Kentucky Fried Chicken Corp. v. Diversified Packaging Corp.

• Decision Date: 18 May 1977
• Docket Number: No. 76-3059,76-3059
• Citation: 552 F.2d 601
• Parties: 1977-1 Trade Cases 61,466 KENTUCKY FRIED CHICKEN CORPORATION, a Delaware Corporation, Plaintiff-Appellant, v. DIVERSIFIED PACKAGING CORPORATION et al., Defendants-Appellees, v. HEUBLEIN, INC., Movant-Appellant.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 601

552 F.2d 601

1977-1 Trade Cases 61,466

KENTUCKY FRIED CHICKEN CORPORATION, a Delaware Corporation, Plaintiff-Appellant, v. DIVERSIFIED PACKAGING CORPORATION et al., Defendants-Appellees, v. HEUBLEIN, INC., Movant-Appellant.

No. 76-3059.

United States Court of Appeals Fifth Circuit.

May 18, 1977.

William J. Dunaj, Robert Pondolfi, Miami, Fla., Robert R. Feagin, III, Tallahassee, Fla., Michael J. McGraw, Gen. Counsel, Louisville, Ky., for Kentucky Fried Chicken Corp. and Heublein, Inc.

Burton H. Shostak, St. Louis, Mo., Edward F. O'Herin, Malden, Mo., Philip de V. Claverie, New Orleans, La., for Diversified Packaging Corp.

Appeal from the United States District Court for the Southern District of Florida.

Before WISDOM, GEE and FAY, Circuit Judges.

WISDOM, Circuit Judge:

This appeal involves a vexatious attempt by losing parties in a Florida district court to relitigate substantially the same issues in a Kentucky district court.

I.

In 1973 Kentucky Fried Chicken (KFC) sued Diversified Container Corporation and Diversified Packaging Corporation in the United States District Court for the Southern District of Florida for unfair competition and trademark infringement. The defendants counterclaimed alleging antitrust violations. After extended proceedings the court found for the plaintiffs on its claims and against the defendants on their counterclaims. The defendants appealed to this Court. We affirmed the district court decision. Kentucky Fried Chicken Corp. v. Diversified Packaging Corp., 5 Cir. (1977) 549 F.2d 368. While they were pursuing their appeal in this Court the defendants, through their alter egos, ¹ Portion Control Corporation, Sanford Gubernick, and Gene Mertens, filed suit in the United States District Court for the Western District of Kentucky presenting substantially the same claims they raised in their appeal to this Court. KFC then filed the present proceedings requesting Florida's district court to enjoin the defendants and their alter egos from relitigating the same claims. The Florida district court declined to hold an evidentiary hearing or to grant the injunction. That order is the subject of this appeal.

To give some background, Kentucky Fried Chicken, the owner of ten registered trademarks, instituted the original action seeking an injunction against Diversified Packaging Corporation and Diversified Container Corporation to stop their trademark infringement and unfair competition. The defendants answered and counterclaimed raising issues of (1) conspiracy to impose tying arrangements upon KFC Corporation's franchisees, restricting their sources of supply of trademarked items, (2) fraud on the patent office in the issuance of KFC Corporation's trademarks, (3) misuse of those trademarks in violation of the antitrust laws, (4) conspiracy to monopolize the supply of packaging products, and (5) conspiracy to restrain trade and fix prices.

The defendants dropped all of their counterclaims before trial except the antitrust tying arrangement claim. After extensive discovery, pretrial proceedings, and a trial of five and a half days, the court decided in favor of KFC on its claim of trademark infringement and unfair competition and against the defendants on their defenses and counterclaims. We affirmed this ruling, 549 F.2d 368.

The entry of the district court's judgment did not stop the defendants' sales of infringing products. As a result, the district court held that Gubernick and Portion Control were guilty of contempt by their continuing to sell products bearing Kentucky Fried Chicken Corporation's trademarks and trade name. In the contempt proceedings the court found that Gubernick and Portion Control were the alter egos and privies of the original defendants and that they were bound by the final judgment in the main case. The defendants took no appeal.

After the contempt judgment and after oral argument had been held on the original appeal to this Court, Portion Control filed a new suit against Kentucky Fried Chicken and Heublein, the parent corporation of KFC, in the Western District of Kentucky, again alleging claims against Kentucky Fried Chicken Corporation including (1) conspiracy and action pursuant thereto to impose tying arrangements upon Kentucky Fried Chicken's franchisees restricting their sources of supply of trademarked items, (2) fraud on the patent office in the issuance of Kentucky Fried Chicken's trademarks, (3) misuse of those trademarks in violation of the antitrust laws, and (4) conspiracy and action pursuant thereto to monopolize the supply of trademark packaging products.

An amended complaint filed in the Kentucky court added Gubernick as a plaintiff. The same claims asserted in the Florida district court were reasserted and four new counts were added. The new counts complained that KFC had sought to collect on the Florida district court's contempt judgment by levying attachment in Missouri upon Portion Control stock held by Gubernick and that Gubernick had requested the Kentucky district court to enjoin Kentucky Fried Chicken's enforcement of the Florida court's contempt judgment.

Later, Kentucky Fried Chicken and Heublein petitioned the Florida district court for an evidentiary hearing and for ancillary relief in the nature of a supplemental injunction to enjoin Gubernick and Portion Control from relitigating claims in another court and attempting to evade and interfere with the enforcement of the...