Funeral Home Jockeying Highlights Trademark and Non-Compete Issues When Selling a Business

There is another example of the importance of paying close attention to proprietary details when negotiating business deals. Last week brought the curious case of HP's former CEO Mark Hurd joining Oracle right after entering into a substantial severance agreement, leading HP to file suit immediately. It seemed very odd that Hurd's arrangement wouldn't have been structured so as to prevent Hurd from so quickly joining a potential competitor and possibly benefiting from HP's confidential information.

This week brings news of an apparent puzzling gap concerning trade name and trademark issues in a merger & acquisition transaction from 15 years ago involving a Chicago area funeral business. The essentials of the story involving Lloyd Mandel are as follows:

When he sold his funeral business in 1995, Lloyd Mandel Levayah Funerals, Mandel agreed to stay out of the Chicago-area funeral industry for 15 years. But on July 21, the day after that clause expired, Mandel opened a new shop, this time from a high-rise office building in Deerfield, operating as Lloyd Mandel Mitzvah Memorial Funerals. . . .

The new business has brought the ire of Service Corp. International, the company that paid him some "millions," as he estimates, for his old business.

So, Levayah, owned by Texas-based SCI, began buying weekly quarter-page ads next to the death notices. Billed as an open letter to clients, the ad describes the history of the business and warns customers that they are the original Lloyd Mandel funeral home -- not to be confused with the new venture by their namesake.

. . .

To Lloyd Mandel, there was only one thing to do: He had to reply. He bought a quarter-page ad in the Tribune, hoping Levayah would continue advertising on Wednesdays.

On Sept. 1, the fourth Levayah ad appeared, and Mandel's ad appeared right below it. In his rebuttal ad, Mandel disputed the competitor's advertisement and denounced their use of his name.

So, after 15 years, the purchaser of the acquired business now faces the original seller competing in the same market for the same clients with a very similar name. There seems to be a real possibility for confusion in the marketplace and it would not be at all surprising if this winds up in litigation eventually.

This is a very puzzling outcome. Mr. Mandel says he is entitled to use his own name. And, depending upon the terms of the business sale agreement that may be the case. If the documents are silent on the use of his name, then he may be right. However, from a purchaser's perspective it would be unfortunate if in all the legalese and negotiations regarding the deal, this specific issue was not addressed. One would expect in the case of an acquisition of a business with a founder's name, such as Bob Evans or Jenny Craig for instance, that more often the not the transaction documents would provide for the founder to not engage in a competitive business using his or her name.

Nonetheless, this is not to second guess whoever handled the deal here. Concessions often are made in the interest of obtaining another important objective or reaching a closing. And, there may have been higher priorities than worrying about what would happen 15 years later. (That is a very long non-compete covenant; the purchasing team may have very happy to leave well enough alone.) Still, determining and negotiating permitted and restricted business activities can be deceptively tricky, so great care is warranted to prevent an unfortunate surprise.

Jeremy A. Gibson is a Chicago business lawyer very experienced in the trademark, non-competition and other proprietary aspects of buying and selling of businesses. We would be happy to review your merger & acquisition situation. We can assist business buyers or sellers throughout the area, including Arlington Heights, Buffalo Grove, Chicago, Deerfield, Des Plaines, Evanston, Glenview, Highland Park, Hinsdale, Lake Forest, Libertyville, Mount Prospect, Naperville, Northbrook, Oak Brook, Palatine, Rolling Meadows, Schaumburg, Skokie, Oak Brook, Oak Park, Vernon Hills, Waukegan, Wheeling and Wilmette.