N. Am. Bus. Ass'n v. United Merch. Servs. Club

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N. AM. BUS. ASS'N, LLC, Plaintiff, v. UNITED MERCH. SERVS. CLUB, LLC, et al., Defendants.

No. 6:22-CV-85-REW-HAI

United States District Court, E.D. Kentucky, Southern Division, London

March 25, 2024

ORDER ON ALL PENDING MATTERS

Robert E. Wier, United States District Judge.

Before the Court is Plaintiff North American Business Association's motion for summary judgment. See DE 60 (Motion); DE 60-1 (Memorandum in Support). Defendant Nicholas Ahlf, proceeding pro se, responded, of sorts, in opposition. See DE 61. Plaintiff replied. See DE 62. The matter is now ripe for review. For the following reasons, the Court GRANTS Plaintiff's motion, which essentially is unopposed under Rule 56. This ruling resolves all pending matters.

I. Background

a. Facts

Plaintiff North American Business Association, LLC d/b/a United Merchant Services Club (“NABA”) is a Nevada limited liability company that owns a business offering payment systems support. See DE 1 (Complaint). NABA was founded in 2009 by Jonathan Ahlf, who was both the president and sole employee of the company for many years. See id. at ¶ 32. As NABA flourished, Jonathan Ahlf enlisted the help of his step-son, Defendant Nicholas Ahlf in 2019. See id. at ¶¶ 3839. Defendant Ahlf was named Senior District Manager. In this capacity, Defendant Ahlf was responsible for client interfacing and account management, which gave him access to NABA's internal client information-including client lists, phone numbers, and email addresses-as well as sensitive business information such as profit margins, rates, residual dollar amounts, equipment, payment platforms, and marketing materials. Defendant Ahlf was received a company email address, administrative privileges to NABA's website, access to client processing platform accounts, and connections to NABA's clients. See id. at 45-47. The duo ran NABA successfully until Jonathan Ahlf died on September 2, 2021. After Jonathan Ahlf's death, his parents, Charles and Marilyn Ahlf, were named as co-administrators of his estate and took over the operation of NABA. See id. at ¶¶ 51-54.

Eleven days after Jonathan Ahlf's death, Defendant Ahlf registered a separate entity with the Nevada Secretary of State, problematically named UNITED MERCHANT SERVICES CLUB, LLC a name virtually identical to NABA's trademarked name. Defendant Ahlf began reaching out to NABA's clients and transferring their accounts from NABA to his own business. Despite acting for his own business, Defendant Ahlf continued to use the name “United Merchant Services Club,” his NABA phone number, as well has his NABA email address. See generally DE 1 at ¶¶ 55-60.

Eventually, some clients affected by Defendant Ahlf's actions discovered the true situation and informed NABA, who, in turn, immediately terminated Defendant Ahlf. Despite his termination, Defendant Ahlf continued contacting NABA's clients using his NABA contact information under the name UNITED MERCHANT SERVICES CLUB, LLC. NABA demanded that Defendant Ahlf discontinue this behavior, but he refused to do so. See generally DE 1 at ¶¶ 62-65; 69-71.

b. Procedural History

To recover, NABA filed the instant action on April 14, 2022 against Defendant Ahlf and Defendant UMSC Services Club, LLC (“Defendant UMSC). See DE 1. In the Complaint, NABA made eight claims total, six of which were against both Defendants-Count 1: federal unfair competition in violation of the Lanham Act; Count 2: false advertising in violation of the Lanham Act; Count 3: common law unfair competition; Count 4: tortious interference with contracts; Count 5: tortious interference with prospective business advantage; and Count 8: unjust enrichment. See DE 1 at ¶¶ 82-109; 124-26. The remaining two claims were made against Defendant Ahlf alone- Count 6: breach of fiduciary duty and Count 7: conversion. See id. at ¶¶ 110-23. NABA asked for an injunction blocking Defendants from using the infringing UNITED MERCHANT SERVICES CLUB, LLC mark and from using NABA's client lists, contacting their customers using the infringing mark, using and/or disseminating NABA's trade secrets, and interfering with NABA's customers. NABA also asked for an order requiring Defendants to take reasonable steps to prevent any false impression of an association between NABA and Defendant UMSC, as well as an order requiring Defendants to contact clients to inform them that their accounts were moved to a company that was not affiliated with NABA. Finally, NABA asked for damages, treble damages, compensatory damages, punitive damages, and the return of property. See id. at ¶¶ A-I.

