has more than 18,000 members in the United States.
2. Under the Appraisal Institute's Bylaws, any certificate, emblem or other indicia of membership in the Appraisal Institute that may be issued to any Member, and any designation that is conferred on any Member by the Appraisal Institute, must be used in accordance with the Appraisal Institute's Bylaws and Regulations, remains at all times the property of the Appraisal Institute, is held by the Member in trust, and must be returned to the Appraisal Institute upon written demand by the Executive Vice President, or other designated individual, if for any reason an individual's membership in the Appraisal Institute is suspended or terminated.
3. The SRA designation is one of the designations conferred by the Appraisal Institute on certain of its members. To become a member of the Appraisal Institute authorized to use the SRA Designation ("SRA Designated Member"), a person must: (1) be an Associate Member in good standing; (2) complete the required courses offered by the Appraisal Institute, (3) pass a series of examinations administered by the Appraisal Institute, (4) produce a satisfactory demonstration appraisal report, (5) satisfy the Appraisal Institute's experience requirements, (6) have good moral character, and (7) have a college degree or fulfill certain alternatives. To indicate that a person is an SRA Designated Member of the Appraisal Institute, that person typically uses the designation after his or her name and displays his or her membership certificate and membership pin, both of which prominently bear both the designation conferred on that member and the name and insignia of the Appraisal Institute.
4. The Appraisal Institute, through its predecessor the Society of Real Estate Appraisers, has continuously used the SRA designation in interstate commerce in connection with real estate appraisal services for over fifty years. In view of the Appraisal Institute's rights in the SRA designation, the United States Patent and Trademark Office has issued the following SRA registrations to the Appraisal Institute:
MARK: SRA
TYPE: Collective Service Mark
REGISTRATION: 1,798,163, October 12, 1993; Incontestable status attained, February 8, 2000; Date of first use and first use in commerce August 1946
SERVICES: Real estate appraisal services
MARK: SRA
TYPE: Collective Membership Mark
REGISTRATION: 2,403,193, November 14, 2000; Date of first use and first use in commerce August 1946
SERVICES: Indicating membership in an association of real estate appraisers.
5. The Appraisal Institute also owns three registrations for SRA APPRAISAL INSTITUTE Design.
6. Registration No. 1,798,163 has achieved "incontestable" status under 15 U.S.C. § 1065 and 1115(b), which means that this registration constitutes "conclusive evidence" of the validity of the registered mark, of the Appraisal Institute's ownership of the mark, and of the Appraisal Institute's "exclusive right to use" the mark in interstate commerce in connection with the services specified in the registration. The other registration, i.e., Registration No. 2,403,193, constitutes "prima facie" evidence of the validity of the registered mark, of the Appraisal Institute's ownership of the mark, and of the Appraisal Institute's "exclusive right to use" the mark in interstate commerce in connection with the services specified in the registrations under 15 U.S.C. § 1057 (b).
7. The Appraisal Institute's SRA designation and mark are inherently distinctive.
8. The Appraisal Institute's SRA designation and mark have come to be associated exclusively with indicating membership in the Appraisal Institute and services emanating from Appraisal Institute SRA Designated Members and have done so before the Defendants' wrongful conduct alleged herein.
9. To continue to be an SRA Designated Member authorized to use the SRA designation. an individual must continue to be a member of Appraisal Institute and must satisfy the Appraisal Institute's ongoing requirements, including requirements for continuing education, and must adhere to the Appraisal Institute's Code of Professional Ethics and Standards of Professional Appraisal Practice. SRA Designated Members also are subject to a peer review process.
