Fry v. Layne-Western Company

• Decision Date: 13 October 1960
• Docket Number: No. 16371.,16371.
• Citation: 282 F.2d 97
• Parties: Vene D. FRY, d/b/a Vene D. Fry Company, Appellant, v. LAYNE-WESTERN COMPANY, Appellee.
• Court: U.S. Court of Appeals — Eighth Circuit

282 F.2d 97 (1960)

Vene D. FRY, d/b/a Vene D. Fry Company, Appellant, v. LAYNE-WESTERN COMPANY, Appellee.

No. 16371.

United States Court of Appeals Eighth Circuit.

June 23, 1960.

On the Merits August 9, 1960.

Rehearing Denied October 13, 1960.

George T. Morton, Jr., of Watson, Ess, Marshall & Enggas, Kansas City, Mo., for appellant.

Edward T. Matheny and C. E. Lombardi, Jr., Kansas City, Mo., for appellee.

Before SANBORN, VAN OOSTERHOUT and MATTHES, Circuit Judges.

On Jurisdiction

PER CURIAM.

This appeal challenges the validity of an injunction granted the plaintiff (appellee) in an unfair competition action. The decision of the trial court is reported in 174 F.Supp. 621.

We find nothing in the record on appeal which demonstrates that the District Court had jurisdiction of the case. Diversity of citizenship was neither pleaded nor proved. There is no allegation in the complaint that there is any amount in controversy.

An action for unfair competition is a common-law cause of action and does not arise under any law of the United States. Under § 1338(b) of 28 U. S.C.A., a claim of unfair competition may be joined with a "substantial and related claim under the * * * trade-mark laws," but, to be "related" to a claim arising under those laws, the unfair competition claim must rest upon substantially identical facts. Landstrom v. Thorpe, 8 Cir., 189 F.2d 46, 51, 26 A.L.R.2d 1170, 1177, and cases cited. See, also, Powder Power Tool Corp. v. Powder Actuated Tool Co., Inc., 7 Cir., 230 F.2d 409, 413. An action for infringement of a common-law trade-mark is not one "arising under any Act of Congress relating to * * * trade-marks," within the meaning of 28 U.S.C.A. § 1338(a). Magic Foam Sales Corp. v. Mystic Foam Corp., 6 Cir., 167 F.2d 88.

Since the District Court did not question its authority to try this case and both parties invoked its jurisdiction to decide the controversy on the merits, and since the defendant has at no time raised any question of lack of jurisdiction, it seems probable that jurisdiction did, in fact, exist.

It is elementary that, in federal courts, jurisdiction must be affirmatively shown; that the facts necessary to establish jurisdiction must be pleaded; that lack of jurisdiction cannot be waived by the parties or ignored on appeal; and that the appellate court must satisfy itself not only of its own jurisdiction but also of that of the District Court. Kern v. Standard Oil Co., 8 Cir., 228 F.2d 699, 701 and cases cited.

Section 1653, Title 28 U.S.C.A., provides: "Defective allegations of jurisdiction may be amended, upon terms, in the trial or appellate courts."

In Illinois Terminal R. Co. v. Friedman, 8 Cir., 208 F.2d 675, 677, and in Kern v. Standard Oil Co., supra, at page 701 of 228 F.2d, we granted the parties leave to amend the pleadings to show, if possible, that federal jurisdiction did, in fact, exist. We shall do the same in this case. The parties may have thirty days to amend their pleadings to show jurisdiction. If jurisdiction is established, the case will be decided on the merits without further argument. If the pleadings are not amended to show jurisdiction, within thirty days, the case will be remanded to the District Court with directions to dismiss it for want of jurisdiction.

On the Merits

VAN OOSTERHOUT, Circuit Judge.

Defendant Fry has appealed from final judgment determining that he is engaged in unfair competition with the plaintiff Layne-Western Company in the sale of vertical turbine pumps in plaintiff's sales area, and granting an injunction against the defendant substantially in accordance with the prayer of the plaintiff's complaint.

On June 23, 1960, we filed per curiam opinion noting that jurisdiction in this case, if it exists, must be based on diversity of citizenship. We found nothing in the record to support diversity jurisdiction. Pursuant to leave granted, the parties have now jointly filed stipulation supplementing the printed record which includes a certified copy of petition for removal of this action to federal court. Jurisdiction based upon diversity of citizenship and the requisite amount has now been satisfactorily established.

Inasmuch as the trial court, in its opinion reported in 174 F.Supp. 621, has set out the pertinent facts in considerable detail, and has set out the issues and its views thereon, we shall try to limit our discussion of the facts to those essential to the decision of this case.

