North Shore Laboratories Corp. v. Cohen

• Decision Date: 22 December 1983
• Docket Number: No. 82-1519,82-1519
• Citation: 721 F.2d 514
• Parties: NORTH SHORE LABORATORIES CORP., Plaintiff-Appellant, v. Harris C. COHEN, Leonard Lyons, Richard Wolf, et al., Defendants-Appellees, The Wonder Seal Co., Intervenor-Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 514

721 F.2d 514

221 U.S.P.Q. 17

NORTH SHORE LABORATORIES CORP., Plaintiff-Appellant, v. Harris C. COHEN, Leonard Lyons, Richard Wolf, et al.,

Defendants-Appellees,

The Wonder Seal Co., Intervenor-Appellee.

No. 82-1519.

United States Court of Appeals, Fifth Circuit.

Dec. 22, 1983.

Russell & Nields, Robert B. Russell, Boston, Mass., Graves, Dougherty, Hearon, Moody & Garwood, R. James George, Jr., John J. McKetta, III, Austin, Tex., for plaintiff-appellant.

McGinnis, Lochridge & Kilgore, Patton G. Lochridge, Joe B. Dibrell, Jr., Austin, Tex., for Lucas and Wonder Seal.

Appeal from the United States District Court for the Western District of Texas.

Before INGRAHAM, WILLIAMS and HIGGINBOTHAM, Circuit Judges.

JERRE S. WILLIAMS, Circuit Judge.

North Shore Laboratories Corp. filed application in the district court, asking that defendant William G. Lucas be held in civil contempt for violating the terms of a consent judgment relating to marketing restrictions growing out of an unfair competition claim. The district court denied North Shore's application, concluding that the conduct complained of by North Shore was not proscribed by the consent judgment. We affirm.

Facts and Proceedings Below

Appellant North Shore Laboratories Corp. manufactures and markets a brown-colored string-type tire repair product under the trade name "Safety Seal." ¹ This product is wrapped in blue parchment paper and is shipped and sold in boxes bearing various slogans and illustrations.

North Shore discovered that a business enterprise, Liberty Rubber, headed by William Lucas, was manufacturing and marketing a brown-colored tire repair product under the trade name "Wonder Seal." Its product also was wrapped in blue parchment paper, and was shipped and sold in boxes bearing a strong resemblance to North Shore's Safety Seal product. In 1979, North Shore brought an action against Lucas and others ² under the Lanham Trade-Mark Act Sec. 43(a), 15 U.S.C. Sec. 1125(a), alleging three counts of false marketing, or "palming off," of a string-type tire repair. The complaint alleged the Wonder Seal product was presented to the public (1) "in a manner tending falsely to lead customers to mistake the product as [North Shore's];" (2) in violation of North Shore's "common law rights by copying [North Shore's] distinctive packaging;" and, (3) falsely representing the characteristics of the product, which, coupled with the alleged palming-off, injured North Shore. Prior to trial, the parties executed a settlement agreement which was incorporated into a consent judgment in March 1979. The judgment in its operative provisions read as follows:

ORDERED, ADJUDGED, and DECREED that Harris C. Cohen, Leonard Lyons, Richard Wolf, William G. Lucas, Randall L. Perry, Agenda Limited, Inc., Consolidated Automotive Manufacturing, Co., and Wonder Seal be and they are hereby restrained and enjoined from selling, manufacturing, accepting orders for, or selling the product attached as Exhibit A to this Judgment, which is the same product as is attached to the Original Complaint in this case as Exhibit 3, and they are further restrained and enjoined from manufacturing, accepting orders for, or selling any product that could reasonably be confused with the product attached as Exhibit B to this Judgment, which is the same product that is attached as Exhibit 9 to the Original Complaint in this case. The foregoing injunction shall not, however, prevent Harris C. Cohen, Richard Wolf, William G. Lucas, Leonard Lyons, Randall L. Perry, Agenda Limited, Inc., Consolidated Automotive Manufacturing Company or Wonder Seal from manufacturing, accepting orders for or selling individually wrapped string type automobile tire repair products of the same size and shape as Exhibit B attached hereto provided that such product or products are not brown, brownish, orange-brown or any other color that could reasonably be confused with said Exhibit B and provided that such product or products are not wrapped in blue, light-blue, greenish-blue or other colored material reasonably likely to be confused with the wrapping on Exhibit B.

