Food Fair Stores, Inc. v. Lakeland Grocery Corp.

• Decision Date: 22 March 1962
• Docket Number: No. 8397.,8397.
• Citation: 301 F.2d 156
• Parties: FOOD FAIR STORES, INC., a corporation, Appellant, v. LAKELAND GROCERY CORP., a corporation, Appellee.
• Court: U.S. Court of Appeals — Fourth Circuit

301 F.2d 156 (1962)

FOOD FAIR STORES, INC., a corporation, Appellant, v. LAKELAND GROCERY CORP., a corporation, Appellee.

No. 8397.

United States Court of Appeals Fourth Circuit.

Argued January 5, 1962.

Decided March 22, 1962.

Lewis T. Booker and Archibald G. Robertson, Richmond Va. (Hunton, Williams, Gay, Powell & Gibson, Richmond, Va., and Stein, Stein & Engel, Jersey City, N. J., on the brief) for appellant.

Norris E. Halpern and William L. Parker, Norfolk, Va., for appellee.

Before SOPER, BRYAN and BELL, Circuit Judges.

SOPER, Circuit Judge.

Food Fair Stores, Inc., the plaintiff below, appeals from an order of the District Court dismissing its complaint for injunctive relief and for an accounting of profits, and permanently enjoining it, upon the counterclaim of Lakeland Grocery Corporation, defendant below, from using the trade name FOOD FAIR in the operation of its retail grocery business in the Norfolk-Portsmouth area of Virginia. The sole question presented is which of the two parties is entitled to the exclusive use of the trade name FOOD FAIR in the area. The District Court concluded, notwithstanding the earlier use of the name FOOD FAIR by the plaintiff as the designation for its chain of retail grocery stores in various areas of the United States that the defendant, Lakeland, by reason of its use of the name for its retail outlet in the Norfolk-Portsmouth area prior to any competitive activity there by Food Fair Stores, was entitled to the exclusive use of the trade name in that area. The correctness of this conclusion depends upon the applicable principles of the Virginia common law of unfair competition.¹

At the time of the trial below, September 1959, Lakeland operated two supermarkets in the Norfolk-Portsmouth area under the name FOOD FAIR. One was opened in May 1953, the other in July 1959. Food Fair Stores' FOOD FAIR supermarkets in the area numbered three. The first was opened in January 1958, and the others in 1958 and 1959 respectively. Lakeland is a Virginia Corporation, incorporated in May 1953, whose activities are limited to the Norfolk-Portsmouth area. Food Fair Stores, on the other hand, at the time of trial was the sixth largest chain food store organization in the country, with 399 retail stores in 9 eastern states distributed as follows: Connecticut 8; Delaware 8; Florida 120; Georgia 3; Maryland 41; New Jersey 79; New York 40; Pennsylvania 94; Virginia 6. Its retail sales in stores bearing the FOOD FAIR name for 53 weeks ending May 2, 1959, totaled $589,892,682; and the amount spent on advertising from 1935 when the FOOD FAIR name was first used by it, aggregated $30,234,148, of which $2,458,004 was expended in the first eight months of 1959.

The origins of this vast corporate business go back to a predecessor which was formed in the 1920's by the merger of several small groups of grocery and meat stores operating in and around Harrisburg, Pa. In the early 1930's its officers evolved or adopted the concept of the self-service supermarket — a store with convenient parking and accessibility to arterial highways, wherein a full range of food products are available to customers at moderate prices resulting from large sales and rapid inventory turnover — and in 1933 it opened its first supermarket in Harrisburg under the name "Giant Quality Price Cutters, Inc." The success of the operation was such that by the end of 1935 it had opened eight supermarkets in Pennsylvania and southern New Jersey, and by the end of 1937, at which time 22 of its supermarkets were in operation, it had moved its home office to Philadelphia and had closed all of its small stores.

The name FOOD FAIR was first used by the predecessor in August 1935 when it incorporated a subsidiary corporation known as Food Fair Stores, Inc. under the laws of Maryland. On October 31, 1935 the subsidiary opened a supermarket in Baltimore, Maryland, and one day later an additional supermarket in New Jersey, under the FOOD FAIR name. By 1938 all of the supermarkets of the predecessor or its subsidiary were operated under the name FOOD FAIR; in 1939 the name FOOD FAIR was registered in the U. S. Patent Office as a trademark for butter and eggs, and in 1942 the predecessor changed its corporate name to Food Fair Stores, Inc. At the same time, the listing of its stock, which had been traded through the New York Stock Exchange since 1937, was similarly changed to FOOD FAIR. From these beginnings Food Fair Stores continued its expansion until by April 1953, it operated 162 supermarkets in six states of which 156 operated under the name FOOD FAIR. As of that time there were 17 stores in New York, 45 in New Jersey, 52 in Pennsylvania, 4 in Delaware, 19 in Maryland, and 25 in Florida. During the year ending April 1953 Food Fair Stores had retail sales totaling $265,787,306. In the year 1952 $1,540,583 was expended in advertising and the total advertising expenditures from 1935 amounted to $9,918,269. Food Fair Stores was then the eighth largest chain of food stores in the United States, and the value of its good will measured by the market value of its stock in excess of its book value was $33,000,000.

