NBA Properties, Inc. v. Gold

• Decision Date: 08 November 1989
• Docket Number: No. 89-1572,89-1572
• Citation: 895 F.2d 30
• Parties: NBA PROPERTIES, INC., Plaintiff, Appellee, v. Richard GOLD, et al., Defendants, Appellants. . Heard
• Court: U.S. Court of Appeals — First Circuit

Page 30

895 F.2d 30

NBA PROPERTIES, INC., Plaintiff, Appellee, v. Richard GOLD, et al., Defendants, Appellants.

No. 89-1572.

United States Court of Appeals First Circuit.

Heard Nov. 8, 1989.

Decided Feb. 1, 1990.

Robert L. Ellman, with whom Chesley Oriel, Alfred E. Pearson, and Finkelstein and Oriel, Framingham, Mass., were on brief, for defendants, appellants.

Jeffrey L. Laytin, with whom Richard B. Verner, Lewin & Laytin, P.C., New York City, Harold W. Potter, Jr., and Sherburne, Powers & Needham, Boston, Mass., were on brief, for plaintiff, appellee.

Before BOWNES, Circuit Judge, VAN GRAAFEILAND, ^* Senior Circuit Judge, and BREYER, Circuit Judge.

BREYER, Circuit Judge.

NBA Properties, Inc. ("NBA"), which controls the legal rights to certain National Basketball Association trademarks and tradenames, found that several franchised "Wild Tops" retail stores were selling clothes and heat transfers bearing those marks and names without NBA permission. NBA sued two companies, one called National Development Group, Inc., and the other Wild Tops Franchising, Inc., along with their principal owner, Richard Gold (collectively, the "Franchisors"). The Franchisors settled the case. In doing so, the Franchisors agreed that the federal district court would enter a "Final Judgment and Permanent Injunction" (the "Decree") forbidding them to engage in this unlawful activity. Such a decree was entered. The Franchisors also signed a contract called a "Settlement Agreement," in which, among other things, they promised to police their franchisees to prevent a repetition of the problem.

About a year or so later NBA found that several Wild Tops franchised retailers were again selling, without permission, clothes with NBA marks and names. NBA went back to court, seeking to hold the Franchisors in contempt of the court's Decree. The court found the Franchisors in contempt of the Decree. The Franchisors now appeal this finding to us.

The Franchisors are willing to assume, purely for the sake of argument, that they have violated the "Settlement Agreement." Even so, they say, they have not violated the Decree. They argue that the language of the Decree (unlike that of the Settlement Agreement, which has not been incorporated into any court order) does not impose an affirmative duty upon them to police their franchisees, and that they themselves did not engage in any of the conduct the Decree forbids. For this reason, they contend, the court could not lawfully hold them in contempt of the Decree itself.

We must decide the issue in this case in light of unbroken lines of authority that caution us to read court decrees to mean rather precisely what they say. Decrees must "be specific;" they must "describe in reasonable detail" just what "acts" they forbid. Fed.R.Civ.P. 65(d). These specificity requirements are not "mere[ly] technical" but are "designed to prevent uncertainty and confusion ... and to avoid" basing a "contempt citation on a decree too vague to be understood." Schmidt v. Lessard, 414 U.S. 473, 476, 94 S.Ct. 713, 715, 38 L.Ed.2d 661 (1974) (per curiam); see Diapulse Corp. of America v. Carba, Ltd., 626 F.2d 1108, 1111 (2d Cir.1980). Also, we must read any "ambiguities" or "omissions" in such a court order as "redound[ing] to the benefit of the person charged with contempt." Ford v. Kammerer, 450 F.2d 279, 280 (3d Cir.1971) (per curiam); see In re Baldwin-United Corp., 770 F.2d 328, 339 (2d Cir.1985); New York Telephone Co. v. Communications Workers of America, 445 F.2d 39, 48 (2d Cir.1971); 11 C. Wright & A. Miller, Federal Practice & Procedure: Civil Sec. 2955, at 538 (1973 & Supp.1989). Finally, we must keep in mind that the franchisees are not the defendants in this case; and, as Learned Hand pointed out, an injunction does not forbid "the act described ..., but only that act when the defendant does it." Alemite Mfg. Corp. v. Staff, 42 F.2d 832, 833 (2d Cir.1930). After reviewing the record and applying these standards, we conclude that the district court could not lawfully hold the Franchisors in contempt of the Decree.

