Black & Yates v. Mahogany Ass'n, No. 7561.

• Court: United States Courts of Appeals. United States Court of Appeals (3rd Circuit)
• Writing for the Court: MARIS, CLARK, and GOODRICH, Circuit
• Citation: 129 F.2d 227
• Parties: BLACK & YATES, Inc., et al. v. MAHOGANY ASS'N, Inc., et al.
• Decision Date: 10 June 1942
• Docket Number: No. 7561.

129 F.2d 227 (1941)

BLACK & YATES, Inc., et al.
v.
MAHOGANY ASS'N, Inc., et al.

No. 7561.

Circuit Court of Appeals, Third Circuit.

June 30, 1941.

Reargued December 5, 1941.

On Rehearing June 10, 1942.

129 F.2d 228

Wallace H. Martin, of New York City (Hugh M. Morris, of Wilmington, Del., and Harry D. Nims and Minturn deS. Verdi, both of New York City, and S. Samuel Arsht, of Wilmington, Del., on the brief), for appellants.

Wm. P. McCool, of New York City (Arthur G. Logan, and Logan & Duffy, all of Wilmington, Del., on the brief), for defendant-appellee Mahogany Associates, Inc.

J. Montgomery Forster, of Philadelphia, Pa. (Arthur G. Logan, of Wilmington, Del., on the brief), for appellee Thompson Mahogany Co.

Before MARIS, CLARK, and GOODRICH, Circuit Judges.

CLARK, Circuit Judge.

The learned district judge seems to us to have been influenced by his solution of an issue that did not happen to be before him. The parties are the protagonists in a fifteen year battle.¹ The contest began with botany and is ending with geography. The three plaintiffs sell a hardwood which grows in the Philippine Islands and to which they have added the designation "mahogany". The defendants are an association and the members thereof which and who claim to be the true prophets of mahogany. They base that claim on certain botanical considerations with which the Federal Trade Commission and the courts at first (1927 and 1928) agreed.²,³ After that original agreement, however, the statutory body vested with jurisdiction abandoned botany for geography. It approved (1931) a stipulation which reads: "Respondent hereby stipulates and agrees that in its sale, description, and advertisement of the wood of the Philippine Islands which it has heretofore designated and described as `Philippine Mahogany' and articles of commerce

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made therewith, it will not employ the word `mahogany' in connection with the sale of said wood without the modifying term `Philippine'." Gillespie Furniture Co., 15 F.T.C.Decisions 444

As the Federal Trade Commission had changed its mind, the enforcing Circuit Court of Appeals was compelled to do likewise and so modified its original decree.⁴ Thereafter a 1934 decision in the United States Supreme Court occasioned still further irresolution on the part of the Commission. That case⁵ prescribed a high degree of proof as essential to the acquisition of a "secondary" trade meaning.⁶ In obedience to the ratio decidendi of this California White Pine holding, the Federal Trade Commission was constrained to and did reopen the controversy for the second time. The reopening, of course, took the form of a call for a further evidential interpretation of the term "Philippine Mahogany".

At this point, the defendant association indulged itself in a bit of forecasting. It did not wait for the revised decision — it attempted a preview. It is of the nature of its anticipation that the plaintiffs now complain. It consists of statements (both oral and written) which were based on the assumption that Philippine Mahogany had not acquired a secondary meaning and which were widely circulated in the hardwood trade. From the assumption it followed, to quote typical assertions of the defendants, that:

(1) "Philippine mahogany is a substitute, is not a mahogany wood, is a misnomer, is in no way related to mahogany, is an inferior wood and not comparable to mahogany, has none of the qualifications of mahogany and will not stand up, is a counterfeit, a substitute and a fraud".

(2) "A dealer is unethical who sells Philippine mahogany under that name".

(3) "To sell Philippine mahogany under that name deceives the public".

(4) "To sell Philippine mahogany is unfair competition."

(5) "In the case pending before the Federal Trade Commission, it is expected that the Commission will rule that the name `mahogany' cannot be applied to any of these Philippine woods." Plaintiffs' Bill of Particulars, paragraphs a, b, f, h, i, r, d, e, s, and u, Appendix to plaintiffs-appellants' brief, pp. 33-34.

It is conceded, as it must that these statements are disparaging. They reflect seriously upon the plaintiffs' property and business practice; and falsely so, unless and until such reflection is sanctioned by a court's condemnation. The learned district judge unconsciously influenced, as we think, by his own disapproval of the practice and by his confidence that the courts will ultimately share his view — as well they may — dismissed the bill. He placed the refusal to enjoin the continuance of the uncomplimentary references on what we deem to be an obsolete conception of the law. The case⁷ relied on is of doubtful application and was decided in 1886. We believe that the law has developed since that time.

