SCI N.C. FUNERAL SERVS., LLC v. McEWEN ELLINGTON FUNERAL SERVS., INC.

SCI N.C. Funeral Servs., LLC v. McEwen Ellington Funeral Servs., Inc.,

2013 NCBC 11.

STATE OF NORTH CAROLINA IN THE GENERAL COURT OF

JUSTICE

MECKLENBURG COUNTY SUPERIOR COURT DIVISION

13 CVS 558

SCI NORTH CAROLINA FUNERAL

SERVICES, LLC; CAROTHERS

HOLDING COMPANY, LLC,

Plaintiffs,

v.

ORDER AND OPINION

MCEWEN ELLINGTON FUNERAL

SERVICES, INC.; MCEWEN FUNERAL

HOME, INC.; MCEWEN FUNERAL

SERVICES, INC.; and CARL M.

ELLINGTON, JR.,

Defendants.

Moore & Van Allen, PLLC by Anthony T. Lathrop and J. Mark Wilson for Plaintiffs.

Devore, Acton & Stafford, P.A. by Fred W. DeVore, III and Troy Stafford and

Womble Carlyle Sandridge & Rice, LLP by James P. Cooney, III for Defendants.

Murphy, Judge.

{1} THIS MATTER is before the Court on Plaintiffs’ Motion for Preliminary

Injunction (the “Motion”). After considering the Motion, the parties’ briefs in

support and opposition, and counsels’ arguments made during a hearing on the

Motion on February 1, 2013, the Court GRANTS Plaintiffs’ Motion finding as

follows:

I.

PROCEDURAL HISTORY

{2} Plaintiffs filed their Verified Complaint on January 11, 2013, alleging

claims for common law trademark infringement and unfair and deceptive trade

practices. Plaintiffs also filed, contemporaneously with their Complaint, a Notice of

Designation of Action as a Mandatory Complex Business Case. The case was

subsequently designated as a mandatory complex business case by the Chief Justice

of the North Carolina Supreme Court, and assigned by the Chief Special Superior

Court Judge for Complex Business Cases to this Court.

{3} The same day Plaintiffs filed their Compliant, they also filed a Motion for

Temporary Restraining Order (“TRO”) pursuant to Rule 65 of the North Carolina

Rules of Civil Procedure, and a Memorandum in Support. The Court held a hearing

on Plaintiffs’ Motion for TRO on January 11, 2013, at which all parties were

represented by counsel, and an order granting Plaintiffs’ Motion for TRO was issued

that same day.

{4} The terms of the TRO enjoined Defendants from “any and all activities that

are likely to cause confusion with Plaintiffs’ rights in the [McEwen name], including

using, in advertising, marketing, or promotion, or as any part of the name of a

funeral services business in the greater Charlotte area, the [McEwen name].” SCI

North Carolina Funeral Servs., Inc. v. McEwen Ellington Funeral Servs., Inc., 13

CVS 558 at 5–6 (N.C. Super. Ct. Jan. 11, 2013) (order granting TRO). Specifically,

Defendants were prohibited “from using the names McEwen Ellington Funeral

Services, McEwen Funeral Home, Inc., McEwen Funeral Services, Inc., or any other

similar mark, word, name, symbol, or slogan that incorporates the [McEwen name]

or is likely to cause confusion with the [McEwen name].” Id. at 6.

{5} Under the terms of the TRO, the Court scheduled a hearing for January 17,

2013, to determine whether Defendants should be preliminarily enjoined from using

the McEwen name. However, during a Case Management Conference on January

16, 2013, the parties consented to an extension of the TRO, and to reschedule the

hearing on Plaintiffs’ Motion until February 1, 2013. SCI North Carolina Funeral

Servs., Inc. v. McEwen Ellington Funeral Servs., Inc., 13 CVS 558 at 1 (N.C. Super.

Ct. Jan. 23, 2013) (order granting first extension of TRO). At the end of the

February 1, 2013, hearing, Plaintiffs moved for the TRO to be extended for an

additional ten (10) days, and Defendants consented. SCI North Carolina Funeral

Servs., Inc. v. McEwen Ellington Funeral Servs., Inc., 13 CVS 558 at 1 (N.C. Super.

Ct. Feb. 1, 2013) (order granting second extension of TRO). On February 8, 2013,

the Court requested the parties’ positions on another extension of the TRO for an

additional five (5) days to give the Court adequate time to consider the matter. All

parties consented to the Court’s request for a third extension. SCI North Carolina

Funeral Servs., Inc. v. McEwen Ellington Funeral Servs., Inc., 13 CVS 558 at 1

(N.C. Super. Ct. Feb. 8, 2013) (order granting third extension of TRO).

II.

