Apple Corps Ltd. v. International Collectors Soc.

• Decision Date: 26 June 1998
• Docket Number: Civ. No. 96-1571(JAG).
• Citation: 15 F.Supp.2d 456
• Parties: APPLE CORPS LIMITED, MPL Communications, Inc., Yoko Ono Lennon As Executrix of the Estate of John Lennon, Subafilms, Ltd. and Yoko Ono Lennon, Plaintiffs, v. INTERNATIONAL COLLECTORS SOCIETY, John E. Van Emden, Scott L. Tilson, Jeffrey B. Franz and Howard E. Friedman, Defendants.
• Court: U.S. District Court — District of New Jersey

15 F.Supp.2d 456

APPLE CORPS LIMITED, MPL Communications, Inc., Yoko Ono Lennon As Executrix of the Estate of John Lennon, Subafilms, Ltd. and Yoko Ono Lennon, Plaintiffs, v. INTERNATIONAL COLLECTORS SOCIETY, John E. Van Emden, Scott L. Tilson, Jeffrey B. Franz and Howard E. Friedman, Defendants.

Civ. No. 96-1571(JAG).

United States District Court, D. New Jersey.

June 26, 1998.

COPYRIGHT MATERIAL OMITTED

Paul V. LiCalsi, Amy J. Lippman, Gold, Farrell & Marks, New York, NY, Robert P. Shapiro, Shapiro & Croland, Hackensack, NJ, for Plaintiffs.

Donald A. Robinson, Robinson, Lapidus & Livelli, Newark, NJ, Bradford J. Badke, Lindal L. Scott, Dewey Ballantine, LLP, New York, NY, for Defendants.

OPINION

GREENAWAY, District Judge.

This matter comes before the Court on the motion for civil contempt of Gold, Farrell & Marks, counsel for plaintiffs Apple Corps Limited, MPL Communications, Inc., Yoko Ono Lennon, as executrix of the estate of John Lennon, Subafilms, Ltd. and Yoko Ono Lennon (collectively "Plaintiffs"). The other motions before the Court are the cross-motion to dissolve the Consent Order and the motion for sanctions of Dewey Ballantine, LLP, counsel for defendants International Collectors Society, John E. Van Emden, Scott L. Tilson, Jeffrey B. Franz and Howard E. Friedman (collectively "Defendants"). These motions arise from the Defendants' alleged breach of a Consent Order that the parties entered into in June 1997. The Consent Order permitted the sale of certain licensed collectors' stamps that bore the images of The Beatles. The Court heard testimony and argument on these various motions over several sessions concluding in April 1998. Based on the arguments presented and the written submissions given to the Court, Plaintiffs' motion seeking civil contempt is granted and Defendants' motion seeking to dissolve the Consent Order and requesting that the Court levy sanctions is denied.

PRELIMINARY STATEMENT

Plaintiffs commenced the above-captioned action against Defendants in April 1996. Plaintiffs alleged that Defendants were unlawfully trading off the good will associated with the legendary rock-n-roll band, The Beatles. Specifically, Plaintiffs alleged that Defendants created, marketed and sold, without any authorization from Plaintiffs, postage stamps featuring images of The Beatles, trademarks and copyrighted photographs (the "Stamps") owned and controlled exclusively by Plaintiffs. In addition to money damages, Plaintiffs sought a permanent injunction enjoining Defendants' exploitation of the Stamps.

In October 1996, Plaintiffs filed a motion for a temporary restraining order and a preliminary injunction barring Defendants from selling any Stamps bearing the likeness of The Beatles and/or Yoko Ono Lennon. In defense of the motion, Defendants' counsel, Bradford Badke, represented to the Court that Defendants would cease marketing any new Stamps bearing the image of Yoko Ono Lennon or The Beatles. On November 6, 1996, the Court denied Plaintiffs' motion for a temporary restraining order and scheduled a preliminary injunction hearing for December 20, 1996. On November 8, 1996, Plaintiffs presented evidence to the Court that Defendants had continued selling such Stamps and requested that the Court reconsider its denial of a temporary restraining order. On November 14, 1996, the parties entered into a Consent Order which inter alia, preliminarily enjoined Defendants from marketing or distributing Stamps or any other product bearing the image of Yoko Ono Lennon or The Beatles.

In June 1997, the parties agreed to resolve the case by a Consent Order which the Court entered on June 19, 1997. On or about September 24, 1997, Plaintiffs brought a motion for contempt seeking to enforce paragraph O of the Consent Order. Paragraph O of the Consent Order provides:

In the event that defendants or any of them breaches any provision of paragraphs A-I or K-L of this Order and as a result of such breach, plaintiffs or any one of them initiates legal proceedings to enforce their rights under this Order, defendants and each of them hereby: (1) agree that plaintiffs will be irreparably harmed by such breach and entitled to injunctive relief to prevent defendants from selling any further Stamps ... and (3) agree to reimburse plaintiffs for all their costs, including reasonable attorney's fees incurred in connection with any successful action or proceeding brought by plaintiffs (or any one of them) to enforce their rights under this Order.

