14 F.3d 824 (2nd Cir. 1994), 505, Totalplan Corp. of America v. Colborne

Docket Nº:505, Dockets 93-7472, 93-7474, 93-7476 and 93-7478.
Citation:14 F.3d 824
Party Name:29 U.S.P.Q.2d 1740 TOTALPLAN CORPORATION OF AMERICA, Plaintiff-Appellant, v. Robert B. COLBORNE; Carmen Strong; James Boughton; John T. Brown; Keith Yardley; Wendell A. Lewis; Harry S. Montgomery; Walter Petrovsky; Richard L. Mikesell, Northwest Pipe & Supply Company, Limited; Michael Chwelos; William Meiklejohn; Lure Camera, Limited, Defendants-Ap
Case Date:February 02, 1994
Court:United States Courts of Appeals, Court of Appeals for the Second Circuit

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14 F.3d 824 (2nd Cir. 1994)

29 U.S.P.Q.2d 1740



Robert B. COLBORNE; Carmen Strong; James Boughton; John

T. Brown; Keith Yardley; Wendell A. Lewis; Harry S.

Montgomery; Walter Petrovsky; Richard L. Mikesell,

Northwest Pipe & Supply Company, Limited; Michael Chwelos;

William Meiklejohn; Lure Camera, Limited, Defendants-Appellees.

No. 505, Dockets 93-7472, 93-7474, 93-7476 and 93-7478.

United States Court of Appeals, Second Circuit

February 2, 1994

Argued Oct. 27, 1993.

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[Copyrighted Material Omitted]

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Lisa T. Sofferin, Buffalo, New York (Rodney O. Personius, Brown & Kelly, Buffalo, New York, of counsel), for plaintiff-appellant.

Richard L. Mikesell, Buffalo, New York (Craig Miller, Diebold & Farmello, P.C., Buffalo, New York, of counsel), for defendants-appellees.

Before: VAN GRAAFEILAND, PIERCE and WINTER, Circuit Judges.

WINTER, Circuit Judge:

Totalplan Corporation of America ("Totalplan") appeals from Judge Elfvin's dismissal of its complaint following a bench trial. In the district court, Totalplan brought suit against appellees for trademark infringement, breach of contract, unfair competition, misappropriation of trade secrets, conspiracy to steal business, and fraudulent transfer of assets. Totalplan appeals from only the dismissal of its trademark and contract claims, directing its arguments solely against Lure Camera, Ltd. ("Lure"), Northwest Pipe & Supply Co., Ltd. ("Northwest"), Michael Chwelos, as President of Northwest, and William Meiklejohn, as a director of Lure. We remand for clarification with regard to the domestic trademark infringement claim and affirm the dismissal of the complaint with respect to the breach of contract claim.


Totalplan is a New York corporation, incorporated in 1974. Lure is a Canadian company that commenced doing business in California in 1974. Lure owned a United States patent on a disposable pocket camera that was marketed under the name "Lure." In 1975, Paul Iannello, the President of Totalplan, became interested in marketing the Lure pocket camera. After meeting with Sidney Dunofsky, then President of Lure, the parties reached an agreement and, on May 27, 1975, signed a contract to provide Totalplan with distribution rights ("the 1975 agreement"). Under the terms of the agreement, Lure agreed to supply Totalplan with 12-shot disposable cameras that would bear a brand name of Totalplan's choice on the front and a backplate bearing the name "Totalplan." Totalplan was given exclusive television and radio marketing rights in the United States and non-exclusive marketing rights through other media.

Totalplan selected the trademark "Love Pocket Cameras" for the product and obtained United States registration of this trademark. After paying for packaging and the tools and dye necessary to manufacture the new frontplates and backplates of the cameras, Totalplan produced television commercials to promote the camera. By October 1975, Totalplan had purchased 15,000 cameras from Lure. However, Totalplan became dissatisfied with the quality of the cameras, and, in November 1975, brought the problems to the attention of Dunofsky and Harry Montgomery, Lure's Vice-President. After receiving assurances that quality problems would be solved, Totalplan continued to market the cameras, but in reduced numbers.

