Metro-Goldwyn Mayer v. 007 Safety Products

• Decision Date: 05 May 1999
• Docket Number: No. 98-2160,METRO-GOLDWYN,98-2160
• Citation: 183 F.3d 10
• Parties: (1st Cir. 1999) MAYER, INC., DANJAQ, INC. AND EON PRODUCTIONS, LTD., Plaintiff-Appellees, v. 007 SAFETY PRODUCTS, INC., Defendant, Appellant. . Heard
• Court: U.S. Court of Appeals — First Circuit

Page 10

183 F.3d 10 (1st Cir. 1999)

METRO-GOLDWYN MAYER, INC., DANJAQ, INC. AND EON PRODUCTIONS, LTD., Plaintiff-Appellees, v. 007 SAFETY PRODUCTS, INC., Defendant, Appellant.

No. 98-2160.

UNITED STATES COURT OF APPEALS FOR THE FIRST CIRCUIT.

Heard May 5, 1999.

Decided July 7, 1999.

APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MASSACHUSETTS

[Copyrighted Material Omitted]

Philip X. Murray for appellant.

Nicholas C. Theodorou, with whom John A. Shope, Sarah Cooleybeck and Foley, Hoag & Eliot, LLP were on brief for appellees.

Before Torruella, Chief Judge, Cyr, Senior Circuit Judge, and Pollak,^* Senior District Judge.

CYR, Senior Circuit Judge.

Defendant 007 Safety Products, Inc. ("Safety Products") appeals a district court order which enjoined Safety Products and related parties from violating a settlement agreement with the alleged owners of the trademarks "James Bond" and "007." We affirm.

I BACKGROUND

Safety Products, which manufactured and sold such products as tear gas and pepper spray, was founded by Ronald Pasqualino in 1990. Ronald designed product packaging which included a logo depicting the numerals "007" superimposed on a spray can ("007 spray can logo"). In 1994, Angelo Pasqualino, Ronald's brother, became a partner in Safety Products. As Safety Products was virtually insolvent, Angelo personally invested $150,000, and incorporated the company, designating himself as president, and himself and his wife, Patricia, as the only corporate officers directors, and shareholders. Patricia took no part in operating the business, nor did the corporation convene directors meetings, issue corporate shares, or declare dividends.

In return for his services, including his solicitation of business accounts, Ronald received $300 per week. Safety Products deducted these payments on its tax returns as salary expense. Ronald also applied for a trademark on the 007 spray can logo. The trademark application was actively opposed by plaintiff-appellee Danjaq, Inc., which itself claimed the trademark for the James Bond "007" can logo.

In April 1996, Danjaq, Inc., Metro-Goldwyn-Mayer, Inc., Eon Productions, Ltd., and MAC B, Inc. (collectively: "Danjaq") brought suit in federal district court, claiming that Safety Products' 007 spray can logo infringed their registered trademarks. The district court declined Danjaq's request for preliminary injunctive relief in July 1996. Rather than take an interlocutory appeal, Danjaq elected to enter into a settlement agreement with Safety Products, which prescribed, inter alia, that: (1) Danjaq pay Safety Products $150,000; (2) Safety Products be permitted to continue to use "007" in its corporate name, but be prohibited from using "007," "James Bond," or the associated logos in its product packaging or advertising; (3) Safety Products file -- or "ensure that Ronald Pasqualino, and or . . . any other appropriate person . . . -- . . . file the appropriate documents necessary to abandon" the pending trademark application for the 007 spray can logo; and (4) the parties "take all reasonable steps . . . to persuade the district court to vacate [its July 1996 order denying Danjaq a preliminary injunction]" and refrain from interim release and publication of its July 1996 order. Ronald Pasqualino was not mentioned in the Agreement, which was executed by Angelo as president of Safety Products.

Danjaq promptly remitted the $150,000 to Safety Products, which wired $50,000 to a bank account controlled by Ronald, designating it in the company books as "Ronnie's share" of the settlement proceeds. On June 23, 1997, Ronald withdrew his trademark application. The district court in turn vacated its earlier July 1996 order denying preliminary injunctive relief to Danjaq.

On August 13, 1997, Danjaq informed the court of the settlement. The court conditionally dismissed the case, subject to its reopening in the event the settlement was not consummated within sixty days. Five weeks later, however, Ronald filed an application with the United States Patent and Trademark Office ("Trademark Office") to reinstate his trademark application. In addition, he threatened to publish the vacated July 1996 order on the Internet unless Danjaq paid him money over and above the $150,000 already paid to Safety Products.

On October 9, 1997, Danjaq moved to set aside the conditional dismissal entered by the district court on August 13, and to enforce the Settlement Agreement. Meanwhile, the Trademark Office denied the pending application to reinstate the trademark application withdrawn by Ronald Pasqualino on June 23.