FACTUAL BACKGROUND

{6} “Every order granting an injunction and every restraining order shall set

forth the reasons for its issuance . . . .” N.C. R. Civ. P. 65(d). However, findings of

fact and conclusions of law made when ruling on motions for injunctive relief are

not binding on a court when evaluating subsequent dispositive motions or the

merits of the action in an eventual trial. Windsor Jewelers, Inc. v. Windsor Fine

Jewelers, LLC, 08 CVS 24643 (N.C. Super. Ct. May 22, 2009) (order denying a

motion to dismiss that argued that defendants were entitled to a dismissal because

the court denied plaintiffs’ request for injunctive relief); A.E.P. Indus. v. McClure,

308 N.C. 393, 400, 302 S.E.2d 754, 759 (1983) (stating that “[a] preliminary

injunction is interlocutory in nature, . . . [and] ‘[i]ts decree bears no precedent to

guide the final determination of the rights of the parties.’” (quoting State v.

Fayetteville St. Christian Sch., 299 N.C. 351, 357–58, 261 S.E.2d 908, 913 (1980))).

Accordingly, the following factual background is recited solely for the purpose of

providing context for the Court’s reasons underlying the injunction.

{7} Plaintiffs are North Carolina limited liability companies that own and

operate a number of funeral homes offering funeral services in and around

Charlotte, North Carolina. (Vr. Compl. ¶ 1.)

{8} Carl J. McEwen (“McEwen”), the founder of McEwen Funeral Services, Inc.

(“MFS”) (not to be confused with Defendant McEwen Funeral Services, Inc. which

was only recently registered with the North Carolina Secretary of State), began

servicing funeral homes in 1921. (Defs.’ Mem. Opp. Mot. for Prelim. Inj. (“Defs.

Mem.”) 3.) By 1944, McEwen opened a location in Charlotte on Morehead Street

(the location currently used by Defendants to provide funeral services), and

eventually brought in other family members to help run MFS and McEwen Funeral

Home of Mint Hill (“MFS Mint Hill”). (Defs. Mem. 3.) One of the family members

brought in by McEwen was Carl McEwen Ellington, Sr. (“Ellington Sr.”) (McEwen’s

grandson) who ran the company from 1956 until 1986 when MFS and MFS Mint

Hill were sold. (Defs. Mem. 3.) Defendant Carl McEwen Ellington, Jr. (“Ellington

Jr.”) (Ellington Sr.’s son) was a shareholder in MFS and a partner in MFS Mint

Hill. (Vr. Compl. ¶ 16.)

{9} On July 24, 1986, the McEwen family, including Ellington Sr. and Ellington

Jr., entered into a Capital Stock Purchase Agreement (“Stock Agreement”) and

Asset Purchase Agreement (“Asset Agreement”) with Service Corporation

International (“SCI”) (not to be confused with Plaintiff SCI North Carolina Funeral

Services, Inc. (“SCI NC”)) for the sale of MFS’s stock and MFS Mint Hill’s assets.

(Vr. Compl. 12.) These agreements explicitly covered the ownership and sale of

MFS and MFS Mint Hill’s trademarks and trade names, and provided that “[MFS]

owns the common law and exclusive right to the trade name ‘McEwen Funeral

Service’ in the trade area in which such name is utilized in the Corporation’s

business . . . [,]” (Aff. of Robert D. Polydys, II (“Polydys”) Ex. A (“Stock Agreement”)

Art. III § 13), and that “[MFS Mint Hill], at the Closing . . . will sell, transfer,

convey and deliver to [SCI] . . . all of the assets . . . of [MFS Mint Hill] of every type

and description, . . . including, without limitation, . . . [all] trademarks, trade names

(including all trade names under which the Seller does business) . . . .” (Aff. of

Polydys Ex. B (“Asset Agreement”) Art. I § 1.)

{10} Since the sale, the McEwen name has been continuously used in the

ownership and operation of funeral homes throughout Charlotte, Mint Hill,

Pineville, and Monroe. In addition, MFS continued to use its Charlotte location on

Morehead Street until the early 2000s. (Vr. Compl. ¶ 18; Pls.’ Mem. Supp. Mot. for

Prelim. Inj. (“Pls. Mem.”) 4.)

{11} The McEwen name has been promoted through sponsorship of community

activities organized by “Hospice and Palliative Care of Charlotte, the Levine

Children’s hospital, the Knights of Columbus, the Lions Club, and a variety of other

organizations and schools.” (Aff. of Polydys ¶ 11.) The McEwen name is also

advertised in the Charlotte region through television, radio, and print media that

costs tens-of-thousands-of-dollars per year. (Aff. of Polydys ¶¶ 12–14.)

{12} Plaintiffs have not registered the McEwen name under either the North

Carolina Trademark Registration Act or the federal Trademark Act of 1946. (Defs.’

Mem. 2.)

{13} Despite being a former shareholder in MFS and partner in MFS Mint Hill,

recently, Ellington Jr. registered a funeral home with the North Carolina Board of

Funeral Service under the trade name McEwen Ellington Funeral Services (Vr.

Compl. ¶ 19), and registered the following corporations with the North Carolina

Secretary of State: McEwen Ellington Funeral Services, Inc.; McEwen Funeral

Home, Inc.; and McEwen Funeral Services, Inc. (Vr. Compl. ¶ 20.)

{14} Defendants have begun funeral home operations at the Morehead

Street location previously used by Plaintiffs, erected a sign on the site using the

name McEwen Ellington Funeral Services, and, according to Plaintiffs, contracted

for advertising to be run under the McEwen Ellington Funeral Services name in the

January 12–13, 2013, weekend edition of the Charlotte Observer. (Pls.’ Mem. 4; Vr.

