Buti v. Impressa Perosa, SRL, No. 95 Civ. 3525 (AGS).

• Court: United States Courts of Appeals. United States Court of Appeals (5th Circuit)
• Writing for the Court: David Jaroslawicz, Jaroslawicz and Jaros, New York City, for Defendant
• Citation: 935 F. Supp. 458
• Parties: Tommaso BUTI and Fashion World Company, Plaintiffs, v. IMPRESSA PEROSA, S.R.L., Defendant.
• Docket Number: No. 95 Civ. 3525 (AGS).
• Decision Date: 09 August 1996

935 F. Supp. 458

Tommaso BUTI and Fashion World Company, Plaintiffs,
v.
IMPRESSA PEROSA, S.R.L., Defendant.

No. 95 Civ. 3525 (AGS).

United States District Court, S.D. New York.

August 9, 1996.

935 F. Supp. 459

Samuel I. Burstyn, Miami, FL, Robert W. Cinque, Cinque & Cinque, P.C., New York City, for Plaintiffs.

David Jaroslawicz, Jaroslawicz and Jaros, New York City, for Defendant.

MEMORANDUM DECISION

SCHWARTZ, District Judge:

Before the Court is Magistrate Judge Peck's Report and Recommendation urging that the Court grant plaintiffs Tommaso Buti and Fashion World Company (collectively "Buti") — owners of the "Fashion Cafe" in Rockefeller Center in Manhattan — summary judgment on their action seeking a declaratory judgment that defendant Impressa Perosa, S.R.L. ("Impressa") — owner of a "Fashion Cafe" in Milan, Italy — does not have rights in the trademark "Fashion Cafe" for restaurant services and clothing in the United States. Magistrate Judge Peck also recommends that the Court grant Buti summary judgment dismissing Impressa's federal trademark counterclaims with prejudice and its state law claims without prejudice. Finally, Magistrate Judge Peck recommends that certain portions of the affidavit of Impressa attorney David Jaroslawicz be struck, and that Buti's request for sanctions be granted in part. For the reasons set forth below, the Court adopts the Report and Recommendation, except for its recommendation regarding the imposition of sanctions.

BACKGROUND

The Magistrate Judge thoroughly and accurately describes the facts underlying this action, see Report and Recommendation at pp. 3-12, and they will not be repeated here. In a well-reasoned Report and Recommendation, the Magistrate Judge recommends that this Court grant Buti's summary judgment motion as to Impressa's federal trademark counterclaims because Impressa did not "use" the mark "Fashion Cafe" in the United States prior to Buti's trademark registration and use. The Magistrate Judge further recommends that Buti be awarded a declaratory judgment that Impressa does not have any trademark in the name "Fashion Cafe" in the United States, and that Buti did not infringe any such rights.

With regard to Buti's motion to strike certain affidavits submitted by Impressa and his request for sanctions, Magistrate Judge Peck recommends that certain portions of the affidavit of Impressa's attorney David Jaroslawicz be stricken, and that Buti's request for sanctions be granted "to the limited extent of the reasonable cost of researching and preparing that portion of the motion to strike dealing with defense counsel's affidavit." Report and Recommendation at 34-35.

Impressa has timely filed objections to the Magistrate Judge's Report and Recommendation. After consideration, the Court rejects all of the objections, except those regarding the imposition of sanctions.

DISCUSSION

I. Disposition of Lanham Act Claims

The Court has conducted a de novo review of the record and arguments considered by the Magistrate Judge and concludes that the Magistrate Judge's recommendations regarding disposition of the Lanham Act claims should be adopted by this Court. As Impressa recognizes, the critical issue with respect to the Lanham Act claims asserted by each party is whether the plaintiffs or the defendant were first to use the name "Fashion Cafe" in commerce, as the phrase "use in commerce" is defined in the Lanham Act, 15 U.S.C. § 1127. See Defendant and Counterclaim Plaintiff's Objections to the Magistrate Judge's Report and Recommendation ("Objections") at 3.

The Court agrees with the Magistrate Judge's conclusion that the activities engaged in by Impressa officer Giorgio Santambrogio — including advertising and promotion of the Milan "Fashion Cafe" unconnected to an established United States business¹ — do not

935 F. Supp. 460

constitute "use in commerce" in the United States so as to confer upon Impressa rights in the "Fashion Cafe" mark in the United States. Rather than ignoring the definition of "use in commerce," as Impressa contends, the Magistrate Judge's Report and Recommendation refers to and quotes the statutory definition, and cites case law interpreting it. See Report and Recommendation at 14

The Report and Recommendation begins its analysis of the trademark priority issues by referring to the territoriality doctrine, under which a trademark is recognized as having a separate existence in each sovereign territory in which it is registered or legally recognized as a mark. Thus, it is clear that Impressa does not derive any right to the "Fashion Cafe" mark in the United States from either its trademark registration of "Fashion Cafe" in Italy in 1988 or from its operation since 1987 of the Milan "Fashion Cafe."