Plaintiff is a Delaware corporation, organized in 1924. It is an affiliate¹ of Layne & Bowler, Incorporated, of Memphis, Tennessee, hereinafter usually called the Memphis company. It has the exclusive right to sell the Memphis company's pumps in an eight state area. Such rights as to Missouri, Kansas, Nebraska, Oklahoma and Colorado were acquired in 1924, as to Illinois and Iowa in 1936, and as to Wyoming in 1953.

In September, 1955, defendant, a licensed engineer, became a manufacturer's representative at Kansas City, Missouri, for Layne & Bowler Pump Company, a California corporation of Los Angeles, California, hereinafter called the California company. Defendant's territory covered western Missouri and part of Kansas. Defendant also represented other manufacturers in other lines not here involved. After 1955 he devoted part of his time to the sale of the California company's products in his assigned territory.

Both the Memphis company and the California company manufacture vertical turbine pumps. The pumps are used principally for municipal water supply, for various industrial purposes not limited to the pumping of water, and for irrigation. Pumps are usually built to specification and cost from $1,000 to $100,000 each. Frequently, but not always, purchasers secure the advice of a consulting engineer before buying the pump.

Mahlon Layne, the inventor of the pump manufactured by both the Memphis and the California companies, and P. D. Bowler organized the predecessors of the Memphis and the California companies. Layne & Bowler Company, a Texas corporation, now Layne & Bowler, Incorporated (the Memphis company) was incorporated in 1907. Layne & Bowler Corporation, now Layne & Bowler Pump Company (the California company) was incorporated in 1912. By 1916 Layne had acquired a majority of the stock in both corporations. Joint ownership and control of the corporations continued until 1923 when Layne gave most of his stock in the Memphis corporation to his sons, thus ending the common ownership of the two corporations. In 1927, a controlling interest in the California corporation was given by Layne to the Layne Foundation, a philanthropic organization. The Layne Foundation in 1947 sold the controlling stock in the California corporation to individuals unrelated to the Layne family.

Plaintiff's cause of action is based upon unfair competition. Plaintiff claims to be entitled throughout the eight state area where it does business to the good will attaching to its corporate name and to the names "Layne", "Layne & Bowler" and "Lane & Bowler, Incorporated", which good will is alleged to have been created by the plaintiff since its organization in 1924, both by advertising and by doing business as a distributor of Layne pumps.

Plaintiff claims that defendant's sale of pumps under the name of Layne & Bowler Pump Company and the distribution of advertising literature using the names "Layne" and "Layne & Bowler" and the corporate name Layne & Bowler Pump Company, deceives plaintiff's customers and enables defendant to avail himself of plaintiff's good will, reputation and business.

While defendant admits that he has used the name Layne & Bowler Pump Company in soliciting sales of pumps for the California company, he denies that he has circulated any advertising literature or has otherwise used the names "Layne" and "Layne & Bowler" in connection with the sale of pumps except as part of his manufacturer's full corporate name or its trade-mark, Layne & Bowler Verti-Line pumps. Defendant also asserts as a defense that the California corporation was organized in 1912 and that it was engaged in the manufacture and selling of vertical turbine pumps long prior to the time when plaintiff was organized and commenced business.

No issue of patent or trade-mark infringement is presented by this case. The featured word in the Memphis company's trade-mark is the word "Layne". The featured word in the California company's trade-mark is the word "Verti-Line". The full corporate name and address of each company does appear upon the pumps it manufactures.

The right of both companies to use the Layne patents is unquestioned.

The primary question presented by this appeal is the right of defendant to use the corporate name of the California company in connection with the sale of its pumps in the eight state territory occupied by the plaintiff. It is undisputed that the plaintiff has established a profitable business which has a good reputation and an established good will in its eight state area. Plaintiff has at all times used the word "Layne" and at times the words "Layne & Bowler" as well as it own corporate name in connection with its extensive promotion, advertising and sale of the pumps of the Memphis company.

The California company has from its inception up to 1955 used the words "Layne & Bowler" as a trade-mark for its pumps and as a trade name for itself. In 1955 it registered the coined word "Verti-Line" as a trade-mark and since that time has called its products Verti-Line pumps or Layne & Bowler Verti-Line pumps. It has featured the trade-mark Verti-Line, which is set out in large letters. The Layne & Bowler name and the California company's address appear less prominently upon its pumps and in its advertising material.

Because of the rather complicated nature of the product and the necessity of making certain that the pump sold is suited for its intended purpose, most sales made by both parties to this action are made by personal contact...