Idaho Potato Com'n v. Washington Potato Com'n

• Decision Date: 10 March 1976
• Docket Number: Civ. No. 1-75-48.
• Parties: IDAHO POTATO COMMISSION and the State of Idaho, Plaintiffs, v. WASHINGTON POTATO COMMISSION et al., Defendants.
• Court: U.S. District Court — District of Idaho

410 F. Supp. 171

IDAHO POTATO COMMISSION and the State of Idaho, Plaintiffs, v. WASHINGTON POTATO COMMISSION et al., Defendants.

Civ. No. 1-75-48.

United States District Court, D. Idaho.

October 21, 1975.

Opinion on Motion to Dismiss March 10, 1976.

COPYRIGHT MATERIAL OMITTED

Paul S. Street, Moffatt, Thomas, Barrett & Blanton, Boise, Idaho, Wayne L. Kidwell, Atty. Gen., Rudolf D. Barchas, Deputy Atty. Gen., Boise, Idaho, for plaintiffs.

Slade Gorton, Atty. Gen., E. E. "Bill" Rosatto, Sr., Asst. Atty. Gen., Olympia, Wash., Charles C. Flower, Wilson & Flower, Yakima, Wash., Jeremiah A. Quane, John P. Howard, Quane, Smith, Howard & Hamlin, Boise, Idaho, Van Cott, Bagley, Cornwall & McCarthy, Salt Lake City, Utah, for defendants.

MEMORANDUM DECISION AND ORDER

J. BLAINE ANDERSON, District Judge.

Plaintiffs, Idaho Potato Commission (I.P.C.) and the State of Idaho, have brought suit under the diversity statute, 28 U.S.C.A. § 1332, and under the Trademark Act, 15 U.S.C.A. § 1121, against defendants for infringement of the trademark "Idaho" and for unfair competition. The Washington Potato Commission (W.P.C.) and Pacific National Advertising, Inc. have moved to dismiss the complaint predicated upon 28 U.S. C.A. § 1332 and to change venue to the District of Washington for a determination of claims based on the Trademark Act. The matter has been fully briefed and the Court, being fully advised in the premises, hereinafter renders its Memorandum Decision and Order.

Defendants contend that this Court does not have diversity jurisdiction for the reason that the State of Idaho is not a citizen.¹ It is well-settled that a state is not a citizen for diversity purposes. Postal Telegraph Cable Co. v. State of Alabama, 155 U.S. 482, 15 S.Ct. 192, 39 L.Ed. 231 (1894). However, the real party in interest, rather than the names of the parties, controls the question of whether there is diversity jurisdiction. Rule 17(a) F.R.C.P. If the State of Idaho participates in this lawsuit as a nominal party only, then jurisdiction exists.

The real party in interest issue initially requires a determination of what party possesses the right sought to be enforced. Wright & Miller, Federal Practice and Procedure: Civil § 1542, p. 639 (1971). Here, the trademark registrant is the State of Idaho and as such is granted the right to sue for infringement. 15 U.S.C.A. § 1114. The term "registrant," however, is defined as including legal representatives, successors and assigns of a registrant. 15 U.S.C.A. § 1127. In its broadest sense, "legal representative" means one who stands in the place of and represents the interests of another. Black's Law Dictionary, Revised 4th Ed. (1966). By virtue of Idaho Code § 22-1201 et seq., the I.P.C. stands in the place of and represents the interests of the State of Idaho in guarding against infringement of the trademark "Idaho". Idaho Code § 22-1207 grants the I.P.C. the following powers:

". . .

8. To define and designate the character of the brands, labels, stencils, or other distinctive marks under which said potatoes may be marketed in order to secure the greatest returns to producers and meet the requirements of their advertising campaign.

9. To devise and arrange for the application of either a seal, label, brand, package, or any other suitable device that will protect the identity of the original Idaho pack of potatoes as near to the final consumer as possible.

10. Whenever and wherever it deems it to be necessary the commission shall use its offices to prevent any substitution of other potatoes for Idaho potatoes and to prevent the misrepresentation or the misbranding of Idaho potatoes at any and all times at any and all points where they discover the same is being done."

Idaho Code § 22-1207 contemplates that the I.P.C. will administer the application of the mark "Idaho" to Idaho potatoes. Supervision and control over the use and protection of the mark has been delegated to the I.P.C.

The foregoing analysis is further supported by Rule 17(a) F.R.C.P., for the rule contemplates that a party entitled to sue by a statute is a real party in interest. A party authorized by statute may sue in its own name without joining the party for whose benefit the action is brought. Rule 17(a) F.R.C.P. As stated in Wright & Miller, supra § 1543, p. 644:

"The modern function of the rule in its negative aspect is simply to protect the defendant against a subsequent action by the party actually entitled to recover, and to ensure generally that the judgment will have its proper effect as res judicata."

