Hester Industries, Inc. v. Tyson Foods, Inc.

• Decision Date: 29 July 1997
• Docket Number: No. 93-CV-391.,93-CV-391.
• Citation: 985 F.Supp. 236
• Parties: HESTER INDUSTRIES, INC., Plaintiff, v. TYSON FOODS, INC., Defendant.
• Court: U.S. District Court — Northern District of New York

985 F.Supp. 236

HESTER INDUSTRIES, INC., Plaintiff, v. TYSON FOODS, INC., Defendant.

No. 93-CV-391.

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

July 29, 1997.

COPYRIGHT MATERIAL OMITTED

Nixon & Vanderhye, P.C. (Robert W. Adams, Duane M. Byers, Robert A. Rowan, J. Scott Davidson, of counsel), Arlington, VA, Kohn, Bookstein & Karp, P.C. (Richard A. Kohn, of counsel), Albany, NY, for plaintiff.

Husch & Eppenberger (Karen J. Halbrook, Joseph H. Knittig, of counsel), Kansas City, MO, Levene, Gouldin & Thompson (David M. Gouldin, of counsel), Binghamton, NY, Shughart, Thomson & Kilroy, P.C. (John R. Cleary, of counsel), Kansas City, MO, for defendant.

McAVOY, Chief Judge.

In August 1989, The plaintiff, HESTER INDUSTRIES, INC. (hereinafter "Hester"), filed a Complaint against the defendant, TYSON FOODS, INC. (hereinafter "Tyson"), alleging that Tyson's use of the mark WING FLINGS constituted trademark dilution and infringement. Shortly before trial, the parties entered into a Settlement Agreement that was incorporated into a Dismissal Order, filed on April 9, 1992. The Settlement Agreement provided, inter alia, that "Tyson agrees to stop all uses of the WING FLINGS mark in association with poultry products." See Settlement Agreement ¶ 1.

It is now alleged that Tyson did not comply with the Settlement Agreement, and that Hester has been damaged as a result. Hester subsequently brought an action for Tyson's alleged failure to comply with the Dismissal Order/breach of the Settlement Agreement. Following extensive and contentious discovery, this matter was tried before the undersigned in a non-jury trial commencing January 14, 1997.

I. FINDINGS OF FACT

A. Parties

The plaintiff, Hester Industries, Inc., is a "further processor" of poultry products with annual sales for the year 1996 in excess of $48 million. Approximately forty-percent of Hester's sales are generated from the sale of chicken wings products, the so-called "WING DINGS" family of products. The sale of "WING DINGS" accounts for approximately fifty-percent of Hester's profits. These products are sold primarily to food distributors. Hester's target consumer is the U.S. population as a whole. Most of the "WING DINGS" products ultimately reach consumers through institutional, restaurant, retail, wholesale club store, or food service outlets.

The defendant Tyson Foods, Inc., is a competitor of Hester in relation to the chicken wings products, and is the largest poultry processor in the world, with annual sales approximating $8 billion. Approximately $120 million dollars of sales from about September 1992 to January 1, 1996 were generated annually from the sale of chicken wing products, the so-called IQF or "Instant Quick Freeze" product, first sold under the mark WING FLINGS and then WING FLINGERS. This product is sold through sales representatives and brokers primarily to retail and wholesale club stores.

The Hester "WING DINGS" product is a pre-cooked, pre-seasoned frozen chicken wing product.

The Tyson IQF product, at one time called WING FLINGS, and then, WING FLINGERS, is a raw, uncooked, unseasoned frozen chicken wing product.

Hester holds a valid, federally licensed U.S. trademark in the WING DINGS mark.

Moreover, pursuant to a Settlement Agreement effective March 12, 1992, and incorporated into this Court's April 9, 1992 Order of Dismissal, relating to the previous¹ action involving these parties, Tyson agreed to stop "all uses of the WING FLINGS mark in association with poultry products" by certain dates. More specifically, Tyson agreed to exhaust its inventory of product number 141, the 5 lb. bag of WING FLINGS, by September 1, 1992. All other inventory bearing the WING FLINGS mark was to be exhausted by December 1, 1992. Tyson was permitted to extend those dates for no more than two months upon prior notice to Hester. Tyson also agreed that from the date of the Settlement Agreement, it would not have any new packaging or other materials produced bearing the WING FLINGS mark. Hester paid Tyson $150,000.00 and agreed not to contest the use of the mark WING FLINGERS.

Hester has vigorously defended the "WING DINGS" mark in the past through the use of negotiated settlements and litigation.

After the deadlines set forth in the Settlement Agreement had passed, Hester learned of an advertisement in the March 10, 1993, Washington Post for the sale of Tyson WING FLINGS.

Hester's attorneys sent a letter to Tyson, dated March 17, 1993, complaining of the continued sale of product marked with the infringing mark, and demanded an accounting of all uses of WING FLINGS after September 1, 1992. By letter dated March 19, 1993, Tyson's attorneys declined to comply with Hester's demand, and stated that Tyson had "better things to do with its time."

