Rainbow Ranch Corp. v. Rainbow Shops, Inc.

Citation89 Misc.2d 808,392 N.Y.S.2d 796
Parties, 198 U.S.P.Q. 107 RAINBOW RANCH CORP. and its subsidiary Rainbow Ranch East, Plaintiffs, v. RAINBOW SHOPS, INC., Defendant. RAINBOW SHOPS, INC., Third-Party Plaintiff, v. Leo LENTIN, Third-Party Defendant.
Decision Date16 February 1977
CourtUnited States State Supreme Court (New York)

Burtson & Simon, Centereach, for plaintiff.

Lawrence I. Wolfson, Hicksville, for third-party defendant.

Irving Coopersmith, New York City, for defendant and third-party plaintiff.

ALEXANDER BERMAN, Justice.

In this action for a declaratory judgment, plaintiff and the defendant move for summary judgment. Additionally, defendant seeks similar relief against the third party defendant, Leo Lentin.

Plaintiff owns two retail stores selling ladies' wearing apparel and accessories. It acquired its first store in 1956 from the third party defendant, Leo Lentin, who then owned that store located in Middle Island, Suffolk County, and operated it under the name of Rainbow Ranch. As part of that transaction, plaintiff was given the right to use the name Rainbow Ranch. Subsequently, in 1974, plaintiff opened a second store in Southampton, Suffolk County, under the name Rainbow Ranch East. It is the latter store which is the focus of this litigation, for when defendant, Rainbow Shops, Inc. learned of the existence of the Southampton store, it initiated correspondence with plaintiff seeking to dissuade it from continuing to use the name 'Rainbow' in its title. The latter efforts having proved unsuccessful, this litigation followed.

Defendant owns and operates 37 retail ladies' apparel and specialty shops, most of which are located in the metropolitan area of New York City and Nassau County, including seven in various parts of Suffolk County. It, and its predecessor have been in business since 1921 and have operated these stores under the name of Rainbow Shops. Defendant caused the name 'Rainbow Shops' to be registered in the U.S. Patent Office on September 16, 1947 and secured a renewal thereof on January 18, 1972 which extended the registration to 1994. During the year 1976, it spent more than $167,000 in advertising its stores and of this sum, more than $38,000 related specifically to its seven stores in Suffolk County. Over the many years it has become well known in the trade in the areas which it serves. Plaintiff's president, in an examination before trial, acknowledged that he was well aware of the existence of the defendant's chain of stores, but denies that he knew of an injunction which had been obtained by defendant in 1951 against plaintiff's predecessor, Lentin. This injunction decree, dated March 12, 1951, came about as a result of Lentin's use of the name 'The Rainbow' in his store at Middle Island. This injunction order, which was made on consent, directed Lentin to discontinue the use of the name 'The Rainbow' but permitted him to use the name Rainbow Ranch 'limited to the locality at which the defendant is presently located, Middle Island, Long Island, and that no further right to the use by the defendant, or anyone else, of the name Rainbow Ranch in any other locality is hereby given . . .'

Lentin, who has been brought into this action by defendant, admits that the injunction was obtained against him, but claims that he had forgotten about it, and that he had never informed plaintiff thereof, at the time of the sale of the business. He thus confirms the contention of plaintiff that it first became aware of the injunction when a copy thereof was sent to it by defendant's counsel.

The substance of plaintiff's claim to continue the use of the name Rainbow Ranch East is that defendant's stores and plaintiff's stores are dissimilar in appearance either in 'signs or type of store'; that defendant's nearest store is 50 miles from its store in Southampton; and that there is 'no confusion among the public concerning the name Rainbow Ranch East and Rainbow Shops.' It further contends that it should not be bound by the injunction order since it was unaware of it in the first place, and was not a party to the proceeding in which it was issued. It makes a final claim that defendant is guilty of laches in not having acted promptly to enforce its rights.

Aside from the legal issue as to whether plaintiff is bound by the terms of the injunction and whether there is likely to be confusion in the public mind as to the identity of plaintiff and the extent to which plaintiff may be usurping the name and good will of defendant, the essential facts related herein are not in dispute. Furthermore, pictures presented by plaintiff of its store front and sign and one of defendant's stores and sign do not demonstrate, as claimed by plaintiff, any substantial difference in appearance. They are both conventional retail stores with store front windows displaying dresses and other ladies' garments. It should also be noted that no challenge is made to the right of defendant to the name Rainbow Shops and its trade mark.

Addressing the question of whether plaintiff is in any way bound by the injunction, it is the determination of this Court that, while it may not be punished for violating the decree, once plaintiff became aware of its existence, it was bound to give effect to it as a lawful mandate of the Court.

'A person may be bound by the terms of an injunction even though not a party to the action in which it was granted if he has notice or knowledge of the order and is within the class of persons whose conduct it is intended to be restrained . . . Union Tool Co. v. Wilson, 259 U.S. 107, 42 S.Ct. 427, 66 L.Ed. 848 . . .' Fordham University v. King, 63 Misc.2d 611, 612, 313 N.Y.S.2d 208, 210.

In a later case (People v. Poray, infra) this doctrine was extended to cover employees of the company against whom the injunction was issued.

'The defendant is cautioned that an injunction order is binding even upon persons who were not parties to the action if they have knowledge of the order and are either employees, or agents of the defendant, or act in collusion or combination with him.' (People v. Poray, 67 Misc.2d 591, 592, 324 N.Y.S.2d 709, 711).

It seems logical that if employees are bound by an injunction obtained against their employer, where they were aware of its existence, then certainly an assignee or purchaser of the business of the employer would be bound thereby.

Aside from technicalities as to the extent to which the injunction may apply, it nevertheless constituted a restriction upon the rights of plaintiff when the latter purchased the business from Lentin. It is an elementary proposition of law that an assignee or purchaser can acquire only the rights which the assignor or seller possessed and that such rights are subject to any existing infirmities or restrictions.

'It is elementary ancient law that an assignee never stands in any better position than his assignor. He is subject to all the equities and burdens which attach to the property assigned because he receives no more and can do no more than his assignor.' Int. Ribbon Mills, Ltd. v. Arjan Ribbons, Inc., 36 N.Y.2d 121, 365...

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    • June 5, 1980
    ...70 (Sup.Ct.1970), and the New York trademark and anti-dilution statutes, see Polaroid, supra; Rainbow Ranch Corp. v. Rainbow Shops, Inc., 89 Misc.2d 808, 392 N.Y.S.2d 796 (Sup.Ct.1977) (rejecting defense on facts); Cue Publications Co. v. Colgate-Palmolive Co., 23 A.D.2d 829, 259 N.Y.S.2d 3......
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    ...rights, and Wilkins, as assignee of Abensohn, did not succeed to anything beyond that. See Rainbow Ranch Corp. v. Rainbow Shops Inc., 89 Misc.2d 808, 392 N.Y.S.2d 796 (N.Y.Sup.Ct.1977) (assignee never stands in any better position than his As concerns the trademark rights, the plaintiffs de......
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    ...in the public mind and will undoubtedly dilute the value of the Bull's-Eye name and trade mark." Rainbow Ranch Corp. v. Rainbow Shops, Inc., 89 Misc.2d 808, 392 N.Y.S.2d 796, 799 (Sup.Ct.1977). The preceding discussion concerning Kraft's likelihood of success on its trademark infringement c......
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    ... ... exclusive right to use). See also Rainbow Ranch Corp. v ... Rainbow Shops, Inc ., 89 Misc.2d ... ...
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