110 F.3d 318 (6th Cir. 1997), 96-4218, Blue Cross & Blue Shield Mut. of Ohio v. Blue Cross and Blue Shield Ass'n

Docket Nº:(96-4218)/Cross-Appellee,
Citation:110 F.3d 318
Party Name:42 U.S.P.Q.2d 1321 BLUE CROSS & BLUE SHIELD MUTUAL OF OHIO, Plaintiff-Appellant
Case Date:March 26, 1997
Court:United States Courts of Appeals, Court of Appeals for the Sixth Circuit
 
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Page 318

110 F.3d 318 (6th Cir. 1997)

42 U.S.P.Q.2d 1321

BLUE CROSS & BLUE SHIELD MUTUAL OF OHIO, Plaintiff-Appellant

(96-4218)/Cross-Appellee,

v.

BLUE CROSS AND BLUE SHIELD ASSOCIATION,

Defendant-Appellee/Cross-Appellant (96-4325),

v.

COLUMBIA/HCA HEALTHCARE CORPORATION and Integrated Health

Corporation, Third-Party Defendants-Appellants

(96-4241)/Cross-Appellees.

Nos. 96-4218, 96-4241, 96-4325.

United States Court of Appeals, Sixth Circuit

March 26, 1997

Argued Jan. 30, 1997.

Rehearing and Suggestion for Rehearing En Banc Denied May 13, 1997.

Page 319

[Copyrighted Material Omitted]

Page 320

Kenneth F. Seminatore, Douglas A. Andrews, John E. Schiller, Climaco, Climaco, Seminatore, Lefkowitz & Garofoli, Cleveland, OH, Raymond W. Lembke, Daniel Joseph Hoffheimer, Taft, Stettinius & Hollister, Cincinnati, OH, Jonathan M. Jacobson, argued and briefed, Andrew J. Rossman, Akin, Gump, Strauss, Hauer & Feld, New York City, for Plaintiff-Appellant Cross-Appellee in Nos. 96-4218, 96-4325.

C. Steven Tomashefsky, Chester T. Kamin, argued and briefed, John Hamill, Brent D. Hanfling, Linn A. Brady, Eric A. Sacks, Kristina M. Entner, John F. Ward, Jr., Darryl M. Bradford, Jenner & Block, Chicago, IL, Jerome C. Randolph, Keating, Muething & Klekamp, Cincinnati, OH, Steven J. Miller, Goodman, Weiss & Freedman, Cleveland, OH, Ann M. Kappler, Paul M. Smith, Sam Hirsch, Jenner & Block, Washington, DC, for Defendant-Appellee Cross-Appellant in Nos. 96-4218, 96-4241 and 96-4325.

Charles D. Tetrault, argued and briefed, Vinson & Elkins, Washington, DC, for Defendant-Appellee in No. 96-4218.

Mark E. Staib, David C. Weiner, Hahn, Loeser & Parks, Cleveland, OH, Charles D. Tetrault, argued and briefed, Alden L. Atkins, Vinson & Elkins, Washington, DC, for Defendants-Appellants Cross-Appellees in No. 96-4241.

Mark E. Staib, David C. Weiner, Hahn, Loeser & Parks, Cleveland, OH, Roger M. Synenberg, Synenberg & Marein, Cleveland, OH, Charles D. Tetrault, argued and briefed, Alden L. Atkins, Vinson & Elkins, Washington, DC, for Defendant-Appellee in No. 96-4325.

Before: BOGGS, BATCHELDER, and DAUGHTREY, Circuit Judges.

BOGGS, Circuit Judge.

Blue Cross & Blue Shield Mutual of Ohio ("BCBSO"), Columbia/HCA Healthcare Corporation, and Integrated Health Corporation (together with Columbia/HCA Healthcare Corporation, "Columbia") appeal the district court's order preliminarily enjoining BCBSO from using the Blue Cross and Blue Shield service marks of which the Blue Cross and Blue Shield Association ("BCBSA") is licensor. We affirm the order of the district court.

I

BCBSO is a not-for-profit mutual insurance company organized under Ohio law. BCBSO provides health insurance and related services to approximately 1,500,000 persons in Ohio. BCBSA, an Illinois not-for-profit corporation, owns the Blue Cross and Blue Shield service marks (known as "the Blue marks"), and licenses their use to the sixty or so independent insurance companies (known as "Blue Plans," "Blues," and "Plans") that form BCBSA's membership. Columbia/HCA, a for-profit Delaware corporation, owns hundreds of hospitals and other health-care providers. Integrated Health Care Corporation is a subsidiary of Columbia.

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On March 28, 1996, BCBSO signed an agreement with Columbia, whereby (in outline) BCBSO would transfer most of its insurance business to a new Columbia subsidiary ("BlueCo") in exchange for a payment of $299.5 million and BCBSO's agreement to reinsure the transferred health insurance and health maintenance organization businesses. The BCBSA committee charged with enforcing the Blue mark licenses concluded on May 24, 1996, that the Columbia deal violated BCBSO's license agreements, and presented to the BCBSA board of directors for approval a resolution stating that consummation of the Columbia transaction would cause BCBSO's licenses to terminate. On June 12, 1996, one day before the BCBSA board convened to consider the resolution (which it approved), BCBSO filed suit in district court, alleging antitrust violations and tortious interference with contract, seeking a declaratory judgment that the Columbia transaction did not violate the license agreements, and seeking an injunction barring BCBSA from terminating the licenses as a result of the Columbia transaction.

