639 F.2d 29 (1st Cir. 1980), 80-1151, G. & C. Merriam Co. v. Webster Dictionary Co., Inc.

Docket Nº:80-1151.
Citation:639 F.2d 29
Party Name:G. & C. MERRIAM CO., Plaintiff-Appellee, v. WEBSTER DICTIONARY COMPANY, INC. et al., Defendants-Appellants.
Case Date:December 22, 1980
Court:United States Courts of Appeals, Court of Appeals for the First Circuit
 
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639 F.2d 29 (1st Cir. 1980)

G. & C. MERRIAM CO., Plaintiff-Appellee,

v.

WEBSTER DICTIONARY COMPANY, INC. et al., Defendants-Appellants.

No. 80-1151.

United States Court of Appeals, First Circuit

December 22, 1980

Argued Sept. 8, 1980.

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[Copyrighted Material Omitted]

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Donald G. McGrath, Buffalo, N. Y., with whom McGrath, Meyer, Liberman & Lipp, P.C., Buffalo, N. Y., and Paul A. Manoff, Boston, Mass., were on brief, for defendants-appellants.

Edward R. Lev, Boston, Mass., with whom Louis A. Rodriques, and Sullivan & Worcester, Boston, Mass., were on brief, for plaintiff-appellee.

Before COFFIN, Chief Judge, WYZANSKI, Senior District Judge, [*] and KEETON, District Judge. [**]

KEETON, District Judge.

By judgment dated February 7, 1980, appellants Webster Publishing Company, Ltd., Webster Home Mailing Service, Ltd., and Webster Home Mailing Service, Inc. (collectively, "Webster Publishing") and George W. Hoskins were held in contempt of court for violation of an injunction issued by the district court on October 27, 1977, and were assessed a fine, jointly and severally, in the amount of $50,000. They now appeal from that judgment, challenging the validity of the injunction and arguing that they did not violate it, that they were not bound by it, and that the fine cannot be sustained under theories of either civil or criminal contempt.

I.

This action arose out of a trademark dispute involving advertisements for various "Webster" dictionaries placed by two brothers and their several closely-held corporations. In December, 1975, Plaintiff-Appellee G. & C. Merriam Co. ("Merriam") brought an action in the district court against Webster Dictionary Company, Inc., a/k/a John Hoskins Sales Agency ("Webster Dictionary Company"), alleging that certain advertisements for dictionaries placed by Webster Dictionary Company violated the Lanham Act, 15 U.S.C. § 1125(a), and Mass.Gen.Laws ch. 93A, and constituted unfair competition. Merriam charged that Webster Dictionary Company's advertisements contained false and deceptive statements deliberately calculated to mislead the public into believing that the dictionaries offered by defendants were Merriam's higher quality "Webster's Third New International Dictionary Unabridged" and that the advertisements violated Merriam's trademark rights. Merriam sought damages and injunctive relief.

On January 28, 1976, Merriam moved for a preliminary injunction to restrain Webster Dictionary Company from placing further advertisements suggesting that the dictionaries offered by Webster Dictionary Company were the Merriam dictionary. After a hearing, the district court by Memorandum and Order of May 19, 1976 denied Merriam's request for preliminary relief on the ground that "the defendant's voluntary amendment of the advertisement makes unnecessary the issuance of a preliminary injunction." 1

Subsequently, Merriam attempted to conduct discovery through depositions, requests for documents, interrogatories, and requests for admissions. Webster Dictionary Company failed to respond to Merriam's discovery requests. On March 21, 1977 Webster Dictionary Company informed the district court by letter that it was discharging its attorneys by reason of its insolvency, and that Webster Dictionary Company "was willing to consent to the entry of an appropriate judgment against it." On April 25, 1977, the case was called for trial. Webster

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Dictionary Company failed to appear by counsel. 2

The district court, holding that Webster Dictionary Company had defaulted, proceeded with a hearing on damages. Merriam's counsel later submitted a proposed form of permanent injunction and judgment. On October 27, 1977, the district court issued findings of fact and entered a default judgment for Merriam against Webster Dictionary Company, granting the requested injunctive relief and awarding Merriam damages, costs and, attorneys' fees totaling $75,169.19. The injunction permanently enjoined Webster Dictionary Company 3 and its "officers, directors, principals, servants, employees, consultants, agents, attorneys, representatives, successors, and assigns, and others acting in association therewith, including, but not limited to, John P. Hoskins and Thomas H. Lucas" from, inter alia, "publishing, advertising, offering for sale or selling, or causing to be published, advertised, offered for sale or sold, any publication by means of any one or more of the following descriptions, titles, representations:"

(7) as to any publication or trade name described or identified by the word "Webster" (or any variant thereof), any of the following descriptions or representations:

(a) world-famous

(b) authentic

(c) original

(d) genuine

(e) renowned

(f) any variant of (a)-(e) above

(g) any other word or combination of words used to imply the meaning of one or more of (a)-(e) above....

