MARY KAY, INC. v. WEBER
601 F.Supp.2d 839
Facts
Mary Kay, Inc. produces and sells beauty and hygiene products. Amy Weber became a Mary Kay representative (also known as an Independent Beauty Consultant (IBC)) on January 27, 2000. To be considered an active IBC, a Mary Kay consultant must order a minimum of $200 worth of products per month. Furthermore, Amy Weber’s job as an IBC included selling Mary Kay products to individually sought-after customers, and she was allowed to designate the price of the products she sold.
Amy Weber ordered her last batch of products from Mary Kay, Inc. in September 2004; however, she still had excess inventory from previous purchases because she was unable to sell them. During the beginning of 2005, Amy Weber and her husband Scott decided to clear their inventory by selling the leftover products on eBay. After the success of the sales on eBay, Amy and Scott Weber ordered more Mary Kay products via eBay and resold them on eBay at a higher price. Other Mary Kay sellers began contacting Amy and Scott about their sales to see if the Webers wanted to purchase their Mary Kay products for resale. This business developed into an eBay store named marykay1stop, where Scott and Amy resold their purchased Mary Kay products.
Mary Kay, Inc. was notified of the Weber’s eBay store on June 16, 2005. Mary Kay, Inc. sent a letter to Amy Weber informing her of her IBC agreement violation that stated she was not allowed to participate in activity such as selling her Mary Kay inventory on eBay. Amy Weber did not respond to the letter, so on July 29, 2005, Mary Kay, Inc. sent Amy a second letter, which yielded no response. As a result, Mary Kay, Inc. terminated Amy Weber’s IBC agreement with Mary Kay, Inc. on August 19, 2005.
Mary Kay, Inc. complained to eBay about the use of “Mary Kay†in the eBay store name “marykay1stop†on November 3, 2005, and subsequently sent a letter to Amy’s husband, Scott Weber, directing him to stop using “Mary Kay†in the eBay store’s name. Scott Weber responded by calling a Mary Kay, Inc. paralegal, Nancy Pike. The Webers maintain that Nancy Pike informed them that they could continue to operate under their eBay store as long as they changed their name, eliminating “Mary Kay†from its title, and removed all copyrighted photographs owned by Mary Kay, Inc. The Webers changed their eBay store name and removed all copyrighted material owned by Mary Kay, Inc. They renamed their store “Touch of Pink†and stated that it is independent of Mary Kay, Inc.
The Webers continue to sell Mary Kay, Inc. cosmetics and toiletries on their “Touch of Pink†website, but they only use “Mary Kay†“mainly to identify the brand of products they buy and sell and disclaim affiliation and association with Mary Kay.†Defendants’ Motion for Summary Judgment and Brief in Support. The products the Webers sell at “Touch of Pink†were purchase from Mary Kay, Inc. IBCs, both currently and formerly employed, and the products are unaltered at all times.
Procedural History
Mary Kay, Inc. filed suit against the Webers in May 2008, making eight claims: (1) tortious interference with an existing contractual relationship, (2) tortuous interference with a prospective relationship, (3) unfair competition under the Lanham Act, (4) passing off under the Lanham Act, (5) trademark infringement under the Lanham Act, (6) unfair competition under Texas common law, (7) trademark infringement under Texas common law, and (8) unjust enrichment. Original Complaint for Damages and Injunctive Relief and Motion for Leave to Conduct Expedited Discovery. The Webers moved for summary judgment on their affirmative defenses and most of the eight claims brought against them.
Issues
1. Whether emails to Mary Kay, Inc. were admissible to show consumer confusion about the relationship between Mary Kay, Inc. and the Webers?
2. Whether a survey of Mary Kay product purchasers that may have shown consumer confusion about the relationship between Mary Kay, Inc. and the Webers was admissible?
3. Whether survey respondents’ explanations were admissible to show consumer confusion about the relationship between Mary Kay, Inc. and the Webers?
4. Whether emails sent to the Webers by their customers that complained about used, expired, or damaged products were admissible under the business records hearsay exception?
5. Whether genuine issues of material fact precluded the Weber’s summary judgment affirmative defense of the first sale doctrine on Mary Kay’s claims against the Webers for trademark infringement?
