Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

ADT LLC v. NorthStar Alarm Services, LLC

United States Court of Appeals, Eleventh Circuit

April 14, 2017

ADT LLC, Plaintiff-Appellee,
v.
NORTHSTAR ALARM SERVICES, LLC, Interested Party-Appellant.

         Appeal from the United States District Court for the Southern District of Florida D.C. Docket No. 9:12-cv-81120-DTKH

          Before WILLIAM PRYOR and MARTIN, Circuit Judges, and DUFFEY, [*] District Judge.

          WILLIAM PRYOR, Circuit Judge

         This appeal presents the question whether a nonparty, not in privity with a party to an injunction, may be bound by that injunction as a successor in interest under the theory of de facto merger. After ADT LLC, sued Vision Security, LLC, for violations of the Lanham Act, 15 U.S.C. § 1125(a), the parties agreed to an injunction that prohibited Vision Security from using certain sales tactics. NorthStar Alarm Services, LLC, then acquired customer accounts, rental leases, and other assets from Vision Security and hired four senior officers and some of the sales team of Vision Security. When NorthStar allegedly used sales tactics prohibited by the injunction, ADT moved the district court to hold NorthStar in contempt of the injunction. The district court determined that, although NorthStar and Vision Security were not in privity, NorthStar was bound by the injunction as a successor to Vision Security under a state-law theory of de facto merger. We disagree. NorthStar cannot be bound by the injunction when it is not in privity with Vision Security and in the absence of any evidence that it had notice of the injunction, Fed.R.Civ.P. 65(d)(2). We vacate the order that held that NorthStar is bound by the injunction.

         I. BACKGROUND

         In 2012, ADT filed a complaint against Vision Security that alleged violations of the Lanham Act, 15 U.S.C. § 1125(a). ADT alleged that Vision Security made false statements to customers of ADT to trick them into signing contracts with a different security alarm company. The parties settled the lawsuit by agreeing to an injunction, which prohibited Vision Security from making false statements about ADT and from training "any person who may sell for or solicit customer[s] on behalf of Vision[] to violate the terms of th[e] Permanent Injunction."

         In January 2015, Vision Security executed an asset purchase agreement with NorthStar. Although ADT argues that the agreement effected a corporate merger, NorthStar insists that the agreement involved only the purchase of some customer accounts from Vision Security. Under the agreement, NorthStar acquired from Vision Security 8, 000 customer accounts to add to the 35, 000 accounts NorthStar had before the agreement, goodwill, deferred revenues relating to the customer accounts, all the furniture, fixtures and equipment used in connection with the business that relate to the customer accounts, and obligations under some contracts, including real estate leases in Arizona and Utah. The agreement also specified that NorthStar did not acquire from Vision Security cash, bank accounts, customer accounts, contracts, and other accounts and assets not listed in the agreement, intellectual property, books of account and books of original entry, personnel records, any insurance policies or associated causes of action, all claims for tax refunds, all rights of Vision Security, and the equipment of the sole remaining employee of Vision Security, Danielle Paletz. The agreement never mentioned the injunction in favor of ADT.

         The agreement provided that NorthStar would hire four senior officers from Vision Security. One officer, Robert Harris, was the owner and chief executive officer of Vision Security and became the president of NorthStar. He also became a member of the board of directors of NorthStar and received almost fourteen percent of its stock. In his new position at NorthStar, Harris oversaw seven or eight regional sales managers, four of whom came to NorthStar from Vision Security. He testified that "[t]he leadership of the sales organization report directly to [him.]" But he also testified that his "primary role at NorthStar is involved in recruiting people to come work for NorthStar" and that he did not "personally do any sales training at NorthStar." NorthStar also hired between thirty and thirty-five of the 250 sales representatives of Vision Security. But there was high turnover in the sales staff of Vision Security from year to year because most of the sales agents were seasonal independent contractors.

         Vision Security terminated its sales force after it executed the agreement, consistent with a clause that prohibited Vision Security and Harris from competing with NorthStar for five years. But Paletz remained employed by Vision Security to service between 1, 500 and 2, 000 accounts that Vision Security retained. Another company provided monitoring services for those accounts.

         About one year after the entry of the injunction against Vision Security, ADT determined that NorthStar was violating the terms of the injunction. It moved the district court for an order to show cause why NorthStar and Harris should not be held in contempt of the injunction. ADT argued that that the injunction against Vision Security bound NorthStar because NorthStar had purchased part of the alarm business of Vision Security.

         After a hearing, a magistrate judge recommended that NorthStar and Harris be bound by the injunction. The magistrate judge determined that NorthStar and Vision Security were not in privity, but that NorthStar was bound by the injunction as a successor to Vision Security under a state-law theory of de facto merger. The magistrate judge also determined that Harris was bound "because in his capacity as CEO and sole managing member of Vision [Security], his liability is the same as if he had been a named party in the underlying lawsuit." The district court adopted the recommendation of the magistrate judge, and only NorthStar appealed.

         II. STANDARDS OF REVIEW

         We review an order that grants, continues, or modifies an injunction for abuse of discretion. Siegel v. LePore, 234 F.3d 1163, 1178 (11th Cir. 2000) (en banc). "We review the underlying findings of fact for clear error and conclusions of law de novo." Common Cause/Ga. v. Billups, 554 F.3d 1340, 1349 (11th Cir. 2009). Whether a party is in privity with another party is a question of fact that we review for clear error. See E.E.O.C. v. Pemco Aeroplex, Inc., 383 F.3d 1280, 1285 (11th Cir. 2004).

         III. ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.