Modern Woodmen of America v. Hatfield

• Decision Date: 26 August 1912
• Docket Number: 1,313.
• Citation: 199 F. 270
• Parties: MODERN WOODMEN OF AMERICA v. HATFIELD et al.
• Court: U.S. District Court — District of Kansas

199 F. 270

MODERN WOODMEN OF AMERICA v. HATFIELD et al.

No. 1,313.

United States District Court, D. Kansas.

August 26, 1912

Ferry Doran & Dean, of Topeka, Kan., for complainant.

Rodolph Hatfield, of Wichita, Kan., and J. G. Johnson, of Peabody Kan., for defendants.

CAMPBELL District Judge.

In this case the question now is on demurrer to the bill. It appears from the bill that complainant is an Illinois corporation, a fraternal beneficiary society, having for its purposes fraternal relations among its members and financial aid to their beneficiaries upon their death; that it has been, and is now transacting business in this state under due authorization since 1883, has about 80,000 members, has paid out to beneficiaries of deceased members more than $100,000,000, and is now paying out $11,000,000 per annum. Its organization as to head camp and subordinate officers is then set out, and the facts that the organization extends to 35 states of the Union and portions of Canada, and that its revenues are derived from dues and assessments comprising general and benefit funds.

'That the complainant has fixed laws, rules, and regulations which are passed and adopted by the Head Camp of the society; that under these laws, rules, and regulations, the society is controlled and managed and its funds collected and distributed; that these laws, rules, and regulations, and all forms adopted by the Head and Local Camps thereunder, are the property and assets of the complainant society; that they are distinctive and well known to its membership and to the general public; that the local camps of the state of Kansas are known as 'the Kansas Woodmen,' and have been so known for many years; that the Modern Woodmen of America is known to be a strong, safe, well managed, fraternal beneficiary society, and that as such its name and the component parts thereof have a good will and property value; that the word 'Woodmen' is the principal part and the essence of the complainant's name; that the good will thereof has been established at great expenditure of time and money; and that as used in complainant's name it is a descriptive word, and that the public is in the habit of designating the complainant society by that name.'

The defendants are alleged to be citizens of Kansas, and the amount in controversy is alleged to exceed $3,000, exclusive of interest and costs.

It is then alleged:

'That at a meeting held in January, 1912, the complainant, through its Head Camp, or lawmaking body, deemed it wise, and for the best interest of the society and its members, to increase the rates of assessments, and at said meeting lawfully increased the same, said increase to become effective January 1, 1913; that the defendants herein, and others acting with them, whose names are to the complainant unknown, and are too numerous to be here inserted, if known, confederated and conspired together, and are now confederating and conspiring under the pretext of opposing said increase of rates, to fraudulently and unlawfully appropriate to themselves and their alleged new society, the name, title, insignia, designations, laws, rules, regulations, and property of the complainant, Modern Woodmen of America; that in consummation of said unlawful conspiracy and fraudulent acts said defendants have flooded the Kansas membership of the Modern Woodmen of America, and the public, with letters, writings, and articles issued through a publicity bureau created by them, urging said Kansas members of the Modern Woodmen of America to desert said society and to enter and become members of an alleged new society under the name of 'The Kansas Fraternal Woodmen,' and are also soliciting the public to become members of said alleged new society; that in further consummation of said unlawful and fraudulent purposes said defendants have made application to the charter board of the state of Kansas for charter for their said alleged new society under the name and title of 'the Kansas Fraternal Woodmen'; that said defendants have incorporated in the proposed name of their new society the word 'Woodmen' for the purpose and with the intent of misleading and deceiving the members of the Modern Woodmen of America, and the public, and of thus appropriating the good will and fixed property rights of the complainant, by leading and causing said membership of the Modern Woodmen, and the public, generally, to believe that the new society is in truth and in fact a branch or part of the Modern Woodmen of America, well knowing that the Kansas members of said organization are known, and have for many years been known, as 'The Kansas Woodmen."

