Levitt Corp. v. Levitt

• Citation: 593 F.2d 463
• Decision Date: 22 February 1979
• Docket Number: D,Nos. 530,553,s. 530
• Parties: LEVITT CORPORATION and LSI United Corp., Plaintiffs-Appellees, v. William J. LEVITT, International Community Corporation, International Construction Corporation, and Levitt Industries, Inc., Defendants-Appellants. ockets 78-7520, 78-7606.
• Court: United States Courts of Appeals. United States Court of Appeals (2nd Circuit)

Page 463

593 F.2d 463

201 U.S.P.Q. 513

LEVITT CORPORATION and LSI United Corp., Plaintiffs-Appellees, v. William J. LEVITT, International Community Corporation,

International Construction Corporation, and Levitt

Industries, Inc., Defendants-Appellants.

Nos. 530, 553, Dockets 78-7520, 78-7606.

United States Court of Appeals, Second Circuit.

Argued Jan. 12, 1979.

Decided Feb. 22, 1979.

Jay Goldberg, New York City (Curtis E. Claymont, New York City, John L. Pollok, Hoffman, Pollok, Mass & Gasthalter, New York City, of counsel), for defendants-appellants.

David I. Goldblatt, New York City (Proskauer, Rose, Goetz & Mendelsohn, New York City, of counsel), for plaintiff-appellee Levitt Corp.

Kane, Dalsimer, Kane, Sullivan & Kurucz, New York City, for plaintiff-appellee LSI United Corp.

Before KAUFMAN, Chief Judge, and WYATT, District Judge. ^*

IRVING R. KAUFMAN, Chief Judge:

In 1929, William J. Levitt founded Levitt and Sons. In the intervening decades, Levitt and Sons has risen to national prominence in the housing industry, but the original founder and owner has relinquished his role. We are asked to determine the extent to which Mr. Levitt, having sold both his company and the goodwill it has accumulated over the years, may publicize his name and record of experience, as he embarks on new ventures in real estate development.

I.

William Levitt was, until January 1968, the controlling shareholder of Levitt and Sons (a New York corporation), builders best known for residential communities in New York and Pennsylvania called "Levittown." In that year, he agreed to merge his business into a wholly-owned subsidiary of ITT Corporation known as ITT Levitt, Inc. This was shortly renamed Levitt & Sons, Inc. (Delaware). The new company succeeded to all rights to the assets of Levitt and Sons (the old New York corporation), including the goodwill, trademarks, trade names, service marks and service names associated with that corporation. The marks included the registered names "Levitt", "Levitt and Sons", and "Strathmore" ¹ as well as the common law trademark "Levittown". In exchange for his shares of Levitt and Sons, Mr. Levitt received more than 550,000 shares of ITT common stock, with a market value in excess of $60 million. In addition, ITT agreed to employ Mr. Levitt for at least five years at a minimum annual salary of $175,000.

ITT, however, ran afoul of the antitrust laws, and in 1971 Judge Blumenfeld directed the conglomerate to divest itself of its interest in the Levitt company. ² To implement its order, the court appointed Victor Palmieri and Company as trustee, with directions to structure an operating company out of the assets of ITT's subsidiary and to dispose of the new firm as an ongoing business. In July 1976, the subsidiary transferred certain of its assets, including all of the trademarks and goodwill associated with the business, to Levitt Corporation, a plaintiff in the present action. ³ The trustee continued to manage Levitt Corporation until February 1978, when the business was sold to Starrett Housing Corporation for $30 million. Levitt Corporation has continued to exploit the "Levitt" marks; indeed, its current projects include seven housing developments in Florida, all of which are currently being promoted in advertisements and brochures as "Levitt" enterprises.

At the same time that ownership of the Levitt firm was regularly changing hands, Mr. Levitt's employment contract with ITT and its successors underwent a series of refinements as well, culminating in a covenant in November 1975 with Levitt & Sons, Inc. (Delaware). Mr. Levitt agreed that until June 1977, he would not enter any business involving the construction, sale, or leasing of residential housing, or the development of unimproved land for use in such construction. After that date, Mr. Levitt could return to the industry in which he had been so successful, provided that he abided by several restrictions. ⁴ In particular, he explicitly acknowledged that he does not have any right to use the name "Levitt" as a corporate title, trademark or trade name in the construction business. He did retain the right to use his own name publicly as a corporate officer or director of a business enterprise, but only to the extent that such use would not be likely to create confusion with the corporate title, trademarks, or trade names of Levitt & Sons, Inc.

