Santa's Workshop, Inc. v. Sterling

• Decision Date: 25 July 1956
• Citation: 2 A.D.2d 262,153 N.Y.S.2d 839
• Court: New York Supreme Court — Appellate Division
• Parties: , 111 U.S.P.Q. 120 SANTA'S WORKSHOP, Inc., North Pole, N. Y., Plaintiff-Respondent-Appellant, v. Joseph STERLING, doing business as Sterling Alaska Fur & Game Farms Lake Placid, N. Y., Defendant-Appellant-Respondent.

Page 839

153 N.Y.S.2d 839

2 A.D.2d 262, 111 U.S.P.Q. 120

SANTA'S WORKSHOP, Inc., North Pole, N. Y. Plaintiff-Respondent-Appellant, v. Joseph STERLING, doing business as Sterling Alaska Fur &amp Game Farms Lake Placid, N. Y. Defendant-Appellant-Respondent.

Supreme Court, Appellate Division, Third Department.

July 25, 1956.

Hancock, Dorr, Ryan & Shove, Syracuse, and Charles Gold, New York City, for defendant-appellant-respondent (Lewis C. Ryan, Syracuse, on the argument; Benjamin Shove, Syracuse, and Mortimer J. Metchik, New York City, on the brief).

Bliss & Bouck, Schoharie, for plaintiff-respondent-appellant (F. Walter Bliss, Schoharie, on the argument; Warner M. Bouck, Schoharie, and Harold R. Soden, Lake Placid, on the brief).

Before BERGAN, COON, HALPERN, ZELLER and GIBSON, JJ.

BERGAN, Justice.

Plaintiff since July, 1949 has maintained a public entertainment and sales facility on Whiteface Mountain known as 'Santa's Workshop'. Its location is called by plaintiff 'North Pole' and a post office has been established using that name.

The facility consists of a group of specially designed buildings, painted in brilliant colors and with high-gabled roofs, centering around Santa, his home, his workshop, St. Nick's chapel, and his 'friendly animals'. The enterprise was very extensively advertised beginning in 1949; it obtained additional broad publicity in many media, and from the outset was highly successful.

The defendant for many years had operated fur farms in the Adirondack region. The animals were placed on public display and were advertised from time to time as 'Nature's Magnificent Killers'. He has two places of business, one at Ausable Chasm on Route 9 which travelers coming from the north would usually pass in going to plaintiff's facility; and one at Lake Placid on Route 86, which would be passed by travelers coming from the west to Whiteface Mountain.

There was nothing in the business enterprise of the defendant as he conducted it until 1950 which would have any rational association with Santa or St. Nick. He had no Santa on the premises and it may not easily be seen what place such a symbol would occupy in his game animal exhibit. But immediately after the successful inception of plaintiff's business in 1949, defendant changed his advertising. In 1950 he advertised in the Adirondack Guide that he had 'Santa's Friendly Animals'.

He did not continue this term after that year, but thereafter used 'St. Nick's Animals'. Over the entranceways of defendant's two establishments are large cutouts of Santa Claus and a white deer; and in the Ausable Chasm establishment there is a large billboard of Santa Claus seated in a sleigh with the legend 'Here are 500 St. Nick's Game and Fur Animals'.

It should be noted, also, that after 1950 when defendant adopted the Santa Claus advertising appeal, the customers who were induced thereby to patronize the defendant found no one impersonating Santa Claus or St. Nick on the defendant's grounds after they had paid their admission fees.

The cutouts used by defendant bear marked resemblance to plaintiff's Santa advertising and there are numerous advertising practices of defendant demonstrated in the record which seem grafted on plaintiff's usages and business promotion.

This action by plaintiff is for an injunction and other relief. The Official Referee has found that the acts of the defendant constitute unfair business competition and has granted an injunction. The unfair competition pursued by defendant has been adequately demonstrated.

No one owns Santa Claus. The legend and the symbol have a solid place in the public domain. But where one business man has developed a special use of a word or symbol that has been open to anyone to use, a competitor may not unfairly appropriate the same concept to sow confusion from which he reaps a profit.

