Canterbury Belts Ltd. v. Lane Walker Rudkin, Ltd.

• Decision Date: 13 February 1989
• Docket Number: No. 1037,D,1037
• Parties: CANTERBURY BELTS LTD, Plaintiff-Appellant, v. LANE WALKER RUDKIN, LIMITED, Defendant-Appellee. ocket 88-7034.
• Court: U.S. Court of Appeals — Second Circuit

Page 34

869 F.2d 34

9 U.S.P.Q.2d 1991

CANTERBURY BELTS LTD, Plaintiff-Appellant, v. LANE WALKER RUDKIN, LIMITED, Defendant-Appellee.

No. 1037, Docket 88-7034.

United States Court of Appeals Second Circuit.

Argued April 28, 1988.

Decided Feb. 13, 1989.

Joel E. Lutzker, New York City (William Andes, Amster, Rothstein & Ebenstein, New York City, of counsel), for plaintiff-appellant.

James E. Sullivan, New York City (Alan K. Roberts, Roberts, Spiecens & Cohen, New York City, Joseph L. Strabala, San Francisco, Cal., of counsel), for defendant-appellee.

Before CARDAMONE, PRATT and MAHONEY, Circuit Judges.

MAHONEY, Circuit Judge:

This appeal presents for review an order of the United States District Court for the Southern District of New York, Charles S. Haight, Jr., Judge, denying the application of plaintiff-appellant Canterbury Belts Ltd. ("Canterbury"), a New York corporation, for an order of civil contempt, pursuant to 18 U.S.C. Sec. 401(3) (1982), for violation of injunctive provisions in a 1982 consent decree. The decree was entered in an action alleging trademark infringement, unfair competition and false designation of origin brought by Canterbury against Lane Walker Rudkin, Limited ("Limited"). Contempt sanctions were sought against Limited, Lane Walker Rudkin Industries ("Industries"), the parent of Limited, and LWR Export, Ltd. ("Export"), another subsidiary of Industries which is the successor to Limited with respect to the activities at issue in this litigation. Limited, Industries and Export are corporations organized under the laws of New Zealand.

The consent decree provides that "[Limited] ..., and all persons acting in active concert or participation with it, shall cease and desist from all use of the term 'Canterbury' except as part of the composite 'Canterbury of New Zealand', with all elements being displayed in substantially equal prominence." The district court determined that Export's use of the trailing phrase "of New Zealand," in a design logo appearing on the exterior of at least one retail store and on various garments, was of sufficient size not to violate the "substantially equal" provision of the consent decree. The district court further determined that even where Export did not use the "trailer" at all in certain advertisements and trade show circulars, Canterbury had failed to show an intentional violation of the consent decree in the case of the advertisements, and had failed to prove economic injury or consumer confusion in the case of the trade show circulars. Relief was accordingly denied. Finally, the court held that service upon industries had not been sufficient to provide personal jurisdiction over that corporation, which does not do business in California or anywhere in the United States.

Reversed and remanded.

Background

Canterbury is the owner of the trademark "Canterbury" on and in connection with diverse articles of men's and women's fashion accessories, including belts, watchbands, bracelets, wallets, cuff links and similar items. Limited used the trade names "Canterbury", "Canterbury of New Zealand" and "Canterbury/Lane Walker Rudkin" in connection with men's apparel. As a result, Canterbury sued Limited in 1981 for trademark infringement, unfair competition and false designation of origin. In April, 1982, the parties entered into a consent decree which included the following provisions:

3. As of and after January 1, 1983, defendant [Limited], its officer [sic], agents, servants, and employees, and all persons acting in active concert or participation with it, shall cease and desist from all use of the term "Canterbury" except as part of the composite "Canterbury of New Zealand", with all elements being displayed in substantially equal prominence.

4. Notwithstanding the provision in Paragraph 3 hereof, Defendant [Limited], and its officers, agents, servants, and employees, and all persons acting in active concert and participation with it, shall not use the term "CANTERBURY" including without limitation and by way of example as part of the composite "Canterbury of New Zealand" in connection with the sale of any products identified in Plaintiff's Registrations, namely, men's and women's belts for wearing apparel, credit card cases, pocket secretaries, wallets, watchbands, cuff links, key rings made in whole or in part of precious metal, key clips made in whole or in part of precious metal, money clips made in whole or in part of precious metal, tie clips and identification bracelets.

Emphasis added.