6. Whether the Webers tortuously interfered with Mary Kay, Inc.’s existing contracts?
7. Whether the Webers tortuously interfered with Mary Kay, Inc.’s possible future relationships?
8. Whether Mary Kay, Inc. was entitled to recovery for unjust enrichment?
Holdings
1. Customer e-mails to Mary Kay were admissible to show consumer confusion about the relationship between Mary Kay, Inc. and the Webers.
2. The survey of Mary Kay product purchasers that may have shown consumer confusion about the relationship between Mary Kay, Inc. and the Webers was inadmissible.
3. Survey respondents’ explanations were admissible to show consumer confusion about the relationship between Mary Kay, Inc. and the Webers.
4. Emails sent to the Webers by their customers that complained about used, expired, or damaged products were not admissible under the business records hearsay exception.
5. Genuine issues of material fact precluded the Weber’s summary judgment affirmative defense of the first sale doctrine on Mary Kay’s claims against the Webers for trademark infringement.
6. The Webers did not tortuously interfere with Mary Kay, Inc’s existing contracts.
7. The Webers did not tortuously interfere with Mary Kay, Inc’s possible future relationships.
8. Mary Kay, Inc. was not entitled to recovery for unjust enrichment.
Analysis
1. Customer emails to Mary Kay could suggest to a reasonable juror that she believed the Webers’ store and Mary Kay were affiliated. One customer, Quiles, stated that she believed she had ordered and was sent the product from Mary Kay. The Court found that the customer emails were relevant because they showed consumer confusion about the relationship between Mary Kay, Inc. and the Webers’ store, “Touch of Pink.â€
2. Survey responses from purchasers who may have shown consumer confusion were deemed inadmissible. The Court found that there is a genuine issue of fact as to whether the first sale doctrine applies, so that question should go to the jury. The jury should be instructed that if the Webers have improperly suggested affiliation with Mary Kay, the first sale doctrine will not apply. The Court also stated that the jury should not be told about the 45% of consumers who were confused about the relationship between Mary Kay, Inc. and the Webers because the statistic is based on legally irrelevant conclusions.
3. The survey asked consumers to explain their answers. The Court found that these explanations “provide evidence of actual confusion without hiding the reason behind the confusion. In looking at these explanations, the court can easily distinguish legally relevant confusion from legally irrelevant confusion.†The Court determined that the results of the survey that are admissible will only extend to the explanations provided by consumers.
4. The Court reasoned that emails sent to Mary Kay by consumers who were complaining of used, damaged, or expired products were “out-of-court statements offered for the truth of the matter asserted.†Furthermore, these e-mails are hearsay not covered by any exception, and are therefore inadmissible. The consumer who sent the emails described them as business records, but the Court reasoned that they do not comply with all the requirements of Federal Rule of Evidence 803(6). The emails were not found to be part of regularly conducted activity. The Court went on to explain that even if the emails were considered part of the Webers’ record of customer complaints, there would still be a double hearsay problem. The record may be covered by the Rule 803(6) exception, but the emails would have to be covered by another hearsay exception. Because they are not covered, they will not be used for the Courts examination of the defendants’ motion for summary judgment.
5. The Court found the holding in Warner-Lambert persuasive. “The purposes of the Lanham Act would not be fulfilled by requiring trademark holders to establish quality control procedures that prevent virtually all departures from established norms before affording relief against sellers who fail to abide by those norms.†Mary Kay presented evidence showing that it had quality control procedures in place. The Court reasoned that while these procedures may not be the “most stringent measures of insuring freshness†available, testimony demonstrated that Mary Kay tries adamantly to not distribute expired products to consumers. Furthermore, the Court found that there is a genuine issue of fact when it came to the question of whether these expired, damaged, or used products diminished Mary Kay’s mark. The Court reasoned that there is no evidence on how many more expired Mary Kay products were available to the public as a result of the Webers' sales. However, there was evidence of the close connection between the Webers and their customers. Statistics showed that the Webers have advertised and succeeded in obtaining a large amount of attention among individuals interested in Mary Kay products. These close and extensive amounts of relationships would allow a reasonable juror to conclude that the Webers' expired products are widespread enough to affect the Mary Kay mark. The Court reasoned that Mary Kay, therefore, identified a genuine issue of material fact as to whether the first sale doctrine applied. There was enough evidence to allow a reasonable juror to conclude that Mary Kay made legitimate efforts to keep expired products out of the stream of commerce. Furthermore, they could conclude that the Webers were hindering Mary Kay’s efforts and diminishing the Mary Kay mark. Therefore, the Webers were not entitled to summary judgment on the affirmative defense of the first sale doctrine.
