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Denali Real Estate, LLC v. Denali Custom Builders, Inc.

Supreme Court of Nebraska

April 25, 2019

Denali Real Estate, LLC, a Nebraska limited liability company, doing business as Denali construction and Denali Homes, appellee,
v.
Denali Custom Builders, Inc., a Nebraska corporation, appellant.

         1. Injunction: Equity. An action for injunction sounds in equity.

         2. Equity: Appeal and Error. On appeal from an equity action, an appellate court decides factual questions de novo on the record and, as to questions of both fact and law, is obligated to reach a conclusion independent of the trial court's determination.

         3.__:__.On appeal from an equity action, when credible evidence is in conflict on material issues of fact, the court considers and may give weight to the fact that the trial court observed the witnesses and accepted one version of the facts over another.

         4. Statutes: Appeal and Error. Statutory interpretation is a question of law, which an appellate court resolves independently of the trial court.

         5. Rules of the Supreme Court: Pleadings. Nebraska courts will look to federal decisions interpreting corresponding federal rules for guidance in interpreting similar Nebraska civil pleading rules.

         6. Rules of the Supreme Court: Motions to Dismiss: Moot Question. Generally, the denial of a motion to dismiss under Neb. Ct. R. Pldg. § 6-1112(b)(6) becomes moot after trial.

         7. Pleadings: Judgments: Appeal and Error. A party who unsuccessfully moves for judgment on the pleadings must either file additional pleadings or go to trial on the issues joined by the original pleadings, and, by saving exception to the action of the trial court in overruling his or her motion, obtain a review thereof on appeal from the final judgment, if adverse.

         8. Pleadings: Judgments. Even when a party does not move to amend pleadings, a court may constructively amend pleadings on unpleaded issues in order to render a decision consistent with the trial.

         [302 Neb. 985] 9. Directed Verdict: Waiver: Appeal and Error. A defendant who moves for a directed verdict at the close of the plaintiff's evidence and, upon the overruling of such motion, proceeds with trial and introduces evidence, waives any error in the ruling on the motion.

         10. Names: Words and Phrases. A designation is "used" as a trade name when the designation is displayed or otherwise made known to prospective purchasers in the ordinary course of business in a manner that associates the designation with the goods, services, or business of the user.

         11. Names: Proof. In a case for trade name infringement, the plaintiff has the burden to prove by a preponderance of the evidence the existence of (1) a valid trade name entitled to protection and (2) a substantial similarity between the plaintiff's and the defendant's names, which would result in either actual or probable deception or confusion by ordinary persons dealing with ordinary caution.

         12. Names. The evil sought to be eliminated by trade name protection is confusion.

         13. Names: Proof. The likelihood of confusion in the use of trade names can be shown by presenting circumstances from which courts might conclude that persons are likely to transact business with one party under the belief they are dealing with another party. If the similarity is such as to mislead purchasers or those doing business with the company, acting with ordinary and reasonable caution, or if the similarity is calculated to deceive the ordinary buyer in ordinary conditions, it is sufficient to entitle the one first adopting the name to relief.

         14. Names. Among the considerations for determining whether trade name confusion exists are (1) degree of similarity in the products offered for sale; (2) geographic separation of the two enterprises and the extent to which their trade areas overlap; (3) extent to which the stores are in actual competition; (4) duration of use without actual confusion; and (5) the actual similarity, visually and phonetically, between the two trade names.

         15. Corporations: Names. Under Neb. Rev. Stat. § 87-302 (Cum. Supp. 2018), a corporation engages in a deceptive trade practice when, in the course of its business, it causes the likelihood of confusion or of misunderstanding as to the source, sponsorship, approval, or certification of goods or services or affiliation, connection, or association with, or certification by, another.

         16. Claims: Names: Deceptive Trade Practices. While a claim for the misuse of a trade name considers only the trade name seeking protection, a claim for a deceptive trade practice expands the consideration to issues of image and trade dress.

         17. Torts: Intent: Proof. To succeed on a claim for tortious interference with a business relationship or expectancy, a plaintiff must prove (1) the [302 Neb. 986] existence of a valid business relationship or expectancy, (2) knowledge by the interferer of the relationship or expectancy, (3) an unjustified intentional act of interference on the part of the interferer, (4) proof that the interference caused the harm sustained, and (5) damage to the party whose relationship or expectancy was disrupted.

         18. ___: ___: ___ . One of the basic elements of tortious interference with a business relationship requires an intentional act that induces or causes a breach or termination of the relationship or expectancy.