Compl. ¶ 24.)

{15} Plaintiffs also allege that the script used in the signage advertising

Defendants’ Morehead Street location is “similar to the script used on the [MFS]

sign [that had been used] at this location until the early 2000s” (Aff. of Polydys ¶

15); that Defendants “have decorated the lobby of [the Morehead Street location]

with the same painting of Carl J. McEwen that is in the lobby of [MFS] at Sharon

Memorial Park and [MFS] Mint Hill Chapel” (Aff. of Polydys ¶ 18); and that while

Defendant Ellington, Jr. has not customarily used his middle name (McEwen) in

other business contexts, the McEwen name inexplicably began to appear when

Defendants opened their competing funeral home business. (Aff. Polydys ¶¶ 20–21.)

{16} On December 7, 2012, Plaintiffs mailed Ellington Jr. a letter stating that

Plaintiffs own and operate five funeral homes in North Carolina containing the

name McEwen and advised Ellington Jr. that he should withdraw his registration

of the marks listed above. (Pls.’ Mem. 5.)

{17} To demonstrate that a likelihood of confusion between the parties’ trade

names exists, Plaintiffs allege that the following examples of “actual confusion”

have already occurred: (1) that on the week of January 7, 2013, mail for McEwen

Ellington Funeral Services was mistakenly delivered to MFS’s Mint Hill Chapel

location; (2) that on January 14, 2013, flowers intended of a funeral service to be

performed by McEwen Ellington Funeral Services were delivered by mistake to

MFS’s Sharon Memorial Park location; and (3) that on January 14, 2013, one of

MFS’s managers was asked by a customer if a funeral service could be held at

McEwen Ellington Funeral Services’ new facility. (Aff. of Polydys ¶ 23.)

III.

PRINCIPLES OF LAW

A.

PRELIMINARY INJUNCTION STANDARD

{18} The purpose of a preliminary injunction is “‘to preserve the [status quo]

pending trial on the merits.’” A.E.P. Indus., Inc., 308 N.C. at 401, 302 S.E.2d at 759

(quoting State v. Fayetteville St. Christian Sch., 299 N.C. at 357, 261 S.E.2d at

913). The remedy of a preliminary injunction “‘is an extraordinary measure[,] . . .

[and] will be issued only (1) if a plaintiff is able to show likelihood of success on the

merits of [its] case and (2) if a plaintiff is likely to sustain irreparable loss unless

the injunction is issued . . . .’” Id. (quoting Investors, Inc. v. Berry, 293 N.C. 688,

701, 239 S.E.2d 566, 574 (1977)).

B.

COMMON LAW TRADEMARK INFRINGEMENT THROUGH THE USE OF

SURNAMES

{19} “A man has the right to use his own name in connection with his business,

provided he does so honestly and does not resort to unfair methods by which he

wrongfully encroaches upon another’s rights or commits a fraud upon the public.”

Zagier v. Zagier, 167 N.C. 616, 617, 83 S.E. 913, 913 (1914) (citing Bingham Sch. v.

Gray, 122 N.C. 699, 707, 30 S.E. 304, 304 (1898)). Accordingly, “[a]s a rule, a trade-

mark can not be taken in a surname . . . .” Bingham Sch., 122 N.C. at 707, 30 S.E.

at 305 (citing Brown Chem. Co. v. Meyer, 139 U.S. 540 (1891)); accord Zagier, 167

N.C. at 617, 83 S.E. at 913 (stating that “[a]s a rule, a trade-mark cannot be taken

in a surname . . . .”).1

{20} That a plaintiff is incorporated using its founder’s surname

does not give it the exclusive right to that name; another corporation

might be created by and operated under the same title, when not in the

same locality, in the absence of proof of an intent to injure the first

named corporation or to avail itself fraudulently of the other’s good

name and reputation.

Bingham Sch., 122 N.C. at 707, 30 S.E. 304–05.

{21} As a result,

‘any one [sic] having the same surname as that under which a business

has been long and successfully conducted by another, so as to acquire a

reputation therefor [sic], can conduct a like business under the same

name, provided there be no intent to injure or fraudulently attract the

benefit of the good name and reputation previously acquired by the

other.’

Zagier, 167 N.C. at 617, 83 S.E. at 913 (quoting Bingham Sch., 122 N.C. 699, 30

S.E. 304 (pinpoint citation omitted because the quoted language is from Headnote 1

of the Bingham School opinion)). “‘It is not the use, but dishonesty in the use, of the

1 In support of the rule that a trademark cannot be taken in a surname, the Court in Zaiger

cited to Russia Cement Co. v. LePage, where the Massachusetts Supreme Judicial Court

held that

‘A person cannot make a trade-mark of his own name, and thus debar

another having the same name from using it in his business, if he does so

honestly and without any intention to appropriate wrongfully the good-will of

a business already established by others of the name. Every one [sic] has the

absolute right to use his own name honestly in his own business for the

purpose of advertising it, even though he may thereby incidentally interfere

with and injure the business of another having the same name. In such case

the inconvenience or loss to which those having a common right to it are

subjected is damnum absque injuria. But although he may thus use his

name, he cannot resort to any artifice or do any act calculated to mislead the

public as to the identity of the business, firm, or establishment, or of the

article produced by them, and thus produce injury to the other beyond that

which results from the similarity of name.’

