Monte Carlo Shirt, Inc. v. Daewoo Intern. (America) Corp.
| Decision Date | 08 June 1983 |
| Docket Number | 81-5972,Nos. 81-5908,s. 81-5908 |
| Parties | , 36 UCC Rep.Serv. 487 MONTE CARLO SHIRT, INC., a California Corporation, Plaintiff-Appellant/Cross-Appellee, v. DAEWOO INTERNATIONAL (AMERICA) CORPORATION, a New York Corporation, and Daewoo Industrial Co., Ltd., Defendants-Appellees/Cross-Appellants. |
| Court | U.S. Court of Appeals — Ninth Circuit |
Hillel Chodos, Beverly Hills, Cal., for plaintiff-appellant.
Don A. Proudfoot, Graham & James, Los Angeles, Cal., for defendants-appellees.
Appeal from the United States District Court for the Central District of California.
Before SNEED and ALARCON, Circuit Judges, and COPPLE *, District Judge.
I.
Monte Carlo Shirt, Inc., a New York corporation, contracted with Daewoo Industrial Company, Ltd. (Daewoo), a South Korean corporation, to purchase 2400 dozen men's dress shirts manufactured to its specifications and bearing its label. Monte Carlo rejected the shirts after they arrived in this country because the documents necessary to clear the shipment arrived too late for Christmas sales. The American subsidiary of Daewoo, Daewoo International (America) Corp. (Daewoo America), purchased the shirts from Daewoo and sold them without Monte Carlo's permission to discount retailers, with Monte Carlo labels and polybags Monte Carlo tried its case before a jury. The interference with business and conversion claims were apparently abandoned at trial and are not on appeal. The jury entered a verdict for Monte Carlo on the breach of contract claim and awarded it $79,073 for lost profits. Monte Carlo also prevailed on the trademark claim, for which it received general compensatory damages of $1,582,735, special compensatory damages of $70,048, and punitive damages of $3,000,000. The jury denied relief on the claim under CUPA, and the court directed a verdict for Daewoo on the Lanham Act claim.
still intact. In response Monte Carlo sued Daewoo 1 for breach of contract, common-law trademark and tradename infringement, interference with business, conversion, violation of a provision of the California Unfair Practices Act (CUPA), Cal.Bus. & Prof.Code Sec. 17043, and violation of the Lanham Act, 15 U.S.C. Secs. 1051-1127. Jurisdiction was predicated on diversity, 28 U.S.C. Sec. 1332, as well as the Lanham Act, 15 U.S.C. Sec. 1121, and the trademark and unfair competition provisions of 28 U.S.C. Sec. 1338. Daewoo cross-complained for breach of contract.
Daewoo then moved for a new trial or, in the alternative, for judgment notwithstanding the verdict. The court refused to order a new trial on the breach of contract claim, but granted the motion on the remaining claim of trademark infringement. The court based its decision on its belief that the jury was misinstructed on the elements of trademark infringement and on a variety of errors affecting the computation of damages. The new trial was never held. Daewoo moved for summary judgment and the court granted its motion, holding that "[t]he sale of the Monte Carlo shirts with the Monte Carlo labels intact could not as a matter of law deceive or confuse the public concerning the source and origin of the shirts." (citation omitted).
Monte Carlo appeals from the order partially granting a new trial on the trademark infringement claim and from the subsequent grant of summary judgment against it on that issue. 2 Daewoo cross-appeals the denial of a new trial on the breach of contract claim. We affirm the dispositions by the trial court. Because we accept the court's view that no trademark claim could be shown on these facts, neither in the first trial nor in a new one, we need not address the propriety of the grant of a new trial. We discuss only the issuance of summary judgment on the trademark claim and the denial of a new trial on the breach of contract claim.
II.
