Red Door Real Estate, LLC v. Karwashan, et al. (Lawyers Weekly No. 12-146-16)

No. 14-03235-BLS 2
In this action, plaintiff Red Door Real Estate, LLC (Red Door) alleges that the defendants have infringed upon its state service mark and otherwise engaged in unfair business practices. The five count Amended Complaint seeks damages as well as injunctive relief. The matter came before this Court for jury waived trial in August 2016. Based on that evidence this Court finds to be credible together with reasonable inferences drawn therefrom, I makes the following findings and rulings.
Plaintiff Red Door is a limited liability company that has its principal place of business in Quincy, Massachusetts. It was founded by Madeline Cheney in January 2010. Red Door is a real estate brokerage firm that represents buyers and sellers in commercial and residential real estate transactions. In addition to Cheney, it employs between 12 and 17 other brokers. The focus of Red Door’s business is in the South Shore, with most of its residential sales occurring in Quincy and its environs. Its total sales volume in 2015 was $ 23 million.
In July 2010, Red Door applied for and obtained state registration of a service mark.1 Cheney, who holds a bachelor’s degree in marketing, was the person who designed the logo that was part of that mark. The logo consists of black and red writing with the word “Red Door” appearing in block letters above the word “Real Estate” written in cursive. An angular drawing suggesting a roof and a door is positioned above the word “Red” in the logo. The registration for this service mark was renewed in 2015. It appears on all of Red Door’s marketing and advertising materials. It is also used on its internet site and on each broker’s business card.
Shortly after Red Door opened its business, Cheney learned that there was another real estate agency located in Milton by the name of Red Door Realty. Cheney did not disclose this on her application for a service mark, even though the application expressly sought such information. In any event, the owner of Red Door Realty did not object to Cheney’s use of the Red Door title. In fact, the two companies have actually been co-brokers on one deal. There was no evidence presented at trial that there was any confusion among customers of either firm as a result of the name similarity even though they are both in the same line of business and operate in adjoining communities. That there has been no confusion suggests to this Court that the name of a real estate brokerage (unless it is a nationally known business like Century 21) is not what draws customers into doing business with it.
Defendant Red Door Properties, Inc. (Red Door Properties) was organized in December 2012. Its owner and president is Susan Karwashan. Like Red Door, it represents buyers and sellers in commercial and residential real estate transactions; it also handles residential rentals.
1 Cheney also applied for a federal trademark but was turned down because a real estate firm with the name “Red Door Properties” that operated in another state had already applied for and obtained registration of its mark. This Court gives little weight to this determination. Certainly, it is not “res judicata” as to any issues that this Court must decide (plaintiff’s contention notwithstanding). Compare B&B Hardware, Inc. v. Hargis Industries, Inc. ___U.S. ___, 135 S.Ct. 1293 (2015) (where the court held that a decision by the United States Patent and Trademark Office must be given collateral estoppel effect in a suit between the same parties).
Its principal place of business is in Seekonk, Massachusetts, with another office opening in Norwood in 2014. In addition to Karwashan, Red Door Properties employs about five or six brokers, some of them working part time, and all paid on a commission basis. The sales volume of Red Door Properties is also considerably smaller than that of Red Door. For example, Red Door Properties’ tax returns for 2013 show total gross sales of only $ 74,258. The 2014 tax returns show total gross sales of $ 180,092. Consummated sales between 2012 and 2014 were scattered across different South Shore communities, including Seekonk, towns near the Rhode Island border, and Norwood. This same disparity in size and volume of business is reflected in 2012-2014 listings that appear in the Multiple Listing Service (MLS) under the name of Red Door Properties as compared to Red Door. Compare Exhibits 94 and 95 to Exhibit 98. In short, Red Door is a far larger (and far more profitable) company.
The logo for Red Door Properties consists of the words “Red Door” written over the words “Properties, Inc.” The lettering for Red Door is in stylized loopy print, with sweeping curves in the letters R and D. The words “Properties Inc.” Is in capital letters and block print. As Karwashan recalls it, the logo was created by the printing company that she hired in 2012 to make up business cards. It charged her $ 25 to do so. The logo was used on signs posted at properties being offered for sale or rental by Red Door Properties and at its offices. Although the company does have a website (where the logo also appeared) its marketing is much more limited than Red Door’s marketing efforts. There was no evidence that Red Door Properties used the same news media outlets as Red Door or that its marketing material (which consisted of postcards to potential sellers and an occasional ad in a local paper) was widely circulated so as to reach the same audience. 2
2 Although plaintiff contend that both entities advertised on the same Bruins website, this is not supported by the credible evidence. Red Door Properties did pay $ 200 for a one-time placement on an internet site relating to the
Each of the brokers at Red Door Properties used his or her own cell phones to communicate with clients as well as his or her own personal email account that did not include the company’s name. Although they had to conduct their business through the brokerage firm for legal reasons, there was no evidence that the name Red Door Properties figured in any potential client’s decision to list property with the defendant. To the contrary, the evidence showed that Red Door Properties generated its business by “word of mouth,” based on the personal relationships each broker cultivated with his/her customer: those customers would then refer new business to the broker. Two of the brokers had worked for another real estate brokerage before moving to Red Door Properties and brought some customers with them in that move.