At that time no FOOD FAIR Store was being operated by it in Virginia. The closest store to Norfolk, Virginia, was in Baltimore, Maryland. Two stores were being operated in the metropolitan area of Washington, D. C. under the name Food Lane to avoid confusion since the name FOOD FAIR had been earlier appropriated in the area by another operator. The reason for the step is made plain by the decision in Food Fair Stores v. Square Deal Market Co., 93 U.S.App.D.C. 7, 206 F.2d 482, where it was shown that approximately 18 weeks after the adoption of the name FOOD FAIR by the plaintiff, a store in Washington, D. C. was opened by Square Deal Market Co., Inc. under the same name without knowledge of the earlier adoption of the name by the plaintiff's predecessor. The court held that under the circumstances it was entitled to continue the use of the name and Food Fair Stores was enjoined from using it in that area.

On May 14, 1953, the defendant, Lakeland Grocery Corporation, opened its first supermarket in the Norfolk-Portsmouth area, using the name FOOD FAIR. Harold Eisenberg, the president of Lakeland, testified that prior to 1953 he knew that Food Fair Stores was an organization of chain stores on the East Coast that "had a lot of stores", and that he was also aware that there were many independently owned stores operating under the name FOOD FAIR, as in Washington, D. C., Richmond, and western Virginia², and that Food Fair Stores had no supermarkets under the name FOOD FAIR in Virginia. He stated that the name FOOD FAIR was selected for Lakeland's store since an establishment about a mile down the highway on which the store was located used the name "Furniture Fair" and it was thought that the highway would "become * * * made up of establishments that had a carnival-like or food fair operation" and that the FOOD FAIR designation would "tie-in" with such a scheme.

Shortly after the opening of the Lakeland supermarket, Food Fair Stores was advised of the fact, and on June 1, 1953 wrote Lakeland asserting its right to the exclusive use of the term FOOD FAIR as a trade name, and protesting Lakeland's use of the name. Thereafter, no further action was taken until 1956 when Food Fair Stores unsuccessfully tried to negotiate a purchase of the Lakeland store. In 1956 Food Fair Stores purchased a site outside of Norfolk on which it constructed a supermarket which was opened under the name FOOD FAIR on January 15, 1958, two days after the institution of this action. In June 1957 letters were exchanged in which Lakeland protested the prospective opening of this store and Food Fair Stores reasserted its prior right to use the name. In October 1957 a store was opened in Portsmouth using the name FOOD FAIR under license from Lakeland, and in July 1959 Lakeland opened another supermarket in Portsmouth under the FOOD FAIR name. Food Fair Stores in turn opened two additional stores in the area in 1958 and 1959 respectively, using the FOOD FAIR designation. Additional negotiations between the parties commencing in 1958 came to nought in 1959, and the trial of this case followed in September 1959.

At the trial it was stipulated that the style and size of the lettering of the signs on the stores was essentially similar so as to cause the average person viewing the signs to conclude that the stores were operated by the same organization, and the plaintiff sought to establish the right to exclusive use of the designation FOOD FAIR, founded on its prior adoption and long employment of the term as the trade name of its expanding chain store organization.

To show that the name FOOD FAIR was well and favorably known in the area and had attained a secondary meaning prior to the opening of its FOOD FAIR store by Lakeland, the plaintiff relied on its activities over a long period of years and the advertisement of its name as above described. It showed also that stores in the Norfolk area had been selling produce to Food Fair Stores for years long prior to 1953 and that its trucks prominently displaying the FOOD FAIR name made frequent trips there to pick up merchandise. And it pointed out that the region was a cosmopolitan area attracting people from all parts of the east coast who were familiar with the FOOD FAIR name and identified it with the plaintiff.

With respect to the reasonable probability of expansion of the Food Fair chain into the Norfolk-Portsmouth area in 1953 it was shown that the business continued to expand along the eastern seaboard until in September 1959 there were 399 stores located in the region extending from Connecticut to Florida, including six in operation in Virginia, with additional stores and a supply warehouse there then under construction. Pursuant to the plan to extend the business a store was opened in Alexandria,...