(Consent Order ¶ O). Accordingly, Plaintiffs seek: (1) an order adjudging Defendants in civil contempt for violating the Consent Order; (2) a permanent injunction barring Defendants from selling any stamps featuring the name and/or likeness of The Beatles (collectively, or individually); and (3) attorneys' fees and costs incurred in connection with enforcing their rights under the Consent Order.

Defendants subsequently filed a cross-motion to rescind the Consent Order pursuant to Rule 60(b) of the Federal Rules of Civil Procedure due to Plaintiffs' alleged breach of the Consent Order. Defendants also filed a separate motion seeking to impose sanctions on Plaintiffs' counsel on the grounds that counsel behaved unethically in procuring the stamps which form the basis of their contempt motion.

This Court heard four days of testimony and argument in connection with all three motions on November 3, 1997, November 24, 1997, January 13, 1998 and April 7, 1998.

FACTS¹

A. The Parties

Pursuant to agreements with former members of The Beatles, Plaintiff Apple Corps Limited ("Apple") is the sole and exclusive owner of rights in and to the name and likeness of The Beatles. Plaintiff MPL Communications, Inc. ("MPL") is the exclusive owner of rights in and to the name and likeness of Paul McCartney. Plaintiff Yoko Ono Lennon, as Executrix of the Estate of John Lennon, is the exclusive owner of rights in and to the name and likeness of John Lennon and the "John Lennon" registered trademarks. Plaintiff Subafilms, Ltd. ("Subafilms") is the copyright owner in and to the full-length animated film "Yellow Submarine" and the images contained therein. Plaintiff Yoko Ono Lennon ("Mrs.Lennon") is the exclusive owner of rights in her own name and likeness.

Defendant International Collectors Society ("ICS") is a Maryland corporation engaged in the direct marketing and sale of products, including postage stamps duly and legally issued by the governments of foreign countries, throughout the United States. Defendant John Van Emden is the President of ICS. Defendants Scott L. Tilson and Jeffrey B. Franz are co-founders and officers of ICS.²

B. The Consent Order and the Lennon License

Subject to certain exceptions, the June 1997 Consent Order permanently enjoins Defendants from distributing or selling "postage stamps or any other product ... bearing or referring to (i) the name and/or likeness of The Beatles, John Lennon ... (vi) the John Lennon registered trademark of the John Lennon signature ..." (Consent Order ¶ A(i) and (vi)).

One of the exceptions to the Consent Order's permanent injunction provides that Defendants may continue to sell Stamps featuring John Lennon's name, trademark or image pursuant to a written license agreement from the Lennon Estate (the "Lennon License"). (Consent Order ¶ D). The Lennon License requires that prior to distribution, Defendants submit for approval any "promotional material which incorporates Licensor's Trademarks ... which is intended to be used in conjunction with the sale or distribution of' Lennon Stamps. (Lennon License ¶ 3(a)(i)). The Lennon Estate may not unreasonably withhold approval of promotional material; however, material not approved within seven days of Licensor's receipt is deemed disapproved. Id. Exhibit A to the Lennon License provides that "Lennon and John Lennon are trademarks of the Estate of John Lennon."

Another exception to the Consent Order's permanent injunction allows Defendants to sell (i) up to 2,000 of each of the Stamps listed in Exhibit E to the Consent Order for a period commencing February 28, 1997 and ending February 28, 1998; and (ii) the Stamps listed in Exhibit F to the Consent Order for a period commencing February 28, 1997 and ending February 28, 1999 (collectively the "Sell-Off Stamps").³ (Consent Order ¶ E(i)). However, Defendants may sell the Sell-Off Stamps "only to persons who, according to [Defendants'] records, are members of the Beatles/Lennon Club by reason of purchase of stamps other than the Sell-Off Stamps ..." Id.

The Beatles/Lennon Club is comprised of people who: (1) have previously purchased a Beatles or John Lennon stamp from Defendants; and (2) are currently enrolled in Defendants' "new issue service." The "new issue service" is a service that periodically ships new stamps to a customer on a "keep or return basis." When a person purchases a Beatles or John Lennon stamp, Defendants assign that person a VIP number. If that person joins the new issue service, Defendants enroll that person in the Beatles/Lennon Club and sends a letter welcoming her to the club.

C. ICS

ICS uses more than seventy toll-free telephone numbers for marketing to new customers and three toll-free telephone numbers for marketing to existing customers. ICS provided a club membership toll-free telephone number (1-800-606-3490) exclusively to persons who were enrolled in one of ICS's clubs⁴ dedicated to a celebrity or famous person. Club members received that number with their membership package. This telephone number is not printed on any other material or advertised to the general public.

D. The Fact Booklets

Defendants publish and distribute booklets containing information about certain celebrities with the sale of certain stamps. These are known as "99 facts booklets." At issue are two versions of these 99 facts booklets: one entitled "99 Little Known Facts About John Lennon and Groucho Marx" (the "Lennon/Marx Fact Book") and...