Emmpresa Cubana Del Tabaco v. Culbro Corp.

• Decision Date: 15 December 2000
• Docket Number: No. 97 CIV. 8399 RWS.,97 CIV. 8399 RWS.
• Parties: EMMPRESA CUBANA DEL TABACO, d.b.a. Cubatabaco, Plaintiff, v. CULBRO CORPORATION and GENERAL CIGAR CO., INC., Defendants.
• Court: U.S. District Court — Southern District of New York

Page 203

123 F.Supp.2d 203

EMMPRESA CUBANA DEL TABACO, d.b.a. Cubatabaco, Plaintiff, v. CULBRO CORPORATION and GENERAL CIGAR CO., INC., Defendants.

No. 97 CIV. 8399 RWS.

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

December 15, 2000.

Ribinowitz, Boudin, Standard, Krinsky & Lieberman by Michael Krinsky, David B. Goldstein, Christine S. Kim, New York City, for Plaintiff.

Morgan & Finnegan by Harry C. Marcus, Janet Dore, New York City, for Defendants.

OPINION

SWEET, District Judge.

Plaintiff Empresa Cubana del Tabaco d.b.a Cubatabaco ("Cubatabaco") has moved under Federal Rules of Civil Procedure 7 and 38 to strike the jury demand of defendants Culbro Corporation, and General Cigar Co., Inc. (collectively, "General Cigar"). For the reasons set forth below, the motion is granted.

This motion requires once again peering through the mists of time, aided by precedent, to define the line between equity and law in a controversy over trademark, in this instance the "COHIBA" mark as applied to cigars. The dispute may foreshadow an effort by Cubatabaco to return the Cuban Cohiba to the market in the United States. Since Cubatabaco is an instrumentality of the government of Cuba, the right to a jury trial is both procedurally challenging and tactically significant.

Prior Proceedings

Cubatabaco filed its complaint on November 12, 1997, alleging that Cubatabaco possessed a COHIBA mark for its cigars which was "well-known" in the United States at the relevant times, and that General Cigar's efforts to exploit and trade upon Cubatabaco's COHIBA mark in order to generate profits on the sale of its own cigars entitle Cubatabaco to relief under the Paris Convention for the Protection of Intellectual Property (the "Paris Convention") Arts. 6bis¹ and 10bis (unfair competition); the Inter-American Convention, Arts. 7 (use of mark in United States by someone who knows of its prior existence and continuous use in another treaty country), 20 (unfair competition) and 21 (unfair competition); section 43(a) of the Lanham Act, 15 U.S.C. §§ 1125(c)(1) (trademark dilution) and 1125(a) (willful trademark and trade dress infringement); and New York State law (trademark dilution, willful infringement, unfair competition).

In addition to an injunction against future use by General Cigar of the COHIBA mark, Cubatabaco seeks an order directing the United States Patent and Trademark Office to cancel General Cigar's United States trademark registration Nos. 1,147,309, issued in 1981, and 1,898,273, issued in 1995, as well as an order requiring General Cigar to disgorge its profits on a theory of unjust enrichment through its exploitation of the fame and reputation of Cubatabaco's COHIBA brand in the promotion and sale of its own cigars in the United States.

General Cigar filed its answer and jury demand, and the instant motion to strike the demand was heard and marked fully submitted on September 6, 2000.²

Facts

The parties have set forth by memoranda certain of the relevant facts which are set forth below as background, not as findings.

Cubatabaco is a Cuban state enterprise and is the owner of a COHIBA trademark registration for cigars in Cuba and the rest of the world except for the United States. It obtained the Cuban registration in 1972 and, beginning in the early 1970's, subsequently registered the COHIBA mark in over 115 countries. Directly and through its licensee, Habanos, S.A., Cubatabaco exports Cuban COHIBA cigars throughout the world, excluding the United States as a result of the United States trade embargo. Cubatabaco, through its licensee, also sells COHIBA cigars to the numerous foreign visitors to Cuba, including United States nationals.

Culbro Corporation merged into and was survived by General Cigar Holdings, Inc., of which General Cigar Co., Inc. is presumably an operating subsidiary.

General Cigar first obtained United States trademark registration for the COHIBA mark, Registration No. 1,147,309, on February 17, 1981. Cigar Aficionado magazine in Autumn 1992 featured the Cuban COHIBA in a cover story about "Cuba's Best Cigar," entitled "The legend of Cohiba: Cigar Lovers Everywhere Dream of Cuba's Finest Cigar." General Cigar applied for a second registration for a plain block letter form of the COHIBA mark in 1992, obtaining Registration No. 1,898,273.

In September 1997, General Cigar expanded its sales of cigars made in the Dominican Republic under the COHIBA name. In January 1997, Cubatabaco initiated cancellation proceedings in the Trademark Trial and Appeals Board.

