Fund of Funds, Limited v. First American Fund of Funds

• Decision Date: 27 June 1967
• Docket Number: No. 66 Civ. 2341.,66 Civ. 2341.
• Parties: The FUND OF FUNDS, LIMITED and I. O. S., Ltd. (S. A.), Plaintiffs, v. FIRST AMERICAN FUND OF FUNDS, INC., Defendant.
• Court: U.S. District Court — Southern District of New York

274 F. Supp. 517

The FUND OF FUNDS, LIMITED and I. O. S., Ltd. (S. A.), Plaintiffs, v. FIRST AMERICAN FUND OF FUNDS, INC., Defendant.

No. 66 Civ. 2341.

United States District Court S. D. New York.

June 27, 1967.

COPYRIGHT MATERIAL OMITTED

Robert J. Haft, Ross, Stamer, Wolf & Haft, New York City, for plaintiff.

Milton Mound, Mound, Belfer & Greenburg, New York City, for defendant.

MOTLEY, District Judge.

Opinion on Motion for Summary Judgment

Plaintiff, The Fund of Funds, Limited, was incorporated in 1962 under the laws of the Province of Ontario, Canada. Its principal place of business is in Geneva, Switzerland. The name used by plaintiff for its mutual fund investment business is The Fund of Funds. Plaintiff has used this name since its incorporation on August 9, 1962. The Fund of Funds is an open-end mutual fund, the investment portfolio of which consists mainly of the shares of 20 United States mutual funds and 9 companies managing mutual funds. The Fund of Funds, as of June, 1966, had net assets in excess of $400,000,000. The United States mutual fund shares which comprise the portfolio of The Fund of Funds were purchased for it by broker-dealers in the United States.

The Fund of Funds, Ltd., is one of several companies established by the other plaintiff, Investors Overseas Services, Limited, (I. O. S.). This plaintiff is a corporation organized under the laws of the Republic of Panama with its principal place of business also in Geneva, Switzerland. I. O. S. is the exclusive distributor of the shares of The Fund of Funds which are sold outside of the United States to non-United States citizens and nationals.¹

Offices outside the United States which sell The Fund of Funds shares are located in 60 foreign countries. These shares are also sold through sales representatives in 50 other foreign countries. I. O. S. claims it is the largest mutual fund and investment program distributor specializing in the international market. No claim or proof has been offered to the contrary. I. O. S. says it has more than 100,000 clients in 125 countries. Again, this claim is not disputed.

Since 1962, plaintiffs claim, they have continuously publicized and used the name The Fund of Funds by printing the name on its stationery, printed matter, prospectus, periodic reports and by advertising. Plaintiffs further claim they have expended substantial sums of money and considerable time in keeping the name The Fund of Funds before the investment community. Plaintiffs have publicized and distributed, for informational purposes, to broker-dealers, investment bankers, stock exchange firms, mutual funds management companies, investment advisers, and other members of the professional investment community throughout the world, information concerning the activities of The Fund of Funds in the form of magazines, bulletins and reports. These claims are not challenged.

In addition, The Fund of Funds has been the subject of several articles in widely circulating American magazines and newspapers such as Time, Business Week, Newsweek, The New York Times, and the Wall Street Journal. The Fund of Funds is depicted by these articles as a financial phenomenon enjoying unparalled success—something of an investment wonder of the world.

A Securities and Exchange Commission Report on the mutual funds business released December 2, 1966, focused on the activities of plaintiffs, particularly The Fund of Funds, resulting in even more publicity, not all favorable, for plaintiffs. CCH, Federal Securities Law Reporter, Current, Sec. 74,545 (1967).

There seems to be no room for doubt that the foregoing described publicity had made the name The Fund of Funds a household name in the mutual funds investment community, despite the fact that the name had been in use only since August 1962, when defendant became incorporated in September 1965. Perhaps the fact that in approximately three and one-half years The Fund of Funds purchased, through United States broker-dealers, approximately $400,000,000 of United States mutual funds bespeaks most convincingly the household character of the name.

Prior to August 1962, when plaintiff first used the name The Fund of Funds, no other company had ever used the words "fund of funds" as a part of its name. In fact, it appears that the idea, itself, of a fund of funds may be the progeny of plaintiffs. Plaintiff, The Fund of Funds, Limited, is the largest company in the world engaged in a fund of funds business, although there is evidence of similar activity by smaller companies abroad. CCH, Federal Securities Law Reporter, supra, § 74,545.

