Getty Petroleum Corp. v. Island Transp. Corp.

• Court: U.S. Court of Appeals — Second Circuit
• Writing for the Court: Before NEWMAN, KEARSE, and CARDAMONE; CARDAMONE
• Citation: Getty Petroleum Corp. v. Island Transp. Corp., 862 F.2d 10, 8 USPQ2d 1687 (2nd Cir. 1988)
• Decision Date: 15 December 1988
• Docket Number: D,No. 1289,1289
• Parties: GETTY PETROLEUM CORP., Plaintiff-Appellee, v. ISLAND TRANSPORTATION CORP., Skybolt Auto Service, Inc., Vito P. Gerbino, Vincent R. Gerbino, Thunderking, Inc., Tri-Star Brokers, Inc., Turgot Ozen, Salem Heat & Petroleum Corp., and Lewis Cahill, Defendants, Salem Heat and Petroleum Corp., and Lewis Cahill, Defendants-Appellants. SALEM HEAT & PETROLEUM CORP., and Lewis Cahill, Third-Party Plaintiffs, v. SKYBOLT AUTO SERVICE, INC., Thunderking, Inc., Vito P. Gerbino, and Vincent R. Gerbino, Third-Party Defendants. ocket 88-7268.

Page 10

862 F.2d 10

8 U.S.P.Q.2d 1687

GETTY PETROLEUM CORP., Plaintiff-Appellee, v. ISLAND TRANSPORTATION CORP., Skybolt Auto Service, Inc., Vito P. Gerbino, Vincent R. Gerbino, Thunderking, Inc.,

Tri-Star Brokers, Inc., Turgot Ozen, Salem Heat & Petroleum

Corp., and Lewis Cahill, Defendants,

Salem Heat and Petroleum Corp., and Lewis Cahill,

Defendants-Appellants.

SALEM HEAT & PETROLEUM CORP., and Lewis Cahill, Third-Party Plaintiffs, v. SKYBOLT AUTO SERVICE, INC., Thunderking, Inc., Vito P.

Gerbino, and Vincent R. Gerbino, Third-Party Defendants.

No. 1289, Docket 88-7268.

United States Court of Appeals Second Circuit.

Argued June 23, 1988.

Decided Oct. 20, 1988.

As Amended Dec. 15, 1988.

Carl S. Levine, Mitchel Field, N.Y. (Meredith Barg, Levine & Robinson, Mitchel Field, N.Y., of counsel), fordefendants-appellants.

Robert G. Del Gadio, Garden City, N.Y. (Randolph E. White, Garden City, N.Y., of counsel), for plaintiff-appellee.

C. Fred Weil, Jericho, N.Y. (Davis & Weil, Jericho, N.Y., of counsel), submitted brief for third-party defendants-appellees.

Before NEWMAN, KEARSE, and CARDAMONE, Circuit Judges.

CARDAMONE, Circuit Judge:

This appeal from the Eastern District of New York presents four issues of law arising from the infringement of a registered trademark. Appellants Salem Heat & Petroleum Corp. and Lewis Cahill appeal from a jury verdict which found that they had secretly and unlawfully sold and delivered non-Getty brand gasoline to two Long Island Getty-branded service stations in 1985 and 1986, intentionally infringing the Getty trademark. The jury assessed compensatory and punitive damages in favor of the plaintiff, Getty Petroleum Corp. The case required two trials in the district court. It seems that everything has an end except this litigation, because though the compensatory damages portion of the judgment is affirmed, the award of punitive damages must be reversed and the case remanded to the district court for further consideration of punitive damages under New York law.

BACKGROUND

The facts relating to this appeal may be stated briefly. As a condition to its approval of the 1984 purchase of the Getty Oil Company by Texaco, Inc., the Federal Trade Commission required Texaco to transfer the "Getty" tradename and trademark and to divest itself of the acquired company's northeastern marketing facilities. Power Test Corp. bought Getty Oil's northeastern business in February, 1985 from Texaco and obtained an exclusive trademark license for the "Getty" marks. On July 11, 1985 ownership of the "Getty" marks was transferred to Power Test, which thereupon changed its name to Getty Petroleum Corp. (Getty Petroleum). Getty Petroleum continued the business formerly conducted by Getty Oil and is the plaintiff in this litigation.

Appellant Salem Heat & Petroleum Corp. (Salem), a Port Washington, New York distributor of gasoline and petroleum products, is owned and operated by appellant Lewis Cahill. Salem sold and delivered approximately 500,000 gallons of non-Getty gasoline to Getty-branded service stations in Middle Village and Garden City Park, New York, in 1985 and 1986. At both stations this gasoline was sold as Getty-brand gasoline in violation of the franchise agreements between appellants and Getty Petroleum.

In 1986 Getty Petroleum brought a diversity suit in the United States District Court for the Eastern District of New York (Mishler, J.) against the above two stations' owners and operators. Getty Petroleum also sued three gasoline distributors--including Salem--and their two owners and operators--one of whom is Cahill--seeking injunctive relief and damages for these defendants' infringement of the Getty trademark. In particular, plaintiff's amended complaint alleges that defendants' actions constituted: infringement of its federally registered trademark causing irreparable damage to its goodwill and reputation (Count I); false designation of origin, false description and false representation of the gasoline in violation of the Lanham Trademark Act of 1946, 15 U.S.C. Sec. 1125(a) (Count II); unfair competition (Count III); dilution of the quality of the Getty mark in violation of N.Y.Gen.Bus.Law Secs. 368, 368-d (Count IV); and false and misleading advertising in violation of N.Y.Gen.Bus.Law Secs. 350, 350-d (Count V). Seven of the nine named defendants--other than the two appellants Salem and Cahill--settled with plaintiff Getty Petroleum before trial.