The I.P.C. could sue without joining the State, yet joinder here provides defendants with protection from a subsequent suit arising from the same set of facts. Since defendants are afforded res judicata protection, there is no conflict with the purpose underlying the real party in interest rule. In summary, it can be seen that the I.P.C. possesses the substantive right sought to be enforced, and is, therefore, under Rule 17(a), the real party in interest.

The Court's analysis does not stop here, however, for defendants claim that the I.P.C. is a mere arm or alter ego of the State and, therefore, for purposes of this action, the State is the real party in interest. In analyzing the relationship between an agency and its sovereign, courts have looked to: the agency's ability or lack thereof to sue and be sued, performance by the entity of an essential government function, the agency's power to take property in its own name or in the name of the state, corporate status or lack thereof of the agency, and the financial interest or lack thereof by the State. See Annot., 6 A.L.R.Fed. 615 (1971). Two factors are of primary importance, namely, performance of a governmental function and the financial connection or independence between the agency and the sovereign. Broadwater-Missouri Water Users' Ass'n. v. Montana Power Co., 139 F.2d 998 (9th Cir. 1944); DeLong Corporation v. Oregon State Highway Commission, 233 F.Supp. 7 (D.Ore.1964), affirmed 343 F.2d 911 (9th Cir. 1965); cert. denied 382 U.S. 877, 86 S.Ct. 161, 15 L.Ed.2d 119; Fowler v. California Toll-Bridge Authority, 128 F.2d 549 (9th Cir. 1942). The pertinent statutes reveal that the I.P.C. is an independent self-governing state agency which is financed through its own taxing power pursuant to Idaho Code § 22-1211. All costs and expenses incurred by the commission in performing its duties are to be paid out of the commission's fund and there can be no liability of the state beyond the amount of such fund. Idaho Code § 22-1210. Idaho Code § 22-1201 declares the policy of the Act as that of promoting Idaho's potato industry by expanding markets, thereby promoting the general welfare of the people. While the goal of the I.P.C. is to better the welfare of Idaho residents, its function is to carry out advertising and promotion which traditionally is not a governmental function. Commercial advertising is distinguishable from conservation of water resources as in Broadwater-Missouri Water Users' Ass'n. v. Montana Power Co., supra, and the construction of roads and bridges as in DeLong Corporation v. Oregon State Highway Commission, supra, and Fowler v. California Toll-Bridge Authority, supra. The fact that statutes do not expressly confer the power to sue and be sued upon the I.P.C. or declare that it is a body corporate is not dispositive, rather the controlling criteria establishes that the I.P.C. is financially independent and does not perform an essential governmental function. Therefore, it is the conclusion of the Court that the State of Idaho is a nominal party and the I.P.C. is the real party in interest. Accordingly, the Court holds that it has diversity of citizenship jurisdiction.

Defendant W.P.C. contends that even if this Court determines that it has diversity of citizenship jurisdiction, it should transfer the action to the District of Washington pursuant to 28 U.S.C.A. 1404(a), which provides as follows:

"For the convenience of parties and witnesses, in the interest of justice, a district court may transfer any civil action to any other district or division where it might have been brought."

Additionally, while defendants concede the Court has subject matter jurisdiction under the Trademark Act, they assert that venue is proper in the District of Washington. Reliance is placed on 28 U.S.C.A. 1391(b), which provides as follows:

"A civil action wherein jurisdiction is not founded solely on diversity of citizenship may be brought only in the judicial district where all defendants reside, or in which the claim arose, except as otherwise provided by law."

Since this Court has jurisdiction under both the diversity of citizenship statute and the Trademark Act, the Court must decide if the claim arises here. Balancing the contacts involved in a given action is a reasonable manner of determining "where the claim arose" for venue purposes. Arnold v. Smith Motor Co., Brookfield, Mo., 389 F.Supp. 1020, 1023-1024 (N.D.Iowa 1974); Honda Associates, Inc. v. Nozawa Trading Co., 374 F.Supp. 886 (S.D.N.Y.1974). Defendants argue that all defendants reside in Washington, witnesses are located there, the relevant acts giving rise to a cause of action took place in Washington and that suit in Idaho would cause defendants a severe burden. On the other hand, plaintiffs assert that they reside in Idaho, witnesses regarding defendants' claim of abandonment of the trademark are located here, and that the damage caused by infringement and unfair competition occurred in Idaho. The case of Honda Associates, Inc. v. Nozawa Trading, Inc., supra, while instructive, offers very little guidance for the reason that the weight of contacts overwhelmingly lay in California. On the facts before this Court, an equal balance of contacts exists between the two states. Were plaintiffs forced to sue in Washington, they would be inconvenienced and the same holds true for defendants if they defend in...