Hester commenced the present action, by the filing of a Summons and Complaint, on March 25, 1993. The Complaint, subsequently amended, alleges breach of contract, violation of the stipulated Order of Dismissal, trademark dilution, trademark infringement, and unfair competition. After a bench trial, and after a full review of the record in this case, the Court has determined that the sole claim to be decided by this Court is whether or not, and to what extent, Tyson violated the stipulated Order of Dismissal by continued use of the WING FLINGS mark after the deadline set forth therein.

The food service and retail sales markets for poultry products are blurred and/or overlap.

Hester has made no claim for lost sales or lost profits, However, Hester seeks Tyson's profits relating to the sales of alleged offending chicken wing products made by Tyson after the deadlines set forth in the Settlement Agreement.

B. Wrongful Acts of Tyson

Tyson became aware that it was using invoices with the WING FLINGS mark in July 1993. Upon learning of the noncompliant use of the mark, Tyson did not investigate for other such uses and did not issue a statement to its employees, agents, and/or customers to cease the use of the WING FLINGS mark.

Tyson became aware that it was packaging product in packages bearing the WING FLINGS mark in mid-December 1992. Following that discovery, Tyson did not notify Hester of the noncompliance. Tyson did not investigate for additional noncompliant packaging, and did not issue a statement to its employees, agents, and/or customers to cease use of the WING FLINGS mark.

Tyson was aware, after the deadline in the Settlement Agreement, that wholesale clubs and retail stores, to which it sold IQF products and for whom Tyson paid at least some advertising costs, were, at least episodically, advertising the sale of Tyson WING FLINGS.

Tyson sales representatives and/or brokers made on site visits to a number of stores and wholesale clubs, after the deadline set forth in the Settlement Agreement, to inspect the display of IQF products and "signage." The sales representatives and brokers reported no violations of the Settlement Agreement.

Tyson was aware that IQF product was shipped to club stores in packaging bearing the WING FLINGS mark after the deadline date of the Settlement Agreement.

Tyson's knowledge of noncompliant use of the WING FLINGS mark is illustrated by the following examples testified to at trial:

The Kroger Company bought Tyson IQF products from at least March 12, 1992 through October 12, 1994. Price lists provided to Kroger prior to October 1, 1994 used the WING FLINGS mark. "Receiver" documents, indicating the receipt of IQF product, and provided to Kroger, used the WING FLINGS mark. The WING FLINGS mark was used in Kroger advertising during, at least, the dates March 29, 1993 through April 4, 1993, and December 28, 1992 through January 3, 1993.

Tyson sales representatives and/or brokers check with the Kroger stores to ensure that Tyson products are ordered and displayed properly. At no time was Kroger instructed by Tyson to stop using the WING FLINGS mark.

At no time was Kroger confused as to the source of the chicken wing products it purchased. There is no evidence of actual consumer confusion relating to the chicken wings products sold at Kroger.

Meijer, Inc. received price lists and invoices from Tyson covering the dates January 1993 through March 1993, using the WING FLINGS mark. In addition, Meijer, Inc. used "ad slicks" provided by Tyson for advertisements on April 4, 1993, and from May 23, 1993 through May 23, 1993 through May 29, 1993, using the WING FLINGS mark.

Meijer, Inc. had no knowledge of the Settlement Agreement executed by the parties, and Tyson, as of October 14, 1994, had not instructed Meijer, Inc. to cease use of the WING FLINGS mark.

At no time was Meijer, Inc. confused as to the origin of the chicken wing products it purchased for resale.

Prior to April 1993, Sam's Club stores sold IQF product in WING FLINGS packaging, and displayed signage using the WING FLINGS mark. Sam's was not instructed by Tyson to cease use of the WING FLINGS mark, prior to October 4, 1994. Sometime thereafter, Tyson instructed Sam's to cease use of the WING FLINGS mark.

After the deadline date set forth in the Settlement Agreement, BJ's Wholesale Club sold Tyson IQF product in packaging using the mark. During at least the month of November 1994, Tyson shipped 6 lbs. packages of IQF product to BJ's. This product was identified on the BJ's Daily Vendor Sheets as "Tyson 6 lb. Wing Flings." Sometime thereafter, Tyson instructed BJ's to cease use of the WING FLINGS mark.

The Order Guide provided to members of the Associated Grocers company, dated October 7, 1994 through October 13, 1994 uses the term "Tyson Wing Flings." Advertisements for Associated Grocers during the years 1992 and 1993 used the term "Tyson Wing Flings." The Associated Grocers' invoices sent to member grocery stores listed a product called "Tyson Wing Flings." As of October 12, 1994, Tyson had not instructed Associated Grocers not to use the WING FLINGS mark.

In October or November of 1994, Tyson...