Central Bancorp, Inc. v. Central Bancompany, Inc.

          ORDER GRANTING PRELIMINARY INJUNCTION IN PART

          WILLIAM J. MARTINEZ UNITED STATES DISTRICT JUDGE

         Plaintiff Central Bancorp, Inc., operates a full-service bank under the name “Central Bank & Trust” in Colorado Springs. A little more than five miles away, but still in Colorado Springs, Defendants recently opened a bank branch under the name “Central Bank.” Plaintiff now sues Defendants for trademark infringement and unfair competition, seeking to bar Defendants from operating branches anywhere in Colorado under a name that includes the word “Central.”

         Currently before the Court is Plaintiff's Motion for Preliminary Injunction (ECF No. 16) and associated briefing (ECF Nos. 32, 43, 53, 54). The Court held an evidentiary hearing on May 1, 2019. For the reasons explained below, the Court finds that Plaintiff is entitled to a preliminary injunction against Defendants' use of “Central Bank” or “Central Trust Bank” in El Paso County, but not in the entire state of Colorado. Such an injunction is conditioned on a $100, 000 bond from Plaintiff.

         Because Defendants cannot simply change the name of their Colorado Springs branch overnight (due to the need for regulatory approval, at a minimum), the Court will order Defendants to begin the planning process for a name change and to submit a status report with a realistic timeline for carrying out the name change.

         I. BACKGROUND

         From the testimony and exhibits received at the hearing, the Court finds as follows. Because the parties dispute which of them is the senior user of the “Central Bank” mark in Colorado, the Court will present the facts in strict chronological order.

         A. Defendants' Missouri Origins

         Defendant Central Bancompany is a bank holding company that owns and controls Defendant Central Trust Bank and Defendant Mortgage Central, LLC. Central Trust Bank began as the Central Missouri Trust Company in Jefferson City, Missouri, in 1902. In the late 1960s, it changed its name to Central Trust Bank. In 1987, it received permission from the appropriate regulators to operate under the name “Central Bank.” Throughout, it has remained headquartered in Jefferson City and has a significant, visible presence in Missouri. For example, it has had extensive business dealings with the Missouri state government, and it is the official banking sponsor of the St. Louis Cardinals and the University of Missouri-meaning that a person wanting to have Cardinals-themed or Mizzou-themed checks or debit cards must go through Central Bank.

         Central Bancompany also owns and controls Jefferson Bank, which is not a defendant here. Jefferson Bank operates exclusively in Jefferson City under its own branding.

         B. Defendants' Operations in Colorado Before 2010

         1. FSA Servicing

         Beginning in 1998, Defendant Central Trust Bank became the Flexible Spending Account (FSA) servicer for Colorado state employees, other than University of Colorado employees; and in 2004, became the FSA servicer for University of Colorado employees as well. In practical application, this meant that an employee with an FSA would submit a claim for reimbursement through a company called ASI Flex, which is not owned or controlled by Defendants. ASI Flex would determine eligibility for reimbursement, and Central Trust Bank (using the name "Central Bank") would fund any reimbursement, usually through a mailed check. The following check image, although dated in 2012, is a representative of what such a check would have looked like during the relevant time period (i.e., before Plaintiff began operations in January 2010):

         (Image Omitted.)

         (Defendants' Exhibit ("DX") S.) As will become clear below, the stylized flower logo at the top, just left of center, is meant to represent a dogwood flower and is now Defendants' federally registered trademark and a ubiquitous part of their brand presence.

         Central Trust Bank remains the Colorado state government's and University of Colorado's FSA servicer bank to this day. Together, more than 8, 000 employees currently participate in those two FSA programs. Defendants presented no evidence of the enrollment numbers just before Plaintiff began operations in January 2010.

         2. Hunting & Fishing License Payment Processing

         In the late 1990s, Central Trust Bank developed a system to speed up approval and issuance of hunting and fishing licenses. Previously, standard practice in most states required filling out a form and mailing it in. Central Trust Bank created a process whereby a party seeking a fishing license at a local bait shop, for example, could fill out an application, pay the fee (which was wired to Central Trust Bank), and immediately receive approval, giving the bait shop authority to print a license on the spot. From 2002 through 2008, Central Trust Bank was the contractor for the Colorado Department of Natural Resources to process payments for hunting and fishing licenses under this system. By the end of that term, Central Trust Bank was administering the same system in many other states, including Missouri and Kansas. (DX C at 10.) It had also served Nebraska and Wyoming at some point in the past. (Id.)

         During the six years Central Trust Bank administered this system in Colorado, about 1, 700 vendor shops made it available to license applicants. Employees of those vendor shops operating the license approval system may have had exposure to the name “Central Bank” or “Central Trust Bank, ” but there is no evidence in the record that license applicants had any notion of Central Trust Bank's role in the process.

         3. Servicing Account Holders Living in Colorado

         Defendants have records of 3, 886 account holders with mailing addresses in Colorado who interacted or continue to interact with Defendants as “Central Bank, ” counting from as far back as Defendants' records go (at least the 1950s) until the present, including closed accounts. (DX Z at 1.)^[1] These account holders variously held or hold all the sorts of accounts one would expect from a consumer bank (checking, savings, money market, investment, IRA, etc.). (Id. at 2-151.) But Defendants' evidence makes it impossible to discern how many individuals began banking with Central Bank before 2010, as opposed to how many accounts were opened before 2010. Also, it is impossible to tell how many individuals interacted with Defendants from El Paso County. In any event, Defendants have acquired most of these account holders through their Missouri connections, e.g., they opened an account in Missouri and then moved to Colorado, or they applied for an account with Defendants to get Cardinals-branded checks.