At some time before or after this consent decree was signed, Limited ceased doing business. ¹ Export apparently succeeded to the operations and assets of Limited, and in any event conducted the activities which led Canterbury to seek contempt sanctions.

Contending that Limited and its privies had violated the consent decree, Canterbury moved for contempt sanctions in December, 1985. The district court ultimately determined that Export had used the word "Canterbury" without the qualifying phrase "of New Zealand" in advertisements for Export's clothing, and in listings of Export's products in trade show circulars. The district court also found that Export was currently using, on the exterior of at least one retail store and on various garments, the following design logo:

NOTE: OPINION CONTAINS TABLE OR OTHER DATA THAT IS NOT VIEWABLE

Initially, however, by memorandum opinion and order dated December 4, 1986, the district court determined that by serving its motion papers upon Limited's counsel of record, Canterbury had obtained personal jurisdiction over Limited for the purpose of Fed.R.Civ.P. 65(d) proceedings to hold that corporation in contempt, but had not thereby obtained personal jurisdiction over Industries and Export. Canterbury thereupon purported to serve Export and Industries by service upon an officer of Export at Export's place of business in Foster City, California. In addition, Canterbury served Industries by registered mail, return receipt requested, from the clerk of the United States District Court for the Southern District of New York to Industries' home office in New Zealand pursuant to Fed.R.Civ.P. 4(i)(1)(D).

Subsequently, by memorandum opinion and order dated December 1, 1987, the district court determined that the attempted service upon Industries through Export's California office was insufficient to obtain personal jurisdiction over that corporation, which was not doing business in California or anywhere else in the United States. ² Curiously, the district court did not address plaintiff's attempted Rule 4(i)(1)(D) service upon Industries. The court further determined that Limited had ceased doing business, but that "[g]iven the corporate relationship and genesis of Export," Export was "in active concert or participation with" Limited within the meaning of Fed.R.Civ.P. 65(d), and was accordingly subject to the consent decree. The court then went on to address the merits of the contempt motion as against Export alone.

In denying that motion, the district court first noted that no violation of paragraph 4 of the consent decree was claimed, and only paragraph 3 thereof was at issue. It then determined that although the required appendage "of New Zealand" was in significantly smaller letters, Export's design logo did not violate the "substantially equal prominence" provision of paragraph three of the consent decree.

The court next addressed Export's use of the phrase "Canterbury" without the trailer "of New Zealand" in various advertisements and trade circulars. Addressing the advertisements, the court determined that Export had made "good faith efforts" to have them conform with the consent decree, that the violations resulted from the failure of third-party copy writers to follow Export's instructions, and that accordingly no contempt was shown. As to the trade circulars, Judge Haight concluded that there was no showing of "direct economic loss," in view of the difference between Canterbury's and Export's product lines, and "no evidence of ... actual consumer confusion," again precluding a finding of contempt. Finally, the court ruled that the parties would bear their own costs and fees.

This appeal followed.

Discussion

A. Construction of the Consent Decree.

Consent decrees are to be construed as contracts. United States v. ITT Continental Baking Co., 420 U.S. 223, 236-37, 95 S.Ct. 926, 934-35, 43 L.Ed.2d 148 (1975). Their meaning is ordinarily to be discerned within the "four corners" of the decree. As stated in United States v. Armour & Co., 402 U.S. 673, 91 S.Ct. 1752, 29 L.Ed.2d 256 (1971):

Consent decrees are entered into by parties to a case after careful negotiation has produced agreement on their precise terms. The parties waive their right to litigate the issues involved in the case and thus save themselves the time, expense, and inevitable risk of litigation. Naturally, the agreement reached normally embodies a compromise; in exchange for the saving of cost and elimination of risk, the parties each give up something they might have won had they proceeded with the litigation. Thus the decree itself cannot be said to have a purpose; rather the parties have purposes, generally opposed to each other, and the resultant decree embodies as much of those opposing purposes as the respective parties have the bargaining power and skill to achieve. For these reasons, the scope of a consent decree must be discerned within its four corners, and not by reference to what might satisfy the purposes of one of the parties to it.

Id. at 681-82, 91 S.Ct. at 1757 (footnote omitted) (emphasis partially added); see Berger v. Heckler, 771 F.2d 1556, 1568 (2d Cir.1985); Hart Schaffner & Marx v. Alexander's Dep't Stores, Inc., 341 F.2d 101, 102 (2d Cir.1965) (per curiam).

Nonetheless, "[a]ssuming that a consent decree is to be interpreted as a contract, it would seem to follow that evidence surrounding its negotiation and tending to...