Sanborn v. Palm

• Decision Date: 04 June 1971
• Docket Number: Civ. A. No. 70-L-47.
• Citation: 336 F. Supp. 222
• Parties: Dan SANBORN et al. v. R. H. PALM et al.
• Court: U.S. District Court — Southern District of Texas

336 F. Supp. 222

Dan SANBORN et al. v. R. H. PALM et al.

Civ. A. No. 70-L-47.

United States District Court, S. D. Texas, Laredo Division.

June 4, 1971.

Ewers, Toothaker, Ewers, Abbott, Evins & Talbot, O. C. Hamilton, Jr., McAllen, Tex., for plaintiffs.

Hall & Zaffirini, H. C. Hall, III, Laredo, Tex., and Mayfield, Broaddus & Perrenot, R. B. Perrenot, El Paso, Tex., for defendants.

CONNALLY, Chief Judge.

MEMORANDUM:

This action had its genesis in a three-pronged controversy between the parties for the alleged infringement of trademark and unfair competition in El Paso, Texas, in Laredo, Texas, and in the State of California. With jurisdiction vested under §§ 1121-1125 of Title 15 U.S.C.A., the plaintiffs sought injunctive relief and a declaratory judgment to establish the plaintiffs' right, exclusively as against the defendants, to the name "Sanborn" in the business of selling Mexico automobile insurance and travel service. An accounting, with money damages, also was sought.

Dan Sanborn, a resident of McAllen, Texas, and two corporations which he owns and controls, are the parties plaintiff. The defendants are a number of individuals, most of whom were formerly associated together in the Belk Insurance Agency. Throughout the trial all the defendants were known as the "Belk group" or "Belk interests". Recently R. H. Palm, one of such defendants, has succeeded to the interests of the others, and hence the defendants collectively will be referred to as "Palm" or as "Belk".

These issues encompassed in the main action were fully tried, to the Court without a jury, February 24-26, 1971. Thereafter the Court announced its findings to the effect that the defendants had deliberately undertaken to misappropriate the trade name, trademarks, and good will of the plaintiff Sanborn. Injunctive relief was granted restraining the defendants from further use of the name in connection with its El Paso operations. Action was withheld with respect to the defendants' operations in California, by reason of the fact that the plaintiff previously had initiated and brought to trial a state court action (also resulting in injunctive relief in his favor) against the defendants in a California court, which action was then on appeal. In deference to the state court's priority of jurisdiction, action was withheld. Action was likewise withheld with respect to the Laredo controversy as will appear hereafter.

Following the announcements of the findings and conclusions, the parties entered into settlement negotiations which culminated in an agreement under which the defendants abandoned further right to use the Sanborn name, trademarks, etc. in their El Paso operations and in the State of California. The plaintiff repurchased two insurance agencies in Laredo, Texas, including the use of his name in connection therewith. As result of this agreement, there presently remains for determination only a cross-action filed by the defendants. They allege that by reason of the terms of, and operation under, the two contracts of February 29, 1968, plaintiff committed a violation of the Sherman Act, 15 U.S. C.A. § 1, for which they seek to recover an exceedingly large amount as damages, attorneys' fees, etc.

To bring this controversy into proper context, the following statement of the background is required.

As every traveler by automobile to our sister republic to the south is aware —or learns at his peril—public liability insurance is a matter of necessity while traveling by automobile in Mexico. The rates are high by American standards, and are fixed by Mexican law. Such coverage usually is sold for the duration of a trip, frequently a matter of one to three weeks. In recent years it has become a flourishing business in the Amercan ports of entry and in the cities in proximity to the Mexican border.

The plaintiff Sanborn was referred to by one of the defendants in his testimony as the father of the Mexico insurance business. Whether this be entirely accurate, certainly he was one of the pioneers. In 1951 Sanborn established a local insurance agency for writing such insurance at McAllen, Texas, using the name "Sanborn's". The travel agency business—that is, the securing of reservations for travelers, dissemination of advice, the promotion of tours, etc.—was found to be closely connected with the sale of such insurance, and the plaintiff Sanborn conducted the two businesses jointly. Within a few years he established similar businesses in a number of other border towns. Sometime thereafter the two corporate plaintiffs were chartered under Texas law as will appear hereafter.

