Hearthlist Digest #437 - Wednesday, April 5, 2000 CFM vs. Hearthstone by "Jason Perry" <[email protected]> Ending Distributor Relationships =96 A Reply To Karen Fenton by "Tony Woodruff" <[email protected]>
(back) Subject: CFM vs. Hearthstone From: "Jason Perry" <[email protected]> Date: Tue, 4 Apr 2000 21:28:06 -0400 FOR IMMEDIATE RELEASE Contacts: Jason Perry, Vice President, Marketing Vermont Castings, Majestic Products Co. (800) 525-1898 Rina Ristagno, Marketing Manager Vermont Castings, Majestic Products, Co. (800) 525-1898 Federal Court Protects Vermont Castings Trademark FORT WAYNE, Indiana, Mar. 15, 2000 -- A United States District Court judge has ruled that HearthStone (NHC, Inc.) must immediately stop using the name VermontHearth in response to a trademark infringement suit brought by CFM Majestic Inc. The Court ruled that the VermontHearth name was too similar to the established Vermont Castings=AE trademark, and thus, was likely to create confusion in the marketplace. In ruling in CFM's favor, the Court found that the Vermont Castings=AE trademark had attained a high level of consumer recognition through more than 20 years of consumer-directed efforts. "This strength (of the Vermont Castings trademark)," the Court said in its 37-page ruling, "comes from the fact that Vermont Castings virtually started the market for high quality, cast-iron stoves a generation ago. Since its inception, Vermont Castings, and now CFM, have consistently promoted and advertised the Vermont Casings mark, building a virtually unparalleled reputation for quality in the industry." In evaluating the merits of the case, the Court sought out why the name VermontHearth was selected in the first place. "It is important that we focus our analysis upon the intent of (NHC's President Manuel) Perez. . . . (This analysis) leads to a fair inference, drawn by this Court, that NHC, as the junior user, adopted the mark for the purpose of profiting from the aura of goodwill surrounding the Vermont Castings=AE mark." The Court continued: ". . .(The term) 'Vermont' was selected to instantly achieve high quality design identity for NHC. However, this connection between the name 'Vermont" and design superiority had been created by Vermont Castings' dint of effort, and directly supports the conclusion that NHC's true intent here was to come as close as possible to the Vermont Castings=AE name, to trade on that reputation and to possibly confuse the buying public." CFM Majestic, Inc., through its Vermont Castings, Majestic Products Division, manufactures and markets a premier line of gas and wood stoves, fireplaces, fireplace inserts, gas logs and barbecue grills. -- 30 --
(back) Subject: Ending Distributor Relationships =96 A Reply To Karen Fenton From: "Tony Woodruff" <[email protected]> Date: Wed, 5 Apr 2000 13:36:22 -0400 On March 14th 2000, Ms Karen Fenton published a release regarding the on going lawsuit between Energy Works Wholesale (EWW) and my company. Her statement was brief, and did not present a full picture of the course of events. I wish to provide a more complete history, which now follows. HISTORICAL BACKGROUND In 1984, Regency Industries Ltd (which became FPI in 1996) began an association with EWW by which EWW distributed Regency products in California and Nevada. The terms of this arrangement were not put into a written contract, as is common practice in the hearth products industry. By mid 1995, Regency began to be concerned with the volume of sales at EWW, and also some of EWWs philosophies and sales strategies. (Regency believes that one of EWWs beliefs was that the hearth products market was not moving towards gas products.) These issues were clearly communicated to EWW in person and in writing on several occasions in late 1995 and early 1996. During the HPA Expo in Charlotte in March 1996, Regency learned from a California dealer that EWW had begun selling the Pacific Energy brand of hearth products. EWW had not told Regency of this, despite having spent 3 days before the Expo, at Regencys expense, at a Regency strategy conference at a resort in Asheville, NC. During the Expo, Robert Little, President of Regency and Tony Woodruff, VP Sales & Marketing, met with Jay Fenton, owner of EWW. Mr Fenton confirmed that he was now distributing the Pacific Energy brand, and that he would not be adding any resources to his organization to cope with this extra workload. Regency now fully believed that it had a big problem in one of its largest markets. The company believed that it was now facing declining California sales, major strategy differences with EWW, and declining support from EWW. Three weeks later on April 15th 1996, Tony Woodruff met with Jay Fenton in California, and ended their distribution relationship, offering to buy back all current product at EWWs cost plus a premium of 25% profit for EWW. Subsequently, Regency began setting up its own distribution system in California. THE LEGAL DISPUTES At the termination EWW owed Regency $86,728, which it refused to pay. Regency and the Canadian Export Development Corporation, filed suit for non-payment. EWW filed counter claims against the company and also personally against Robert Little and Tony Woodruff, alleging fraud, antitrust violations, libel, theft of trade secrets, duress, unfair business practices, intentional interference with EWWs business, and breach of contract. Various efforts at settlement were attempted, including mediation with a judge, but none were successful. A long, expensive process of discovery and numerous court motions and hearings then began. Gradually the issues were clarified and the court began making decisions. In July 1998 Regency sought a court order on its original complaint, and EWW ultimately paid $92,228, including interest. EWW dropped the personal suits against Little and Woodruff. The court decided that there was no evidence to support the claims of fraud, antitrust, and duress and ultimately threw these out. The court also decided that Regency had not acted with malice, and so the jury could not consider any punitive damages claim. The court dismissed the personal lawsuit filed by Jay Fenton and he was required to repay certain legal costs to Regency. EWWs lawsuit was allowed to proceed to trial. On February 22nd 2000 a 21/2 week trial commenced before a jury. The jury had to decide 4 allegations libel, theft of trade secrets, breach of contract and intentional interference with business. The jury voted unanimously that there was no libel or theft of trade secrets, but voted 9-3 that there was breach of contract and 10-2 that there was intentional interference with business, and awarded $500,000 damages to cover these infractions. In California, jurors are free to discuss what happened in the jury room after they announce their verdict. When questioned, several jurors said that there was a long debate over the issues. The majority of the jurors apparently felt that the Pacific Energy product line was not a competitor of Regency, and so there was no valid reason to end the distribution arrangement. Regency understands that this was the key issue which determined the finding of both breach of contract and interference. Other than the jury apparently concluding that Pacific Energy is not a competitor of Regency and the consequent findings of breach of contract and intentional interference, all issues heard so far in the case have been decided in favor of Regency. One final allegation, of unfair business practices, is due to be heard before Judge Flynn on April 7th. FPI / Regency believes that several errors occurred in the long trial and intends to vigorously appeal the two findings against it. This appeals process may take up to another 2 years, and until all appeals are completed, the preliminary award by the jury is under question. Tony Woodruff may be reached by e mail at [email protected].