         19. Actions: Names: Injunction. Neb. Rev. Stat. § 87-217 (Reissue 2014) authorizes a registrant of a trade name to proceed by suit to enjoin the use or display of imitations of its trade name.

         20. Deceptive Trade Practices: Injunction. Neb. Rev. Stat. § 87-303(a) (Cum. Supp. 2018) authorizes a court to grant an injunction against a person committing a deceptive trade practice.

         21. Equity. In an equitable action, the district court is vested with broad equitable powers and discretion to fashion appropriate relief.

         22. Jurisdiction: Appeal and Error. Once an appellate court acquires equity jurisdiction, it can adjudicate all matters properly presented and grant complete relief to the parties.

          Appeal from the District Court for Lancaster County: Robert R. Otte, Judge.

          Matt Catlett, of Law Office of Matt Catlett, for appellant.

          Joseph C. Byam, of Byam & Hoarty, for appellee.

          Heavican, C.J., Miller-Lerman, Cassel, Stacy, Funke, Papik, and Freudenberg, JJ.

          CASSEL, J.

         I. INTRODUCTION

         A company using registered trade names obtained a permanent injunction, statutory damages, and attorney fees against a corporation using a similar name. The corporation appeals, contending that it used only its legal corporate name. But because evidence showed otherwise and actual confusion resulted, the corporation's central argument fails. We first consider whether the denials of the corporation's pretrial motions to dismiss and for judgment on the pleadings survive the trial, reaching only the latter motion. Upon de novo review, we uphold the [302 Neb. 987] judgment on the company's claims of trade name infringement and deceptive trade practices, but not its claim for intentional interference with a business relationship. Otherwise finding no merit to the appeal, we affirm the judgment.

         II. BACKGROUND

         1. Parties

         Denali Real Estate, LLC (DRE), doing business as Denali Construction and Denali Homes, is a Nebraska limited liability company with an office in Omaha, Nebraska. It filed a certificate of organization with the Nebraska Secretary of State in 2014. In September 2015, DRE registered with the Secretary of State the trade names "Denali Construction" and "Denali Homes." That same month, it began building, advertising, and selling new homes under the name "Denali Homes." DRE markets its homes in eastern Nebraska and has built homes in Douglas, Lancaster, and Sarpy Counties.

         Denali Custom Builders, Inc. (DCB), is a Nebraska corporation with an office in Lincoln, Nebraska. It filed articles of incorporation and commenced business on February 29, 2016. It builds new homes in Lancaster County.

         2. Lawsuit

         In July 2016, DRE demanded that DCB stop using the name "Denali Custom Builders, Inc." in its business. DCB continued to use the name, and DRE filed suit in the district court in October.

         DRE alleged misuse of trade name, claiming that DCB's "use of the trade name 'Denali Custom Builders, Inc.' has caused confusion, mistake, and deception among purchasers and potential purchasers of homes in Nebraska." DRE sought injunctive relief and damages attributable to DCB's "wrongful use of [DRE's] trade name," including lost profits and reasonable attorney fees.[1]

         [302 Neb. 988] DRE also alleged deceptive trade practices in violation of the Uniform Deceptive Trade Practices Act.[2] It alleged that DCB's use of DRE's trade name caused confusion and misunderstanding as to DCB's affiliation with DRE. On this claim. DRE sought an injunction and costs.[3]

         Finally, DRE alleged interference with a business relationship. It claimed that DCB was "deceiving the members of the public" into believing that DCB's advertising was that of DRE. thereby interfering with DRE's "business relationships with the public generally."

         3. Pretrial Proceedings

         DCB responded by filing a motion to dismiss, alleging that the complaint failed to state a claim upon which relief may be granted. The district court denied the motion.

         After the denial of DCB's motion to dismiss, DCB filed an answer. As an affirmative defense, it alleged that "[t]he Complaint fails to state a claim upon which relief can be granted because 'Denali Custom Builders, Inc.' is [DCB's] legal name, not [DCB's] trade name."

         After the close of the pleadings, DCB moved for judgment on the pleadings. The court overruled the motion. In doing so, the court stated that "there is a reasonable dispute as to whether there's a misuse of the trade name or of the names used by [DCB]" and that the factual allegations in the complaint were sufficient to support the causes of action.

