Neuhoff, Inc. v. Neuhoff Packing Co.

• Decision Date: 12 April 1948
• Docket Number: No. 10545.,10545.
• Citation: 167 F.2d 459
• Parties: NEUHOFF, Inc., v. NEUHOFF PACKING CO.
• Court: U.S. Court of Appeals — Sixth Circuit

167 F.2d 459 (1948)

NEUHOFF, Inc., v. NEUHOFF PACKING CO.

No. 10545.

Circuit Court of Appeals, Sixth Circuit.

April 12, 1948.

Holman Willis and Holman Willis, Jr., both of Roanoke, Va. (Willis & Willis, of Roanoke, Va., and Armistead, Waller, Davis & Lansden, of Nashville, Tenn., on the brief), for appellant.

Charles H. Smith, of Knoxville, Tenn. (Charles H. Smith, of Knoxville, Tenn., Seth M. Walker, of Nashville, Tenn., on the brief; Smith & Smith, of Knoxville, Tenn., and Walker & Hooker and David M. Keeble, all of Nashville, Tenn., of counsel), for appellee.

Before HICKS, ALLEN and MARTIN, Circuit Judges.

MARTIN, Circuit Judge.

Neuhoff, Incorporated, a Virginia corporation, has appealed from a decree of the United States District Court for Middle Tennessee which enjoined it from engaging in specified acts of unfair competition with Neuhoff Packing Company, a Tennessee corporation. The use of its corporate name by appellant and its use of the trade names "Neuhoff" and "Neuhoff's" in proscribed territory was found, in the circumstances of the case, to constitute "constructive fraud."

As is generally true in litigation pertaining to unfair competition, the facts must be set forth somewhat in detail.

In 1889, Henry Neuhoff, later joined in partnership by his brother, Lorenz Neuhoff, engaged in business in Nashville, Tennessee. At first, hams were bought from a slaughterhouse, processed, and sold in and around Nashville. By 1902, the business had expanded to include slaughtering, as well as processing. More working capital was required to obtain the full benefit of increasing prosperity; so, in 1906, the two partners, together with another brother and other persons, obtained a Tennessee charter under the name "Neuhoff Abattoir and Packing Company, Inc.," changed by charter amendment in 1919 to "Neuhoff Packing Company." In August, 1930, the charter of Neuhoff Packing Company was surrendered to the State of Tennessee; and, on the same date, the company was reincorporated by the same name.

Immediately after the original charter had been obtained in 1906, Henry Neuhoff and Lorenz Neuhoff, in consideration of issuance to them of stock in the corporation, conveyed to it the assets and good will of the partnership and the trade name "Neuhoff." In 1911, the corporation acquired the business and properties of Tennessee Packing and Provision Company, including the registered trade-mark "Old Hickory," thereafter used as a trade-mark for ham, bacon, sausage, lard, and other products processed by the corporation.

Neuhoff Packing Company improved its plant and steadily expanded its business until, by 1930, a large volume of fresh and processed meats and by-products of slaughtered animals was being sold by it in an extensive territory in Tennessee and Alabama, and in a smaller territory in Kentucky, Virginia, North Carolina, Georgia and South Carolina. Valuable good will had been built up by the Neuhoff company to such extent that Swift and Company desired to acquire its properties and good will. Swift's offer being acceptable, a contract in writing was entered into between that company and Neuhoff Packing Company on November 8, 1930. This contract was subsequently rejected by a vote of the stockholders of Neuhoff Packing Company "for Federal income tax purposes," and a new and somewhat complicated plan of sale was formulated.

In January, 1931, the stockholders of Neuhoff Packing Company adopted a resolution expressing their desire to liquidate the corporation; and, by action of the directors, the corporate name of the company was changed by charter amendment of January 8, 1931, to "Nashville Provision Company." Between January 1 and January 3, 1931, the directors of Neuhoff Packing Company declared a dividend in kind of the fixed assets of the company, as described in a schedule to the contract with Swift and Company of November 8, 1930, which the stockholders had rejected.

In payment and satisfaction of this dividend in kind, Neuhoff Packing Company conveyed to its stockholders by deed dated January 7, 1931, all the fixed assets including the company's good will, trade rights, trade-marks, trade names, and the right to use the corporate name, "Neuhoff Packing Company." On the same date, Swift and Company submitted, in writing, an offer, unconditionally accepted by all stockholders of Neuhoff Packing Company, to purchase for a consideration of $1,600,000 in cash the assets, good will and properties set out in the schedule to the agreement of November 8, 1930, with the understanding that the stockholders were to perform the obligations imposed upon Neuhoff Packing Company in the contract of November 8, 1930, to the same extent as if the corporation had seen fit to accept and perform the contract.