The gravamen of Getty Petroleum's claims against appellants Salem and Cahill--which, as noted, has been the subject of two jury trials--was that they infringed the Getty mark by delivering non-Getty gasoline to Getty-branded service stations. At the first trial held in November, 1987 appellants conceded the substance of plaintiff's allegations, but attempted to prove that Getty had acquiesced in the infringement. The jury was not persuaded, and returned a special verdict finding that appellants had "knowingly and intentionally contributorily infringe[d]" the Getty trademark as to both service stations, and assessed their joint proportionate share of fault at 50 percent. The jury found that "as a result of the activities of Salem and/or Cahill," plaintiff's lost profits at the Middle Village station were $39,335 and at the Garden City Park station were $3,920, the sum of which is the $43,255 awarded plaintiff as compensatory damages. Finally, having found appellants' actions to have been done intentionally and "with a callous disregard for the rights of Getty in its trademark," the jury assessed punitive damages against appellants in the amount of $875,000.

Following that verdict, appellants moved, inter alia, for a judgment notwithstanding the verdict (j.n.o.v.) pursuant to Fed.R.Civ.P. 50(b) or, alternatively, for a remittitur of the punitive damages award. Judge Mishler denied the former relief, but granted appellants' motion to vacate the $875,000 punitive damages award unless Getty agreed to remit the sum of $775,000 and to accept the balance of $100,000. Counsel for Getty Petroleum elected on behalf of his client not to accept the remittitur. The district court thereupon vacated the punitive damage award because it found the $875,000 verdict so high as to shock its conscience. Judge Mishler then ordered a second trial limited to the issue of punitive damages. Ironically, at the second trial, the jury returned an even larger verdict for plaintiff, this time awarding $1 million in punitive damages. Appellants again unsuccessfully moved for a j.n.o.v.

Accordingly, in its March 4, 1988 Decision and Order, the district court granted plaintiff judgment for a total of $43,255, plus 6 percent interest, in compensatory damages, $1 million in punitive damages, and attorney fees for the first trial. Getty Petroleum was later awarded attorney fees for the second trial. In addition, Judge Mishler denied Salem and Cahill's request for a set-off of the compensatory damage award against the amounts paid by the settling tortfeasors, and dismissed sua sponte their third-party complaint for contribution against the operators of the Middle Village station. The district court judge carefully reviewed the additional evidence regarding punitive damages presented at the second trial and declined to vacate this award, as he had after the first trial. From this judgment, Salem and Cahill appeal.

DISCUSSION

Four issues are raised: (1) the propriety of the punitive damages award; (2) the district court's refusal to bifurcate the liability and damages issues for trial; (3) its refusal to reduce appellants' liability for compensatory damages; and (4) the dismissal of appellants' third-party complaint seeking contribution from settling co-defendants.

I Punitive Damages

Appellants first argue that punitive damages are not available as a remedy under Sec. 35 of the Lanham Act, 15 U.S.C. Sec. 1117(a) (Supp. IV 1986). Recently, we ruled on this issue in Getty Petroleum Corp. v. Bartco Petroleum Corp., 858 F.2d 103 (2d Cir.1988) (Getty I ). In Getty I, we examined the language of Sec. 35 of the Lanham Act, its legislative history and the relevant case law. Such analysis persuaded us that Sec. 35 does not authorize an award of punitive damages for a willful infringement of a registered trademark. Consequently, the punitive damages awarded in the instant case--which will be referred to hereafter for purposes of clarity as Getty II--must be vacated.

Nevertheless, the instant case differs from Getty I in one significant respect. In Getty I, before the case was submitted to the jury, plaintiff withdrew all of its asserted causes of action, except its claim of trademark infringement in violation of the Lanham Act. Thus, the only theory of recovery considered by the jury--which awarded compensatory and multimillion dollar punitive damages--was federal infringement. On appeal, the principal issue in Getty I was whether punitive damages are available under Sec. 35 of the Lanham Act. Holding that such an award was not authorized, we reversed that portion of the verdict. In Getty II, on the other hand, plaintiff did not withdraw its non-Lanham Act claims. Although defense counsel asked that all but the federal infringement claims be dismissed as duplicative, the district judge refused, reasoning that it would be better to submit fact questions to the jury in order to determine the answers to the legal issues raised by the five counts, and that Getty Petroleum had raised sufficient questions on its state law claims to withstand appellants' motion to dismiss.

An award of punitive damages might still be an available remedy for Getty Petroleum's non-Lanham Act causes of action in the instant case. 2 J. McCarthy, Trademarks and Unfair Competition, Sec. 30:29(A) at 517 (2d ed. 1984) ("In jurisdictions where punitive damages are available in tort cases, they are equally allowable in cases of trademark infringement and unfair competition."); see Le Mistral, Inc. v....