Hester Industries, Inc. v. Tyson Foods, Inc.

• Citation: 160 F.3d 911
• Decision Date: 20 November 1998
• Docket Number: Nos. 97-9606,97-9608,s. 97-9606
• Parties: HESTER INDUSTRIES, INC., Plaintiff-Appellee-Cross-Appellant, v. TYSON FOODS, INC., Defendant-Appellant-Cross-Appellee.
• Court: U.S. Court of Appeals — Second Circuit

Page 911

160 F.3d 911

48 U.S.P.Q.2d 1844

HESTER INDUSTRIES, INC., Plaintiff-Appellee-Cross-Appellant, v. TYSON FOODS, INC., Defendant-Appellant-Cross-Appellee.

Nos. 97-9606, 97-9608.

United States Court of Appeals, Second Circuit.

Argued July 14, 1998.

Decided Nov. 20, 1998.

Robert W. Adams, Nixon & Vanderhye, P.C., Arlington, VA (Duane M. Byers, Robert A. Rowan, J. Scott Davidson, Nixon & Vanderyhe, P.C., Arlington, VA, Richard A. Kohn, Thuillez, Ford, Gold & Johnson LLP, Albany, NY, of counsel), for Plaintiff-Appellee-Cross-Appellant.

Jonathan J. Lerner, Skadden, Arps, Slate, Meagher & Flom LLP, New York City (Christopher P. Malloy, Skadden, Arps, Slate, Meagher & Flom LLP, New York City, John R. Cleary, Shughart Thomson & Kilroy, Kansas City, MO, of counsel), for Defendant-Appellant- Cross-Appellee.

Before: MINER and CABRANES, Circuit Judges, and COVELLO, District Judge. ^*

MINER, Circuit Judge:

Defendant-appellant Tyson Foods, Inc. ("Tyson") appeals from a judgment of the United States District Court for the Northern District of New York (McAvoy, C.J.) imposing upon defendant a civil contempt fine of $8,599,272.84 based on defendant's For the reasons that follow, we vacate so much of the judgment as imposes a fine for civil contempt and remand for further proceedings consistent with this opinion.

violation of the terms of a settlement agreement that the court had referred to in its prior order dismissing plaintiff's trademark dilution action, and from orders granting partial summary judgment in favor of plaintiff Hester Industries, Inc. ("Hester"), denying defendant's motion for partial summary judgment and denying defendant's motion, pursuant to Fed.R.Civ.P. 59(e), to alter or amend the district court's judgment. Plaintiff-appellee cross-appeals from the district court's final judgment to the extent that the court's monetary award was purportedly deficient.

BACKGROUND

In August of 1989, Hester, now operating as a division of ConAgra, Inc., commenced a trademark dilution action against Tyson alleging, inter alia, that Tyson's use of the words "WING FLINGS" in connection with its sale of frozen raw chicken wings diluted Hester's "WING DINGS" mark in violation of the laws of the State of New York and other states. Hester uses its WING DINGS mark in connection with its sale of pre-cooked, pre-seasoned chicken wing products. ¹

Just before trial, however, the parties entered into a settlement agreement (the "Agreement"). The Agreement was signed by the parties and attached to a "Stipulated Order of Dismissal" entered by the district court on April 9, 1992. The Agreement required Tyson to discontinue all use of the WINGS FLINGS mark. Specifically, pursuant to Section 2 of the Agreement, Tyson agreed not to order any new packaging or other materials bearing the WING FLINGS mark. Moreover, it agreed to phase out existing WING FLINGS inventory according to a prescribed schedule. Tyson estimated that existing inventory of a certain five-pound product bag "should be exhausted by September 1, 1992" and all other inventory bearing the mark "should be exhausted by December 1, 1992." The Agreement stated that "if Tyson has not exhausted its existing inventory at the end of the[se] periods, ... Tyson will then inform Hester of the new estimated time for exhausting this inventory." However, the Agreement allowed the aforementioned cut-off dates to be extended for no longer than two months.

In the Agreement the parties also provided that the lawsuit would be dismissed by stipulation. Paragraph 6 states, in pertinent part, as follows:

Hester will promptly dismiss with prejudice by stipulation of the parties without the entry of any judgment, injunction, or order for injunctive relief, Civil Action No. 89-CV-949 pending in the United States District Court for the Northern District of New York. However, such dismissal will be dependent on the terms of this Agreement being subjected to enforcement by specific performance by the United States District Court for the Northern District of New York. As a result, a copy of this Settlement Agreement will be filed with the Court along with the dismissal papers.

