Sheila's Shine Products, Inc. v. Sheila Shine, Inc.

• Decision Date: 16 November 1973
• Docket Number: No. 71-3407,72-1294.,71-3407
• Citation: 486 F.2d 114
• Parties: SHEILA'S SHINE PRODUCTS, INC., a California corporation, Plaintiff-Appellee-Cross Appellant, v. SHEILA SHINE, INC., a Florida corporation, et al., Defendants-Appellants-Cross Appellees. SHEILA'S SHINE PRODUCTS, INC., Plaintiff-Appellant, v. SHEILA SHINE, INC., et al., Defendants-Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

486 F.2d 114 (1973)

SHEILA'S SHINE PRODUCTS, INC., a California corporation, Plaintiff-Appellee-Cross Appellant, v. SHEILA SHINE, INC., a Florida corporation, et al., Defendants-Appellants-Cross Appellees.

SHEILA'S SHINE PRODUCTS, INC., Plaintiff-Appellant, v. SHEILA SHINE, INC., et al., Defendants-Appellees.

Nos. 71-3407, 72-1294.

United States Court of Appeals, Fifth Circuit.

October 11, 1973.

Rehearing Denied November 16, 1973.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

James V. Johnstone, Miami Beach, Fla., Creel & Glasgow, Joe Creel, Miami, Fla., for Sheila Shine, Inc. and others.

Louis Schneiderman, Miami, Fla., George B. White, San Francisco, Cal., for Sheila's Shine Products, Inc.

Before GEWIN, SIMPSON and RONEY, Circuit Judges.

Rehearing Denied in No. 71-3407 November 16 1973.

SIMPSON, Circuit Judge:

These two cases arise from protracted trademark litigation between the parties. Plaintiff-appellee, Sheila's Shine Products, Inc., a California corporation (SS California) initiated this action against defendant-appellant, Sheila Shine, Inc., a Florida corporation (SS Florida) and certain of SS Florida's officers and employees: William S. Wallach, Philip Wallach, and Don Solomon as individual defendants. A general partnership, Pan American Chemical Company, formerly composed of William Wallach and Don Solomon, was also named as a defendant. SS California's complaint asked injunctive relief and damages, claiming unfair competition based upon common-law trademark infringement, tortious and unlawful interference with its business, and fraud and deceit. SS Florida counterclaimed on the same basis as plaintiff's complaint, and also alleged infringement of defendant's federal and state registered trademark. In answer to the original complaint, SS Florida pleaded a purchase of plaintiff's business from SS California's predecessors in interest, abandonment, estoppel, laches and statutes of limitations. In response to the counterclaim, SS California pleaded laches and statutes of limitations.

The action was tried before the court below and a jury. The jury found generally in favor of plaintiff SS California but assessed no damages, either compensatory or punitive, against either the corporate defendant SS Florida or against the individual defendants.¹ Following receipt of the jury's verdict, the trial court made findings of fact and conclusions of law and granted limited equitable relief in favor of both parties. The principal appeal, case No. 71-3407 involves SS California's and SS Florida's appeals from adverse portions of the lower court's decree. In addition, SS California appeals from a later order of the lower court granting sanctions for violation of the court's original order and refusing to approve SS California's new label design. This appeal is case No. 72-1294.

The Principal Appeal—No. 71-3407

Near the end of 1945, Daniel G. McCafferty and his wife, Helen McCafferty, commenced a business of home manufacture and sale of metal and wood polish in Long Beach, California. The polish was originally named "Sheila's Shine", after the McCafferty's infant daughter Sheila. The McCaffertys also devised a trademark for the labels on the polish containers. The trademark consisted of a picture of their daughter, Sheila. The McCaffertys subsequently shortened the name "Sheila's Shine" to "Sheila Shine". Defendant SS Florida conceded first use of the name "Sheila Shine" by the McCaffertys, who were SS California's predecessors in interest.

From 1945 until the formation of SS California in 1967 the McCaffertys operated from various California cities, including Long Beach, Morro Bay, and San Francisco. Between 1953 and 1967 the McCaffertys also used property in Caliente, Nevada, for the purpose of mixing and storing polish. Additionally, from 1957 until about the time of Daniel McCafferty's death in July, 1965, the McCaffertys also used property owned by Helen McCafferty's son Robert Belt in Verdi, Nevada, for mixing polish.

Prior to June of 1967, at which time Helen McCafferty organized the plaintiff corporation, the McCaffertys used two basic methods of marketing the polish. Principally, the McCaffertys themselves would travel from city to city with a load of polish, selling it personally door to door to restaurants, bars, and other business establishments. In addition, the McCaffertys would also sell polish outright to various "salesmen" for resale on their own terms. With minor exceptions, these salesmen maintained no permanent contact with the McCaffertys, and they did not report back to the McCaffertys concerning polish resales.