This Court finds that these personal relationships were (and are) equally important for the plaintiff Red Door. Although Cheney described her extensive efforts to “protect” her mark, the brokers themselves are prominently featured in those marketing efforts and the goodwill that the broker develops with his or her client is necessarily critical to keeping that client and generating future business. In other words, the name of the real estate entity or the appearance of its logo is not a significant factor in Red Door’s ability to attract and keep customers. It is a business driven by the personality of the broker and the extent to which that firm has a dominant presence in a particular community.
As to the similarities between the two sets of logos, Cheney served as the plaintiff’s expert on this subject, with no independent analysis done. Because of her strong interest in the outcome of the case and also because her credentials with regard to making such a comparison
Providence Bruins — not the Boston Bruins, where Red Door advertised. There was some testimony that Stop and Shop carts in Brockton had Red Door Properties’ name and logo. Karwashan testified, however, that she had purchased that advertising with the understanding that it would appear in Seekonk, not Brockton, and that, in any event, this advertising did not generate a single call from a prospective client. This Court credits that testimony.
are quite limited, this Court does not give her testimony as to the similarities much weight to the extent that it is offered as an expert opinion. The similarities that Cheney points to are fairly obvious: both use the same shade of red and the words themselves are similar. There are clear differences, however: Red Door Properties’ logo does not have any roofline or door as part of it, and the lettering for the phrase “Red Door” is quite different. On the more important issue of how name and logo play a part in generating business in this particular field, Cheney’s testimony was of no assistance.
Cheney learned about Red Door Properties in March 2013 when there was a customer inquiry received by Red Door’s website that related to property in Seekonk. Red Door did not lists any properties in Seekonk. Curious as to why this inquiry was made, Cheney checked the MLS website. MLS contains a list of all residential properties with information concerning their asking price, their status (e.g. “new” or “under agreement”), and the identity of the listing and sales brokers. Cheney determined that the listing broker for the Seekonk property was Red Door Properties. The individual who made this inquiry (Lisa Figueira) did not testify at trial, so there is no evidence as to why she made the inquiry of Red Door instead.
Cheney immediately contacted Karwashan at Red Door Properties; Karwashan informed her that she had just started her company, and that she did not believe she had done anything wrong since she had registered her corporation with the Secretary of State. Cheney followed this telephone call up with an email, then retained a lawyer when there was no indication that Karwashan was going to change the name. On May 21, 2013, Cheney’s counsel sent a “cease and desist” letter to Red Door Properties, alleging in general terms that the similarities in name and logo “could create a likelihood of confusion.” Karwashan turned over this letter to her lawyer (not the same lawyer who represented her at trial of this matter), who assured her that she
had nothing to worry about and that she could simply ignore the letter. He took no action on her behalf, and Karwashan made no changes. This lawsuit was instituted in November 2014.
In January 2015, Karwashan took a personal leave of absence from the business to care for her dying father. In the fall of 2015, new counsel took over her representation and around that same time, Red Door Properties changed its name to Red Real Estate, Inc. It also redesigned its logo. This redesign was done by the same printing company that designed the first one: Karwashan instructed it to keep the color red as part of the logo but otherwise left the design up to the printer. The result was a logo that had “Red” in a loopy script similar to the “Red” of Red Door Properties. Two angular lines arched over the word “Red,” presumably to suggest rooftops (although Karwashan thought they were mountain ridges). “Real Estate Inc.” was written across the bottom in black, all capitalized and in block print.
This Court finds that this change in the logos did diminish similarities – to the extent that they existed — between the names and logos before the change was made. Of most importance was the elimination of the word “Door.” Web searches are often based on a name, and elimination of that word thus necessarily decreased the chance that a prospective client would mistakenly land on the defendant’s website in that search when in fact he or she intended to look for the plaintiff’s firm, Red Door. Of course, a customer using simply the word “Red” could end up on the plaintiff’s website, but that does not support plaintiff’s claim of harm.
