Maltina Corporation v. Cawy Bottling Company

• Decision Date: 11 July 1972
• Docket Number: No. 71-1532.,71-1532.
• Citation: 462 F.2d 1021
• Parties: MALTINA CORPORATION and Julio Blanco-Herrera, Plaintiffs-Appellants, v. CAWY BOTTLING COMPANY, Inc., Defendant-Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

462 F.2d 1021 (1972)

MALTINA CORPORATION and Julio Blanco-Herrera, Plaintiffs-Appellants, v. CAWY BOTTLING COMPANY, Inc., Defendant-Appellee.

No. 71-1532.

United States Court of Appeals, Fifth Circuit.

May 23, 1972.

Rehearing and Rehearing Denied July 11, 1972.

J. W. Gipple, Fleit, Gipple & Jacobson, Washington, D. C., Phillip W. Knight, Enrique Jova, Fowler, White, Humkey, Burnett, Hurley & Banick, Miami, Fla., for plaintiff-appellant.

Peter M. Lopez, Miami, Fla., for defendant-appellee.

Before WISDOM, COLEMAN and SIMPSON, Circuit Judges.

Rehearing and Rehearing En Banc Denied July 11, 1972.

WISDOM, Circuit Judge:

In this appeal former owners of a Cuban brewery confiscated by the Castro regime seek to preserve their right to use the United States trademark registered in the name of the confiscated brewery. These efforts met with failure in the district court. The court held that the Act of State Doctrine deprived the former owners' assignee of standing to sue. We hold that the district court applied the Act of State doctrine more broadly than prior decisions allow.

I.

The plaintiff, Maltina Corporation, allegedly is a successor in interest to a Cuban Corporation, Nueva Fabrica de Hielo, S. A. ("Nueva Fabrica"). Nueva Fabrica produced and distributed beer and a "malta" from 1885 until its assets were confiscated by Cuban Law No. 890, on October 13, 1960. "Malta" is a dark brown, non-alcoholic carbonated beverage flavored with malt and brewed somewhat as beer. Nueva Fabrica registered for its Malta the trademark "Cerveza Cristal & design" in the United States Patent Office in 1957.

The family of Nueva Fabrica's President, Julio Blanco-Herrera, owned a controlling 55 percent of the shares of the corporation. The remaining principal stockholders were the Gelats family, who held about 15 percent of the stock. All but a single member of the Executive Committee of the corporation, which governed its day to day operations, fled to the United States when the Cuban Government confiscated the assets of Nueva Fabrica.

As the district court stated: "Sometime during 1961, the Executive Committee met in this country to discuss the affairs of Nueva Fabrica de Hielo, S. A. At this meeting, certain remaining assets of the company were discussed including a small account with the Morgan Trust Company of New York, an account in the First National Bank of New York, and a debt owed by a company in Owens, Illinois. These monies were subsequently recovered and placed in the Dade Federal Savings & Loan Association of Miami. The committee discussed the U. S. trademark and decided to attempt to retain ownership and use of the mark because of the great influx to this country of Cuban nationals who are familiar with the Cristal labels. The committee decided to attempt to obtain the backing of a responsible brewery which would lend its support to a malta made with the Cuban company's formula." Julio Blanco-Herrera initiated such efforts on behalf of the Executive Committee.

During 1962, Dr. de la Carrera, General Counsel for Nueva Fabrica and a member of the Executive Committee, told the Executive Committee that the trademark "Cerveza Cristal" would soon need to be renewed under the provisions of the trademark law.¹ In circumstances not here relevant, Blanco-Herrera executed an affidavit on June 6, 1962, stating that the trademark "Cerveza Cristal & design" was still in use and owned by Nueva Fabrica. In 1963, Blanco-Herrera formed the Maltina Corporation to distribute "Malta Regal", a product of the National Brewing Company. Because Blanco-Herrera and Dr. de la Carrera believed that Nueva Fabrica could not function legally in the United States, to preserve the "Cristal" trademark, Blanco-Herrera, acting as President of Nueva Fabrica, assigned the mark, together with the good will of the business, to Maltina Corporation. The assignment was recorded at the United States Patent Office on October 22, 1965.

After the purported assignment to Maltina, and while continuing to market Malta Regal, Blanco-Herrera continued his efforts to find backing for Malta Cristal. With Blanco-Herrera's participation, National Brewing Company produced a malta under the Cristal label in January of 1969. Blanco-Herrera testified that from the time he came to the United States in 1960 until a malta was produced under the Cristal label in 1969, he never had any intention to abandon the trademark, but instead made every effort to market his product expeditiously without sacrificing its quality.

The President of the defendant Cawy Bottling Company testified that his company tried to discover whether the Malta Cristal label was in use in this country and discovered that it was not. In October, 1967, Cawy attempted to register the "Cristal" mark with the United States Patent Office, but the application was rejected because of the plaintiffs' prior registration. Cawy had the trademark "Malta Cristal" registered in the office of the Secretary of the State of Florida on October 27, 1967. The Cawy malta was first marketed in February, 1968. On February 12, 1969, Cawy filed a petition with the United States Patent Office seeking to cancel the plaintiffs' registration. Maltina Corporation answered the petition, but the parties stipulated that those proceedings be stayed pending a suit in federal court to resolve the underlying issues. Blanco-Herrera and Maltina filed this action against Cawy in the United States District Court for the Southern District of Florida on March 27, 1970, seeking injunctive, monetary, and other relief from the defendant's alleged infringing activities. See 15 U.S.C. §§ 1114-1118.

