Safeway Stores, Inc. v. Safeway Quality Foods, Inc.

• Decision Date: 21 October 1970
• Docket Number: No. 17579.,17579.
• Parties: SAFEWAY STORES, INCORPORATED, a corporation, Plaintiff-Counter-defendant-Appellant, v. SAFEWAY QUALITY FOODS, INC., a corporation; Safeway of Brownsburg, Inc., a corporation; Supermarket Developers, Inc., a corporation; Michael DeFabis, Jr.; Philip DeFabis; Julius DeFabis; Ernest DeFabis and Roy M. Vittorio, Defendants-Counterclaimants-Appellees.
• Court: U.S. Court of Appeals — Seventh Circuit

433 F.2d 99 (1970)

SAFEWAY STORES, INCORPORATED, a corporation, Plaintiff-Counter-defendant-Appellant, v. SAFEWAY QUALITY FOODS, INC., a corporation; Safeway of Brownsburg, Inc., a corporation; Supermarket Developers, Inc., a corporation; Michael DeFabis, Jr.; Philip DeFabis; Julius DeFabis; Ernest DeFabis and Roy M. Vittorio, Defendants-Counterclaimants-Appellees.

No. 17579.

United States Court of Appeals, Seventh Circuit.

June 9, 1970.

As Modified on Denial of Rehearing and Rehearing Denied October 21, 1970.

R. J. Lindquist, Jr., R. C. Stanton, Oakland, Cal., Harry T. Ice, James E. Hawes, Jr., Ice, Miller, Donadio & Ryan, Indianapolis, Ind., for appellant.

Thomas M. Scanlon, Patrick J. Fisher, Indianapolis, Ind., for appellees.

Before DUFFY, Senior Circuit Judge, and FAIRCHILD and CUMMINGS, Circuit Judges.

As Modified on Denial of Rehearing and Rehearing En Banc Denied October 21, 1970.

DUFFY, Senior Circuit Judge.

This suit is based on alleged trademark infringement and related unfair competition. Plaintiff seeks to enjoin defendants' use of the word "SAFEWAY" in connection with their operation of certain grocery stores in the Indianapolis, Indiana Metropolitan Area, and also to enjoin the use of "SAFEWAY" as a part of the corporate name and business name of the corporate defendants.

Paragraph I of the complaint claims plaintiff is entitled to relief under the Lanham Act, 15 U.S.C.A. § 1051 et seq.; Paragraph II charges unfair competition; Paragraph III charges the corporate defendants with adopting corporate names and business names confusingly similar to that of plaintiff and contrary to Burns' Ind.Stats. Sec. 25-203.

Defendants deny that plaintiff is entitled to any relief and also plead the affirmative defense of laches. Defendants also ask for concurrent registration of the service mark "SAFEWAY" on the principal register. The District Court found for the defendants.

The plaintiff is a Maryland corporation with principal office and place of business in Oakland, California. It was organized in 1926 and acquired a California corporation, Safeway Stores, Inc.

For the year ending December 31, 1963, plaintiff's gross sales were in excess of 2 billion 600 million dollars. At the end of that year, it had 1,827 stores in operation within the United States. However, with the exception of 219 stores in Maryland, Delaware, Virginia and the District of Columbia, it owned only three stores east of the Mississippi river, two in Pennsylvania and one in Mississippi. The District Court noted that plaintiff never had a store in Indiana or in any of the four states adjacent to Indiana. The trial court also found that plaintiff has no plans for opening a store in any location within the State of Indiana and "* * * there is no likelihood that it will do so."

Plaintiff has in excess of 58,000 stockholders but less than 600 of them were residents of Indiana. The District Court found "In the area in which plaintiff operates retail grocery stores, and with the persons and companies with which plaintiff does business, the name and mark of `SAFEWAY' signifies an organization with a good reputation."

It is admitted that the tradename and trademark "SAFEWAY" was not original with plaintiff. It appears to have been registered in the Patent Office by many corporations other than plaintiff.

The District Court also found "SAFEWAY" has acquired a secondary meaning in the areas where it operates its supermarkets as signifying the plaintiff, its goods and services. The trial court stated: "However, the term has no such secondary meaning in Indiana."

In 1943 or 1944, Michael DeFabis, Sr., an Italian immigrant, who had no knowledge of plaintiff's existence, opened a small grocery store in Indianapolis, Indiana. He had a sign painter paint "SAFE-WAY MARKET" on a window of the store. From that time on, the DeFabis family has operated several grocery stores in the Indianapolis Area under the name "SAFE-WAY" or "SAFE-WAY."