6. The Webers established that there are no genuine issues of material fact that the alleged interference was willful and intentional, the second element of tortuous interference. Mary Kay cannot prevail on this claim without proof of this element. Therefore, the Court granted the Webers’ motion for summary judgment on the claim of tortuous interference.
7. Mary Kay was only able to show evidence of the Webers' conscious desire to interfere with Mary Kay's recruitment of potential IBCs by pointing out that the Webers’ website sells using components of an IBC’s duties. They used Mary Kay shopping bags, catalogs, samples, promotional items, training videos, etc. and didn’t sign an IBC contract to do so. Mary Kay cannot prove, however, that the Webers wanted or thought they would appear as an IBC. Without this evidence, the Court found there is no genuine issue of fact as to whether the defendants desired or even knew to a substantial certainty that their conduct would interfere with potential IBC contracts. Therefore, the Webers’ motion for summary judgment on the claim of tortuous interference with a prospective contract was granted by the Court.
8. The Webers asserted that unjust enrichment does not apply here because unjust enrichment, according to Walker v. Cotter Properties, Inc. is “the result of a failure to make restitution of benefits either wrongfully or passively received under circumstances which give rise to an implied or quasi-contractual obligation to repay,†and the unjust enrichment cause of action in this case not relevant or related to this case. Because Mary Kay admitted, and it is affirmed by the Court, that the Lanham Act provides for the disgorgement of the Webers' profits, Mary Kay is not entitled to damages under a theory of unjust enrichment. Therefore, the Webers’ motion for summary judgment on the claim of unjust enrichment was granted.
601 F.Supp.2d 839
Facts
Mary Kay, Inc. produces and sells beauty and hygiene products. Amy Weber became a Mary Kay representative (also known as an Independent Beauty Consultant (IBC)) on January 27, 2000. To be considered an active IBC, a Mary Kay consultant must order a minimum of $200 worth of products per month. Furthermore, Amy Weber’s job as an IBC included selling Mary Kay products to individually sought-after customers, and she was allowed to designate the price of the products she sold.
Amy Weber ordered her last batch of products from Mary Kay, Inc. in September 2004; however, she still had excess inventory from previous purchases because she was unable to sell them. During the beginning of 2005, Amy Weber and her husband Scott decided to clear their inventory by selling the leftover products on eBay. After the success of the sales on eBay, Amy and Scott Weber ordered more Mary Kay products via eBay and resold them on eBay at a higher price. Other Mary Kay sellers began contacting Amy and Scott about their sales to see if the Webers wanted to purchase their Mary Kay products for resale. This business developed into an eBay store named marykay1stop, where Scott and Amy resold their purchased Mary Kay products.
Mary Kay, Inc. was notified of the Weber’s eBay store on June 16, 2005. Mary Kay, Inc. sent a letter to Amy Weber informing her of her IBC agreement violation that stated she was not allowed to participate in activity such as selling her Mary Kay inventory on eBay. Amy Weber did not respond to the letter, so on July 29, 2005, Mary Kay, Inc. sent Amy a second letter, which yielded no response. As a result, Mary Kay, Inc. terminated Amy Weber’s IBC agreement with Mary Kay, Inc. on August 19, 2005.
Mary Kay, Inc. complained to eBay about the use of “Mary Kay†in the eBay store name “marykay1stop†on November 3, 2005, and subsequently sent a letter to Amy’s husband, Scott Weber, directing him to stop using “Mary Kay†in the eBay store’s name. Scott Weber responded by calling a Mary Kay, Inc. paralegal, Nancy Pike. The Webers maintain that Nancy Pike informed them that they could continue to operate under their eBay store as long as they changed their name, eliminating “Mary Kay†from its title, and removed all copyrighted photographs owned by Mary Kay, Inc. The Webers changed their eBay store name and removed all copyrighted material owned by Mary Kay, Inc. They renamed their store “Touch of Pink†and stated that it is independent of Mary Kay, Inc.
