American Cyanamid Co. v. Sterling Drug, Inc.

• Decision Date: 15 December 1986
• Docket Number: Civ. A. No. 83-431 (AJL).
• Citation: 649 F. Supp. 784
• Parties: AMERICAN CYANAMID COMPANY, Plaintiff, v. STERLING DRUG, INC., Defendant.
• Court: U.S. District Court — District of New Jersey

649 F. Supp. 784

AMERICAN CYANAMID COMPANY, Plaintiff, v. STERLING DRUG, INC., Defendant.

Civ. A. No. 83-431 (AJL).

United States District Court, D. New Jersey.

December 15, 1986.

Donald I. Robinson, Robinson, Wayne, Levin, Riccio & LaSala, Newark, N.J., and Raymond I. Geraldson, Jr., Pattishall, McAuliff & Hofstetter, Chicago, Ill., for plaintiff.

John L. McGoldrick, McCarter & English, Newark, N.J., and Ronald S. Kadden, Von Maltitz, Derenberg, Kunin & Janssen, New York City, for defendant.

LECHNER, District Judge.

This action based on trademark infringement is brought by the makers of the household cleaning product, "Pine-Sol," against the makers of a similar product, "Lysol Pine Action." It appears the central ingredient in each of these household cleaning products is pine oil. The complaint charges defendant with trademark infringement and breach and frustration of purpose of an agreement entered into by the parties in 1967. Plaintiff has demanded a trial by jury. Defendant has moved to strike the jury demand on the ground the claims asserted are equitable by nature and thus afford plaintiff no right to trial by jury.

Facts

Plaintiff, American Cyanamid Company ("American Cyanamid"), is a Maine corporation with its principal place of business located in Wayne, New Jersey. Defendant, Sterling Drug, Inc. ("Sterling Drug"), is a Delaware corporation having its principal place of business in New York, New York. Jurisdiction is asserted on the basis of diversity of citizenship, 28 U.S.C. § 1332, and under the trademark laws of the United States, 15 U.S.C. § 1121 and 28 U.S.C. § 1338.

Since at least 1950, the parties or their predecessors in interest have sold competing household cleaning and disinfectant products. Agreements between the parties, the first entered into in 1956 and the second in 1967, have established at least some of the terms and conditions governing the manufacture and sale of certain of these products. The 1967 agreement focuses primarily on American Cyanamid's manufacture and sale of, and use of the tradename for, its "Pine-Sol" product, a wall and floor cleaner for which American Cyanamid holds one or more registered trademarks.

On February 7, 1983, American Cyanamid filed its original complaint in this action against Sterling Drug. As amended on April 26, 1983, the complaint alleges Sterling Drug has begun to advertise and sell a pine oil cleaner, "Lysol Pine Action" in direct competition with American Cyanamid's "Pine-Sol." The amended complaint charges Sterling Drug with: (1) consumer fraud and deceptive business practices;¹ (2) trademark infringement; (3) breach of contract; and (4) frustration of the purpose of the 1967 agreement. The amended complaint, as filed, sought: (1) a permanent injunction against further trademark infringement; (2) an accounting and payment of all profits derived by Sterling Drug's wrongful acts; (3) treble damages;² (4) costs; and (5) provisions to assure Sterling Drug's compliance with the injunction.

Crucial for purposes of the pending motion are three clauses in the amended complaint's prayer for relief. The second paragraph of the prayer asks that: "Defendant, be required as trustee ex maleficio, to account for and pay over to plaintiff all profits derived by defendant for its aforesaid wrongful acts." The third paragraph of the prayer asks that: "Defendant be required to pay to plaintiff treble the amount of damages incurred by plaintiff by reason of defendant's aforesaid wrongful acts."³ The eighth paragraph of the prayer asserts: "A trial by jury is demanded for all issues triable by jury."

By notice of motion, filed October 31, 1986 and argued on December 2, 1986, Sterling Drug has moved to strike American Cyanamid's request for a jury trial. Sterling Drug contends American Cyanamid has no constitutional right to a jury trial because all of American Cyanamid's claims, and the various forms of relief sought thereunder, are equitable by nature. Since the Seventh Amendment protects the right to a jury trial only for legal claims and relief, Sterling Drug argues the jury demand must be rejected.⁴ American Cyanamid counters that its request for an accounting of the profits earned by Sterling Drug, and the paying over of such amounts, is in essence a legal claim and thus supports its request for a jury trial. Because I find the remaining claims of American Cyanamid seek purely equitable relief, the motion to strike the jury demand is granted.