The small family business was confined to Long Beach and its environs until 1947, when the McCaffertys embarked on what Helen McCafferty described as the first transcontinental trip. During this trip the McCaffertys used the two sales methods described above, direct personal sales and sales to salesmen who answered newspaper ads and purchased polish for resale. During this trip the McCaffertys went to Miami, Florida, and while there appointed Pan American Chemical Company, a partnership composed of defendants William S. Wallach and his father, Philip Wallach, as distributors of Sheila Shine Polish. Pan American obtained polish from the W. B. Fleming Company (Fleming) of Jacksonville, Florida, to whom the McCaffertys had previously given an exclusive right to manufacture and sell the polish in Florida. Pan American continued to act as a distributor of the polish supplied by Fleming until early 1955.

The McCaffertys took a second transcontinental trip in 1954, using the same sales methods as before. In January of 1955, the McCaffertys again visited Miami, Florida. About January 11, 1955, an arrangement was made between the McCaffertys and the Wallachs doing business as Pan American. Pan American contended that this agreement constituted an outright purchase by Pan American of the Sheila Shine polish business from the McCaffertys, whereas Helen McCafferty contended that the transaction constituted only a reappointment of Pan American as Sheila Shine distributor for the state of Florida. The trial court found as a fact "that Pan American Chemical Company was at least granted the exclusive right to manufacture and sell the polish in the state of Florida in the January, 1955 transaction."²

A few weeks after the January 11, 1955, transaction the McCaffertys returned to California. From February of 1955 until Helen McCafferty and her son Robert Belt returned to Miami in May of 1966, there was never any inquiry by the McCaffertys of Pan American and no communication of any kind passed between the McCaffertys and Pan American. The district court found as a fact that there was no direction or supervision after January of 1955 by the McCaffertys over Pan American, nor was any such supervision or direction attempted at any time.

Following their return to California in 1955, the McCaffertys' selling operations until 1968 were primarily confined to those areas of California around San Francisco and Los Angeles. In addition there were occasional selling trips into Nevada, several selling trips between 1955 and 1958 to Utah, Nevada, and New Mexico, and a 1963 trip to Oregon, Washington, Utah, Colorado, and Nevada. Except for sales in California and certain sales in Nevada, no evidence was introduced as to the extent of business done in other states during this period. The district court found that any business which the McCaffertys had established or may have established outside the state of California, Nevada, Oregon, Washington, Utah, Colorado, and Hawaii was fully and completely abandoned after 1955. Further, the lower court found that notwithstanding mail orders from states other than those listed above, any semblance of an established business by the McCaffertys outside those states ceased to exist shortly after it was first created.³ During the entire time in which they were manufacturing and marketing Sheila Shine polish, the McCaffertys' advertising was limited to a 1946 Long Beach yellow pages telephone listing and 1954 Daymar Publications catalogue listing. The latter did not list the polish by name. There was never any other telephone listing by name of the McCafferty business prior to the incorporation of SS California in 1967.

In 1965, Daniel McCafferty died intestate. His share of the polish business passed to his wife Helen under California's community property laws. Also in 1965, the McCaffertys discovered that SS Florida had established and was conducting a nationwide business in the sale of Sheila Shine polish. Shortly after Daniel McCafferty's death, all the mixing and manufacturing equipment at the Verdi, Nevada, location was sold or discarded; no further polish was mixed until Berryman Products, Inc. began production for SS California in late 1967 or early 1968.

In June of 1967 the plaintiff corporation (SS California) was organized. In exchange for 300 shares of its stock, Helen McCafferty conveyed to SS California cash, certain items of office equipment, and her interest in the trade name and business of Sheila Shine Polish. From the incorporation in June 1967 until the end of 1967 sales were less than $500.00. Gross sales for the fiscal year ending June 30, 1968, were less than $5,000.00; and gross sales for the fiscal year ending June 30, 1969, were under $25,000.00, of which over $18,000.00 in sales were to customers previously doing business with the defendant, SS Florida.

Beginning in 1955, and following the disputed transaction of January 11 of that year, Pan American began a gradual plan of expanding its sales of Sheila Shine polish under the name Sheila Shine throughout the state of Florida and into neighboring states as well. Initially Sheila Shine was just one of hundreds of items which Pan American marketed. Beginning in 1959 when sales of Sheila Shine polish began to rise noticeably, William S. Wallach began to segregate invoices...