Indeed, there was virtually no evidence that the similarity in the names of the two companies actually caused any confusion among those interested in procuring the services of a real estate brokerage firm. In addition to that first inquiry from Lisa Figueira that popped up on plaintiff’s website, Cheney received only two more inquiries over the next two years. One came in October 2013, when a person identified as Heather Hatten made an inquiry on the Red Door
website. She had used “Bing” as her search engine and had conducted the search using the words “Red Door Realty.” The inquiry concerned property located in Rehoboth – an area in which Red Door Properties (but not Red Door) operates. Shortly thereafter, a woman named Kathleen Gagliardi contacted Red Door about Stoughton property. As it turned out, Gagliardi was the owner of that property (listed by Red Door Properties) and had been instructed by a Red Door Properties broker, Steven Callahan, to “google” her address in order to get some idea as to whether other agencies were advertising or showing it. None of these inquiries support a finding that Red Door lost business that it would have gotten had it not been for the similarity in names. Indeed, none of the brokers at Red Door Properties knew that Red Door existed before this lawsuit, much less were they aware of any occasion on which a prospective customer mistakenly approached them, thinking that they were the plaintiff.
Red Door business records reflecting sales volume and net commissions are also of no assistance to plaintiff on this issue of harm. In 2012, Red Door generated $ 9,193,845 in sales; after agents were paid commissions, the company netted $ 74,175. Those figures jumped in 2013 to $ 16,786,550 in total sales, and $ 197,496 in net commissions. There was a more modest increase for the next year (with total sales of $ 17,889,478 and net commissions of $ 148,068), but another big jump in 2015, when total sales rose to $ $ 22,910,820 and net commissions were $ 226,196. In contrast, the total sales made by Red Door Properties was fairly flat over these same years and was only a fraction of what Red Door took in.
Red Door did incur marketing expenses over this same period – expenses for which it seeks reimbursement as part of its damages. In 2013, Red Door hired a marketing firm to develop suggestions to increase its profile: those recommendations included the production of a video for placement on its website (which would be redesigned), television advertisements, and
tri-fold brochures specifically aimed at buyers and sellers. Red Door adopted many of these recommendations, at a total cost of about $ 70,000. Cheney testified that these efforts were undertaken to mitigate any confusion between Red Door and Red Door Properties. This Court finds, however, that they were undertaken before there was any real evidence of such confusion. Moreover, Red Door clearly benefited from this marketing push, as is apparent from its sales, and thus had some incentive to do this even in the absence of this litigation.
The Amended Complaint contains the following claims: State Trademark Infringement in violation of G.L.c. 110H (Count I); Unfair Competition (Count II), Palming Off (Count III); Unfair Trade Practices in violation of G.L.c. 93A §11 (Count IV), and Dilution (Count V). All of these claims rest on plaintiff’s allegation that the names and logos used by the defendants — whether it is Red Door Properties or Red Real Estate — are likely to cause confusion among those looking for real-estate services and that as a consequence of these confusion, the plaintiff has been harmed. The plaintiff bears the burden of proof on these elements. This Court concludes that the plaintiff has failed to satisfy that burden.
This conclusion follows from the facts that this Court has found. Although both parties provide real estate services, they each focus their business on different parts of the state: Red Door is based in Quincy, whereas the defendant Red Real Estate (and before that, Red Door Properties) is based in Seekonk with a smaller office in Norwood. They do not use the same channels for marketing. Although the names Red Door Properties and Red Door are similar, there is absolutely no evidence that anyone interested in listing property with Red Door mistakenly went to Red Door Properties or that Red Door Properties made sales as a result of any confusion as to name. Indeed, apart from two internet inquiries from what appears to be
prospective buyers who may have thought they were contacting Red Door Properties and not Red Door, there is virtually no evidence of any confusion.
As to the logos themselves, there are just as many differences between them as there are similarities. More important, there was no evidence that either the name or the logo was a factor in attracting business to either firm. Name and logo might be important if plaintiff was associated with a nationally known entity that has strong name recognition. Here, both parties are small entities and are quite local. Under those circumstances, the choice of a broker has much more to do with whether the real estate agency has a strong presence in the community and whether the broker is able to establish a relationship of trust with the prospective customer.
That there was no actual confusion is borne out by the complete absence of proof that plaintiff suffered any damages. Red Door sales went consistently up every year, reaching $ 23 million in 2015. Although Cheney did invest $ 70,000 in marketing efforts, this a decision that she made without any real proof that they were necessary. Indeed these efforts paid off, since they were more than recovered by the increase in sales volume that followed. They are not expenses attributable to anything that defendants did or did not do. Finally, plaintiff has failed to offer any evidence of intangible harm to reputation.
Accordingly, it is hereby ORDERED that judgment enter in favor of the defendants on all counts and that the Complaint against them be DISMISSED, with prejudice.
Janet L. Sanders
Justice of the Superior Court
Dated: October 26, 2016

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