Discussion

The Federal Rules of Civil Procedure provide: "The right of a trial by jury as declared by the Seventh Amendment to the Constitution or as given by a statute of the United States shall be preserved to the parties inviolate." Fed.R.Civ.P. 38(a). The Seventh Amendment provides: "In suits at common law, where the value in controversy shall exceed twenty dollars, the right of trial by jury shall be preserved...." The right to a jury trial has been interpreted to attach in suits asserting legal claims as opposed to suits asserting claims of equity, admiralty and maritime jurisdiction. See Parsons v. Bedford, 28 U.S. (3 Pet.) 433, 445-46, 7 L.Ed. 732 (1830). The Supreme Court has further interpreted the Seventh Amendment as requiring, in actions where both legal and equitable issues are presented, "that any legal issues for which a trial by jury is timely and properly demanded be submitted to a jury." Dairy Queen, Inc. v. Wood, 369 U.S. 469, 473, 82 S.Ct. 894, 897, 8 L.Ed.2d 44 (1962), citing, Beacon Theatres, Inc. v. Westover, 359 U.S. 500, 79 S.Ct. 948, 3 L.Ed.2d 988 (1959).

Insofar as the amended complaint seeks injunctive relief, it is equitable by nature. The issue presented by this motion, therefore, is whether American Cyanamid's claim for an accounting and restitution of Sterling Drug's allegedly unlawful profits sounds in law and thus warrants a jury trial. The clause at issue, to reiterate, provides: "Defendant, be required as trustee ex maleficio, to account for and pay over to plaintiff all profits derived by defendant for its aforesaid wrongful acts." Sterling Drug advances a technical argument, rooted in historical distinctions between actions at law and equity, that an action seeking an "accounting for profits," as distinct from an action seeking an "accounting for damages," is purely equitable and therefore carries no right to a jury trial. American Cyanamid counters that controlling case law does not treat such claims so technically and, because its claim seeks essentially legal relief — i.e. a monetary recovery — the right to a jury trial is preserved. Sterling Drug responds that the case law relied upon by American Cyanamid is inapposite since those cases, unlike the case at bar, specifically involved claims for damages.

The issue before the Court is difficult since the distinction upon which American Cyanamid's right to a jury trial depends is founded not upon any logical rationale per se, but rather upon an historical anomaly incorporated into the Constitution by way of the Seventh Amendment. The question presented, therefore, is not whether it makes any inherent sense to try American Cyanamid's claim to a jury but rather whether, as an historical matter, American Cyanamid's claim would have been submitted to a jury.

The parties do not disagree that if this action were seeking only an injunction, it would be purely equitable and not entitle American Cyanamid to a jury trial; nor do they disagree that if the action were seeking only money damages for breach of contract, it would be purely legal and entitle American Cyanamid to a jury trial. The parties do disagree, however, whether in this action, where plaintiff is seeking an accounting and recovery of allegedly unjust profits, the claim might properly be classified as a legal claim triable to a jury.

Sterling Drug points out that courts and commentators have recognized actions seeking an accounting and recovery of unjust profits, as an historical matter, to be equitable actions. As noted by the Supreme Court in Hamilton-Brown Shoe Co. v. Wolf Bros. & Co., 240 U.S. 251, 259, 36 S.Ct. 269, 272, 60 L.Ed. 629 (1916) (citations omitted):

The right to use a trade-mark is recognized as a kind of property, of which the owner is entitled to the exclusive enjoyment to the extent that it has been actually used.... The infringer is required in equity to account for and yield up his gains to the true owner, upon a principle analogous to that which charges a trustee with the profits acquired by wrongful use of the property of the cestui que trust. Not that equity assumes jurisdiction upon the ground that a trust exists.... The jurisdiction must be rested upon some other equitable ground — in ordinary cases, as in the present, the right to an injunction — but the court of equity, having acquired jurisdiction upon such a ground, retains it for the purpose of administering complete relief, rather than send the injured party to a court of law for his damages. And profits are then allowed as an equitable measure of compensation, on the theory of a trust ex maleficio.

See also Roberts v. Sears, Roebuck & Co., 617 F.2d 460, 465 (7th Cir.1980) ("Restitution for the disgorgement of unjust enrichment is an equitable remedy with no right to a trial by jury.").

Professor Moore's treatise recognizes a claim for restitution of ill-gotten gains as equitable and not entitled to a jury trial: "In equity, restitution is usually thought of as a remedy by which defendant is made to disgorge ill-gotten gains or to restore the status quo, or to accomplish both objectives. It may be ancillary or incidental to another form of remedy or it may be the only remedy that is sought.... When restitution is sought in the form and in the situations allowed in equity prior to the Rules or authorized by valid statute there is no right to jury trial." 5 Moore's Federal Practice ¶ 38.242 at 38-195, 38-196 (citations omitted). See also Dobbs, Handbook on the Law of...