El Chico, Inc. v. El Chico Cafe

• Decision Date: 30 July 1954
• Docket Number: No. 14776.,14776.
• Parties: EL CHICO, Inc. et al. v. EL CHICO CAFE et al.
• Court: U.S. Court of Appeals — Fifth Circuit

214 F.2d 721 (1954)

EL CHICO, Inc. et al. v. EL CHICO CAFE et al.

No. 14776.

United States Court of Appeals, Fifth Circuit.

July 30, 1954.

Coke and Coke, John N. Jackson, Clinton Foshee, Dallas, Tex., Francis C. Browne, Washington, D. C., for defendant-appellant, El Chico Canning Co., Inc.

Clarence G. Campbell, Clarence P. Greer, New York City, for plaintiff-appellant, El Chico, Inc.

Gene Lary, John A. Erhard, Dallas, Tex., for defendant-appellees, El Chico Cafe, et al.

Before HUTCHESON, Chief Judge, and RIVES, Circuit Judge, and RICE, District Judge.

RIVES, Circuit Judge.

Plaintiff sought to enjoin all the defendants from using the trade name El Chico in their businesses. Jurisdiction was based on diversity of citizenship. The district court enjoined the defendant El Chico Canning Company, Inc., and dismissed the complaint as to the other defendants.¹ Plaintiff appeals from that part of the judgment which dismisses the complaint against all other defendants, and the defendant El Chico Canning Company, Inc., appeals from that part of the judgment enjoining it.

For the purposes of appeal, the findings of fact made by the district court are fully accepted by the defendant-appellant, and plaintiff-appellant concedes in brief that such findings "* * * are based on the overwhelming preponderance of evidence, except as to the interstate operation of the defendants other than the El Chico Canning Company, Inc. * * *." However, in a part of its argument to which we shall refer, the plaintiff-appellant implicitly attacks also the finding, "* * * that there was no fraud, nor deceit by the defendants in the continuation of their businesses, nor in their original establishment."

The plaintiff's restaurant, El Chico, at Greenwich Village, New York, has acquired national and international fame, and caters to customers and distinguished visitors from different parts of the United States and from many other nations. It is Spanish in character, atmosphere, decorations, food and entertainment, and is considered one of the four or five leading night clubs in New York City. It was founded by a native of Spain, Benito C. Collada, in 1925 at 245 Sullivan Street, New York, and opened in 1930 under the corporate name of El Chico, Inc. at its present location, 80 Grove Street, New York. It has consistently enjoyed very wide and favorable publicity through newspapers, periodicals, and trade publications, extensive radio broadcasting and presently through radio and television appearances of El Chico entertainers and musicians. In the twenty years from 1931 to 1951, its investment for advertising and promotion amounted to $489,000.

The five defendant Cuellar brothers are of Mexican descent, born in Texas. In October, 1940, two of the Cuellar brothers opened a restaurant known as El Chico Cafe at 3514 Oak Lawn Avenue, Dallas, Texas, which is still in operation at the same address. The first El Chico Cafe prospered, and in October, 1946, the other three Cuellar brothers joined the first two in opening a second El Chico Cafe in Dallas. In November, 1947, El Chico number three was opened in Fort Worth. In January, 1949, El Chico number four was opened in Fort Worth. In June, 1949, El Chico number five was opened in Dallas. In March, 1950, El Chico number six was opened in Shreveport, Louisiana. In October, 1950, an El Chico Cafe was opened at the State Fair Grounds in Dallas. In September, 1951, El Chico number seven was opened in Longview, Texas, by El Chico Cafe, Inc., a Texas corporation. In November, 1949, El Chico Canning Company, Inc. was organized in Dallas. The defendants' restaurants do not furnish entertainment, and are not within the class known as night clubs. They are Mexican as distinguished from Spanish in food, furnishings and decorations.

On October 8, 1940, an assumed name certificate was filed with the County Clerk of Dallas County, showing "El Chico Cafe" to be owned by Gilbert Cuellar and Mack Cuellar. On September 18, 1947, these two registered the name El Chico together with a design or symbol² not claimed to be infringing with the Secretary of State of Texas pursuant to the Texas Statutes.³ Later the name and symbol were assigned to a new partnership composed of the five brothers, and that partnership has issued franchise agreements for their use by the various cafes and the canning company. From 1941 to 1951, the defendants have spent approximately $100,000.00 in advertising through newspapers, radio and other media.