At a hearing below on the defendant's motion for summary judgment, Marion Goderich, an expert on Cuban law, testified that the effect of Cuban Law 890 was to dissolve Nueva Fabrica de Hielo, S. A. Goderich based this conclusion on Article 221 of the Commercial Code of Cuba, which provides:

Companies of any kind whatsoever shall be dissolved for the following reasons:

* * * * * *

(2) Entire loss of capital.

Goderich explained the provision in his testimony:

Article 221 says that corporations of any kind whatever will be totally dissolved by the causes that follow, and in No. 2 it says, `total loss of capital\' — now, when there is a confiscation, of course, the corporation, as such, loses its capital totally to the Cuban Government, and because there is subrogation, and that\'s one of the reasons why there is a dissolution of the corporation.

The Court below took this testimony to be "virtually uncontradicted". It held Hielo to have been dissolved, and that the plaintiffs — a crew without a ship — lacked any right to assign the "Cristal" trademark to Maltina. The court expressed distaste for the result it reached, but believed the result compelled by the Supreme Court's decision in Banco Nacional de Cuba v. Sabbatino, 1964, 376 U.S. 398, 84 S.Ct. 923, 11 L.Ed.2d 804. We reverse.

II.

The Act of State doctrine, as set forth in Sabbatino, prevents the federal courts from sitting in judgment "on the acts of the government of another country done within its own territory", 376 U.S. at 416, 84 S.Ct. at 934, quoting Underhill v. Hernandez, 1897, 168 U.S. 250, 252, 18 S.Ct. 83, 42 L.Ed. 456.² We are therefore foreclosed from considering the propriety of the Cuban Government's expropriation of the assets of Nueva Fabrica de Hielo, S. A., accomplished by Cuban Law No. 890, at least as to those assets of Nueva Fabrica within the territorial confines of Cuba at the time of expropriation.

At the same time, it is settled by a long line of cases that "our courts will not give `extra-territorial effect' to a confiscatory decree of a foreign state, even where directed against its own nationals." F. Palicio y Compania, S. A. v. Brush, S.D.N.Y.1966, 256 F.Supp. 481, 488, aff'd mem., 2 Cir. 1967, 375 F.2d 1011; Tabacalera Severiano Jorge, S. A. v. Standard Cigar Co., 5 Cir. 1968, 392 F.2d 706, cert. den. 393 U.S. 924, 89 S.Ct. 255, 21 L.Ed.2d 260; Compania Ron Bacardi, S. A. v. Bank of Nova Scotia, S.D. N.Y.1961, 193 F.Supp. 814; Zwack v. Kraus Bros. & Co., S.D.N.Y.1954, 93 F.Supp. 963, aff'd., 2 Cir. 1956, 237 F.2d 255. Thus "foreign confiscatory decrees purporting to divest nationals and corporations of the foreign sovereign of property located in the United States uniformly have been denied effect in our courts. . . ." Banco Nacional de Cuba v. Sabbatino, supra, 376 U.S. at 447, 84 S.Ct. 923, 950, 11 L.Ed.2d at 834 (dissenting opinion of Mr. Justice White), citing, e. g., Moscow Fire Ins. Co. v. Bank of New York, 280 N.Y. 286, 20 N.E.2d 758, aff'd sub nom. United States v. Moscow Fire Ins. Co., 309 U.S. 624, 60 S.Ct. 725, 84 L.Ed. 986.³

We also accept the proposition, not seriously questioned in recent years, that "trademarks registered in this country are generally deemed to have a local identity — and situs — apart from the foreign manufacturer." F. Palicio y Compania, supra, 256 F.Supp. at 491; Carl Zeiss Stiftung v. V. E. B. Carl Zeiss, Jena, S.D.N.Y.1968, 293 F.Supp. 892, 896, modified on other grounds, 2 Cir. 1970, 433 F.2d 686; Zwack v. Kraus Bros. & Co., 2 Cir. 1956, 237 F.2d 255; Baglin v. Cusenier Co., 1911, 221 U.S. 580, 596, 31 S.Ct. 669, 55 L.Ed. 863. Thus the precise question raised by the present case is whether a foreign sovereign's dissolution of its own corporation is dispositive of the corporation's power to exercise dominion over assets located within the United States simply because the dissolution of the corporation is an "act of a foreign state, done within its own territory"; or whether the foreign sovereign's action is to be treated as a foreign decree governing property located within the United States and therefore to be recognized only if consistent with our policy and laws. Prior decisions uniformly espouse the latter position. In Zwack v. Kraus Bros. & Co., supra, the Second Circuit permitted the members of a confiscated Hungarian...