Webster Dictionary Company failed to file a timely appeal from the district court's judgment. 4

On August 2, 1979, Merriam moved for the issuance of an order to show cause and for a contempt order, alleging in substance that George Hoskins and the three corporations referred to herein as Webster Publishing were bound by the district court's injunction of October 27, 1977, and that they had violated the injunction by the manner in which they had advertised various dictionaries, encyclopedias, and a home mailing service. In particular Merriam complained of appellants' use of an illustration of Noah Webster, captioned as "the inspiration for the founding of our company," the description of appellants' "Webster" dictionaries and encyclopedias as, inter alia, "authoritative," and the description of Webster Publishing as, inter alia, "world famous." The district court issued an order to show cause requiring John Hoskins, George Hoskins, and Webster Publishing to show why they should not be held in civil contempt for failure to comply with the injunction. Thomas H. Lucas was not named in the show cause order.

After some discovery, a hearing on Merriam's Motion for Contempt was held on October 11, 1979, at which appellants were represented by counsel. Merriam's Motion for Contempt was dismissed by agreement as to John Hoskins, formerly president of Webster Dictionary Company, because he had left Webster Dictionary Company in 1977 and was not associated with appellants or their alleged contempt. The court heard argument on whether appellants were bound by and had violated the injunction, and heard some evidence concerning Merriam's

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damages, but noted that if the court found appellants had violated the injunction an additional hearing on damages would probably be held. The court indicated that it intended to decide the question whether appellants were in contempt on the basis of the deposition of George Hoskins and documents offered in evidence by Merriam and stipulated to (except with respect to relevance) by appellants, consisting primarily of documents relating to incorporation and interests in Webster Publishing and copies of the challenged advertisements of Webster Publishing.

On January 25, 1980, the district court issued its Findings, Ruling and Order on Merriam's motion for contempt. The court found as facts that (1) appellants had been duly served; (2) appellants were "successors of the original defendant or persons acting in concert with it"; (3) George Hoskins was a "key employee" of Webster Dictionary Company and "the principal" of the corporate appellants, Webster Publishing; (4) George Hoskins had actual knowledge of the terms of the original injunction; and (5) appellants' use of the words "world-famous" and "authoritative" in their advertisements violated the injunction. Based on these findings, the court held that appellants were bound by the injunction issued against Webster Dictionary Company and that appellants were thus in contempt of court. On February 7, 1980, the district court entered a contempt judgment against appellants, including an order that they pay to Merriam a fine in the amount of $50,000, with interest from January 25, 1980. From that judgment they appeal.

II.

Central to the determination of the legal questions presented by this case is an understanding of the relationship among John and George Hoskins, the two groups of closely-held reference book marketing companies (collectively referred to as Webster Dictionary Company and Webster Publishing, respectively), and the offending advertisements. 5 John Hoskins incorporated the original defendant, Webster Dictionary Company, in 1975, and was its president and sole shareholder until about March 1, 1977, at which time he left the reference book business. George Hoskins began working with his brother John for Webster Dictionary Company in 1975, as general sales manager. Webster Dictionary Company's business was to solicit mail-order sales of various dictionaries through advertisements in newspapers and periodicals in the United States and Canada, which orders were forwarded to the actual publishers, who shipped directly to the customer.

Although the record is not altogether clear on the point, it could be reasonably inferred that in Webster Dictionary Company's activities John Hoskins was in charge, that George Hoskins was the next most active person in the operation, and that corporate formalities were not rigorously observed.

Webster Dictionary Company operated out of the adjacent apartments of John and George Hoskins in Toronto, Canada. At most it had about six employees. George Hoskins, as general sales manager, was responsible for all aspects of Webster Dictionary Company's advertising and sales, including the design, preparation and placement of advertisements. Although there was no written agreement as to George's compensation, he...

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