At the instance of Swift and Company, a charter of incorporation was obtained on January 8, 1931, from the State of Tennessee for "Neuhoff Packing Company," and its entire authorized capital stock of $2,000,000 was paid up in cash by Swift and Company. Other auxiliary transactions were consummated on the same date. White Provision Company (a Georgia corporation owning a packing plant in Atlanta), in which the old Neuhoff Packing Company was a large stockholder, conveyed its assets to a nominee of Swift and Company; Nashville Cold Storage Company, a subsidiary of the old Neuhoff Packing Company, also conveyed its assets to Swift's nominee; and the old Neuhoff Packing Company, whose name had been changed to Nashville Provision Company, assigned and transferred to the newly incorporated Neuhoff Packing Company its entire right, title and interest in and to the registered trade-mark "Old Hickory."

Also, on January 8, 1931, Lorenz Neuhoff, Arthur Neuhoff and Lorenz Neuhoff, Jr., delivered to Swift and Company their separately executed agreements that they would not, for a period of fifteen years, directly or indirectly in person, or as stockholders, directors, or employees, of any corporation, or otherwise, engage or become interested in any business competing or liable to compete in any way with the business theretofore conducted by the Neuhoff Packing Company in Kentucky, Tennessee, Alabama, Georgia, Florida, North Carolina and South Carolina, except in those portions of the states named where no business was being carried on by the Neuhoff Packing Company at the time its liquidating dividend was declared.

On January 9, 1931, all stockholders of the old Neuhoff Packing Company (incorporated in 1906 and re-incorporated in 1930), in consideration of the $1,600,000 paid to them by Swift and Company, delivered to the newly incorporated Neuhoff Packing Company a deed which, in addition to the real estate conveyed therein, transferred personal property of the old Neuhoff Packing Company, then called Nashville Provision Company, "including but not being limited to, the good-will of said business and all trade rights, trade marks, trade names, brands, formulae, inventions, patents and interests therein, and patent licenses and contracts in respect to said inventions, patents, interests and licenses, and all switch or side tracks, and agreements relating thereto owned and/or used by the Neuhoff Packing Company, now the Nashville Provision Company, in the operation of its business, and the right to use the corporate name of the Neuhoff Packing Company." Italics supplied. All cash, bills, notes, accounts receivable, merchandise and supplies were excluded from the conveyance, which was expressly made to the grantee and its successors and assigns forever.

Since acquiring the business of the old Neuhoff Packing Company, the appellee has vigorously expanded its operation; and has expended much money in plant enlargement and construction, in the installation of modern machinery and improvement in processing, and in the purchase of automobiles and delivery trucks. More than 300,000 head of livestock are slaughtered yearly; and the annual gross business transacted by appellee exceeds $8,000,000. The company employs some 625 persons in office work and plant operation, and sends out twenty traveling salesmen to solicit orders.

The automobiles used by its salesmen are painted a distinctive orange with blue trim, and "Neuhoff Packing Company, Old Hickory Brand," is painted in blue letters on the outside panel of each door. Likewise, this color scheme is carried out in the painting of its delivery trucks and the trade name "Neuhoff" and the trade-mark "Old Hickory" are prominently displayed thereon. The name "Neuhoff" and the trademark "Old Hickory" have been featured by large signs painted on the walls of a hundred buildings, more or less, in and around Nashville and along the highways of Tennessee. These names have been featured, also, in radio advertising, by frequent pronouncement of them in describing the company's numerous products. A dozen of its leading brands are labelled and advertised under the name "Neuhoff's Old Hickory Brand," followed by a description of the product, with a statement that it is manufactured by "Neuhoff Packing Company, General Office, Nashville, Tenn."

We turn now to the activities of the originators of Neuhoff, Inc., and of the appellant corporation which they created.

It should be recalled that Lorenz Neuhoff, Jr., had been a stockholder of the old Neuhoff Packing Company (organized in 1906 and re-incorporated in 1930) and had joined with all the other stockholders in the execution of the deed of January 9, 1931, conveying to appellee the property therein described "and the right to use the corporate name of Neuhoff Packing Company." In May, 1933, Lorenz Neuhoff, Jr., together with J. B. Harris and H. W. Cole, obtained a Virginia charter for "Neuhoff, Incorporated." The three named incorporators, with Lorenz Neuhoff, were named as officers and directors of the corporation, the principal office of which was to be located at Lynchburg and later, by charter amendment, at Salem, Virginia. Broadest...