Ausable River Trading Post, LLC v. Dovetail Solutions, Inc.
874 F.3d 271
| 6th Cir. | 2017Background
- The Tawas Area Chamber of Commerce (Chamber) obtained a federal trademark for the winter festival name “Perchville.”
- AuSable River Trading Post, LLC (Trading Post) sold or had orders for merchandise bearing “Perchville.”
- The Chamber sued Trading Post employee Salvatore Agnello in Michigan state court for unauthorized use; the Trading Post was not a party and the Chamber did not initially know Agnello acted for the Trading Post.
- The state court entered a permanent injunction against Agnello (binding on those in active concert with him); Agnello—unrepresented and confused—consented to the injunction and did not substantially defend the trademark’s validity.
- Trading Post later sued in federal court challenging the Perchville trademark’s validity; the district court granted summary judgment for defendants, holding Trading Post barred by res judicata because it was in privity with Agnello.
- The Sixth Circuit reversed, holding the record did not establish the substantial identity of interests or that Agnello adequately represented the Trading Post such that privity (and res judicata) applied.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Trading Post’s trademark-invalidity suit is barred by res judicata based on prior injunction against employee Agnello | The Trading Post argues it is not bound because it was not a party, Agnello did not defend the trademark, and Agnello did not represent or protect Trading Post’s interests | Defendants contend the injunction was a merits decision and Agnello’s injunction, notice, and compliance place him in privity with Trading Post, so the claim could have been raised earlier | Reversed: no privity as a matter of law; Agnello’s lack of substantive defense, minimal notice, and differing interests mean res judicata does not bar Trading Post’s claim |
Key Cases Cited
- Niemi v. NHK Spring Co., Ltd., 543 F.3d 294 (6th Cir.) (standard of review for summary judgment)
- Exec. Arts Studio v. City of Grand Rapids, 391 F.3d 783 (6th Cir.) (federal courts give state judgments the preclusive effect under state law)
- Adair v. State, 680 N.W.2d 386 (Mich.) (elements and breadth of res judicata under Michigan law)
- Sewell v. Clean Cut Mgmt., Inc., 621 N.W.2d 222 (Mich.) (res judicata principles)
- Dart v. Dart, 597 N.W.2d 82 (Mich.) (res judicata bars claims from same transaction that could have been raised)
- Bates v. Twp. of Van Buren, 459 F.3d 731 (6th Cir.) (employee-employer privity found where interests and defenses aligned)
- Ludwig v. Twp. of Van Buren, 682 F.3d 457 (6th Cir.) (prospective relief against employers may bind employees; explains special problem for employer-targeted injunctions)
- ADF Intern., Inc. v. Steelcon, Inc., 409 F. Supp. 2d 836 (E.D. Mich.) (privity found where nonparty’s claims matched prior party’s substantive defense)