The Report and Recommendation addresses the effect of Impressa's efforts to advertise and promote the Milan "Fashion Cafe" in the United States. Magistrate Judge Peck concludes that (1) "mere advertising" unconnected to an established business is not "use" under the Lanham Act, and (2) United States advertising of a foreign business is not "use" of the mark in the United States. Noting that the federal courts do not appear to have addressed the second issue, Magistrate Judge Peck points out that decisions of the Patent and Trademark Office's Trademark Trial and Appeal Board ("TTAB") have resolved the issue adversely to Impressa's position in this litigation.² After summarizing the holdings of these decisions, the Magistrate Judge concludes that although there was advertising of the Milan "Fashion Cafe" in the United States, such advertising only had an impact on commerce in Milan; all restaurant services were rendered there, any profit flowed there, and one must be in Milan to avail oneself of the restaurant services. Report and Recommendation at 19 n. 8. Thus, the Magistrate Judge concluded, "there is no impact on United States commerce and no use or rights to the mark in the United States."³ Id. The Court agrees, and rejects Impressa's argument (unsupported by any directly relevant authority) that the distribution of vouchers for free meals (among other promotional activities) satisfies the Lanham Act's definition of "use in commerce," when Impressa rendered no restaurant services in the United States and its activities had no impact on United States commerce.

In the Court's view, the Magistrate Judge's conclusions and recommendations constitute an entirely correct resolution of the trademark issues. Accordingly, the Court adopts Magistrate Judge Peck's recommendations regarding disposition of the Lanham Act claims.

II. Dismissal of State Law Counterclaims

Impressa also argues that the Report and Recommendation is erroneous to the extent that it recommends the dismissal of Impressa's state law counterclaims "without prejudice". Impressa contends that there is diversity

935 F. Supp. 461

or alienage jurisdiction⁴ over these claims, and that the Magistrate Judge overlooked this basis of jurisdiction when he recommended that the Court decline to exercise supplemental jurisdiction over Impressa's state law counterclaims. The Court rejects this objection for the reasons set forth below

First, the Court notes that Impressa failed to explicitly plead diversity jurisdiction in its Answer and Counterclaims. It is firmly established that diversity of citizenship "should be distinctly and positively averred in the pleadings, or should appear with equal distinctness in other parts of the record." Leveraged Leasing Admin. Corp. v. Pacifi-Corp Capital, Inc., 87 F.3d 44, 47 (2d Cir. 1996) (citation and internal quotations omitted). Impressa now seeks to invoke the Court's diversity jurisdiction by making jurisdictional allegations in its Objections to the Magistrate Judge's Report and Recommendation. Despite the deficiencies in Impressa's pleading regarding diversity jurisdiction, the Court has addressed the merits of Impressa's jurisdictional argument.

A careful review of the case law regarding the effect of a 1988 amendment to the diversity statute on the scope of alienage jurisdiction leads to the conclusion that there is no basis for such jurisdiction in this lawsuit between an Italian citizen and a New York limited partnership, on one side, and an Italian corporation, on the other.

It appears undisputed that Impressa is an Italian corporation, Complaint ¶ 3, and that Plaintiff Fashion World Company is a New York Limited Partnership.⁵ Complaint ¶ 2. The citizenship of Buti for diversity jurisdiction purposes is not nearly so clear. Impressa argues that Buti, an Italian citizen in the United States on a permanent visa, should be considered a citizen of New York for the purposes of diversity jurisdiction because he is domiciled here. Objections at 14 n. 7. Impressa thus contends that because it is an Italian corporation, and the plaintiffs are a New York limited partnership and a New York domiciliary, this Court has diversity jurisdiction.

The Court rejects Impressa's analysis. For purposes of diversity jurisdiction, it is clear that Article III of the Constitution does not afford Congress the power to grant the federal courts jurisdiction over an action between two aliens. See, e.g., Mossman v. Higginson, 4 U.S. (4 Dall.) 12, 14, 1 L.Ed. 720 (1800) ("the legislative power of conferring jurisdiction on the federal Courts, is, in this respect, confined to suits between citizens and foreigners"); Jackson v. Twentyman, 27 U.S. (2 Pet.) 136, 136, 7 L.Ed. 374 (1829) ("the judicial power was not extended to private suits, in which an alien is a party, unless a citizen be the adverse party"); Joseph Muller Corp. v. Societe Anonyme de Gerance et D'Armement, 451 F.2d 727, 729 (2d Cir.1971) ("all parties are aliens, and neither the constitutional nor statutory grants of jurisdiction include such a suit"), cert. denied, 406 U.S. 906, 92 S.Ct. 1609, 31 L.Ed.2d 816 (1972).

It is equally clear that, at least since Strawbridge v. Curtiss, 7 U.S....