Diamond Co. v. Gentry Acquisition Corp., Inc.

• Decision Date: 25 February 1988
• Docket Number: No. 137875,137875
• Citation: 531 N.E.2d 777,48 Ohio Misc.2d 1
• Parties: The DIAMOND COMPANY, Plaintiff, v. GENTRY ACQUISITION CORP., INC., et al., Defendants.
• Court: Ohio Court of Common Pleas

Page 1

48 Ohio Misc.2d 1

531 N.E.2d 777

The DIAMOND COMPANY, Plaintiff, v. GENTRY ACQUISITION CORP., INC., et al., Defendants.

No. 137875.

Court of Common Pleas of Ohio Cuyahoga County.

Feb. 25, 1988.

Jeffrey H. Friedman and David M. Smith, Cleveland, for plaintiff

Porter, Wright, Morris and Arthur, and Kathleen McDonald O'Mally, Cleveland, for defendants.

JOURNAL ENTRY AND OPINION

JAMES J. McMONAGLE, Judge.

On October 15, 1988, the plaintiff filed its Verified Complaint for Temporary Restraining Order, Preliminary Injunction, Permanent Injunction and Damages. The defendants have responded with an Answer and Counterclaim but the issues addressed herein concern only the plaintiff's Preliminary Injunction request. The parties have been afforded a full evidentiary hearing and the matter has been fully briefed.

Although Ohio Civ.R. 65 does not specifically set forth the standards for issuance of injunctive relief, the following guidelines are appropriate for a Court to consider:

(1) The likelihood or probability of the movant's success on the merits;

(2) Whether the movant has an adequate remedy at law;

(3) Will the issuance of the preliminary injunction prevent the claimed irreparable injury;

(4) What injury to the parties and others will be caused by the granting of the preliminary injunction;

(5) The public interest that will be served by the granting of the injunctive relief; and

(6) Whether or not the injunctive relief sought is for the purpose of maintaining the status quo pending trial on the merits.

See, Mason County Medical Assoc. v. Knebel (6th Cir.1977) 563 F.2d 256; In re: DeLorean Motor Co. (6th Cir.1985), 755 F.2d 1223; North Avondale Neighborhood Assoc. v. Cincinnati Metro. Housing Authority (6th Cir.1972) 464 F.2d 486; Crews v. Radio 1330, Inc. (1977) 435 F.Supp. 1002; Dodd v. Rue (1979) 64 O.Misc. 21, 411 N.E.2d 201; Fed.R.Civ.P. 65.

Because of the potentially harmful nature of preliminary injunctive relief when weighed against its purpose to "protect an effective judgment on the merits" and its function to serve "as a means of preserving the court's ability to grant effective, meaningful relief after a determination of the merits," Gobel v. Laing (1967) 12 Ohio App.2d 93, 94, 231 N.E.2d 341, the plaintiff is required to show by "clear and convincing evidence" its entitlement to this claimed relief. Southern Ohio Bank v. Savings Ass'n. (1976) 51 Ohio App.2d 67, 366 N.E.2d 296. That burden of proof has been defined as "a degree of evidence required in a special type of civil case that is less than the degree required in a criminal case but more than that required in an ordinary civil action." Household Finance Corp. v. Altenberg (1966), 5 Ohio St.2d 190, 193, 214 N.E.2d 667.

The plaintiff claims the defendants' advertising has the effect of "duping the unsuspecting public into purchasing goods which are not of the quality or standard of which they have been advertised" and this violates the Ohio Deceptive Trade Practices Act, R.C. § 4165.02, the pertinent parts of which provide as follows:

A person engages in a deceptive trade practice when, in the course of his business, vocation, or occupation, he:

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(E) Represents that goods or services have sponsorship, approval, characteristics, ingredients, uses, benefits, or quantities that they do not have or that a person has a sponsorship, approval, status, affiliation, or connection that he does not have;

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(G) Represents that goods or services are of a particular standard, quality or grade, or that goods are of a particular style or model, if they are of another;

(J) Makes false statements of facts concerning the reasons for, existence of, or amounts of price reductions[.]

R.C. § 4165.03 permits a private cause of action even though in commercial advertising, the public always benefits:

A person likely to be damaged by a deceptive practice of another may be granted an injunction against it under the principles of equity or on terms that the court considers reasonable. Proof of monetary damage or loss or profit is not required.

The plaintiff has asked this Court to enjoin the defendant from continuing its present advertising scheme so that it can recover what it is already entitled to--a market free of false advertising. Johnson & Johnson v. Carter-Wallace, Inc. (2nd Cir.1980) 631 F.2d 186, 192.

The plaintiff, Diamond Company (hereinafter referred to as "Diamond") is engaged in the men's retail clothing business and operates approximately 25 men's clothing stores in and around Cleveland, Akron, Columbus, Toledo and Erie, Pennsylvania. Twenty-two of these stores are best described as "regular-priced men's stores" and three are categorized as "discount clothing stores."

