United We Stand America, Inc. v. United We Stand, America New York, Inc.

Decision Date15 October 1997
Docket NumberD,No. 1681,1681
Citation128 F.3d 86
Parties, 44 U.S.P.Q.2d 1351 UNITED WE STAND AMERICA, INC., a D.C. Corporation, Plaintiff-Counterdefendant-Appellee, v. UNITED WE STAND, AMERICA NEW YORK, INC., a New York Corporation, Defendant-Appellant, and Alex Rodriguez, individually and d/b/a United We Stand, America New York, Inc., Defendant-Counterclaimant-Appellant. ocket 96-9500.
CourtU.S. Court of Appeals — Second Circuit

Thomas J. Hillgardner, Flushing, NY (Hillgardner & Hansen, Flushing, NY), for Defendants-Counterclaimant-Appellants.

Loretta M. Gastwirth, Mineola, NY (Meltzer, Lippe, Goldstein, Wolf & Schlissel, P.C., Mineola, NY, Kim J. Askew, Craig W. Budner, David J. Schenck, Hughes & Luce, L.L.P., Dallas, TX), for Plaintiff-Counterdefendant-Appellee.

Before: MESKILL, JACOBS and LEVAL, Circuit Judges.

LEVAL, Circuit Judge:

United We Stand America, Inc. ("United") brought this action to enjoin the use of its registered service mark "United We Stand America" by defendants United We Stand, America New York, Inc. ("UWSANY") and Alex Rodriguez. The district court entered default judgment against UWSANY after its failure to appear, and granted summary judgment in favor of plaintiff United against Rodriguez. UWSANY's motion to vacate the default was denied.

Both defendants appeal. UWSANY argues that its default should have been vacated under Fed.R.Civ.P. 60(b) because it was due to "excusable neglect." Both defendants contend that (i) their political activities are not "services" within the meaning of the Lanham Act, 15 U.S.C. § 1114(1)(a), so that their use of plaintiff's mark in connection with their activities does not violate the Act; (ii) their use of the mark is entirely intrastate and is therefore not within the reach of the Commerce Clause or the Lanham Act; and (iii) their use of plaintiff's mark in their political activities is protected by the First Amendment. We reject these arguments and affirm the judgment of the district court.

Background

"United We Stand America" (the "Mark") was a service mark initially used by the principal campaign committee for Ross Perot's 1992 presidential campaign. The Perot committee actively used the Mark in New York and on a national basis from August 1992 onward. Perot's campaign committee established the plaintiff corporation United and, shortly after the 1992 election, assigned its rights in the Mark to the plaintiff. United immediately filed with the Patent and Trademark Office for registration, which became effective in 1994.

Defendant Rodriguez worked with the Perot campaign in New York in 1992 and was aware of its use of the Mark as its slogan. After friction and division among Perot's New York supporters, Rodriguez incorporated UWSANY in October 1992, and became its president. Rodriguez caused UWSANY to use the Mark in connection with its political activities.

In June 1994, United filed a complaint against UWSANY and Rodriguez charging infringement of its Mark. The amended complaint alleges claims of infringement and unfair competition under the Lanham Act, 15 U.S.C. § 1051 et seq., common law infringement and unfair competition under New York law, and violations of N.Y. Business Law §§ 133 and 368-d.

Although UWSANY appeared through counsel on July 1, 1994, its attorney was not retained to represent UWSANY in this matter and immediately withdrew. UWSANY was ordered to retain counsel by August 15, 1994, or face default judgment. On August 15, UWSANY appeared through counsel. However, the attorney moved to withdraw two days later. The district court allowed his withdrawal when the attorney explained that he had a physical disability which made it impossible for him to represent UWSANY, that he had told this to UWSANY before appearing, and that UWSANY had assured him it would immediately hire substitute counsel. On June 7, 1995, the district court entered a default judgment against UWSANY because it had "failed to retain counsel after repeated orders by the Court to do so" and, as a result, had failed to enter a timely answer to the complaint.

UWSANY subsequently retained counsel and, in October 1995, sought to vacate the default judgment. The motion was referred to Magistrate Judge Dolinger, who recommended that the motion be denied. The magistrate judge found that UWSANY failed to show "excusable neglect," Fed.R.Civ.P. 60(b), and, further, that it had not proceeded in good faith. In addition, he ruled that UWSANY had failed to show a meritorious defense and that United would be unfairly prejudiced by a decision to vacate the default. The district court adopted the magistrate judge's findings and recommendations, and denied UWSANY's motion to vacate the default judgment.