The Webers continue to sell Mary Kay, Inc. cosmetics and toiletries on their “Touch of Pink†website, but they only use “Mary Kay†“mainly to identify the brand of products they buy and sell and disclaim affiliation and association with Mary Kay.†Defendants’ Motion for Summary Judgment and Brief in Support. The products the Webers sell at “Touch of Pink†were purchase from Mary Kay, Inc. IBCs, both currently and formerly employed, and the products are unaltered at all times.
Procedural History
Mary Kay, Inc. filed suit against the Webers in May 2008, making eight claims: (1) tortious interference with an existing contractual relationship, (2) tortuous interference with a prospective relationship, (3) unfair competition under the Lanham Act, (4) passing off under the Lanham Act, (5) trademark infringement under the Lanham Act, (6) unfair competition under Texas common law, (7) trademark infringement under Texas common law, and (8) unjust enrichment. Original Complaint for Damages and Injunctive Relief and Motion for Leave to Conduct Expedited Discovery. The Webers moved for summary judgment on their affirmative defenses and most of the eight claims brought against them.
Issues
1. Whether emails to Mary Kay, Inc. were admissible to show consumer confusion about the relationship between Mary Kay, Inc. and the Webers?
2. Whether a survey of Mary Kay product purchasers that may have shown consumer confusion about the relationship between Mary Kay, Inc. and the Webers was admissible?
3. Whether survey respondents’ explanations were admissible to show consumer confusion about the relationship between Mary Kay, Inc. and the Webers?
4. Whether emails sent to the Webers by their customers that complained about used, expired, or damaged products were admissible under the business records hearsay exception?
5. Whether genuine issues of material fact precluded the Weber’s summary judgment affirmative defense of the first sale doctrine on Mary Kay’s claims against the Webers for trademark infringement?
6. Whether the Webers tortuously interfered with Mary Kay, Inc.’s existing contracts?
7. Whether the Webers tortuously interfered with Mary Kay, Inc.’s possible future relationships?
8. Whether Mary Kay, Inc. was entitled to recovery for unjust enrichment?
Holdings
1. Customer e-mails to Mary Kay were admissible to show consumer confusion about the relationship between Mary Kay, Inc. and the Webers.
2. The survey of Mary Kay product purchasers that may have shown consumer confusion about the relationship between Mary Kay, Inc. and the Webers was inadmissible.
3. Survey respondents’ explanations were admissible to show consumer confusion about the relationship between Mary Kay, Inc. and the Webers.
4. Emails sent to the Webers by their customers that complained about used, expired, or damaged products were not admissible under the business records hearsay exception.
5. Genuine issues of material fact precluded the Weber’s summary judgment affirmative defense of the first sale doctrine on Mary Kay’s claims against the Webers for trademark infringement.
6. The Webers did not tortuously interfere with Mary Kay, Inc’s existing contracts.
7. The Webers did not tortuously interfere with Mary Kay, Inc’s possible future relationships.
8. Mary Kay, Inc. was not entitled to recovery for unjust enrichment.
Analysis
1. Customer emails to Mary Kay could suggest to a reasonable juror that she believed the Webers’ store and Mary Kay were affiliated. One customer, Quiles, stated that she believed she had ordered and was sent the product from Mary Kay. The Court found that the customer emails were relevant because they showed consumer confusion about the relationship between Mary Kay, Inc. and the Webers’ store, “Touch of Pink.â€
2. Survey responses from purchasers who may have shown consumer confusion were deemed inadmissible. The Court found that there is a genuine issue of fact as to whether the first sale doctrine applies, so that question should go to the jury. The jury should be instructed that if the Webers have improperly suggested affiliation with Mary Kay, the first sale doctrine will not apply. The Court also stated that the jury should not be told about the 45% of consumers who were confused about the relationship between Mary Kay, Inc. and the Webers because the statistic is based on legally irrelevant conclusions.