In November, 1949, the partnership composed of the five Cuellar brothers filed an application in the United States Patent Office for registration of the name and symbol as a trade-mark. The application lay on file without anything happening until September, 1950, when one of the Cuellars went to Washington for the purpose of getting action on it. Publication of the mark followed in the Official Gazette of the United States Patent Office. An attorney friend of the plaintiff called the publication to plaintiff's attention and thus it was that sometime near Chrismas, 1950, the plaintiff learned for the first time of the use of the name El Chico by the defendants.

The plaintiff does not contend that it was entitled to protection of its trade name under the Trade Mark Act in effect when in March, 1931, it filed with the Department of Commerce a record of its incorporation papers and name "El Chico, Inc.", and received an acknowledgment stating, "You are advised that the papers relating to El Chico, Inc., have been recorded with this office, relating to the names of corporations in the trademark division as of March 9, 1931. The recording fee of four dollars has been received." Instead, the plaintiff acquiesces in the district court's conclusion that "* * * it is evident that the law of unfair competition must rule this case." In legal effect the plaintiff's position is similar to that of the petitioner in Pecheur Lozenge Co. v. National Candy Co., 315 U.S. 666, 667, 62 S.Ct. 853, 86 L.Ed. 1103, where the Court said:

"But an examination of the original exhibits, not printed in the record, and of petitioner\'s brief on the merits here, discloses that the registration referred to is that of petitioner\'s labels under the Copyright Law of the United States, 17 U.S. C.A. § 1 et seq., and not registration under the Trademark Law. It thus appears that petitioner has alleged no cause of action under the Copyright Law and is not entitled to the benefits of registration under the Trademark Law. The only cause of action that this record could possibly support is for unfair competition and common law `trademark infringement\', to which local law applies. See Fashion Originators\' Guild v. Federal Trade Commission, 312 U.S. 457, 467, 468, 668, 61 S.Ct. 703, 707, 708, 85 L.Ed. 949."

It is clear, we think, that in the absence of a Federally registered trade-mark, issues of substantive law arising in actions for the infringement of a trade name, or for unfair competition, are governed by state law even though the acts complained of may be committed in various states and may affect interstate commerce. Philco Corporation v. Phillips Mfg. Co., 7 Cir., 133 F.2d 663, 148 A.L.R. 125; Annotation 148 A.L.R. 155; 52 Am.Jur., Trademarks, Tradenames, etc., Secs. 90, 89.

Plaintiff-appellant's statement of points to be relied on on appeal⁴ was unduly restrictive, but clearly did not mislead any of the parties nor result in a record inadequate for the consideration of the questions actually presented, and hence will not preclude us from such consideration. Foremost Dairies v. Ivey, 5 Cir., 204 F.2d 186, 188.

As to the name, the district court made the following finding:

"I find that the two words, `El Chico,\' were arbitrary trade names, insofar as they related to both plaintiff and the defendants. But that the phrase, `El Chico,\' is without subject, and is merely the beginning of a sentence, and is, and was, and has been used for a long time upon many sorts of articles, and as a part of persons\' names." 110 F.Supp. 642

The plaintiff does not and cannot claim to be the originator of El Chico as a trade-mark. One of the defendants' exhibits shows twenty-seven trade-mark registrations of Chico, El Chico and similar names for various products and articles, several of them prior to 1925, when plaintiff's restaurant was first founded. A Moorish king of Granada, who reigned from 1482 to 1483 and again from 1486 to 1492 when he was driven out by King Ferdinand and Queen Isabella, was called El Chico. Chico has frequently been used both as a surname and as the first name or nickname of persons. In Mexico, a mining town called El Chico is located in the State of Hidalgo, and there are six towns named Chico in the United States. A river 130 miles long in northeast Luzon, Philippine Islands is called Chico, and that is the name of two rivers in South Argentina. A Spanish American restaurant of much less fame than the plaintiff is located in New York City called Gay Chico Restaurant. Small restaurants are located in New York State bearing that name, an El Chico in Buffalo, New York, an El Chico Cafe in Binghamton, New York, and another Chico's Restaurant in Binghamton. There are three restaurants in West Virginia, two in Pennsylvania, and one in Illinois bearing the name El Chico. An El Chico Market is located in Newark, New Jersey. The evidence discloses such extensive use of the words El Chico as to bring them within the classification of a "weak" trade name which could be used without infringement in the absence of actual confusion or intent to deceive, especially where the marketing territories were different. Arrow Distilleries v. Globe Brewing Co., 4 Cir., 117 F.2d 347; see 52 Am.Jur., Trademarks, Tradenames, etc., Sec. 54.

The district court found:

"That there is no testimony of any confusion occasioned by customers of the plaintiff by reason of the later establishment of the defendants\' business. Nor that there

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