In the interim Rodriguez filed a counterclaim charging United with obtaining its service mark registration by fraud. United moved for summary judgment against Rodriguez. In a report dated April 29, 1996 Magistrate Judge Dolinger recommended that summary judgment be granted in favor of United both on its own claims and on Rodriguez's counterclaim. Rodriguez's counterclaim was to be dismissed because Rodriguez failed to show that United made misrepresentations in registering the Mark. Summary judgment was to be granted in favor of United on its claims against Rodriguez because he raised no valid defense. The district court adopted Magistrate Judge Dolinger's recommendation in full and granted summary judgment in United's favor.

Discussion

UWSANY challenges the denial of its motion to vacate default judgment against it. Under Fed.R.Civ.P. 60(b), default judgment may be vacated upon a showing of "excusable neglect." In evaluating "excusable neglect," courts generally consider "(1) whether the default was willful; (2) whether defendant has a meritorious defense; and (3) the level of prejudice that may occur to the non-defaulting party if relief is granted." American Alliance Ins. Co., Ltd. v. Eagle Ins. Co., 92 F.3d 57, 59 (2d Cir.1996). The district court denied UWSANY's motion to vacate based on its findings, inter alia, that default was willful and that UWSANY had failed to show a meritorious defense to the charges against it. We review this decision for abuse of discretion. Commercial Bank of Kuwait v. Rafidain Bank, 15 F.3d 238, 243 (2d Cir.1994).

UWSANY argues that its default was not willful because it resulted solely from its financial inability to retain counsel. There was, however, substantial evidence supporting the magistrate judge's conclusion, adopted by the district court, that UWSANY's efforts to obtain counsel were a disguise for stalling tactics and that it lacked candor in reporting these efforts to the district judge. Despite its representations that it was attempting to retain an attorney, UWSANY took no steps to do so until the court issued an order threatening default. It then procured the appearance of an attorney who it knew was physically unable to carry out the representation and intended to withdraw immediately; the district court characterized UWSANY's conduct as "a sham effort ... to avoid the previously imposed deadline to obtain counsel." During the fifteen-month period in which UWSANY purportedly attempted to retain counsel, it contacted only a handful of attorneys. The magistrate judge concluded that the apparent effort to retain counsel was in fact dissimulation, and the district court agreed. We find no error in this conclusion.

Moreover, we agree with the district court, for reasons discussed below, that UWSANY and Rodriguez have not demonstrated a meritorious defense to the charges against them.

1. UWSANY's political activities are "services" within the meaning of the Lanham Act.

Appellants contend that UWSANY's political activities, in connection with which it used the Mark, were not "services" within the meaning of the Lanham Act, and that their conduct was, therefore, not within the Act's prohibition. Section 1114(1)(a) bars unauthorized use of a mark

in commerce ... in connection with the sale, offering for sale, distribution, or advertising of any goods or services [if] ... such use is likely to cause confusion....

15 U.S.C. § 1114(1)(a) (emphasis added).

The term "services" has been interpreted broadly. As the court explained in N.A.A.C.P. v. N.A.A.C.P. Legal Defense and Educ. Fund, the right to enjoin infringement of a trade or service mark "is as available to public service organizations as to merchants and manufacturers." 559 F.Supp. 1337, 1342 (D.D.C.1983) (citation omitted), rev'd on other grounds, 753 F.2d 131 (D.C.Cir.), cert. denied, 472 U.S. 1021, 105 S.Ct. 3489, 87 L.Ed.2d 623 (1985). In support of this view, McCarthy comments that "retention of a distinct identity [by a non-profit organization that sells no goods] is just as important as it is to a commercial company." 1 J. Thomas McCarthy, McCarthy on Trademarks and Unfair Competition § 9:5 (4th ed.1996). The protection of the trademark or service mark of non-profit and public service organizations requires that use of the mark by competing organizations be prohibited.

The Lanham Act has thus been applied to defendants furnishing a wide variety of non-commercial public and civic benefits. See, e.g., Kappa Sigma Fraternity v. Kappa Sigma Gamma Fraternity, 654 F.Supp. 1095, 1101 (D.N.H.1987) (membership in collegiate Greek-letter fraternity and solicitation of alumni contributions); American Diabetes Ass'n, Inc. v. Nat'l Diabetes Ass'n, 533 F.Supp. 16, 20 (E.D.Pa.1981) (solicitation of donations), aff'd, 681 F.2d 804 (3d Cir.1982); United States Jaycees v. Philadelphia Jaycees, 490 F.Supp. 688, 691 (E.D.Pa.1980) (public service projects including Special Olympics, Christmas shopping for orphans, and half-way houses), rev'd on other grounds, 639 F.2d 134 (3d Cir.1981); United States Jaycees v. San Francisco Junior Chamber of Commerce, 354 F.Supp. 61, 64, 65 (N.D.Cal.1972) (meetings, competitions, and other special...

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