On September 3, 1996, BCBSA alleged in a counterclaim that BCBSO's transfer of assets to BlueCo would effect an assignment or sublicense of the marks, and transfer of goodwill associated with the marks to a non-licensee, in violation of the license agreements. BCBSA further asserted that the transaction would constitute an infringement in violation of the Lanham Act, 15 U.S.C. § 1114(1), and dilution of the marks in violation of the Federal Trademark Dilution Act, 15 U.S.C. § 1125. And, in a third party claim, BCBSA asserted that Columbia induced the infringement. Among other relief, BCBSA sought preliminary and permanent injunctions against infringement of the marks, and against consummation of the Columbia transaction. The district court issued a case management plan, under which discovery would close on October 1, and a hearing on the parties' respective motions for injunctions would be held on October 18.

Meanwhile, on July 11, 1996, the Attorney General of Ohio filed suit in state court against BCBSO and three of its officers, seeking a declaration that BCBSO was a charitable trust under Ohio law. The Attorney General sought the removal of BCBSO's existing trustees and their replacement with trustees meeting her approval. She also sought appointment, in the event the Columbia transaction closed, of herself as a receiver to distribute charitable trust funds to appropriate charities. See Complaint of Attorney General, J.A. at 961; OHIO REV.CODE 109.23 et seq.; excerpts of complaint and statute infra at 323-24. In August, BCBSO moved to dismiss the complaint.

On September 30, 1996, BCBSA notified BCBSO that the Attorney General's lawsuit had triggered § 15(a)(vii) of the license agreements, which automatically terminates the agreements if "an action is instituted against the Plan or BCBSA seeking its dissolution or liquidation of its assets or seeking the appointment of a trustee, interim trustee, receiver or other custodian for any of its property or business and such action is consented to or acquiesced in by the Plan or by BCBSA or is not dismissed within sixty days of the date upon which it was instituted." On October 3, BCBSA amended its counterclaim to seek a declaration that BCBSO's licenses had automatically terminated, and filed a motion for a preliminary injunction barring BCBSO from using the marks.

BCBSO promptly filed a motion for a temporary restraining order to bar BCBSA from "disconnecting" BCBSO as a result of the asserted automatic termination. After a hearing, the district court denied the motion on October 11. Meanwhile, BCBSO filed a motion in the Ohio state court in which the Attorney General's action was pending, seeking to "strike nunc pro tunc" portions of the prayer for relief in that action that specifically requested appointment of a receiver and trustees. The Ohio state court entered an order granting that motion on October 7.

The district court held a hearing on October 18, at which it heard testimony and arguments regarding both the Columbia transaction and the automatic termination issue. On November 4, the district court granted BCBSA's motion for a preliminary injunction, finding that BCBSA was "highly likely" to succeed on the merits of the automatic termination claim. Blue Cross & Blue

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Shield Mut. of Ohio v. Blue Cross & Blue Shield Ass'n, No. 1:96CV1275 (N.D.Ohio Nov. 4, 1996) (memorandum of opinion and order denying plaintiff's motion for preliminary injunction and granting defendant's motion for preliminary injunction) ("Mem.Op."). The court determined that BCBSO would suffer irreparable harm from losing its rights to use the Blue Cross names and marks, but that BCBSA would also suffer irreparable harm by the use of its marks by a non-licensee. The court held that the balance of hardships worked in favor of BCBSA's motion for a preliminary injunction. The preliminary injunction ordered that "during the pendency of [BCBSA's] counterclaim for a permanent injunction, [BCBSO] shall not use the service marks Blue Cross or Blue Shield in commerce in connection with the sale, offering for sale, distribution or advertising of health care insurance and related services without BCBSA's consent." The court did not reach the original claims regarding the Columbia transaction.

The court denied a stay of the preliminary injunction pending appeal, but required BCBSA to post a $32 million bond in case it were determined the injunction had been erroneously entered. On motion for a stay and for an expedited appeal of the preliminary injunction, a motions panel of this court granted a stay pending appeal on November 22, 1996, conditioned upon BCBSO's posting of a $32 million bond and the non-consummation of the Columbia transaction.

II

This court reviews a challenge to the grant or denial of a preliminary injunction under an abuse of discretion standard and accords great deference to the decision of the district court. The district court's determination will be disturbed only if the district court relied upon clearly erroneous findings of fact, improperly applied the governing law, or used an erroneous legal standard. See Dayton Area Visually Impaired Persons, Inc. v. Fisher, 70 F.3d 1474, 1480 (6th Cir.1995); Washington v. Reno, 35 F.3d 1093, 1098 (6th Cir.1994); Michigan Coalition of Radioactive Material Users, Inc. v. Griepentrog, 945 F.2d 150, 153 (6th Cir.1991).

When ruling on a motion for a preliminary injunction, a...

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