         Over the years, Defendants also have loaned money to Colorado residents, or persons buying real property in Colorado. (DX A-1.) The vast majority of this lending has occurred since 2010. (See id.) Some of it has been to residents of, or related to property in, El Paso County, but little or none of that lending took place before 2010. (Id.)

         C. Plaintiff's Operations in El Paso County

         1. Inception

         Plaintiff is a bank holding company formed in 2006 with the intent to start a new bank in Colorado Springs. The application to start that bank, however, got bogged down in the FDIC approval process, so Plaintiff pursued a different strategy. It acquired an existing-and therefore already FDIC-approved-bank in New Mexico known as Farmers & Stockmens Bank. It then established "Central Bank & Trust" in Colorado Springs as a branch of Farmers & Stockmens Bank.

         2. Operations as "Central Bank & Trust" Since January 2010

         Central Bank & Trust opened its doors at 1 South Nevada Avenue, Colorado Springs, in January 2010, and has remained there ever since. It has no other branches in Colorado. The hearing evidence established that, as banks go, it is a fairly small operation, with two tellers, about twenty walk-in customers per day, about six package deliveries per week, and $100 million in deposits.^[2] Through a mortgage division, it closes between fifteen and thirty mortgage loans per month. Most of Central Bank & Trust's primary commercial banking business is in El Paso County, although it has some statewide recognition as an SBA lender.

         Since the beginning, Central Bank & Trust has represented itself to the public under the following mark, which it has never federally registered:

         (Image Omitted.)

         (ECF No. 43-1 at 10.) On the exterior of its Colorado Springs office, it uses a variant of the logo where the words and the mountain logo are separated by some of the building's windows and lighting fixtures:

         (Image Omitted.)

         (Excerpt from Plaintiffs Exhibit ("PX") 4 at 7.)

         (Image Omitted.)

         (Excerpt from id. at 2.)

         Plaintiff has advertised and sponsored events in the Colorado Springs community. Some of this advertising is under the "Central Bank & Trust" name and other advertising is under the "Central Bancorp" name (the same logo as above, but with "Central Bancorp" beneath the mountain graphic).

         In the Colorado Springs area, the public often refers to "Central Bank & Trust" simply as "Central Bank."

         D. Federal Registration of Defendants' Mark and Rebranding of Defendants' Various Charters

         By 2014, Defendants were operating banks under various names in Missouri, Illinois, Oklahoma, and Kansas. Defendants then chose to rebrand all of them, save for Jefferson Bank, as "Central Bank" branches. Part of that process involved obtaining federal registration of the following mark, which was applied for in September 2014 and officially registered in January 2016:

         (Image Omitted.)

         (Excerpt from DX A-3 at 1.) The dogwood flower is an integral part of the mark. (Id.)

         While the federal application was pending, Defendants went ahead with the changes necessary to convert branches into "Central Bank" branches, including regulatory approval, signage changes, customer notification, and so forth.

         E. Defendants' Expansion into Colorado

         In 2017, Defendant Mortgage Central opened a loan production office at 5278 North Nevada Avenue, Colorado Springs, about five-and-a-half miles north of Plaintiffs Central Bank & Trust. A loan production office, or "LPO," finds potential borrowers, helps them to apply for loans, and then forwards the applications to a bank for approval-in this case, to Defendant Central Trust Bank. The LPO on North Nevada went by the name "Mortgage Central" with an accompanying dogwood flower logo. Beyond the flower logo, Defendant specifically chose not to display any public association with Central Trust Bank or "Central Bank" because it would minimize impact to Defendants' broader reputation if the LPO failed.

         Apparently the LPO did not fail, because Defendants decided in 2018 to convert it into a full-service banking branch under the “Central Bank” brand. Under a Colorado statute,

[any] bank or bank holding company that intends to acquire control of any Colorado financial institution or to conduct interstate branching in Colorado shall provide the [state banking division] with the name or names under which it proposes to conduct the business of such bank, bank holding company, or branch. The bank or bank holding company shall not be eligible to conduct interstate branching or make any such acquisition if the proposed name is either:

(a) Identical to or deceptively similar to the name of any existing Colorado financial institution; except that this paragraph (a) shall not apply if the bank or bank holding company obtains express written consent of the affected existing Colorado financial institution; or

(b) Likely to cause the public to be confused, deceived, or mistaken.

         Colo. Rev. Stat. § 11-104-202(8). Without investigating or otherwise conducting any due diligence into whether any other “Central” banks existed in the area, Defendants submitted the required application under this section, although the application states that the branch would be known as “The Central Trust Bank.” (DX E at 12.) Defendants also applied for approval from their federal regulator (the Federal Reserve Bank of St. Louis) and the Missouri state banking division. As part of the approval process, Defendants published a small notice in the Colorado Springs Gazette on June 20, 2018, announcing the intent to establish “The Central Trust Bank” at the North Nevada location. (DX F.) The Colorado state banking division also likely sent a broadcast e-mail announcing the application to whomever is on an opt-in e-mail distribution list. In response to a question from the Court, Plaintiff's COO, Mr. Coutts, stated under oath that he did not know if anyone employed by Plaintiff was on that distribution list but that he would have been made aware of it if an employee had received an e-mail announcing another "Central" bank coming to town.

         Sometime in June 2018, or perhaps a little later, the Mortgage Central location on North Nevada changed its signage and began representing itself as "Central Bank." It now appears from the outside as follows:

         (Image Omitted.)

         (DX A-13 at 2.) It also advertises on a sign near the street showing the various businesses in the shopping center:

         (Image Omitted.)

(Id. at 7.)

         Around the same time the North Nevada location converted to “Central Bank, ” Defendant established “Central Bank” branches in the Denver Tech Center, Pagosa Springs, and Durango.

         F. ...