In accordance with the foregoing, the parties forwarded the fully executed Agreement to the district court to be filed with the dismissal papers. Although no judicial action was necessary for the stipulation to become effective, the district court entered a Stipulated Order of Dismissal. The district court's dismissal order, adhering to the terms of the settlement agreement, specifically disavowed the entry of any judgment. The order stated as follows:

Pursuant to Rule 41 of the Federal Rules of Civil Procedure and in accordance with the terms of the attached Settlement Agreement between the parties, this action is hereby dismissed with prejudice, including all claims or causes of action asserted herein. Further, pursuant to the agreement of the parties in settlement, no judgment against either party will be entered and all parties will bear their own costs and attorneys' fees.

The dismissal order bears the notation "Stipulated To" followed by the signature of the After the deadlines set forth in the Agreement had passed, Hester learned of an advertisement for the sale of Tyson's five pound bags of WING FLINGS in the March 10, 1993 edition of the Washington Post. Hester then sent a letter to Tyson dated March 17, 1993, requesting that Tyson cease using the WING FLINGS mark and provide an accounting of all sales of products bearing that mark after September 1, 1992. In a response letter dated March 19, 1993, Tyson's attorney denied any wrongdoing on the part of Tyson and added that Tyson would not provide an accounting because it "ha[d] better things to do with its time."

parties' attorneys and the notation "So Ordered" followed by the signature of Chief Judge McAvoy. The judge made no notation on the settlement agreement, which was attached to the dismissal order.

On March 25, 1993, Hester commenced the present action, claiming that Tyson had breached the settlement agreement by continuing to use the WING FLINGS mark after the applicable cut-off dates. In addition to its contract claim, Hester claimed that Tyson had violated (1) the district court's dismissal order; (2) the terms of New York Business Law § 368-d and other state trademark dilution statutes; and (3) the trademark infringement and unfair competition provisions of 15 U.S.C. § 1114(1). On March 14, 1994, Hester amended its complaint primarily to include a tortious interference with contract claim. Hester sought, inter alia, a preliminary and permanent injunction against Tyson's continued offending use of the mark, treble damages, punitive damages, attorney's fees and any other relief deemed appropriate by the district court.

On June 17, 1994, Hester moved for partial summary judgment on its claims alleging breach of contract and violation of the dismissal order. In an oral ruling on August 8, 1994, the district court granted partial summary judgment for Hester, having found that defendant had breached the settlement agreement based on its admitted offending use of the mark on its packaging and invoices. See Hester Indus. v. Tyson Foods, Inc., No. 93-CV-391, 1994 WL 774553, at * 4-* 5 (N.D.N.Y. Aug.8, 1994) ("Hester I "). Documents submitted to the district court by Tyson indicated, for example, that Tyson was out of compliance with the settlement agreement with respect to packaging at various times between January of 1992 and March of 1993, and between October of 1992 and October of 1993 with respect to invoices. See id. at * 5. The court also found that the dismissal order incorporated the settlement agreement and therefore that a breach of the Agreement could serve as the basis for a finding that Tyson was in contempt of court. See id. at * 3. Specifically, the court stated that "the wording of the [dismissal] order logically leads one to find that the terms of the settlement agreement were conditions approved by the [c]ourt through the dismissal order and, thus, were incorporated into the order." Id. Accordingly, the court concluded that the defendant was in contempt of court for violating the dismissal order. See id. at * 5. The court entered an order confirming its oral ruling on August 15, 1994.

Tyson moved, inter alia, for reconsideration of the court's order granting plaintiff's motion for partial summary judgment. The court denied Tyson's motion on August 15, 1994, having found that there was nothing in its previous order that "present[ed] a clear error of law or an obvious injustice." Hester Indus. v. Tyson Foods, Inc., No. 93-CV-0391, 1994 WL 774634, at * 3 (N.D.N.Y. Aug.15, 1994) ("Hester II ").

On January 4, 1995, Hester again moved for (1) partial summary judgment on the issue of whether Tyson had breached the settlement agreement and violated the dismissal order from late in August of 1994 through mid-October of 1994; and (2) a preliminary injunction against Tyson's continued use of the WING FLINGS mark. By oral ruling on January 27, 1995, the court granted Hester's motion for partial summary judgment, having found that Tyson had further breached the settlement agreement and violated the dismissal order through offending use of the mark on its display boxes and freezer signs at various stores throughout the country between August and October of 1994. See Hester Indus. v. Tyson Foods, Inc., No. 94-CV-391, 1995 WL 113939, at * 1-2 (N.D.N.Y. Jan.30, 1995) ("Hester III "). Accordingly, the court found Tyson to be in The court reserved decision on Hester's motion for injunctive relief and simultaneously rejected Tyson's motion for partial summary judgment, which was based on the theory that plaintiff's claims for trademark infringement, trademark dilution, unfair competition and tortious interference were precluded by res judicata and collateral estoppel. See id. at * 3-4. However, the court found that it could not award...