Joseph Scott Co. v. Scott Swimming Pools, Inc.

• Decision Date: 13 June 1985
• Docket Number: No. 1247,D,1247
• Citation: 764 F.2d 62
• Parties: JOSEPH SCOTT COMPANY, Plaintiff-Appellant, v. SCOTT SWIMMING POOLS, INC., Defendant-Appellee. ocket 84-7681.
• Court: U.S. Court of Appeals — Second Circuit

Page 62

764 F.2d 62

226 U.S.P.Q. 496

JOSEPH SCOTT COMPANY, Plaintiff-Appellant, v. SCOTT SWIMMING POOLS, INC., Defendant-Appellee.

No. 1247, Docket 84-7681.

United States Court of Appeals Second Circuit.

Argued May 29, 1985. Decided June 13, 1985.

George Gottlieb, New York City (Gottlieb, Rackman & Reisman, P.C., Barry A. Cooper, New York City of counsel), for plaintiff-appellant.

Armand Cifelli, Bridgeport, Conn. (Cifelli, Frederick & Tully, James R. Frederick, Bridgeport, Conn., of counsel), for defendant-appellee.

Before KAUFMAN and KEARSE, Circuit Judges, and MISHLER, ^* District Judge.

KAUFMAN, Circuit Judge:

We are called upon today to review the terms of a preliminary injunction that substantially restricts an individual's right to use his own name in promoting a personal business endeavor. Because equitable relief must, by its very nature, be tailored to the facts of a particular dispute, we shall proceed to set forth the factual background of this appeal before addressing the relevant legal principles.

BACKGROUND

In 1937, Joseph M. Scott, Sr.--the father of the principal participants in this action--established Scott House and Garden Service, the predecessor to Scott Swimming Pools, Inc. ("SSPI"). Although the design and construction of swimming pools constituted only a small fraction of the business in its incipiency, by the 1950's it had become the firm's primary source of income. By the time of its incorporation in 1969, SSPI had gained a reputation throughout the state of Connecticut as a builder of quality swimming pools.

Joseph M. Scott, Sr. has two sons, James Scott ("James"), and Joseph M. Scott, Jr. ("Joseph Jr."), who worked in the family business during their youth. James's participation with the company was more constant than Joseph Jr.'s, and he eventually purchased the firm from his father. In 1969, James became president of SSPI, and his father remained as vice president. Following a ten-year period during which Joseph Jr. lived and worked in Texas, he returned to Connecticut in 1965 and rejoined the family business. Until 1972, he was employed by SSPI as a salesman and customer relations representative.

Over the course of time, the two brothers frequently disagreed about the structure and operation of the company and, in 1972, Joseph Jr. left SSPI to embark on his own career. To this end, Joseph Jr. established a firm called Scott AquaScapes ("AquaScapes"), and the brothers entered into an agreement pursuant to which the new company was to serve as the sole residential sales agent for SSPI in Fairfield County, Connecticut. The agreement further provided that AquaScapes would receive a commission equal to ten percent of the price of each SSPI pool that it sold. AquaScapes performed certain peripheral work (e.g., site clearing, rock placement and deck construction) for its own benefit, and assumed sole responsibility for customer relations. Finally, AquaScapes explicitly In 1974, the two companies entered into a new agreement, whereby AquaScapes continued to act as the sole residential sales agent for SSPI in Fairfield County, but no longer sold SSPI pools on a commission basis. Instead, AquaScapes agreed to enter into two contracts with each customer. First, Joseph Jr., as president of AquaScapes, would contract on SSPI's behalf for the purchase and installation of the basic SSPI pool shell. A second contract was to be made for AquaScapes to provide all landscaping and pool servicing. The 1974 agreement permitted AquaScapes to perform additional work, thus providing a correspondingly greater profit potential. All contracts made by Joseph Jr. for the basic SSPI pool were subject to review by SSPI's principal office. As was the case with the earlier agreement, AquaScapes promised to promote the good will of SSPI. Until 1983, SSPI referred all inquiries from potential customers in Fairfield County to AquaScapes. And during this period Joseph Jr. acquired a reputation, in his own right, as a designer of quality custom pools.

agreed to promote SSPI's good will in Fairfield County.

In 1983, Joseph Jr. decided to terminate the agency relationship between AquaScapes and SSPI. He filed an Amended Certificate of Incorporation under Connecticut law changing the name of the firm to the "Joseph Scott Company." The new company did not sell SSPI pools, but instead hired sub-contractors to build basic pools shells. The Joseph Scott Company's logo prominently featured the word "SCOTT," positioned above a tree and pool motif. The slogan adopted by the Joseph Scott Company stated "Swimming Pool Craftsmen & Landscape Designers for Three Generations." Following its formation, the Joseph Scott Company removed the SSPI identification plaques from existing pools it had installed in Fairfield County, and replaced them with new ones that read "JOSEPH SCOTT COMPANY, For Three Generations."