At the district court hearing on Danjaq's motion to set aside the conditional dismissal entered on August 13, Danjaq contended that Ronald -- though neither a named party nor a signatory to the Settlement Agreement -- was so "legally identified" with Safety Products as to have become contractually bound as its agent, see Fed. R. Civ. P. 65(d); infra Section II.C. Following extensive discovery on this issue, the district court permanently enjoined Safety Products, and others in active concert with it (including Ronald Pasqualino), from further attempts to reinstate the withdrawn trademark application or to publish the vacated July 1996 order on the Internet. In due course, Safety Products appealed.

II DISCUSSION

A. Subject Matter Jurisdiction

Safety Products first contends that the district court lacked subject matter jurisdiction to enter final judgment and issue the injunction. It relies on the principle that federal district courts normally lack either the authority to impose a subsequent condition on a dismissal entered with prejudice based on a stipulation of dismissal with prejudice pursuant to Fed. R. Civ. P. 41(a)(1)(ii) ("[A]n action may be dismissed by the plaintiff without order of court . . . by filing a stipulation of dismissal signed by all parties who have appeared in the action."), or the jurisdiction to reopen a dismissed case to enforce a settlement. See Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 378 (1994); cf. Fed. R. Civ. P. 41(a)(2) (providing that, "[e]xcept as provided in [Rule 41(a)(1)], an action shall not be dismissed at the plaintiff's instance save upon order of the court and upon such terms and conditions as the court deems proper"). Even though Danjaq and Safety Products filed no such stipulation of dismissal with prejudice, Safety Products contends that the district court nonetheless lost jurisdiction because Danjaq breached its settlement agreement by failing to file the stipulation. See supra Section I. We do not agree.

First, Kokkonen terminates jurisdiction only after the Rule 41(a)(1)(ii) stipulation has been filed.¹ Thus, Danjaq's failure to file the required stipulation is dispositive.

Second, the Court also explained in Kokkonen that even after the parties file a Rule 41(a)(1)(ii) stipulation the district court retains the power to enforce the settlement agreement provided the dismissal order expressly incorporates the settlement agreement, or expressly preserves jurisdiction over the settlement agreement. See Kokkonen, 511 U.S. at 381-82 ("Even when, as occurred here, the dismissal is pursuant to Rule 41(a)(1)(ii) (which does not by its terms empower a district court to attach conditions to the parties' stipulation of dismissal) we think the court is authorized to embody the settlement contract in its dismissal order (or, what has the same effect, retain jurisdiction over the settlement contract) if the parties agree."); Pratt v. Philbrook, 109 F.3d 18, 21 n.5 (1st Cir. 1997).

The Settlement Agreement in the instant case clearly did not preclude retention of jurisdiction by the district court. Cf. Hester Indus., Inc. v. Tyson Foods, Inc., 160 F.3d 911, 913, 916 (2d Cir. 1998) (finding no jurisdiction where settlement agreement prohibited entry of any judgment or injunction against either party). Quite the contrary, the dismissal order entered by the district court expressly retained jurisdiction over the settlement agreement for sixty days, and Safety Products neither objected nor insisted on its right to an unconditional Rule 41(a)(1)(ii) dismissal. Cf. Gardiner v. A.H. Robins Co., 747 F.2d 1180, 1189-90 (8th Cir. 1984) (finding no jurisdiction where parties to stipulated dismissal neither knew about or agreed to retention of jurisdiction).

B. Scope of Injunction

Safety Products next contends that the district court abused its discretion by enjoining Safety Products from further efforts to reinstate its withdrawn trademark application and from threatening to publish the vacated July 1996 preliminary injunction order on the Internet. See A.W. Chesterton Co. v. Chesterton, 128 F.3d 1, 5 (1st Cir. 1997) (appellate court reviews grants of permanent injunctive relief for abuse of discretion);² see also Fed. R. Civ. P. 65.

1. Trademark Abandonment

The district court determined that Safety Products violated the settlement agreement provision requiring it to abandon the 007 spray can trademark application. See Agreement ¶ 4(g). It held that "[a] withdrawal followed by a 'withdrawal of a withdrawal' is obviously not [an] effective abandonment." Safety Products responds that it did not breach the settlement agreement since the Trademark Office determined that its attempt to withdraw the abandonment was ineffectual.

Danjaq counters that the reinstatement application filed by Safety Products remained pending before the Trademark Office at the time Danjaq filed its motion to enforce the settlement, and, therefore, Danjaq was entitled to prospective injunctive relief. Be that as it may, by the time the district court permanently enjoined Safety Products, the Trademark Office had ruled that Safety Products could not withdraw its June 23 abandonment.

Normally, courts may not enjoin conduct if "(1) it can be said with assurance that 'there is no reasonable expectation . . .' that the alleged violation will recur, and (2)...