In 1947, DeFabis turned over the management of the original market to Philip DeFabis and opened a second store called "Safeway Market # 2" and this store has been operated by defendants continuously to date. On July 29, 1957, "Safeway Quality Foods, Inc." was organized. On June 4, 1962 "Safeway of Brownsburg, Inc." was organized and shortly thereafter opened the "Safeway Brownsburg" store. "Supermarket Developers, Inc." was organized October 4, 1962.

Plaintiff became aware of defendants' grocery stores and their use of "SAFE-WAY" in connection with their grocery business as early as 1947. From time to time, plaintiff supplemented its information as to defendants and their business activities. The plaintiff did not inform any of the defendants of the claims it now asserts in this suit, until shortly prior to November 6, 1963, when it made a written demand that defendants discontinue the use of "SAFE-WAY."

In this suit, plaintiff charged defendants with a conspiracy to exploit plaintiff's name and good will and sought injunctive relief based upon the Lanham Act, Common Law Unfair Competition and the Indiana corporation laws.

The District Court found that the trade area of defendants is and has been limited to the Indianapolis Metropolitan Area.¹

The trial court emphasized that the mark "SAFEWAY" has been used by Michael DeFabis, Sr. with whom all defendants are in privity, for many years before September 19, 1961 when plaintiff procured its Lanham Act Service mark registration No. 721,716. The Court also found the defendants were not chargeable with constructive notice of plaintiff's use of the mark and subsequent registrations thereof. Avon Shoe Co. v. David Crystal, 279 F.2d 607, 611 (2 Cir., 1960), cert.den. 364 U.S. 909, 81 S.Ct. 271, 5 L.Ed.2d 224 (1960).

The District Court also found that none of the defendants has conspired to trade upon plaintiff's registered marks, nor to appropriate the reputation, good will and value connected therewith. We agree!

The trial court also found that evidence clearly shows that defendants, at no time, attempted to palm off goods sold by them as being the goods of plaintiff. Also, that the plaintiff and defendants are not competitive in any market. These findings are clearly established by the evidence.

Plaintiff urges that this Court should not consider itself bound and restricted in any way by Rule 52(a) F.R. Civ.P. (the "clearly erroneous" rule) because the District Court did not prepare separate and detailed findings of fact and conclusions of law. There is no merit to this argument.

Both parties submitted to the trial court proposed findings of fact and conclusions of law. The District Court adopted very little from either proposal, but the Court did draft its own Memorandum Opinion, and therein stated: "* * * we now express our findings of fact and conclusions of law in the form of this memorandum opinion." Thereafter, follows numerous pages of detailed findings under the heading of "Facts." Then follows a heading "Conclusions of Law" containing the legal reasonings adopted by the Court. We hold this was a sufficient compliance within Rule 52(a) F.R.C.P. which appropriate portion, states: "If an opinion or memorandum of decision is filed, it will be sufficient if the findings of fact and conclusions of law appear therein."

Plaintiff now argues that there never has been any significant dispute as to material facts, but the three-day trial was not conducted on any such basis. To illustrate, plaintiff's complaint and amended complaint made serious charges against the DeFabis family, alleging that they had organized an unlawful conspiracy with others to exploit plaintiff's name, and that in order to carry out such conspiracy, they had organized "Supermarket Developers, Inc." in order to permit co-conspirators outside of the DeFabis family to make use of the SAFEWAY name. It also was alleged that the defendant corporations were the "* * * alter ego of the DeFabis defendants. * * *"

All such charges were denied by defendants, and plaintiff then subjected the DeFabis family to extensive discovery, including interrogatories, demands for admissions, and production of books and records. At the trial defendants produced twelve witnesses who were vigorously cross-examined. Thereafter, plaintiff attacked the credibility of defendants' witnesses who testified as to the good faith of the DeFabis family in operating grocery stores under the name of "SAFEWAY" continuously since 1943 and with no knowledge of the plaintiff or its trademark until 1952.

In view of the proof offered by a listing in a 1945 telephone directory, plaintiff did admit that the DeFabis family used the name "SAFEWAY" as early as the early months of 1945.

Plaintiff relies on Independent Nail & Packing Co., Inc. v. Stronghold Screw Products, Inc., 205 F.2d 921 (7 Cir., 1953), cert.den. 346 U.S. 886, 74 S.Ct. 138, 98 L.Ed. 391 (1953) as standing for the proposition that the innocent adoption by a junior user is no defense if the junior user has been guilty of progressive encroachment upon the rights of the senior user.

We hold that our decision in Independent Nail is not controlling here. In that case, the plaintiff and defendant were in competition with each other; both sold their products throughout the United States; both contacted the same...