The first issue presented on appeal is whether the district court was correct in holding as a matter of law that Daewoo's sale of Monte Carlo-labeled shirts could not constitute actionable trademark infringement. The district court's grant of summary judgment will be affirmed only if there was no genuine issue of material fact and the moving party was entitled to prevail as a matter of law. Barona Group of Capitan Grande Band v. Duffy, 694 F.2d 1185, 1187 (9th Cir.1982); Heiniger v. City of Phoenix, 625 F.2d 842, 843 (9th Cir.1980). There was no genuine dispute over the material facts of this case. We do not, however, engage in de novo review in deciding whether Daewoo was entitled to prevail, because Monte Carlo's unregistered trademark is afforded protection only under California law. Our review of the district court's interpretation of state law in diversity cases is limited: we may not overrule the court unless it is The question of state law facing the district court was whether an action would lie in trademark for Daewoo's unauthorized sale of genuine Monte Carlo shirts. Under the circumstances of this case both buyers at the discount retail level (consumers) and other retailers reasonably could assume that Monte Carlo had sold its shirts directly or indirectly to the discount retailers. Any such assumption would be erroneous under the facts of this case. The issue, therefore, is whether Daewoo's unauthorized sale, which made any such erroneous assumption possible, constitutes a trademark violation. We think not. No doubt such an erroneous assumption could cause injury to Monte Carlo which, when caused by another, might constitute a claim in contract or tort. Monte Carlo, however, chose to forego its opportunity to recover for such injury under a contract theory, and it also did not pursue its claims of interference with business and conversion. On the facts of this case, it has not established that such injury can be alleviated under trademark law, although it must be admitted that neither Monte Carlo nor Daewoo has produced persuasive authority pointing either way. 3
"clearly wrong." Young v. Reynolds Metals Co., 685 F.2d 1091, 1092 (9th Cir.1982); Washington ex rel. Edwards v. Heimann, 633 F.2d 886, 888 n. 1 (9th Cir.1980); Gee v. Tenneco, Inc., 615 F.2d 857, 861 (9th Cir.1980).
The California courts have not passed on the viability of a trademark claim for the unauthorized sale of a genuine product. Nonetheless there is sufficient authority for us to conclude that the district court was not clearly wrong in finding that No such confusion was possible in this case. The goods sold by Daewoo were not imitations of Monte Carlo shirts; they were the genuine product, planned and sponsored by Monte Carlo and produced for it on contract for future sale. The shirts were not altered or changed from the date of their manufacture to the date of their sale. 5 Their source was Monte Carlo; the absence of Monte Carlo's authorization of the discount retailers to sell does not alter this. Admittedly the law of trademark has extended well beyond its origin as a remedy for "passing off," but Monte Carlo has not demonstrated that it should reach as far as the facts of this case. Cf. DEP Corp. v. Interstate Cigar Co., 622 F.2d 621, 622 n. 1 (2d Cir.1980) (). The district court was not clearly wrong in granting Daewoo's motion for summary judgment.
Monte Carlo had no action in trademark. A showing of likely buyer confusion as to the source, origin, or sponsorship of goods is part of a cause of action for infringement of a registered trademark. Carson Manufacturing Co. v. Carsonite International Corp., 686 F.2d 665, 669-70 (9th Cir.1981), cert. denied, --- U.S. ----, 103 S.Ct. 1499, 75 L.Ed.2d 930 (1983); Levi Strauss & Co. v. Blue Bell, Inc., 632 F.2d 817, 821-22 (9th Cir.1980); Lindy Pen Co. v. Bic Pen Corp., 550 F.Supp. 1056, 1060-61 (C.D.Cal.1982). This requirement applies to common-law trademark infringement claims brought under California law. Toho Co. v. Sears, Roebuck & Co., 645 F.2d 788, 791 (9th Cir.1981); 7 B. Witkin, Summary of California Law, Equity, Secs. 70, 74 (8th ed. 1974). 4 The possibility of confusion is one that exists between distinct products that are similar in appearance and are marked deceptively. Accordingly, the injury that is remedied by the trademark cause of action is public confusion as to the source of the goods. Shakey's Inc. v. Covalt, 704 F.2d 426 (9th Cir.1983); Carson Manufacturing Co., 686 F.2d at 670-71; North Carolina Dairy Foundation, Inc. v. Foremost-McKesson, Inc., 92 Cal.App.3d 98, 110, 154 Cal.Rptr. 794, 801 (1979)
III.
Daewoo cross-appeals on the breach of contract claim, arguing that the district court misled the jury by giving conflicting instructions. Daewoo's objection was both timely and adequate to make the court "fully aware" of its position, thus satisfying Fed.R.Civ.P. 51. See Brown v. Avemco Investment Corp., 603 F.2d 1367, 1370-71 (9th Cir.1979); see also Kramas v. Security Gas & Oil Inc., 672 F.2d 766, 768-69 (9th Cir.), cert. denied, --- U.S. ----, 103 S.Ct. 444, 74 L.Ed.2d 600 (1982).
Although Daewoo has preserved its objections to the jury instructions, it has not established a basis for reversal. The court instructed the jury on Daewoo's potential liability on both a contract theory and for violation of Cal.Com.Code Sec. 2504. Daewoo challenges the part of the court's contract charge that it labels a "perfect tender" instruction. This instruction was that:
A buyer has no duty to accept goods or pay for them unless there has been a proper tender of delivery.
If the tender of delivery fails in any respect to conform to the contract, the buyer may reject the goods.
The court added that Monte Carlo could not recover unless it was injured by Daewoo's breach. This was followed by what Daewoo concedes...
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