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Tempur-Pedic North America, LLC v. Mattress Firm, Inc.

United States District Court, S.D. Texas, Houston Division

June 25, 2018

Tempur-Pedic North America, LLC, et al., Plaintiffs,
v.
Mattress Firm, Inc., Defendant.

          ORDER

          Gray H. Miller United States District Judge

         Memorandum Opinion and Order Pending before the court are defendant Mattress Firm, Inc.'s (“Mattress Firm”) motion for partial summary judgment (Dkt. 105) and plaintiffs' cross-motion for partial summary judgment (Dkt. 109). Having considered the motions, responses, replies, evidence, and applicable law, the court is of the opinion that Mattress Firm's motion should be GRANTED IN PART and DENIED IN PART and plaintiffs' motion should be DENIED.

         I. Background

         This case involves an on-going business dispute between the plaintiffs, Tempur-Pedic North America, LCC (“Tempur-Pedic”), Sealy Mattress Company (“Sealy”), Dan-Foam APS, and Sealy Technology LLC (collectively “Tempur-Sealy”), and Mattress Firm. Dkt. 101. Tempur-Sealy is a mattress manufacturer and distributor which owns trademarks for Tempur, Tempur-Pedic, Sealy, Sealy Posturepedic, Sterns and Foster, and others (collectively, “Tempur-Sealy Marks”). Dkt. 3-1; Dkt. 3-2. Mattress Firm is a mattress retailer that sold Tempur-Sealy branded mattresses for nearly 20 years. Dkt. 105-1 at 2. While Mattress Firm was an authorized Tempur-Sealy retailer, the parties' relationships were governed by two Master Retailer Agreements (“MRA”) that are substantially similar: one with Sealy (“Sealy MRA”) and one with Tempur-Pedic (“Tempur MRA”). Id. at 3; Dkt. 105-2 (Sealy MRA); Dkt. 105-3 (Tempur MRA).

         In January 2017, the parties dissolved their MRAs. Dkt. 105-1 at 4, 6. Then, Mattress Firm entered into letter agreements with Tempur-Pedic (“Tempur Letter Agreement”) and Sealy (“Sealy Letter Agreement”) (collectively, “Letter Agreements”), which governed the parties' relationship following the termination of the MRAs. Dkt. 105-12 (Tempur Letter Agreement); Dkt. 105-11 (Sealy Letter Agreement). Under the Letter Agreements, Tempur-Sealy and Mattress Firm agreed that their relationship would continue through April 3, 2017. Dkt. 105-12 at 2; Dkt. 105-11 at 2. Tempur-Sealy agreed to continue to sell its products to Mattress Firm through that date at a volume of up to “110% of the corresponding period in 2016." Dkt. 105-12 at 3; Dkt. 105-11 at 3.

         Section 6 of the Letter Agreements requires that no later than April 3, 2017, “Mattress Firm must promptly cease using all [Tempur-Sealy] trademarks, trade names, images, and promotional materials . . . and shall cease holding itself out in any way as an authorized [Tempur-Sealy] retailer.” Dkt. 105-12 at 4-5; Dkt. 105-11 at 4. However, Section 6 permits Mattress Firm to use Tempur-Sealy Marks “for the limited purposes set forth in . . . section 8.c.iii and in 8.d of the MRA.” Dkt. 105-12 at 5; see Dkt. 105-11 at 4 (providing substantially similar language).

         Sections 8.c.iii and 8.d of the Sealy MRA provide:

iii. Retailer shall promptly cease and desist use of all Vendor intellectual property and shall cease and desist holding itself out in any way as an authorized retailer of the Products, provided that, unless Vendor repurchases Retailer's inventory of the Products (including floor samples) at fair value, Retailer shall have the right to sell such Products and use Vendor's intellectual property in connection therewith; and
d. Notwithstanding Section 8.c.iii, Retailer shall have the right at any time and from time to time after the termination of this Agreement to sell Products that are returned to Retailer, and Vendor grants to Retailer a limited, royalty-free license to use Vendor's trademarks specifically for such purpose.

Dkt. 105-2 at 4. Sections 8.c.iii and 8.d of the Tempur MRA provide:

iii. Retailer shall promptly cease and desist use of all Tempur-Pedic® trademarks, tradenames, images, promotional materials and shall cease and desist holding itself out in any way as an authorized Tempur-Pedic® retailer, provided that, unless Vendor repurchases Retailer's inventory of the Products (including floor samples) at fair value as specified in clause (iv) below, Retailer shall have the right to sell such Products and, solely in connection with the sale of such Products, use the applicable model name, and brand name, which may contain intellectual property of Vendor; and
d. Notwithstanding Section 8.c.iii, Retailer shall have the right at any time and from time to time after the termination of this Agreement to sell Products that are returned to Retailer and, solely in connection with the sale of such Products, use the applicable model name and brand name, which may contain intellectual property of Vendor.

Dkt. 105-3 at 4-5.

         After the Letter Agreements were entered into, and since April 3, 2017, Mattress Firm has used Tempur-Sealy intellectual property in ways other than the display of Tempur-Sealy products. Dkt. 110-14; Dkt. 110-16. For example, Mattress Firm has run advertising campaigns and a website using Tempur-Sealy Marks. Dkt. 110-14; Dkt. 110-16. Tempur-Pedic sued Mattress Firm alleging breach of contract and trademark infringement under common law and the Lanham Act. Dkt. 101. Mattress Firm moves for summary judgment on Tempur-Sealy's claim that it breached the Letter Agreements. Dkt. 105. Tempur-Pedic also moves for summary judgment on that claim. Dkt. 109.

         II. Legal Standards

         A. Summary Judgment

         A court shall grant summary judgment if a “movant shows that 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). “[A] fact is genuinely in dispute only if a reasonable jury could return a verdict for the nonmoving party.” Fordoche, Inc. v. Texaco, Inc., 463 F.3d 388, 392 (5th Cir. 2006). “Cross-motions must be considered separately, as each movant bears the burden of establishing that no genuine issue of material fact exists and that it is entitled to prevail as a matter of law.” Shaw Constructors v. ICF Kaiser Eng'rs, 395 F.3d 533, 538-39 (5th Cir. 2004) (footnote omitted). If the moving party meets its burden, the burden shifts to the non-moving party to set forth specific facts showing a genuine issue for trial. Fed R. Civ. P. 56(e). The court must view the evidence in the light most favorable to each non-movant and draw all justifiable inferences in favor of each non-movant. Ford Motor Co. v. Tex. Dep't of Transp., 264 F.3d 493, 498 (5th Cir. 2001). “If there is no genuine issue and one of the parties is entitled to prevail as a matter of law, the court may render summary judgment.” Shaw Constructors, 395 F.3d at 539 (footnote omitted).

         B. Principles of ...


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