Plaintiff I. O. S. also has established numerous subsidiary companies here and abroad in the mutual funds and other commercial fields, including an insurance company in this country known as the Pension Life Insurance Company of America.

From the time of its incorporation on September 23, 1965 until June 2, 1967, defendant's corporate name was First American Fund of Funds, Inc. That name suggested, and the S. E. C. report confirms, that defendant will be one of the first two holding companies in this country to launch an American version of a fund of funds in the mutual fund line of securities. CCH, Federal Securities Law Reporter, supra, § 74,545. Defendant was incorporated under the laws of New York and has its principal office in that State. It has not yet begun to sell its shares to the public. The name of its mutual fund was, prior to June 2, 1967, First American Fund of Funds. After this suit was filed in July 1966, defendant became a registered investment company under the name First American Fund of Funds. Investment Company Act of 1940, 15 U.S.C.A. § 80a-1 et seq. After commencement of this suit, defendant was also registered under the Securities Act of 1933 under its original corporate name (15 U.S.C.A. § 77a et seq.) Defendant, by such registration, was authorized to offer and sell its securities throughout the United States, its territories and possessions but will also use its corporate name throughout the world. In its prospectus submitted to S.E.C. in connection with such registration, defendant advises its prospective customers that it is in no way connected with The Fund of Funds, Ltd.

In March 1966, when defendant filed its registration statement with the S.E. C., under its name prior to June 2, 1967, plaintiffs first learned of the use of the words "fund of funds" by another company. Through their counsel, plaintiffs sent a letter dated March 29, 1966, to defendants advising that plaintiffs viewed the use of such name as confusingly similar to plaintiff's The Fund of Funds name. Plaintiffs in this communication demanded that defendants choose another name which would not be confusingly similar to plaintiffs' name. By letter dated May 2, 1966, defendant "unequivocally" rejected plaintiffs' position "entirely and completely". Defendant further replied: "We intend to continue to use our present corporate name in the United States and throughout the world."

On July 12, 1966, plaintiffs commenced this action in the Supreme Court of New York, New York County, against defendant. The gravamen of that complaint is as follows:

The corporate name of defendant is substantially identical with and is deceptively similar to the corporate title and fund name of plaintiff Funds. The effect of the use of the corporate name "First American Fund of Funds" by defendant will be to deceive the investing public, other funds, broker-dealers, and other persons in the securities business in the United States and abroad into believing that the defendant and plaintiff Funds are one and the same, or that the defendant is a subsidiary or affiliate of plaintiff Funds, or of plaintiff IOS, or that defendant is managed, advised, or distributed by plaintiff IOS, or is a subsidiary or affiliate of plaintiff IOS, or that defendant is in some other manner associated with or related to the plaintiffs. The result will be to imperil plaintiffs' reputation, business and good-will and to confuse the investing public, broker-dealers, other mutual funds, and other persons in the securities business, causing them to believe that plaintiff Funds and defendant are related to or associated with one another, thereby causing loss of sales outside the United States to plaintiff Funds or enabling defendant to make sales and profits it would not otherwise make. Defendant's use of its corporate name will be an unfair and deceptive simulation of plaintiff Funds' corporate title and fund name. Defendant has completely appropriated plaintiff Funds' complete corporate title and fund name.

By petition filed in this court on July 29, 1966, defendant removed the action to this court. Title 28, U.S.C. § 1441 et seq. Defendant claims that this court has jurisdiction of this cause under Title 28, U.S.C. §§ 1331 and 1332. Defendant further claims that the action was removable since the act of defendant specifically complained of by plaintiffs is the filing of a Registration Statement with the S.E.C. pursuant to the Securities Act of 1933, Title 15, U.S.C. § 77a et seq., and the intention of defendant to issue securities under said act. Plaintiffs' name is not a registered trade name or trademark.

This court has jurisdiction of this action as one based upon diversity of citizenship of the parties, Title 28, U.S.C. § 1332. Plaintiffs' claim is one cognizable under New York's common law of unfair competition. American-Marietta Co. v. Krigsman, 275 F.2d 287 (2d Cir. 1960). The relief sought by plaintiffs is an injunction restraining defendant from using the corporate business name of "First American Fund of Funds, Inc.", or any corporate business name or trade name or fund name similar to plaintiffs' corporate or fund name. Plaintiffs also seek an accounting and assessment of damages and profits.

After the removal of this cause to this court, plaintiffs moved under Rule 56, Fed.R.Civ.P., for summary judgment in its...