In its early days Sanborn was not particularly successful. As—in the eyes of the tourist—all Mexican insurance was the same, and the premiums therefor were identical, Sanborn undertook to devise a means of attracting the tourist to his place of business rather than that of his competitors. For this purpose he devised the Sanborn road log, and I find that this marked the beginning and was the primary cause of his ultimate success. This log was no mere road map such as is distributed to its customers by most major oil companies, nor was it simply an atlas such as is available through automobile associations, etc. For the preparation of his logs, Sanborn first cataloged all of the major highways— and later the byways as well—of Mexico. The trip between each city was described in meticulous detail on looseleaf sheets. Not only did the log indicate the route to be followed, the leading hotels, motels and restaurants, but gave a current mile by mile account of what the traveler should expect, such as highway construction, bad roads, sharp turns, etc. It was prepared in a humorous and appealing manner, and was safety oriented—not unusual in light of the fact that the issuer was in the insurance business. Thus when a traveler sought advice through the travel agency, and purchased his insurance through Sanborn's agency, he was provided free of charge with a tailor-made log of his trip from the various looseleaf sheets. These were attractively bound in a folder, with valuable tips for the traveler (such as what to do if subject to certain intestinal disorders which are not uncommon south of the border). Additionally, Sanborn advertised widely, both on a local and a national level, using certain distinctive pictures or insignia throughout. As result, he built up much good will and a valuable public image for "Sanborn's" travel agency and insurance service.

As his business expanded, Sanborn secured a general agency contract with Seguras la Commercial, one of a number of Mexican insurance companies. This contract was in essentially the form of general agency contracts in the insurance business in the United States. Under terms thereof, he was authorized to designate and appoint local agencies to issue policies of insurance. As general agent he furnished such local agencies with the printed policy forms, which they were authorized to validate and sell to the traveling public. He guaranteed to the insurance company the accounts of all of his local agents. He kept the accounts between the local agents and his general agency, and between the general agency and the company. He was authorized to adjust and settle claims on behalf of and in the name of the company. While serving as general agent, Sanborn continued to own a number of the local agencies, and likewise designated others as local agents. His agreement with such local agents was oral (at least until the trial of this action) and was simply to this effect. The local agents were authorized to use the name "Sanborn" and thus to assure themselves of the benefits of the good will and the advertising which the name provided. They were provided the Sanborn road logs free of charge. They received their blank policies which they sold to the public, placing this coverage, of course, with Sanborn as general agent. The commission (as fixed by law at all times relevant hereto, though recently changed) was 40% of the premium collected, with 25% going to the local agent selling the insurance, and the remaining 15% retained by the general agent for his services.

This chain of agencies afforded its customers a further advantage in addition to the road logs, advice, etc. This had to do with the refund of unearned insurance premiums. If, for example, a traveler entered the Republic of Mexico through the port of Brownsville, Texas, and purchased insurance for three weeks, he might return through the port of Laredo, Texas, at the end of two weeks and thus be entitled to a refund of one week's unearned premium. In this event he was able to stop at the Sanborn office in Laredo and secure a cash refund. Obviously, if the agency through which he purchased originally maintained an office only in Brownsville, to secure a refund he likely would be subjected to trouble and delay.

By reason of the foregoing, prior to the time this controversy arose Sanborn and his two corporations had achieved a well recognized and highly respected place in the business of the sale of Mexico insurance and the related travel agency business. Sanborn agencies were in operation at the major ports along the Mexican border. The Sanborn logs, the pictures and other "sales gimmicks" which he employed had found great favor. He enjoyed a large repeat-business, and his satisfied customers passed the word to their friends. This situation continued until about mid-1968, by which time I am convinced that the Belk interests had determined to acquire the Sanborn name, good will, and public image by fair means if possible, and, if not, by foul.

In 1961 Sanborn appointed one A. M. Krohn as a local agent in El Paso, Texas, under an oral arrangement as described above. In October, 1967, Krohn sold the El Paso agency to the Belk interests, at that time an insurance agency in El Paso completely apart from and unconnected with Sanborn. This was with Sanborn's knowledge and consent, and...