435 F.Supp.3d 802
N.D. Ohio2020Background
- Matco Tools operates a branded distribution system selling tools through authorized independent distributors who receive training and a Matco-generated, confidential "List of Calls" identifying customers in a distributor's territory.
- Cary Urquhart became a Matco distributor in 2014, executed a Distributorship Agreement (territory, non-solicitation/post-termination restrictions, confidentiality, trademark-use limits) and an $83,000 promissory note secured by a security agreement.
- By March 2019 Urquhart stopped buying Matco inventory, sold competing GearWrench products to customers on his Matco List of Calls, and for two days after termination continued to display Matco marks on his truck.
- Matco terminated Urquhart on April 29, 2019, then sued May 6, 2019 for breach of contract (non-solicitation and post-termination obligations), trademark infringement, misappropriation of goodwill and trade secrets, and breach of the note; Urquhart asserted counterclaims.
- Urquhart failed to meaningfully participate (defense counsel withdrew; no opposition to summary judgment). The court considered Matco's unopposed motion and entered summary judgment for Matco.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Breach of non-solicitation covenant | Matco: Urquhart solicited Matco customers on List of Calls after abandoning distributorship | Urquhart: no opposition / no evidence to rebut | Court: breach proven; covenant reasonable; judgment for Matco ($42,464 lost profits) |
| Breach of other post-termination obligations (return of property, confidentiality) | Matco: sought enforcement | Urquhart: not opposed | Court: claim rendered moot by parties' July 8, 2019 stipulation regarding retained information |
| Trademark infringement (Lanham Act) | Matco: Urquhart displayed Matco marks after termination causing likelihood of confusion | Urquhart: no opposition / no rebuttal; contended brief holdover | Court: infringement established; willful; awarded $2,295.36 (trebled portion attributable to infringement) |
| Misappropriation of trade secrets (customer lists) | Matco: Lists are trade secrets protected by Ohio law and Urquhart used them without consent | Urquhart: no opposition; conceded lists not public and valuable | Court: lists are trade secrets; misappropriation proven; judgment for Matco |
| Breach of promissory note / unpaid amounts | Matco: Urquhart defaulted on Note and owes inventory charges | Urquhart: no opposition | Court: judgment for Matco for $44,914.83 (note) + $9,440.10 (other amounts) with interest |
| Counterclaims (bad faith, defamation, false light, abuse of process, tortious interference) | Urquhart: alleged Matco acted improperly in bringing claims and in statements to customers | Matco: actions were lawful enforcement of contract/trade-secret rights | Court: counterclaims dismissed; Matco’s claims were meritorious and statements truthful or privileged |
Key Cases Cited
- Pavlovich v. Nat’l City Bank, 435 F.3d 560 (6th Cir. 2006) (elements of breach of contract under Ohio law)
- Certified Restoration Dry Cleaning Network, L.L.C. v. Tenke Corp., 511 F.3d 535 (6th Cir. 2007) (franchisee non-compete protects franchisor goodwill and business system)
- U.S. Structures, Inc. v. J.P. Structures, Inc., 130 F.3d 1185 (6th Cir. 1997) (continued unauthorized use of mark after termination supports likelihood of confusion)
- Fred Siegel Co., L.P.A. v. Arter & Hadden, 707 N.E.2d 853 (Ohio 1999) (customer lists can be trade secrets when reasonable secrecy precautions are taken)
- Charles R. Combs Trucking, Inc. v. Int’l Harvester Co., 466 N.E.2d 883 (Ohio 1984) (standards for recovering lost profits in breach of contract)
- La Quinta Corp. v. Heartland Props. LLC, 603 F.3d 327 (6th Cir. 2010) (separate damages for different legal wrongs do not necessarily produce impermissible double recovery)
- Microsoft Corp. v. McGee, 490 F. Supp. 2d 874 (S.D. Ohio 2007) (willfulness inferred from continued infringement after notice)