COLDWELL BANKER REAL ESTATE LLC v. THE BELLMARC GROUP LLC
2:14-cv-07926
D.N.J.Sep 9, 2021Background:
- Plaintiff Coldwell Banker licensed its marks and franchise system to several New York LLCs owned/controlled by Neil Binder (the Franchisees) under integrated Franchise Agreements (2013) that required payment of royalties (reduced to 2.25%/2.5% by addendum) and Brand Marketing Fund (BMF) contributions, reporting of closings, and compliance with conversion-loan terms and security agreements.
- Coldwell Banker advanced conversion funding (totaling $1,437,500 with conditional forgiveness tied to compliance and revenue thresholds) secured by promissory notes and security agreements; notes became repayable on franchise default.
- Defendants fell behind on royalty/BMF payments, ceased remitting payments on January 8, 2014, failed to repay conversion notes, and refused to turn over collateral after termination; Coldwell Banker issued notices of default and terminated the franchises effective December 18, 2014.
- Coldwell Banker sought accelerated loan repayment, unpaid royalties/BMF, liquidated damages, interest (18%), attorneys’ fees, an accounting for unreported/underreported transactions, and Lanham Act damages for post-termination use of the Coldwell Banker marks.
- The court found breaches (failure to pay royalties/BMF, repay notes, convey collateral), granted an equitable accounting, awarded contract damages plus 18% interest and attorneys’ fees, and awarded $50,000 under the Lanham Act for post‑termination use; final judgment entered for $7,593,262.80 plus fees and costs.
Issues:
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Did Franchisees breach the Franchise Agreements by withholding royalties/BMF and failing to repay conversion notes/turn over collateral? | Franchisees stopped payments Jan 8, 2014, thereby breaching and triggering acceleration and remedies under notes and security agreements. | Defendants disputed notices/timeliness of notice and raised various disputes about obligations and offsets for advertising. | Court held Franchisees breached by failing to pay royalties/BMF, repay notes, and convey collateral; Binder liable as guarantor. |
| Did Coldwell Banker properly terminate and is it entitled to contract damages (including liquidated damages, interest, attorneys’ fees)? | Termination was authorized after notice and failure to cure; contract entitles Coldwell Banker to unpaid fees, accelerated notes, liquidated damages, 18% interest, and fees. | Defendants challenged some interest and liquidated damages calculations and argued offsets. | Court upheld termination, awarded contractual damages (totaling approximately $7.543M for contractual items), 18% interest from termination, and attorneys’ fees; declined duplicative recovery. |
| Is an accounting appropriate for unreported/underreported transactions? | Defendants controlled transaction records and underreported sales; an accounting is needed to determine unpaid amounts. | Defendants did not provide the withheld transaction data in discovery. | Court ordered an equitable accounting, finding information exclusively in defendants’ possession and underreporting occurred. |
| Did Defendants infringe Coldwell Banker’s trademarks post‑termination (Lanham Act) and what statutory damages are appropriate? | Continued use after termination was willful counterfeiting warranting statutory damages. | Defendants ultimately ceased use and conduct was limited in duration; excessive statutory award unnecessary. | Court found post‑termination use (Dec 18, 2014–May 19, 2015) and awarded $50,000 in Lanham Act damages (declining larger statutory award). |
Key Cases Cited:
- Bonnieview Homeowners Ass’n v. Woodmont Builders, LLC, 655 F. Supp. 2d 473 (D.N.J. 2009) (elements of breach of contract claim)
- Goldman S. Brunswick Partners v. Stern, 265 N.J. Super. 489 (App. Div. 1993) (non‑breaching party may treat contract as terminated after material breach)
- E.T. Browne Drug Co. v. Cococare Prods., Inc., 538 F.3d 185 (3d Cir. 2008) (Lanham Act infringement elements)
- Commerce Nat. Ins. Servs., Inc. v. Commerce Ins. Agency, Inc., 214 F.3d 432 (3d Cir. 2000) (effect of incontestable federal registration on infringement elements)
- Motel 6 Operating LP v. Hi Hotel Grp. LLC, 670 F. App’x 759 (3d Cir. 2016) (post‑termination use by franchisee can constitute counterfeiting under Lanham Act)
- Chanel, Inc. v. Gordashevsky, 558 F. Supp. 2d 532 (D.N.J. 2008) (court discretion in awarding statutory damages under Lanham Act)
- Onderdonk v. Presbyterian Homes of N.J., 85 N.J. 171 (1981) (grounds for equitable accounting)
- Christian Legal Soc’y v. Martinez, 561 U.S. 661 (2010) (effect of stipulations/withdrawn facts)