Zagier, 167 N.C. at 617–18, 83 S.E. at 913 (quoting Russia Cement Co., 147 Mass. 206, 209

(Mass. 1888) (citations omitted)).

name that is condemned.’” Zagier, 167 N.C. at 617, 83 S.E. at 913 (quoting Howe

Scale Co. v. Wyckoff, 198 U.S. 118 (1905) (pinpoint citation omitted because the

quoted language is from the syllabus of the Howe Scale Co. opinion)).2

{22} While the use of an individual’s surname is protected under the common

law, “it is also well established that one may, by contract, conclude himself from the

use of his own name in a given business, and the agreement will be enforced by the

courts.” Zagier, 167 N.C. at 617, 83 S.E. at 913 (citing Ranft v. Reimers, 200 Ill. 386

(Ill. 1902); Frazer v. Frazer, 121 Ill. 147 (Ill. 1887); Russia Cement Co., 147 Mass.

206; Hall Safe Lock Co. v. Herring-Hall-Marvin Safe Co., 143 F. 231, 237 (7th Cir.

1906)). In such situations:

‘[o]ne who has carried on a business under a trade name, and sold a

particular article in such a manner, by the use of his name as a trade-

mark or a trade name, as to cause the business or the article to become

known or established in favor under such name, may sell or assign

such trade name or trade-mark when he sells the business or

manufacture, and by such sale or assignment conclude himself from

the further use of it in a similar way.’

Zagier, 167 N.C. at 618 83 S.E. at 913–14 (emphasis added) (quoting Russia Cement

Co., 147 Mass. at 209).

{23} In addition, it is possible “‘that other trademark principles, such as the

doctrine of secondary meaning in connection with surnames or descriptive terms,

will also be applied in cases alleging a corporate name infringement.’” Two Way

Radio Serv., Inc. v. Two Way Radio of Carolina, Inc., 322 N.C. 809, 816, 370 S.E.2d

408, 412 (1988) (quoting R. Robinson, North Carolina Corporation Law and Practice

§ 4-1, at 52 (3d ed. 1983)).

2 The language used in the opinion in Howe Scale Co. states that “[i]t is dishonesty in the

use that is condemned, whether in a partnership or corporate name, and not the use itself.”

Howe Scale Co., 198 U.S. 118, 136.

C.

COMMON LAW PROTECTION OF GENERIC AND GENERALLY DESCRIPTIVE

WORDS

{24} “At common law generic, or generally descriptive, words and phrases, as

well as geographic designations, may not be appropriated by any business

enterprise either as a tradename [sic] or as a trademark.” Charcoal Steak House,

Inc. v. Staley, 263 N.C. 199, 201, 139 S.E.2d 185, 187 (1964). Such words “are the

common property and heritage of all who speak the English language; they are

publici juris. If the words reasonably indicate and describe the business or the

article to which they are applied, they may not be monopolized.” Id. (citations

omitted).

{25} “Although, a generic word or a geographic designation cannot become an

arbitrary trademark, it may nevertheless be used deceptively by a newcomer to the

field so as to amount to unfair competition . . . .” Id. (citing Cleveland Opera Co. v.

Cleveland Civic Opera Ass’n., 22 Ohio App. 400 (Oh. Ct. App. 1926)). In such

situations, “the prohibition against any right to the exclusive use of such a word or

designation has been modified by the ‘secondary meaning’ doctrine.” Charcoal

Steak House, Inc., 263 N.C. at 201, 139 S.E.2d at 187 (citing Surf Club v. Tatem

Surf Club, 151 Fla. 406 (Fl. 1942)).

{26} Secondary meaning is attained “[w]hen a particular business has used

words publici juris for so long or so exclusively or when it has promoted its product

to such an extent that the words do not register their literal meaning on the public

mind but are instantly associated with one enterprise . . . .” Charcoal Steak House,

Inc., 263 N.C. at 201–02, 139 S.E.2d at 187.

D.

EFFECT OF INCORPORATION AND LICENSURE ON COMMON LAW

TRADEMARK RIGHTS

{27} North Carolina law provides that:

The filing of any document, the reservation or registration of any name

under this Chapter or under Chapter 55, 55A, 55B, 57C, or 59 of the

General Statutes, or the issuance of a certificate of authority to

transact business or conduct affairs or a statement of foreign

registration does not authorize the use in this State of a name in

violation of the rights of any third party under the federal trademark

act, the trademark act of this State, or other statutory or common law,

and is not a defense to an action for violation of any of those rights.

N.C. GEN. STAT. § 55D-20(e) (2013) (emphasis added).

IV.

ANALYSIS

A.