In November 1977, Lure sold its assets to Northwest and leased them back. Northwest's President, Michael Chwelos, then replaced Dunofsky as President of Lure. In 1978, Iannello agreed to meet with Chwelos and other Lure officials about expanding the marketing of the pocket camera. Wendell A. Lewis, President of Total Marketing Concepts, Inc., who had previously marketed the pocket camera under the name "Lure," attended the first meeting. At a later meeting in Chicago, it was proposed that Lure cease marketing the "Lure" camera, and produce cameras only under the name "Love." A marketing plan was also proposed whereby all cameras would be manufactured with Love frontplates and backplates bearing Totalplan's name and address. It was proposed that, in exchange for exclusive sales and marketing rights, Totalplan purchase a minimum number of cameras per month for twelve months under a purchase order backed by a domestic letter of credit. Under the proposed scheme, Totalplan would handle marketing on the East Coast, and Lewis would manage West Coast marketing through "Totalplan-West," a division of Totalplan. It was anticipated that Totalplan would prepare all packaging and labels. The packaging was to list two addresses, in Van Nuys, California, and Rochester, New York, where the

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cameras could be returned for film processing. At the Chicago meeting, Lure also proposed that it credit Totalplan with a sale of 100,000 cameras that Montgomery and Lewis had negotiated with Japan. This credit was to aid Totalplan in meeting projected sales and to compensate it for the expense of processing Lure cameras that remained in the market when they were returned.

After the Chicago meeting, numerous drafts of the proposed agreement were circulated. However, none was ever signed. Each draft required that Totalplan purchase a minimum number of cameras, backed by a letter of credit. Totalplan never supplied the letter of credit. One draft, prepared by Totalplan, proposed that Lewis would manage Totalplan-West and be compensated by Totalplan by receiving a commission for the sale of Love cameras. Lewis, through Northwest's attorney, Richard Mikesell, changed the name "Lewis" on the draft to "Pro-West Industries."

In April 1987, Iannello opened two bank accounts for Totalplan-West, one accessible only to him and one accessible to him and to Lewis, in the latter's capacity as manager of Totalplan-West. It was proposed that Totalplan would pay for all cameras purchased from Lure for distribution through Totalplan-West, and Totalplan-West would deposit into the accounts all money received from customers who returned cameras to California for processing. The sums placed in the account exclusively accessible to Iannello were to be sufficient to cover the costs of purchasing the cameras. Lewis, acting through Pro-West, then moved Totalplan-West into the building where Lure's California manufacturing plant was located.

Totalplan began production of labels with the California and New York addresses, as suggested in the proposed agreement. In addition, on April 10, 1978, Totalplan caused 2,880 cameras to be purchased from Lure for Totalplan-West, which were then sold through Totalplan-West to Japan. On April 18, 1978, Totalplan purchased 7,120 cameras for sale to Hikawa Shoji Company in Japan. On May 25, 1978, it purchased another 15,000 cameras for Totalplan-West, which were then shipped to Japan.

In May 1978, Iannello complained to Chwelos and Montgomery that Lewis was not depositing customer money into the Totalplan-West accounts while Totalplan was paying for the cameras that Lure shipped to Totalplan-West. Totalplan then paid $20,000 to Lure for cameras to be shipped through Totalplan-West to Japan. At the end of May, Total Marketing Concepts delivered a check for $40,000 to Totalplan as payment for cameras purchased by Totalplan and shipped to Japan by Totalplan-West. Although the district judge found that this exchange of payments was for cameras that bore the trademark "Love" on the frontplate, the evidence indicates that it related to shipments of "Lure" cameras. Indeed, there is no evidence that any cameras paid for by Totalplan and ultimately shipped to Japan bore the trademark "Love" on their frontplate.

On June 6, 1978, Mikesell sent a letter to John Papsidero, a director of Totalplan, that "put...

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