This, complainant charges, is fraudulent and unlawful, in that it is an attempt to appropriate its name and good will and mislead and deceive its membership and the general public, and is in violation of the state statutory prohibition against the adoption of a name too closely resembling that of a similar association. The recitations of the bill are further amplified by setting forth details not necessary here to repeat. It is charged that the use of the name 'the Kansas Fraternal Woodmen' will tend to and will mislead and deceive complainant's members and the general public, and will lead to confusion and to the great and irreparable injury of the complainant, and that, unless enjoined, the defendants will apply to the state superintendent of insurance for a certificate of authority to do business in the state under the name of 'the Kansas Fraternal Woodmen.'

The prayer is that defendants be enjoined from soliciting membership or distributing literature in the name of 'the Kansas Fraternal Woodmen,' or attempting to procure or procuring from the state charter board a charter in such name; or from the State Superintendent of Insurance a certificate of authority to do business in such name, or from using complainant's form of organization, etc., of complainant's funds, property, or good will.

The demurrer raises two questions: (1) That a foreign corporation doing business in a state only by license has no standing in a United States court of equity to question the right of citizens of the state granting it the license to take any necessary steps under the statutes of the state in which the court is located for the creation of a corporation bearing the same or similar name as the foreign corporation. (2) That complainant, a foreign corporation, cannot invoke a United States court of equity, sitting in Kansas, by injunction, to restrain or enjoin these defendants from applying to duly constituted tribunals, clothed with limited judicial and discretionary powers, for a charter and permission to do business in the state.

In support of the first proposition, the defendants cite Lehigh Valley Coal Co. v. Hamblen et al. (D.C.) 23 F. 225, and Continental Ins. Co. v. Continental Fire Ass'n, 101 F. 255, 41 C.C.A. 326. In the former case it was held by the Circuit Court for the Northern District of Illinois, Judge Gresham presiding, that as the complainant was a foreign corporation, doing business in the state only by comity, and at the sufferance of the state, the complainant had no standing in the federal court to procure an injunction restraining the defendants from receiving stock subscriptions or taking any other steps necessary to be taken under the statute in the creation of the new corporation. It is to be noted that the defendants in that case, under a peculiar provision of the state law, were acting as commissioners to open books for subscriptions to the capital stock of the corporation, and are held by the court to perform a function under the laws of the state, if not as officers, at any rate as instrumentalities employed by the state. The court further held that, in view of the Illinois law prohibiting the issuance of a license to commissioners to receive stock subscriptions in the name of a corporation, the same as that of one or more other existing corporations, the question was primarily one for the Secretary of State. But the court does not hold that the foreign corporation, complainant in that case, is without redress in the federal court against the defendants, acting not as state instrumentalities, but as officers of the corporation, for he says:

'I do not say what may be done if the defendants succeed in creating their corporation bearing the complainant's name, and a suit shall be brought by complainant to prevent individuals claiming to be officers or managers of such corporation from interfering with the complainant's business as already stated.'

But subsequently, in the case of Peck Bros. & Co. v. Peck Bros. Co., 113 F. 291, 51 C.C.A. 251, 62 L.R.A. 81, the Circuit Court of Appeals for the same circuit decided the question in favor of the right of the foreign corporation to such relief, saying in reference to a contrary decision by an Appellate Court of the state:

'We are compelled, with deference, to differ with the learned court, if it intended to hold that incorporation under the laws of the state of Illinois protects one from the consequences of his own wrong. In a certain limited sense the sovereignty of the state had conferred the name. There is, however, in the term 'sovereignty' no magic to conjure by. It can confer upon individuals no right to perpetrate wrong. Nor do we think that the sovereignty of the state of Illinois sought to do that. It has a general law of incorporation, by which any body of men combining for the purpose of business may incorporate under any name they may select. The name is not imposed by the law, but is chosen by the incorporators. With that selection the sovereignty of the state has nothing to do. The act of sovereignty allowing incorporation is permissive, not mandatory. It sanctions the

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