SSPI quickly and vehemently objected to Joseph Scott Company's use of its mark and logo. ¹ In response, in May 1984, Joseph Scott Company sought a declaratory judgment in the United States District Court for the District of Connecticut permitting the use of its name and the name of its president, Joseph M. Scott, Jr., in all aspects of the swimming pool business. SSPI answered in a timely fashion and moved for a preliminary injunction enjoining Joseph Scott Company, inter alia, from infringing SSPI's rights in the mark "SCOTT" and its logo, and prohibiting the use of the name "Joseph Scott, or any colorable imitation thereof, as a company name, trade name, trademark, or service mark."

The parties agreed to the entry of a Temporary Restraining Order on Consent and, in June 1984, a six-day hearing was held on SSPI's motion for preliminary injunctive relief. During the proceedings before Judge Daly, James Scott's secretary testified that she had received a telephone call from a client inquiring whether Joseph Scott, Sr. had formed his own business. Bruce Fishkin, a consultant to both firms, stated that the marketing strategy he had developed for Joseph Jr. was "strategically identical" to the one he had designed previously for SSPI, and that he had warned him of the similarity. Moreover, he opined that if two hundred prospective "Scott" pool purchasers were asked "if ... they could make a distinction [between SSPI and the Joseph Scott Company], I think they'd be confused between the two." Betty Ajay, an established landscape designer, testified that the name Joseph Scott, Jr.

                was synonymous with SSPI in Fairfield County.  Similarly, James Fox, a landscape architect, stated, "I know that Joe Scott [Jr.] is Scott Pools and that's what I care about."    When asked which company would build a pool if he were to refer a customer to Joseph Jr. personally, Fox replied, "Joe Scott Pools, Scott AquaScapes, Scott Pools."
                

From this testimony, the district court concluded that "confusion was evident.... Witnesses repeatedly and inadvertently referred to pools built by the Joseph Scott Company as 'Scott Pools.' " He found that the Joseph Scott Company's logo was "curiously similar and almost identical to the registered logo" of SSPI. The court also focused on the Joseph Scott Company's slogan, which bore a striking resemblance to SSPI's slogan, "the Preferred Builder of Quality since 1937." Judge Daly noted that the Joseph Scott Company's slogan was factually erroneous, and improperly suggested that the firm was related to SSPI. In sum, the district court concluded that the Joseph Scott Company's entire marketing strategy "[h]as caused, and [is] likely to continue to cause, confusion on the part of an appreciable number of consumers." Accordingly, Judge Daly held that there existed "an actual and imminent threat of irreparable harm" to SSPI, and granted injunctive relief.

The preliminary injunction issued by the district court ² is divided into two sections. Section I specifically prohibits the use of Joseph Scott Company timely filed a notice of appeal from the order granting the preliminary injunction. ³

the word "SCOTT" in the name of Joseph Jr.'s company, and contains general prohibitions against unfair competition. Section II delineates those specific circumstances in which the new company may demonstrate Joseph Jr.'s affiliation with the firm. The injunction provides that the name Joseph M. Scott Jr. may be used only as a full signature, and may be no larger than one-fourth the size of the lettering used in the company name. Moreover, the signature may appear only in the "lower right-hand portion of [a] label, advertisement, or page," provided it appears "in direct conjunction with a disclaimer stating, "Not Connected with Scott Swimming Pools, Inc."

DISCUSSION

The standards for granting preliminary injunctive relief are well established in this Circuit. The moving party must show (a) the possibility of irreparable injury, and (b) either (1) likelihood of success on the merits, or (2) sufficiently serious questions going to the merits to make them a fair ground for litigation and a balance of the hardships tipping decidedly toward the party requesting injunctive relief. Abdul Wali v. Coughlin, 754 F.2d 1015, 1025 (2d Cir.1985); Jackson Dairy, Inc. v. H.P. Hood & Sons, Inc., 596 F.2d 70, 72 (2d Cir.1979) (per curiam); Caulfield v. Board of Educ., 583 F.2d 605, 610 (2d Cir.1978). In a trademark case, irreparable injury will be found where "there is any likelihood that an appreciable number of ordinarily prudent purchasers are likely to be misled, or indeed simply confused, as to the source of the goods in question." McGregor-Doniger, Inc. v. Drizzle Inc., 599 F.2d 1126, 1130 (2d Cir.1979).

In reviewing the district court's disposition of a motion for a preliminary injunction factual findings will be upheld unless they are found to be "clearly erroneous." See Anderson v. City of Bessemer, --- U.S. ----, 105 S.Ct. 1504, 84 L.Ed.2d 518 (1985); Fed.R.Civ.P. 52(a). There was ample testimony upon which Judge Daly...