The right of action for disparagement of property was slow in developing at common law. The early cases took a Shaksperian view.⁸ So they lagged behind the analogous attack on personality by way of defamation, although an attack on what a man owns and sells would seem to be just as injurious as an attack on what he is. As one might expect the classic exposition is by Professor Jeremiah Smith.⁹ After the courts crystallized the tort¹⁰ certain elements remained uncertain.

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There was not entire agreement on two points, the always technical and confusing conception of malice and the matter of special damage. The learned professor takes the position that in disparagement of quality the rival competitor is not entitled to the qualified privilege of the rival claimant for title and so malice need not be shown in forfeiture thereof.¹¹ The same view seems implicit in the Restatement of Torts¹² and it is interesting to observe that the more modern codes of business ethics follow the French and German law in proscribing all forms of truthful disparagement.¹³ It may be that allegation and proof of special damage is necessary for a common-law recovery,¹⁴ although even here one notices a relaxation¹⁵ particularly where the trade libel includes assertions of unethical business conduct.¹⁶ The very purpose of the equitable remedy indicates that there is no need for applying any such rigid rule to that side of the court.¹⁷ In the case at bar, however, the learned court acted at a stage in the proceedings whereat such considerations are not before us. In dismissing the complaint, he takes two allegations as true and so is bound by the assertions of malice and loss of sales in paragraphs 29 and 32.¹⁸

If the common law has been the tortoise, equity assuredly has been the hare. This is the more surprising because equity came into existence for the exactly opposite reason. As one might also expect, the leading article on the judicial slothfulness in this field has been penned by another Harvard Law School professor. The learned Dean pulverizes the precedents and ends with the often quoted: "* * * Most of the cases that grant relief speak strongly of the injustice that must result from denial of jurisdiction in these cases. In substance the traditional doctrine puts anyone's business at the mercy of any insolvent malicious defamer who has sufficient imagination to lay out a skillful campaign of extortion. So long as denial of relief in such cases rests on

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no stronger basis than authority our courts are sure to find a way out." Pound, Equitable Relief Against Defamation and Injuries to Personality, 29 Harvard Law Review 640, 668

In view of this critic's eminence, it is not necessary to add much to his demolition of the reasons advanced for the Chancellor's hesitations. Later commentators have discussed them and have greeted with enthusiasm each decision which edges away from the traditional doctrine of negation.¹⁹ The irrelevance of "free speech" and of "a libel is for a jury" are patent. Freedom of discussion of public issues does not demand lack of "previous restraint" for injury to private individuals. Disparagement of goods presents no confusing or complicated matter of personality requiring the sympathetic attention of one's peers.

We are quite willing to repudiate the "waning doctrine that equity will not restrain the trade libel".²⁰ We are further willing to do so directly and without hiding behind the other equitable principles put forward in some of the cases.²¹ In so doing we may well repeat the words of a leading writer: "What does it really matter whether old customers are induced not to carry out their obligations or new customers are persuaded by unfair means not to enter into contractual relations? One practice is as unfair as the other, and in both cases the growth and success of the plaintiff's business are seriously affected." Derenberg, Trade-Mark Protection and Unfair Trading, p. 143.²² Furthermore, we are satisfied that we have ample support in the better reasoned cases.²³

The views just expressed make it unnecessary for us to elaborate upon plaintiffs' failure to state a cause of action under the Sherman or Clayton Acts.²⁴ We quite agree with the learned district judge in that respect. The vital allegations in such an action are similar to those in any civil conspiracy case. A general allegation of conspiracy without a statement of the facts is an allegation of a legal conclusion and insufficient of itself to constitute a cause of action. Although detail is unnecessary, the plaintiffs must plead the facts constituting the conspiracy, its object and accomplishment.²⁵ The plaintiffs have pleaded none of these facts. Neither the date of the alleged conspiracy nor its attendant circumstances

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are set forth. Nor is it averred who make the statements, where, when, or to whom

The order dismissing the complaint is reversed, and the cause remanded for further proceedings in accordance with this opinion.

On Rehearing.

Before BIGGS, MARIS, CLARK, JONES, and GOODRICH, Circuit Judges.

BIGGS, Circuit Judge.

We think that it is unnecessary upon rehearing to discuss at length the conclusion of the...