THE PARTIES’ ARGUMENTS

{28} Plaintiffs argue that they are entitled to injunctive relief because they (1)

“have an exclusive right to the [McEwen name] for us [sic] in conjunction with

funeral home services in Charlotte,” (Pls. Mem. 1), and (2) “Defendants’ use of the

[name] on the same services and in the same territory is likely to cause confusion.”

(Pls. Mem. 1.)

{29} To show that Plaintiffs’ have an exclusive right to the McEwen name,

Plaintiffs argue that: (1) their exclusive right to the McEwen name is recognized

under North Carolina’s common law, (2) the “likelihood of confusion” test is the

proper standard for determining whether Defendants have infringed on Plaintiffs’

rights, (3) Defendants’ are prevented from using the McEwen name because of

Plaintiffs’ senior status to the name even though it is part of Ellington Jr.’s name,

(4) the sale of Ellington Jr.’s rights in the name prohibit his use of the name, and (5)

the North Carolina Board of Funeral Service and the North Carolina Secretary of

State’s registration of the name does not affect Plaintiffs’ common law rights.

{30} Defendants respond by arguing: (1) that Plaintiffs’ senior status does not

provide them with an exclusive right to use of a family name, (2) that Defendants’

use of the McEwen name, when evaluated under the “likelihood of confusion” test,

does not entitle Plaintiffs to their requested relief, and (3) that Plaintiffs are barred

from equitable remedies under the doctrine of unclean hands.

B.

STANDING

{31} The Court notes that a comparison of the allegations in the Verified

Complaint, with the terms of the Stock Agreement and Asset Agreement attached

as exhibits to the Affidavit of Robert D. Polydys, II, results in ambiguity. While

Plaintiffs allege in the Verified Complaint that “the McEwen family sold MFS to

SCI” (while defining SCI as SCI NC and Plaintiff Carothers Holding Company,

LLC, both North Carolina Corporations), the Stock Agreement and Asset

Agreements show the purchaser was SCI, a Texas corporation. (Stock Agreement p.

1; Art. 1 § 1–2; Asset Agreement p. 1; Art. 1 § 1.)

{32} Based on a review of all the motions, memoranda in support and opposition,

affidavits, and accompanying exhibits, it would appear that SCI was the purchaser

of MFS rather than Plaintiffs, and that SCI purchased MFS’s stock, and did not, as

was done with MFS Mint Hill, purchase MFS’s assets. (Stock Agreement p. 1; Art.

1 § 1–2; Asset Agreement p. 1; Art. 1 § 1.) While not raised by the parties at the

hearing, or in their memoranda, Plaintiffs leave unclear how they are able to

enforce rights acquired in an agreement to which they were not a party, or,

assuming that Plaintiffs subsequently acquired the stock purchased by SCI, how

they have standing to sue individually for the protection of rights that belong to a

corporation (MFS), of which they are only shareholders. Goldston v. State, 361 N.C.

26, 30, 637 S.E.2d 876, 879 (2006) (“‘[T]he ‘gist of the question of standing’ is

whether the party seeking relief has ‘alleged such a personal stake in the outcome

of the controversy as to assure that concrete adverseness which sharpens the

presentation of issues upon which the court so largely depends for illumination of

difficult constitutional questions.’” (quoting Stanley v. Dep’t of Conservation & Dev.,

284 N.C. 15, 28, 199 S.E.2d 641, 650 (1973))); see also R. Robinson, North Carolina

Corporation Law and Practice § 17.02[1] (“The North Carolina Courts have

expressly rejected the argument that a shareholder has an individual right to

recover directly for any loss in the value of his shares caused by a wrong committed

against the corporation.” (citing Barger v. McCoy Hillard & Parks, 346 N.C. 650,

488 S.E.2d 215 (1997))).

{33} The Court’s questions about Plaintiffs’ standing do not ignore the fact that

SCI also purchased the assets of MFS Mint Hill. Nevertheless, it remains unclear

at this juncture how Plaintiffs acquired those assets from SCI. Absent ownership of

MFS Mint Hill’s assets, or at a minimum MFS Mint Hill’s trade names, it would

appear that Plaintiffs lack standing to sue for the protection of a trade name they

do not own. (Asset Agreement p. 1; Art. 1 § 1.)

{34} While this issue was not specifically addressed by the parties, the Court

notes that Plaintiffs’ allege in their Verified Complaint that they own MFS, and

“operate[] a number of funeral homes . . . including locations in Charlotte [and] . . .

Mint Hill.” (Vr. Compl. ¶¶ 12, 18.) As a result, the Court accepts, for the purposes

of this Motion, that Plaintiffs acquired MFS’s stock and MFS Mint Hill’s assets from

SCI. Accordingly, Plaintiffs may sue to protect the trade names purchased from

MFS Mint Hill, but may not be authorized to bring cliams individually for

infringement to trade names held by MFS.

C.

DO PLAINTIFFS HAVE AN EXCLUSIVE RIGHT TO USE THE NAME MCEWEN

UNDER THE COMMON LAW?

1.