The evidence introduced at the contempt hearing simply showed that Wild Tops stores in Nanuet and Kingston, New York, near Riverside, California, and in Manchester, New Hampshire, had made unauthorized sales of NBA-marked clothes. It also showed that the Franchisors did not own these stores; relatives of Richard Gold owned some of them, and others are "franchisees," which is to say that they are independent retailers who have signed a franchise contract with the Franchisors. Given this latter fact, we can find no provision in the Decree itself that imposes an obligation that the Franchisors violated.

The Decree, insofar as relevant, says that the Franchisors, "their agents, servants, employees, confederates, attorneys and any persons acting in concert or participation with them," may not engage in

(c) Passing off, inducing, or enabling others to sell or pass off any heat transfers, garments and/or other items which are not genuine NBA products as and for genuine NBA products;

....

(h) Assisting, aiding, or abetting any other person or business entity in engaging in or performing any of the activities referred to in the above subparagraphs....

The Franchisors did not violate these specific obligations. The record contains no evidence that the Franchisors (the two companies and Richard Gold) passed off, induced, or enabled others to sell or pass off unauthorized, NBA-marked clothes as if they were genuine; nor does it show they helped their franchisees do so. Rather, the Franchisors wrote to each of the franchisees telling them that sale of NBA-marked items was unlawful, and that any such future sale would amount to a violation of the franchise agreement and could lead to termination of the franchise contract. They also sent copies of the Decree and the Settlement Agreement to all franchisees. Aside from this conduct (which helps the Franchisors), the record says nothing about the Franchisors' own activity. To find conduct that amounts to the forbidden "enabling" would amount to reading the Decree, phrased in terms of negative prohibitions, as if it imposed an affirmative obligation upon the Franchisors to police their franchisees. To do so would turn a "prohibitory" injunction into a "mandatory" injunction, cf. Jacobson & Co. v. Armstrong Cork Co., 548 F.2d 438, 441 (2d Cir.1977); 11 C. Wright & A. Miller, Federal Practice & Procedure: Civil Sec. 2942, at 377 (1973 & Supp.1989) (noting that courts may be more reluctant to grant mandatory injunctions than prohibitory ones), and, as we have previously said, we can find no legal basis for reading the Decree's language so broadly.

We recognize that the Franchisors took one positive act that, in a sense, "enable[d]" the franchisees to sell the forbidden items; they granted the franchisees the franchise itself. That grant helped the franchisees sell the forbidden articles, for it permitted them to use the name "Wild Tops" in connection with their stores. Since a franchisee, by definition, however, is one who possesses such a grant, to read "enabling" to encompass the simple granting of the franchise itself is to read the Decree as imposing strict liability upon the Franchisors for the acts of thierfranchisees. To find such liability in language that does not state it would require stretching the language, and reading it rather strongly against, rather than "to the benefit of[,] the person charged with contempt." Kammerer, 450 F.2d at 280. Cf. Gonzalez v. Walgreens Co., 878 F.2d 560, 561-62 (1st Cir.1989) (holding that franchisee's mere use of the name "Walgreens" was not enough to create genuine issue of material fact whether franchisor was liable under apparent agency theory for franchisee's alleged negligence).

We also recognize that the record contains considerable evidence showing that certain of the franchisees engaged in the conduct that the Decree forbids, and the Decree prohibits "any persons acting in concert or participation with" the Franchisors from using NBA marks without permission. This language, however, does not help NBA impose contempt liability upon...