10. Defendant Gallagher was admitted to SRA membership on August 17, 1990 but was expelled from SRA membership in the Appraisal Institute effective August 11, 1998 for violating Ethical Rule 2-3(b) of the Appraisal Institute's Code of Professional Ethics, which reads as follows:
It is unethical for a Member to knowingly submit misleading information to a duly authorized peer review committee (or member or agent thereof); or, when requested to do so by a duly authorized peer review committee (or member or agent thereof), to refrain from promptly submitting any relevant information in the possession or control of the Member; to refuse to appear for a personal interview or participate in an interview conducted by telephone; or to refuse to promptly answer all relevant questions concerning the matter being investigated.
11. In a letter dated August 10, 1998, the Appraisal Institute informed Gallagher of the decision to expel him from SRA designated membership and to publish notice of such expulsion, subject to his right to file an appeal. Gallagher did not file an appeal and was notified by letter dated September 16, 1998 that notice of the expulsion would be published in the national publication of the Appraisal Institute. The official publication notice appeared in the Fourth Quarter 1998 issue of Valuation Insights Perspectives.
12. The Appraisal Institute's letter dated August 10, 1998 notifying Gallagher of his expulsion also reiterated the requirements of the Appraisal Institute's Regulation No. 6, Article II that:
An expelled former member is required to completely cease any use of the Appraisal Institute designations or reference to Appraisal Institute membership; to immediately return to the Appraisal Institute his or her membership certificate, emblem and other indicia of membership; and to immediately remove any reference to membership in the Appraisal Institute from his or her letterhead and business cards.
13. Since his expulsion from SRA designated membership, Gallagher has not been authorized by the Appraisal Institute to represent himself to the public as an SRA Designated Member of the Appraisal Institute, either active or inactive, or to utilize any Appraisal Institute member designation, including the SRA designation, either alone or in combination with a former membership number, membership certificate, or any other membership indicia.
14. Gallagher knowingly, intentionally, and falsely represents himself to the public in the course of offering and performing real estate appraisal services as an SRA member of the Appraisal Institute. In wanton and willful disregard of the demands of the Appraisal Institute and the Appraisal Institute's exclusive rights in its registered marks, Gallagher has continued to use the Appraisal Institute's SRA designation in commerce by referring to himself as an SRA member of the Appraisal Institute and to misrepresent himself to the public in the course of providing appraisal services as being entitled to use the SRA designation.
15. On November 28, 2000 Gallagher signed a "Mini-Narrative" appraisal report using the SRA designation after his name, attached to the appraisal report a copy of his SRA Membership Certificate, and included a cover letter that listed his name twice, each time followed by the SRA designation. These representations were false.
16. On January 19, 2001 the Appraisal Institute sent Gallagher a letter at the address of his company, GAC, demanding the immediate cessation of all unauthorized uses of the SRA designation. The letter specifically reminded Gallagher that the SRA designation was a federally registered mark owned exclusively by the Appraisal Institute. That letter further placed Gallagher on notice that his unauthorized use of the SRA mark was likely to cause confusion or deception in the marketplace and, hence, constituted acts of infringement.
17. Gallagher responded to the Appraisal Institute's January 19, 2001 letter by leaving two voice messages with the Appraisal Institute on the afternoon of January 22, 2001 stating that he would refuse to comply with the Appraisal Institute's demand that he cease using the SRA designation, describing the registration of the SRA mark with the Patent Office "as all that garbage" and challenging the Appraisal Institute to file a lawsuit regarding his continuing use of the SRA mark.
18. By letter dated January 24, 2001 the Appraisal Institute responded to Gallagher's voice mails demanding again that he immediately cease and desist using the Appraisal Institute's SRA mark, explaining the confusion to the public by his continued unauthorized use of the SRA mark, demanding again the return of his SRA Membership Certificate, and stating that, without written assurances that he would cease and desist using the SRA mark, the Appraisal Institute would file the necessary lawsuit to protect its property rights in its registered SRA mark.
19. Gallagher answered by letter dated January 25, 2001, in which he repeated that he had the right to continue to use the Appraisal Institute's SRA membership designation even though he was no longer a member, asserted that no one "demands anything of me," but then added that if he received a pleasant phone call asking him "kindly" not to use the SRA mark, he would consider it.