The defendant, Gentry Acquisition Corp., Inc. (hereinafter referred to as "Gentry") began its business in Cincinnati approximately fifteen years ago and now has gross sales in the area of $30,000,000. Gentry first opened a store in the Cleveland market in March, 1986 in Willoughby Hills, Ohio and subsequently opened another outlet on the west side of Cleveland. Gentry now has eight stores competing in the markets of Cincinnati, Columbus, Cleveland, Indianapolis and Chicago in addition to the affiliated stores that it has in New York, New Jersey and Connecticut. The Cincinnati corporate offices retain tight control over all business affairs and all stores receive an even distribution of merchandise which permits a common advertising scheme coordinated by and initiated from the corporate headquarters.

Plaintiff's proof centers upon advertisements contained in a March, 1986 flyer used by Gentry to introduce its Willoughby Hills Store, an October 1, 1987 Cleveland Plain Dealer advertisement and and October 9, 1987 Cleveland Jewish News advertisement. Typical of the claimed misleading and false advertising are the following:

(a) "Now Cleveland men, too, can save about half at Gentry on men's top-quality clothing from the world's outstanding makers and designers";

(b) "We invite you to accept our gift of a wardrobe of three pure silk designer ties of your own choice--many handmade in Italy and England--valued at about $25.00 each";

(c) "To protect our fine sources, we never, EVER, advertise our brand names, though you will see the expensive labels in much of our clothing";

(d) "How can we do it? By buying in tremendous quantities--by buying seasonal production overruns from our carefully selected sources--sometimes by underwriting a manufacturers entire off season production--we get the best makers' best clothing for below normal original whosesale. And sell it, usually, for about half of what you'll pay for the identical fabrics, fashions and tailoring quality in the regular-priced stores and departments";

(e) "And you still save about half of everything, compared to prices for the identical clothing in the best regular-priced department and specialty stores";

(f) "Classic, Button down Oxford dress shirts with the label of America's most-respected traditional shirtmaker. 100% cotton or durable cotton/poly. Elsewhere, $28.00 at Gentry: $16.00."

(g) "Over 6,000 superior-quality, famous maker and designer suits ... Classic traditional and sophisticated Italian styles in the finest year round weight of 100% wool worsteds and time-honored press-holding lightweight Dacron worsteds. You'll see many of the identical suits selling elsewhere for $275.00 to $355.00. At Gentry, mostly: $145.00 and $155.00." (Emphasis added)

The defendant admits the above-quoted are typical of advertisements placed by it, but specifically denies that any of the statements contained therein are untrue, false or deceptive.

Initially, Gentry asserts that the plaintiff has the burden of presenting sufficient evidence for this Court to determine that the speech at issue is not entitled to a constitutional protection and further that there is no less intrusive method other than an injunction by which the plaintiff can be protected from the alleged harm.

The United States Supreme Court has held that speech of any type, to be protected, does not necessarily have to involve an expression of ideas. Virginia State Bd. of Pharmacy v. Virginia Citizens Consumer Council (1976) 425 U.S. 748, 761-762, 96 S.Ct. 1817, 1825, 48 L.Ed.2d 346. Both plaintiff and defendants in this case have a freedom to engage in commercial speech in the form of advertising and this is protected by the First Amendment to the U.S. Constitution and Article I, Section II of the Ohio Constitution. See, e.g., Zauderer v. Office of Disciplinary Counsel of Supreme Court of Ohio (1985), 471 U.S. 626, 105 S.Ct. 2265, 85 L.Ed.2d 652; Norton Outdoor Advertising v. Village of Arlington Heights (1982) 69 Ohio St.2d 539, 433 N.E.2d 198; and City of Cleveland Heights v. Lindsay (1979) 65 Ohio App.2d 215, 417 N.E.2d 1019. Courts are not permitted to invade commercial free speech and grant injunctions which have the effect of being a prior restraint unless there is a clear showing that the speech is unworthy of constitutional protection and that the only remedy is a narrowly-drawn injunction.

In Virginia State Bd. of Pharmacy v. Virginia Citizens Consumer Council, supra, the court provided examples of the type of governmental regulations of commercial speech that would still be permissible:

"Untruthful speech, commercial or otherwise, has never been protected for its own sake ... obviously, most commercial speech is not provably false, or even wholly false, but only deceptive and misleading. We foresee no obstacle to a state's dealing effectively with this problem. The First Amendment, as we construe it today, does not prohibit the state from ensuring that the stream of commercial information flow clearly as well as freely."

Virginia, supra, 425 U.S. at 770, 771-2, 96 S.Ct. at 1829, 1830-1.

In footnote 24 to the Virginia opinion, supra, the Court elaborated on its holding:

"In concluding that commercial speech...