LEGAL STANDARD

{35} At its essence, this case concerns the use of a surname, and not simply the

protection of a trademark or trade name, as argued by Plaintiffs. The North

Carolina Supreme Court has stated that “[a]s a rule, a trade-mark cannot be taken

in a surname . . . .” Bingham Sch., 122 N.C. at 707, 30 S.E. at 305; accord Zagier,

167 N.C. at 617, 83 S.E. at 913. This rule means that Plaintiffs’ use of the McEwen

name “does not give it the exclusive right to that name . . . .” Bingham Sch., 122

N.C. at 707, 30 S.E. at 304. Instead, as the Court in Bingham School stated, other

“corporation[s] might be created by and operated under the same title, when not in

the same locality, in the absence of proof of an intent to injure the first named

corporation or to avail itself fraudulently of the other’s good name and reputation.”

Id. at 707, 30 S.E. at 304–05.

{36} The parties’ argument that the Court should adopt the “likelihood of

confusion” test comes from the North Carolina Supreme Court’s use of the word

“confusion” in its opinion in Blackwell’s Durham Tobacco Co. v. The American

Tobacco Co., 145 N.C. 367, 59 S.E. 123 (1907). In Blackwell’s Durham Tobacco Co.,

the Court stated that “an injunction lies to restrain the simulation and use by one

corporation of the name of a prior corporation, which tends to create confusion and

to enable the latter corporation to obtain, by reason of the similarity of names, the

business of the prior one.” Id. at 374, 59 S.E. at 126 (emphasis added) (quotation

omitted).

{37} Blackwell’s Durham Tobacco Co. is distinguishable from this case, and

surname cases in general, for three reasons. First, Blackwell’s Durham Tobacco Co.

did not deal with surnames, and the Supreme Court’s subsequent opinion in Zagier,

which does involve a challenge to a defendants’ use of a surname, cited to the

fraudulent intent standard adopted in Bingham School, rather than the confusion

standard adopted in Blackwell’s Durham Tobacco Co. Zagier, 167 N.C. at 617, 83

S.E. at 913.3 The use of a separate standard for surname cases leaves this Court to

conclude that the Supreme Court did not intend for the confusion standard to be

applied. Second, the rule against allowing surnames to be taken as trademarks

would by definition distinguish cases like Blackwell’s Durham Tobacco Co., that

concern the protection of trademarks, from cases like Bingham School and Zagier,

that are concerned with preventing “dishonesty in the use[] of the name” that

3 The Court’s decision not to cite toBlackwell’s Durham Tobacco Co.’s confusion standard

cannot be attributed to the fact that the plaintiff in Zagier was an individual rather than a

corporation because the plaintiff in Bingham School was incorporated by the Legislature in

1864. Bingham Sch., 122 N.C. at 705, 30 S.E. at 304.

cannot be trademarked. Id. at 617, 83 S.E. at 913. Third, the complaint in

Blackwell’s Durham Tobacco Co. did not allege that plaintiff’s creation, and thus

use of its trademark, occurred before defendants’ inception. Blackwell’s Durham

Tobacco Co., 145 N.C. at 372, 59 S.E. at 125. The Court stated that this type of

allegation was important because “a trademark[] is acquired, not simply by

adoption, but by using it.” Id. at 374–75, 59 S.E. at 126. Because plaintiff failed to

say when the use began it could not demonstrate that it was the senior user, and

therefore had a protectable trademark. The Court’s decision that plaintiff needed to

allege that it was created prior to the defendant, obviated the need to discuss the

confusion standard because plaintiff failed to demonstrate that it had a protectable

trademark.

{38} While these facts might end the discussion, the Court also recognizes that

the North Carolina Supreme Court has left open the possibility that surnames could

be protectable trademarks if they have “secondary meaning” as the term is used

within trademark law. Two Way Radio Service, Inc., 322 N.C. at 816, 370 S.E.2d at

412 (“‘It is to be expected that other trademark principles, such as the doctrine of

secondary meaning in connection with surnames or descriptive terms, will also be

applied in cases alleging a corporate name infringement.’” (emphasis added)).4

{39} Within the last one-hundred-and-fifteen years there has been very little

case law discussing the status of North Carolina’s common law as it applies to

trademarks, trade names, and surnames. This may account in part for prompting

the parties to apply that the “likelihood of confusion” test established in Pizzeria

Uno Corp. v. Temple, 747 F.2d 1522 (4th Cir. 1984).5 While the applicable case law

4 The Court notes however, that the facts of Two Way Radio Service, Inc. did not concern a

dispute over surnames, but rather, whether “two way radio” had acquired secondary

meaning. The Court’s reference to surnames came in its discussion of whether statutes

enacted by the Legislature had superseded the common law. While the Court’s discussion

was necessary to determine whether the common law of trade names survived to inform the

interpretation of the statutes, it would not have needed to determine whether the doctrine

of “secondary meaning” applied to surname cases. Accordingly, the Court’s language was

likely gratis dictum.

5 The Court acknowledges that it applied this test in its Order granting Plaintiffs’ Motion

for TRO. However, after further reflection, review of the expanded record, and

is old, the standards and legal conclusions articulated in Bingham School and

Zagier have been overturned. Accordingly, the Court is unconvinced, at this point,

that the application of North Carolina’s common law requires the adoption of the

“likelihood of confusion” test. Therefore, the Court will apply the fraudulent intent

standard as established in Bingham School and Zagier, and if necessary, consider

whether the McEwen name has attained “secondary meaning” such that it could

become a protectable trademark.