Discussion

I. The Demand For A Jury Trial Is Stricken

A. The Right To A Jury Trial In Actions At Law

Rule 38(a) of the Federal Rules of Civil Procedure states that "[t]he right of trial by jury as declared by the Seventh Amendment to the Constitution or as given by a statute of the United States shall be preserved to the parties inviolate." Fed.R.Civ.P. 38(a). The Seventh Amendment provides that "[i]n Suits at common law, where the value in controversy shall exceed twenty dollars, the right of trial by jury shall be preserved." U.S. Const. amend. VII.

In construing the foregoing provision of the Seventh Amendment, the Supreme Court has observed:

The right to a jury trial includes more than the common-law forms of action recognized in 1791; the phrase "Suits at common law" refers to "suits in which legal rights [are] to be ascertained and determined, in contradistinction to those where equitable rights alone [are] recognized, and equitable remedies [are] administered" .... The right extends to causes of action created by Congress ... Since the merger of the systems of law and equity, ... this Court has carefully preserved the right to trial by jury where legal rights are at stake.... "`Maintenance of the jury as a factfinding body is of such importance and occupies so firm a place in our history and jurisprudence that any seeming curtailment of the right to a jury trial should be scrutinized with the utmost care....'"

To determine whether a particular action will resolve legal rights, we examine both the nature of the issues involved and the remedy sought. "First, we compare the statutory action to 18th-century actions brought in the courts of England prior to the merger of the courts of law and equity. Second, we examine the remedy sought and determine whether it is legal or equitable in nature...." The second inquiry is the more important in our analysis.

Chauffeurs, Teamsters and Helpers, Local No. 391 v. Terry, 494 U.S. 558, 564-5, 110 S.Ct. 1339, 108 L.Ed.2d 519 (1990) (citations omitted) (emphasis in original).

Consistent with the Supreme Court's warning that any seeming curtailment of the right to a jury trial should be scrutinized with the utmost care, the Second Circuit has held that "`the federal policy favoring jury decisions of disputed fact questions' ... impels us to resolve any doubts in favor of the right to a jury trial." Lee Pharmaceuticals v. Mishler, 526 F.2d 1115, 1117 (2d Cir.1975) (citations omitted).

B. General Cigar Is Not Entitled To A Jury Trial As To Cubatabaco's Claim For Disgorgement Of Profits On An Unjust Enrichment Theory

The crux of the issue presented here is whether or not a claim for disgorgement of profits in a trademark case constitutes a claim for damages entitling the defendant to a jury trial. Fortunately our Circuit has resolved this issue.

In George Basch Co., Inc. v. Blue Coral, Inc., 968 F.2d 1532, 1538 (2d Cir.1992), the Second Circuit explained that in equity a court has the power to grant complete relief by awarding profits for unjust enrichment in trademark infringement suits:

The infringer is required in equity to account for and yield up his gains to the true owner [of the mark], upon a principle analogous to that which charges a trustee with the profits acquired by the wrongful use of the property of the cestui que trust. Not that equity assumes jurisdiction upon the ground that a trust exists.... [T]he jurisdiction must be rested upon some other equitable ground — in ordinary cases, as in the present, the right to an injunction — but the court of equity, having acquired jurisdiction upon such ground, retains it for the purpose of administering complete relief, rather than send the injured party to a court of law for his damages. And profits are then allowed as an equitable measure of compensation, on the theory of a trust ex maleficio.

Id. at 1538 (quoting Hamilton-Brown Shoe Co. v. Wolf Brothers & Co., 240 U.S. 251, 259, 36 S.Ct. 269, 60 L.Ed. 629 (1916)).

Other courts have seen the issue the same way. See Modefine v. Burlington Coat Factory Warehouse Corp., 888 F.Supp. 44, 45-46 (S.D.N.Y.1995) (applying Basch in holding in infringement action that plaintiff's claim for defendant's profits on a theory of unjust enrichment triable without jury); Merriam-Webster, Inc. v. Random House, No. 91 Civ. 1221, 1993 WL 205043, at *2 (S.D.N.Y. June 10, 1993) (applying Basch in holding there was no right to jury trial in trademark infringement action where plaintiff seeking profits solely on unjust enrichment theory), rev'd on other grounds, 35 F.3d 65 (2d Cir.1994); see also Ringling Bros.-Barnum & Bailey Combined Shows, Inc. v. Utah Div. of Travel Dev., 955 F.Supp. 598, 605 (E.D.Va. 1997) ("[T]he disgorgement of defendant's profits [under 15 U.S.C. § 1117(a)] [is] wholly equitable and do[es] not create a constitutional jury trial right.").

The issue becomes clouded when a claim for an accounting is substituted for a damage claim, as in Alcan Int'l Ltd. v. The S.A. Day Manufacturing Co., Inc., 179 F.R.D. 398, 402 (W.D.N.Y.1998) ("[I]t is clear that S.A. Day seeks profits as a rough proxy measure of its damages, given the difficulty of establishing damages due to product disparagement."); The Daisy Group, Ltd. v. Newport News, Inc., 999 F.Supp. 548, 552 (S.D.N.Y.1998) (distinguishing between profits remedy as rough proxy for damages and profits remedy for unjust enrichment — a...