3. The survey asked consumers to explain their answers. The Court found that these explanations “provide evidence of actual confusion without hiding the reason behind the confusion. In looking at these explanations, the court can easily distinguish legally relevant confusion from legally irrelevant confusion.†The Court determined that the results of the survey that are admissible will only extend to the explanations provided by consumers.
4. The Court reasoned that emails sent to Mary Kay by consumers who were complaining of used, damaged, or expired products were “out-of-court statements offered for the truth of the matter asserted.†Furthermore, these e-mails are hearsay not covered by any exception, and are therefore inadmissible. The consumer who sent the emails described them as business records, but the Court reasoned that they do not comply with all the requirements of Federal Rule of Evidence 803(6). The emails were not found to be part of regularly conducted activity. The Court went on to explain that even if the emails were considered part of the Webers’ record of customer complaints, there would still be a double hearsay problem. The record may be covered by the Rule 803(6) exception, but the emails would have to be covered by another hearsay exception. Because they are not covered, they will not be used for the Courts examination of the defendants’ motion for summary judgment.
5. The Court found the holding in Warner-Lambert persuasive. “The purposes of the Lanham Act would not be fulfilled by requiring trademark holders to establish quality control procedures that prevent virtually all departures from established norms before affording relief against sellers who fail to abide by those norms.†Mary Kay presented evidence showing that it had quality control procedures in place. The Court reasoned that while these procedures may not be the “most stringent measures of insuring freshness†available, testimony demonstrated that Mary Kay tries adamantly to not distribute expired products to consumers. Furthermore, the Court found that there is a genuine issue of fact when it came to the question of whether these expired, damaged, or used products diminished Mary Kay’s mark. The Court reasoned that there is no evidence on how many more expired Mary Kay products were available to the public as a result of the Webers' sales. However, there was evidence of the close connection between the Webers and their customers. Statistics showed that the Webers have advertised and succeeded in obtaining a large amount of attention among individuals interested in Mary Kay products. These close and extensive amounts of relationships would allow a reasonable juror to conclude that the Webers' expired products are widespread enough to affect the Mary Kay mark. The Court reasoned that Mary Kay, therefore, identified a genuine issue of material fact as to whether the first sale doctrine applied. There was enough evidence to allow a reasonable juror to conclude that Mary Kay made legitimate efforts to keep expired products out of the stream of commerce. Furthermore, they could conclude that the Webers were hindering Mary Kay’s efforts and diminishing the Mary Kay mark. Therefore, the Webers were not entitled to summary judgment on the affirmative defense of the first sale doctrine.
6. The Webers established that there are no genuine issues of material fact that the alleged interference was willful and intentional, the second element of tortuous interference. Mary Kay cannot prevail on this claim without proof of this element. Therefore, the Court granted the Webers’ motion for summary judgment on the claim of tortuous interference.
7. Mary Kay was only able to show evidence of the Webers' conscious desire to interfere with Mary Kay's recruitment of potential IBCs by pointing out that the Webers’ website sells using components of an IBC’s duties. They used Mary Kay shopping bags, catalogs, samples, promotional items, training videos, etc. and didn’t sign an IBC contract to do so. Mary Kay cannot prove, however, that the Webers wanted or thought they would appear as an IBC. Without this evidence, the Court found there is no genuine issue of fact as to whether the defendants desired or even knew to a substantial certainty that their conduct would interfere with potential IBC contracts. Therefore, the Webers’ motion for summary judgment on the claim of tortuous interference with a prospective contract was granted by the Court.
8. The Webers asserted that unjust enrichment does not apply here because unjust enrichment, according to Walker v. Cotter Properties, Inc. is “the result of a failure to make restitution of benefits either wrongfully or passively received under circumstances which give rise to an implied or quasi-contractual obligation to repay,†and the unjust enrichment cause of action in this case not relevant or related to this case. Because Mary Kay admitted, and it is affirmed by the Court, that the Lanham Act provides for the disgorgement of the Webers' profits, Mary Kay is not entitled to damages under a theory of unjust enrichment. Therefore, the Webers’ motion for summary judgment on the claim of unjust enrichment was granted.