         Forty-nine days after a pretrial conference, DRE moved to amend its complaint and the joint pretrial conference memorandum. DRE sought to add Roger Watton, a potential home-buyer, as a witness and to add as exhibits two bills from a Lincoln utility. DCB filed an objection, noting that the trial was set to begin in 13 days and that DRE had had more than 1 year to amend its complaint. DCB also alleged that it would [302 Neb. 989] be prejudiced by any amendment to the complaint. During a hearing on the motion to amend and the objection, DRE represented that neither the utility bills nor the testimony of Watton were known to DRE at the time of completing the pretrial conference memorandum "because this has just occurred in the last couple weeks." The court overruled the motion to amend the complaint, but sustained the motion to add the witness and exhibits to the pretrial joint conference memorandum.

         Two days before trial, DCB moved for attorney fees under Neb. Rev. Stat. § 25-824(2) and (4) (Reissue 2016). It alleged that the action was frivolous and was brought to harass DCB.

         4. Trial

         The court bifurcated the trial, with the initial portion of the trial addressing liability and a second portion being reserved for consideration of remedies.

         By the time of trial, DRE had built approximately 10 homes. It was building a home "within half a mile" of a home that DCB was building. DCB's signage and its website identified it as "Denali Custom Builders" and, according to DRE's managing partner, used the same fonts and colors as DRE.

         DRE adduced evidence demonstrating confusion regarding DRE and DCB. Internet searches for "denali construction nebraska" or "denali home construction nebraska" directed the searcher to DCB's website. DRE received a document from a lumber company with which it frequently transacted business that identified DRE as both "Denali Custom Homes" and "Denali Custom Builders." A bill from a utility for one of DRE's projects identified the customer as "Denali Custom Builders." Another time, DRE returned materials to an Omaha furniture store but the store gave the credit to DCB. An employee testified that there was confusion as to which entity should get the credit. An appliance sales associate for the same furniture store testified that an order belonging to DRE ended up in the store's system under DCB, which caused confusion. Watton testified that in September 2017, [302 Neb. 990] he and his wife met with representatives of DRE in Omaha to discuss the process for building a home. The following weekend, Watton and his wife toured some homes in Lincoln and there was a home built by an entity containing the name "Denali." After touring the home, Watton did not know what entity had built it. Watton subsequently spoke with a representative of DRE, who clarified that DRE had not built that particular house.

         After DRE presented its case in chief, it asked that the pleadings be amended to conform to the evidence presented. Specifically, DRE wanted the complaint to be amended to show that DCB used names other than its true legal name. DCB objected. The court overruled the motion, because "this is already incorporated into the allegations that have been made and consistent with the matters that we've addressed before." DCB moved for a directed verdict, which the court denied. The only evidence DCB offered was an attorney fee affidavit.

         5. Interlocutory Order and Final Judgment

         After the first phase of the trial, the court entered an order finding in favor of DRE on the issue of liability. The court found that DRE and DCB were operating the same type of business, which generally consisted of building new homes. It found that both businesses advertised on social media, that they were building homes in Lincoln within a half mile of each other, and that they have signs using "Denali."

         Significantly, the court determined that DCB generally did not use its corporate name when conducting business, but, rather, typically removed '"Inc."' and used '"Denali Custom Builders.'"

         The court also determined that DRE's evidence provided a reasonable basis for concluding that there was confusion and that it was likely for such confusion to exist in the future. The court found that DRE's right to use "'Denali'" was superior [302 Neb. 991] to that of DCB, noting that DRE used and registered the trade name for a home construction business first and that it had used the trade name in the ordinary course of business in a manner that associated its business with that name. The court concluded that DRE had met its burden of proof and established its claim for relief for misuse of a trade name.

         The court also found that DRE met its burden of proof and established its claim for relief against DCB for engaging in deceptive trade practices. The court noted that both parties were in the home construction business, that both parties transacted business and advertised in Lancaster County, and that there had been actual confusion by suppliers and the consuming public. The court observed that DCB used similar colors, type fonts, images, and design as those used by DRE.

         Finally, with regard to interference with business relationships, the court found that DCB's use of '"Denali"' interfered with DRE's business relationships. The court found that DRE had a valid business relationship with its suppliers and an expectancy of a business relationship with the consuming public. The court stated that DCB's "failure to terminate the use of the name after being aware of [DRE's] use creates intentional interference under the law."

         Following the second phase of the trial, the court entered judgment. It permanently enjoined DCB from using or displaying "'Denali'" in its business in any manner and gave it a set amount of time to remove "'Denali'" from anywhere it used or displayed that word, including "registration of its corporate name or trade name with the Nebraska Secretary of State and from any signage, website, advertising, social media (including but not limited to Facebook and Twitter)." The court awarded DRE statutory damages of $1, ...


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