Defendant Ahlf filed an answer, pro se, on his own behalf. See DE 15 (Answer). Defendant UMSC never answered, nor has Defendant UMSC retained counsel. The clerk entered default against Defendant UMSC on July 25, 2022. See DE 19 (Clerk Entry of Default). NABA then filed a motion for default judgment against Defendant UMSC, see DE 20, and moved for a temporary restraining order, see DE 21. The Court referred both motions to United States Magistrate Judge Hanly A. Ingram. See DE 22 (Order). Judge Ingram thoroughly evaluated both motions (both were unopposed) and recommended that a default judgment be granted against Defendant UMSC on Counts 1-3 and denied on Counts 4, 5, and 8. See DE 34 at 22 (Recommended Disposition). Judge Ingram also recommended that Defendant UMSC be permanently enjoined from infringing on NABA's trademark and engaging in false advertising, unfair competition, and deceptive trade practices in connection with the infringing “UNITED MERCHANT SERVICES CLUB, LLC” mark. Id. After the objection period passed without any objections from the parties, the Court adopted Judge Ingram's Recommended Disposition. See DE 43 (Order).

The Court subsequently held a damages hearing on January 5, 2023, in light of the Counts adjudicated in the DE 43 Order. See DE 56 (Minute Entry). The Court awarded damages as identified in DE 56, holding the fee ruling for a final decision post-hearing. Id.

On April 7, 2023, Plaintiff moved for summary judgment on the federal unfair competition, common law unfair competition, false advertising, and breach of fiduciary duty claims against Defendant Ahlf.^[1]See DE 60 (Motion). Defendant Ahlf responded to Plaintiff's motion with a one-line, non-substantive filing. See DE 62 (Ahlf Response). Plaintiff replied. See DE 62.

II. Standard of Review

Pursuant to Federal Rule of Civil Procedure 56(a), summary judgment is appropriate if “there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” FED. R. CIV. P. 56(a). In determining whether a genuine dispute exists, the Court considers all facts and draws all inferences in the light most favorable to the non-moving party. See Matsushita Elec. Indust. Co., Ltd. v. Zenith Radio Corp., 106 S.Ct. 1348, 1356 (1986); Lindsay v. Yates, 578 F.3d 407, 414 (6th Cir. 2009). Further, the court may not “weigh evidence [or] determine the truth of the matter[.]” Anderson v. Liberty Lobby, Inc., 106 S.Ct. 2505, 2511 (1986).

The moving party bears the initial burden of showing the absence of a genuine issue of material fact. See Celotex Corp. v. Catrett, 106 S.Ct. 2548, 2553 (1986). If the moving party satisfies its burden, the burden then shifts to the non-moving party to produce “specific facts” showing a “genuine issue” for trial. Id. However, “Rule 56(c) mandates the entry of summary judgment . . . against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, on which that party will bear the burden of proof at trial.” Id. at 2552.

A fact is “material” if the underlying substantive law identifies the fact as critical. See Anderson, 106 S.Ct. at 2510. Then, “[o]nly disputes over facts that might affect the outcome of the suit under governing law will properly preclude the entry of summary judgment. Factual disputes that are irrelevant or unnecessary will not be counted.” Id. An issue is “genuine” if “there is sufficient evidence favoring the nonmoving party for a jury to return a verdict for that party.” Id. at 2511 (citing First Nat'l Bank of Az. v. Cities Servs. Co., 88 S.Ct. 1575, 1592 (1968)). Such evidence must be suitable for admission into evidence at trial. See Salt Lick Bancorp v. FDIC, 187 Fed.Appx. 428, 444-45 (6th Cir. 2006). Failure to respond has a cost. See Rule 56(e)(2)-(3).

III. Analysis

a. Defendants' Responses to the Pending Motion

The Court will first address Defendant UMSC's failure to respond to the pending motion. This District's Local Rules state that a nonmoving party's “[f]ailure to timely respond to a motion may be grounds for granting the motion.” See LR 7.1(c). Nonetheless, even if the non-moving party fails to respond, “[t]he court is required, at a minimum, to examine the movant's motion for summary judgment to ensure that [it] has discharged” its initial burden. Delphi Auto. Sys., LLC v. United Plastics, Inc., 418 Fed.Appx. 374, 381 (6th Cir. 2011) (citing Carver v. Bunch, 946 F.2d 451, 454-55 (6th Cir.1991)). Thus, if a party fails to respond to a pending summary judgment motion, a court may not use that failure, alone, to justify granting the motion; the merits of the motion must be examined under Federal Rule of Civil Procedure 56(c). Id. at 65. The Court may consider facts undisputed, per Rule 56(e)(2), and may grant judgment if the movant is entitled to it. See id. 56(e)(3). The Court will apply the rubric here.

While Defendant Ahlf did respond to the motion, he does nothing to contest NABA's arguments or the way NABA marshalled the record. His response states, in its entirety:

I Nicholas Ahlf herby (sic), file this Motion to Dismiss Summary Judgment, pro se, stating as follows.

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