20. Taking Gallagher up on his offer of a pleasant phone call, the Appraisal Institute's office called and spoke with him on February 2, 2001 and asked him to stop using the SRA mark. He agreed to do so, and the Appraisal Institute sent him a confirming letter on February 7, 2001 thanking him for his agreement and stating that the file was being closed.
21. Despite his promise to cease using the SRA mark, and in wanton and willful disregard of the demands of the Appraisal Institute and the Appraisal Institute's exclusive rights in its registered SRA mark, Gallagher has continued to use the Appraisal Institute's SRA designation in commerce by referring to himself as an SRA member of the Appraisal institute and to misrepresent himself to the public in the course of providing appraisal services as being entitled to use the SRA designation.
22. On February 8, 2001 Gallagher signed an appraisal report for Western Financial Services using the SRA designation on the first page of the report, on the signature line on the second page next to his name, and on the resume accompanying the report. These representations were false.
23. On February 20, 2001 Gallagher signed an appraisal report for Universal Lending Group using the SRA designation on the first page of the report, on the signature line on the second page next to his name, and on the Addendum page. These representations were false.
24. On June 22, 2001 Gallagher signed an appraisal report for Ultimate Mortgage using the SRA designation on the first page of the report, on the signature line on the second page next to his name, on the Certification page, and on the Addendum page. These representations were false.
25. On October 19, 2001 Gallagher signed an appraisal report for Rapha Mortgage Group using the SRA designation on the first page of the report and on the signature line on the second page next to his name. These representations were false.
26. On January 7, 2002 Gallagher signed an appraisal report for Rapha Mortgage Group using the SRA designation on the first page of the report, on the signature line on the second page next to his name, on his resume accompanying the report, and on the Certification page. These representations were false.
27. Until defendants were served with this lawsuit on October 10, 2002, the website promoting and advertising GAC — www.metroplexappraisers.com — contained numerous references to the SRA designation either following Gallagher's name or on his resume. These representations were false. On or about the day after receiving service of process in this action, defendants changed the website to delete references to the SRA designation.
28. Gallagher's continued use of the SRA designation is willful and with the intention to trade upon the valuable goodwill and professional recognition built by the Appraisal Institute in the SRA designation.
29. Gallagher is engaging in the acts complained of herein willfully and with actual knowledge of the Appraisal Institute's ownership of the SRA designation for purposes of advancing his own commercial gain by the misappropriation of the Appraisal Institute's valuable goodwill and business reputation in violation of the rights of the Appraisal Institute as hereinafter set forth.
30. Because of defendants' failure timely to plead or otherwise to defend in this action, they are in default.
31. The Appraisal Institute has succeeded on the merits in this case by virtue of defendants' failure to file an answer in this action or to otherwise respond to the complaint.
32. The Appraisal Institute has no adequate remedy at law and will be irreparably harmed and otherwise damaged due to the likelihood of confusion concerning the SRA Designation, unless defendants are restrained by this Court.
33. Defendants' infringement of plaintiff's SRA designation and trademark was malicious, fraudulent, deliberate, and willful because, among other things, defendants continued to use an identical trademark to plaintiff's federally registered trademark for the identical services specified in plaintiff's trademark registrations after Gallagher was terminated from membership by plaintiff and placed on actual notice of plaintiff's federally registered trademarks. Thus this case constitutes an "exceptional" case under 15 U.S.C. § 1117 and merits the award of reasonable attorney's fees to plaintiff.
34. The burden on defendants to restrain from further infringement is light, because they will be free to conduct their business lawfully following entry of a permanent injunction, while The Appraisal Institute faces a substantial threat of irreparable harm to its business and reputation if its marks are not enforced.
35. Granting a permanent injunction will ensure compliance with both state and federal laws. Therefore, granting a permanent injunction would not disserve the public interest.