It is further ORDERED, ADJUDGED and DECREED that Harris C. Cohen, Leonard Lyons, Richard Wolf, William G. Lucas, Randall L. Perry, Agenda Limited, Inc., Consolidated Automotive Manufacturing Co., and Wonder Seal be and they are hereby enjoined and restrained from manufacturing or using the box attached as Exhibit C to this Judgment, which is the same as the box attached as Exhibit 10 to the Original Complaint in this case, for any purpose, and they are further enjoined and restrained from manufacturing or using any box or package for any product which can reasonably be confused with the box that is attached to this Judgment as Exhibit D, which is the same box as Exhibit 2 attached to the Original Complaint in this case. On any package or box, Defendants shall avoid the type size and style which appears on Exhibit D hereto, pictures of Plaintiff's insertion tool, the words "Beware of imitations," the words appearing on the end of Exhibit D attached hereto, the phrase "The one repair that has done it all," the phrase "Manufactured by 'Wonder Seal', Lockhart, Texas, 78644," unless and until such an address is actually an address at which Defendants can be found, and avoid the wording that appears on the press-out thumb panel of Exhibit D attached hereto.

From March 1979, through the end of 1981, appellee Lucas and his company, Liberty Rubber, manufactured and sold only black-colored tire repairs. Lucas then developed a new formula for tire repairs that caused his product to be brown. In December 1981, Ernest Radbill purchased most of the assets of Liberty Rubber and retained Lucas as a consultant. As part of the agreement, Lucas made Radbill the exclusive licensee of the right to manufacture string-type tire repair products with Lucas' new formula, and Radbill agreed to buy all of the chemical products required for tire repair products exclusively from Lucas. Radbill's newly formed company, Motor Industries, now manufactures and sells the Lucas brown-colored tire repair product. ³ As the district court noted, this product is wrapped in white paper and sold in boxes that are easily distinguishable from North Shore's product. ⁴

After learning about this product, North Shore filed a motion for an order that Lucas show cause why he should not be held in contempt of the 1979 consent judgment because of his production and sale of the brown tire repair. The district court denied the motion, holding that the consent judgment did not contemplate that North Shore would have the sole right to use of the color brown for tire repairs and that North Shore, therefore, failed to meet its burden of providing clear and convincing evidence that Lucas was in violation of the 1979 injunction by his manufacture and sale of brown tire repairs. North Shore appeals from this final judgment.

Standard of Review

In reviewing the district court's interpretation of the language and terms of the March 1979 consent judgment, we initially note that we are not bound by the clearly erroneous standard of review of Federal Rule of Civil Procedure 52(a). As the Supreme Court has stated, "consent decrees and orders have many of the attributes of ordinary contracts, [therefore] they should be construed basically as contracts." United States v. ITT Continental Baking Co., 420 U.S. 223, 236, 95 S.Ct. 926, 934, 43 L.Ed.2d 148 (1975). We have held that "our review of [a] district court's interpretation of [a] consent decree's language is comparable to review of a district court's contract interpretation and is not restricted by the clearly erroneous rule of F.R.Civ.P. 52(a); the matter may rather be considered afresh by this Court as a matter of law." Eaton v. Courtaulds of North America, Inc., 578 F.2d 87, 90 (5th Cir.1978). See also, Paragon Resources v. National Fuel Gas Distribution Corp., 695 F.2d 991, 995 (5th Cir.1983); Kimbell Foods, Inc. v. Republic National Bank, 557 F.2d 491, 495 (5th Cir.1977), cert. denied, 436 U.S. 903, 98 S.Ct. 2230, 56 L.Ed.2d 400 (1978).

Ambiguity in Consent Judgment

Simply stated, North Shore contends that the consent judgment prohibits Lucas from manufacturing and marketing a brown string-type tire repair. Lucas, however, contends the judgment merely prohibits him from manufacturing and marketing a string-type tire repair that could reasonably be confused with North Shore's Safety Seal product. The parties' opposing constructions stem from the language in the first paragraph of the judgment as printed, supra. That paragraph permits Lucas to sell individually wrapped tire repairs of the same size and shape as North Shore's, "provided that such product or products are not brown, brownish, orange-brown or any other color that could reasonably be confused with [North Shore's product] and provided that such product or products are not wrapped in blue, light-blue, greenish blue or other colored material reasonably likely to be confused with the wrapping on [North Shore's product]." (Emphasis added).

North Shore argues that the quoted language prohibits Lucas from manufacturing and selling tire repairs which are either brown in color or wrapped in blue paper. In support of its position, North Shore points to the fact that two "provided that" clauses were used to introduce the two restrictions and thus interprets this as two independent restrictions, the violation of either of which will subject Lucas to contempt charges.

Lucas, on the other hand, contends that the sole purpose of the consent judgment was to prevent him from palming off his product as North Shore's by using the same color, wrapping, and packaging. Lucas emphasizes the fact that the conjunction "and" was used between the restrictions and argues that the two provisions must be read as prohibiting him from manufacturing a product which is both brown and wrapped in blue paper. As further support for...