2.

FRAUDULENT INTENT STANDARD

{40} Under the fraudulent intent standard adopted in Bingham School, when a

surname is already in use in the name of a corporation, a subsequent “corporation

might be created by and operated under the same [name], when not in the same

locality, in the absence of proof of an intent to injure the first named corporation or

to avail itself fraudulently of the other’s good name and reputation.” Bingham Sch.,

122 N.C. at 707, 30 S.E. at 304–05. This standard suggests that: (1) another

corporation may be created using the same name, (2) the subsequent user may only

use the same name when it is not in the same locality as the original user, and (3)

there must be no evidence that the subsequent user selected the name with the

intent to injure the original user or fraudulently avail itself of the original users’

good name and reputation. This standard is identical to the one quoted in Zagier

except that the requirement that a subsequent user not be in the same locality was

omitted. Zagier, 167 N.C. at 617, 83 S.E. at 913 (“[A]ny one having the same

surname as that under which a business has been long and successfully conducted

by another, . . . can conduct a like business under the same name, provided there be

no intent to injure or fraudulently attract the benefit of the good name and

reputation previously acquired by the other.”).

{41} The Court is uncertain whether this omission was intentional, so as to

eliminate the locality requirement, or was a result of the fact that the ruling in

consideration of case law not previously presented to the Court, the Court concludes that

the use of the ‘likelihood of confusion’ test may have been premature.

Zagier was not based on the Court finding fraudulent intent, but rather on the fact

that the subsequent user had contracted with plaintiff to not operate a business

with the disputed surname in a particular city. By concluding that the defendant

had precluded himself from using the name because he contracted that right away,

arguably Zagier’s conclusions are based on a theory of contract rather than on one of

unfair trade practices. In addition, the parties in Zagier appear to have existed in

the same locality.6 Id. at 618, 83 S.E. at 914. Presumably then, any reliance on the

fraudulent intent standard by the Court would have required a discussion of the

geographic proximity of defendant’s competing business to plaintiffs’ operations.

These distinctions lead the Court to conclude that while the opinion in Zagier

quoted the standard from Bingham School it did not do so for the purpose of

resolving the dispute in the case before it, or to amend the standard previously

established. Accordingly, this Court will apply the test as set out in Bingham

School.

3.

MAY DEFENDANTS USE THE MCEWEN NAME APPLYING THE

FRAUDULENT INTENT STANDARD ADOPTED IN BINGHAM SCHOOL?

a.

IS THE SUBSEQUENT USER IN THE SAME LOCALITY AS THE ORIGINAL

USER?

{42} Based on the facts alleged by Plaintiffs, the Court finds, for the purposes of

this Motion, that Plaintiffs “have owned and/or operated a number of funeral homes

in and around the greater Charlotte area that offer funeral services to customers

using the [McEwen name], including locations in Charlotte . . . , Mint Hill, Pineville,

and Monroe.” (Vr. Compl. ¶ 18.)

6 While it appears that the parties inZagier operated in the same locality, this Court

cannot be certain. The Court Zagier only notes that the defendant was prohibited under

the parties’ contract from operating a clothing business in Asheville. There is no discussion

about the defendants’ proximity to plaintiff’s operations, of even if plaintiff had any

operations in existence.

{43} In addition, the Court finds that Defendants “opened a funeral home

business at the location on Morehead Street [in Charlotte, North Carolina] where

Carl J. McEwen first established a business . . . .” (Defs.’ Mem. 4.) The Court also

finds that Defendants “sought to operate under the name McEwen Ellington

Funeral Services.” (Defs.’ Mem. 4.)

{44} Under the standard established in Bingham School, while Defendants may

operate a business under the same name they can not do so within the same

locality. The Court finds that Defendants operate within the same locality as

Plaintiffs and thus should be enjoined from the use of the McEwen name within the

same locality.

b.

DID DEFENDANTS SELECT THE MCEWEN NAME WITH THE INTENT TO

INJURE PLAINTIFFS OR FRAUDULENTLY AVAIL THEMSELVES OF

PLAINTIFFS’ GOOD NAME AND REPUTATION?

{45} While the Court has already determined that Defendants presence within

the same locality as Plaintiffs prevents them from using the McEwen name,

because it is possible that the locality requirement was abandoned by the North

Carolina Supreme Court in Zagier, the Court will also evaluate whether Plaintiffs

have shown a likelihood of success in proving that Defendants selected the McEwen

name with the intent to injure Plaintiffs or fraudulently avail themselves of

Plaintiffs’ good name and reputation.

{46} As noted above: (1) Defendants began funeral home operations at the

Morehead Street location previously used by Plaintiffs for the same services (Pls.’