Unfortunately, this accommodation of interests soon fell apart. In 1976, Mr. Levitt used the designation "William J. Levitt and his Associates" in the course of promoting a project in Nigeria. When challenged, Mr. Levitt conceded that his use of this business title violated the 1975 covenant. Under the terms of a settlement agreement executed in August 1976, any future breaches of the contract would subject him to both injunctive relief and liquidated damages of $520.24 per day.

But the story does not end there. As we noted earlier, Levitt Corporation now has seven residential projects in various stages of development in Florida. The corporation decided to build largely to capitalize on the goodwill purchased from Mr. Levitt, for it was believed that Levitt is a valuable name, particularly among residents of the Northeast who are approaching retirement age.

Mr. Levitt, however, regarded these efforts with disfavor, and in February 1978, the covenant not to compete having expired, he went on the offensive. He issued a press release stating that Starrett's acquisition of Levitt Corporation is "totally confusing the general public and the business community," and that the question being posed by all is "who and what is the real Levitt." The press release announced that Mr. Levitt and the International Construction Corporation (ICC) would shortly reveal plans to build "a new Levittown in the United States." Inquiries were directed to Levitt Industries, Inc. ⁵

The promise of the press release was soon fulfilled, for Mr. Levitt and ICC issued a series of statements announcing that land had been purchased near Orlando, Florida, and that Mr. Levitt planned to build a $600 million "Levittown" there. Despite notification from counsel for Levitt Corporation that these actions violated both the trademark law and the 1975 contract, Mr. Levitt pursued the promotion of his Orlando project. He purchased advertisements in the Washington Post, the New York Times, and elsewhere, bearing the names "Levittown Florida", "Strathmore" and referring to "Levitt and Sons" and to "Levitt's Engineering and Planning Department". Most significantly, William Levitt identified himself as the founder of the company that had built the Levittowns of New York, New Jersey, and elsewhere.

Faced with Mr. Levitt's second refusal in as many years to abide by the bargain he struck when he sold his business, Levitt Corp. brought this suit. On July 18, 1978, alleging, Inter alia, violations of the Lanham Act, 15 U.S.C. § 1114, and of the common law of unfair competition, it obtained a temporary restraining order prohibiting Levitt and the two corporations he heads from publishing any promotional material using the names or marks "Levitt," "Levittown," and "Strathmore" in connection with the development or sale of residential dwellings. ⁶ The application for a preliminary injunction was consolidated with a trial on the merits. Judge Pratt, after trial, ruled that Mr. Levitt had infringed upon the trademarks of the Levitt Corporation and that his use of his name in conjunction with the marks had caused substantial actual confusion between the two enterprises. Considering both the scope of the Levitt Corporation's activity in Florida under the "Levitt" name, and Mr. Levitt's own large-scale entry into the central Florida real estate market, Judge Pratt found such a muddle to have been "inevitable." Indeed, the record reveals that numerous telephone calls, letters, and even reservation deposits were sent to Levitt Corporation on the mistaken assumption that it was building in Orlando. ⁷

Turning to the question of relief, Judge Pratt concluded that the defendants' publicity campaign, by focusing on Mr. Levitt's past accomplishments, had generated such confusion that "it is necessary that strong and substantial restrictions . . . be imposed . . . to protect plaintiffs in their rights." Accordingly, he enjoined the defendants from using the terms "Levittown" and "Strathmore" in connection with their Orange County (Florida) project. Moreover, he required the defendants not only to remove the "Levittown" name from all advertising, maps, streets, government application forms, and other documents, but also, upon plaintiff's request, to issue corrective advertising explaining the suit, to restore the plaintiffs to the position they held before Mr. Levitt invaded the Florida market.

The defendants do not question the propriety of these portions of the order. ⁸ Judge Pratt went on, however, to forbid the defendants "from issuing any press releases or advertising, or generating any publicity concerning William J. Levitt's connection with the Orange County Development" for a period of two years. Acknowledging that this restriction exceeded that to which the parties agreed in 1975, the court below reasoned that it was required to counteract the damage done to the plaintiffs by Levitt's subsequent actions. The prohibition is limited to the Florida venture, and does not preclude disclosure of Levitt's connection with the project insofar as it is necessary to comply with state law, or to attract potential financial backers. ⁹

In addition, Judge Pratt forbade the defendants from publicizing Mr. Levitt's prior connection with Levitt and Sons and its related corporations. This restriction, which is to be applied permanently and to all future residential developments with which Mr. Levitt may be connected, is designed to avoid the likelihood of confusion that would arise if the defendants could invoke the names of earlier Levitt projects in...