Mem. 4); (2) Defendants erected a sign on that location with script “similar to [that]

used on the [MFS] sign [in place] at this location until the early 2000s” (Aff. of

Polydys ¶ 15); (3) Defendants “have decorated the lobby of [the Morehead Street

location]” with the same painting “of Carl J. McEwen that is displayed in the lobby

of [MFS] at Sharon Memorial Park and [MFS] Mint Hill Chapel” (Aff. of Polydys ¶

18); and (4) Ellington, Jr., who has not customarily used his middle name in other

business contexts, started using McEwen when Defendants opened their competing

funeral home business. (Aff. Polydys ¶¶ 20–21.)

{47} All of these facts suggest an intent on the part of the Defendants to injure

the Plaintiffs or avail themselves of Plaintiffs’ good name and reputation. While the

Court cannot say that the lawful use of an individual’s name in the promotion of a

business could be evidence of an intent to injure, the fact that a person inexplicably

changes the use of their middle name when they enter into a competing endeavor

suggests to the Court that there was an intent to acquire the existing company’s

good will and reputation. Accordingly, the Court finds, for the purposes of this

Motion, that Plaintiffs have provided sufficient evidence to show a likelihood of

success in demonstrating that Defendants intended to avail themselves of Plaintiffs’

good name and reputation.

D.

ARE PLAINTIFFS BARRED FROM RECEIVING THE BENEFIT OF AN

EQUITABLE REMEDY UNDER THE DOCTRINE OF CLEAN HANDS?

{48} “One who seeks equity must do equity.” Creech v. Melnik, 347 N.C. 520,

529, 495 S.E.2d 907, 913 (1998). “The fundamental maxim, ‘[h]e who comes into

equity must come with clean hands,’ is a well-established foundation principle upon

which the equity powers of the courts of North Carolina rest.” Id. The doctrine of

clean hands

is an equitable defense which prevents recovery where the party

seeking relief comes into court with unclean hands. However, ‘[r]elief is

not to be denied because of general iniquitous conduct on the part of

the complainant or because of the latter’s wrongdoing in the course of a

transaction between him and a third person, or because of a wrong

practiced by both parties on a third person . . . .’

Ray v. Norris, 78 N.C. App. 379, 384–85, 337 S.E.2d 137, 141 (1985) (quoting 27 AM.

JUR. 2D Equity § 142, at 678–79 (1966)). When determining whether the party

seeking equitable relief has come to the court with clean hands, “[t]he conduct of

both parties must be weighed in the balance of equity . . . .” Creech, 347 N.C. at

529, 495 S.E.2d at 913.

{49} Defendants argue that Plaintiffs should be barred from receiving the

equitable relief of an injunction because they have taken anticompetitive action

against potential suppliers to the Defendants. (Defs. Mem. 13.) After reviewing

Defendants’ Memorandum in Opposition to the Motion and the supporting

affidavits, the Court, however, can not conclude that Plaintiffs’ alleged acts are

anything more than innocuous conduct. While refusing to do business with those

who work with the Defendants may be petty, it does not, based on the facts alleged,

rise to such a level as to leave Plaintiffs with unclean hands.

E.

WHAT EFFECT DO REGISTRATIONS WITH THE NORTH CAROLINA BOARD

OF FUNERAL SERVICES AND NORTH CAROLINA SECRETARY OF STATE

HAVE ON A PARTY’S COMMON LAW RIGHTS?

{50} Defendants suggest that Plaintiffs’ right to use the McEwen name might be

diminished because Defendants were able to register the McEwen name with the

North Carolina Board of Funeral Services and the North Carolina Secretary of

State. However, “registration does not authorize the use . . . of a name in violation

of the rights of any third party under . . . the trademark act of this State, or other

statutory or common law, and is not a defense to an action for violation of any of

those rights.” N.C. GEN. STAT. § 55D-20(e). Accordingly, the Court cannot conclude

that Defendants’ registrations had any effect on Plaintiffs’ common law right to use

the McEwen name.

V.

CONCLUSION

{51} Because the Court determined that Defendants should be enjoined under

the standard adopted in Bingham School, it does not address, at this time, whether

Defendant Ellington, Jr. is also proscribed from using his name because he sold his

stock and other interests in MFS and MFS Mint Hill. Further, the Court leaves for

another day its determination of whether the McEwen name has acquired

secondary meaning as argued by Plaintiffs. For the reasons stated above, the Court

concludes that Plaintiffs have shown a likelihood of success on the merits and that

they would suffer irreparable harm if injunctive relief is not granted.

{52} Accordingly, the Court GRANTS Plaintiffs’ Motion and ORDERS that

Defendants and their officers, directors, employees, agents, representatives, and

those persons acting in concert or participation with Defendants, are immediately

restrained and enjoined from any and all activities that use the McEwen name in

the provision of funeral services within Charlotte, Mint Hill, Pineville, and Monroe.

Defendants are thus prohibited from using the names McEwen Ellington Funeral

Services, McEwen Funeral Home, Inc., McEwen Funeral Services, Inc., or any other

similar mark, word, name, symbol, or slogan that incorporates the McEwen name.

Any and all uses or proposed uses by Defendants of the McEwen name or any

similar mark, including in signs, advertisements, or promotions materials, in

connection with funeral services in Charlotte, Mint Hill, Pineville, and Monroe, are

strictly prohibited.

SO ORDERED, this the 18th day of February 2013.