The use of the term 'St. Nick', and the portrayals of Santa Claus in connection with defendant's business, seem to have the singleminded design, aided by confusion and implicit misrepresentation, of attracting patrons seeking plaintiff's facility to come to the business establishment of the defendant; and this is an unfair competitive practice. Playland Holding Corp. v. Playland Center, 1 N.Y.2d 300, 152 N.Y.S.2d 462; Wholesale Service Supply Corp. v. Wholesale Bldg. Materials Corp., 304 N.Y. 854, 109 N.E.2d 718; Ass'n of Contracting Plumbers of City of New York v. Contracting Plumbers Ass'n of Brooklyn & Queens, 302 N.Y. 495, 99 N.E.2d 542; Warren, Inc., v. Turner's Gowns, 285 N.Y. 62, 32 N.E.2d 793; Westcott Chuck Co. v. Oneida Nat. Chuck Co., 199 N.Y. 247, 92 N.E. 639. The injunction was warranted.

Besides the injunction, the judgment awards $125,000 in damages to the plaintiff. The view of the Official Referee stated in his opinion was that although damages disclosed in this record cannot be determined with mathematical certainty, the sum allowed was sufficient to compensate plaintiff 'for the losses sustained' from defendant's practices.

One finding which implements the decision is that defendant's increased profits from 1950 to 1954 were at least $145,000 and that 'Not all, but a substantial portion of such increased profits' resulted from defendant's unfair practices and that at least $125,000 'of such increased profits' resulted from the practices complained of. There is another finding in immediate context that plaintiff suffered 'lost profits', which as a proposed finding, is marked 'Found except as to the amount of damages which I find to be $125,000.'

Since the judgment allowed $125,000 in all as damages it seems fair to read the findings as not intending to allow each measure separately, one based on plaintiff's loss of profits and the other based on defendant's increased profits; and for the purpose of review we will treat them as having been made in the alternative.

The plaintiff's business did not decrease, but rather increased steadily and consistently during the period of defendant's unfair competitive practices. Plaintiff did a gross business, including receipts from admissions, sales of toys and souvenirs and miscellaneous receipts, in 1950 of $417,006.21; in 1951, of $477,712.17; in 1952 of $542,327.21; in 1953 of $653,828.36; and in 1954 of $688,856.84.

The net profit realized by plaintiff on this very substantial gross business was a relatively small amount and showed marked fluctuations. In 1954, for example, on almost $690,000 gross business, the net profit was $23,734.07, a little more than 3%. The year before, in 1953, on over $650,000 the net profit was $80,124.65 or over 12%; in 1951 on $477,000 it was $49,074.25, or about 10%.

Receipts for admissions to plaintiff's project remained fairly stable from 1950 to 1954 with a gradual upward curve, from $178,557 in 1950 to $249,121 in 1954. Defendant's receipts for admissions were as follows: 1949, $22,921; 1950, $32,761; 1951, $52,874; 1952, $57,459; 1953, $48,899; 1954, $57,104. These receipts suggest the relative sizes of the two business operations.

The plaintiff's proof of damage is based on the theory that the year 1949, which was immediately before defendant began his unfair advertising practice, ought to be accepted as the level at which defendant's business would have continued had the unfair competitive practice not been engaged in; and that all the admissions from 1950 to 1954 inclusive, above the $22,921 in 1949, are to be attributed to customers of plaintiff, lured away by defendant's advertising practices. Thus in 1950, plaintiff claims $9,839 was thus diverted by defendant; in 1951, $29,952; in 1952, $34,537; in 1953, $25,977; and in 1954, $34,182.

These figures roughly average about 10% of the admissions of the plaintiff during this period. But from the loss of this relatively small part of its business, plaintiff claims that it lost an amount equivalent to nearly 100% of its profit during five years. To the actual five-year profit of $276,147.89, it claims the customers taken by defendant would have added $224,176 to plaintiff's profits if they had come into plaintiff's project.

This claim is based on the theory that for each dollar of admissions, the average customer would spend a certain average amount for purchases and other items in plaintiff's project; and that since certain expenses, such as overhead and administrative salaries would remain constant, the profit on these relatively few additional customers proportionately would be very large.

The actual course of business operations of plaintiff, however, does not suggest that the loss of the number of customers claimed to have been lured away by defendant would have had such an important effect on plaintiff's net profit.

On the contrary, sometimes an increase in admissions showed a lower net profit. For example, plaintiff's records show $4,522 more in admissions in 1951 than in 1950 ($183,079 against $178,557). Instead of showing the kind of increased net profit which the theoretical projections by the accountant suggest, the net profit of the plaintiff actually went down from $59,094.26 in 1950 to $49,074.25 in 1951. Again, plaintiff had an increase in admissions from $230,049 in 1953 to $249,121 in 1954; but a decline in net profit from $80,124.65 in 1953 to $23,734.07 in 1954.

There were, of course, other factors entering into the changes from year to year in plaintiff's profits which are explainable on the basis of specific calculations and for specific reasons; but these changes do cast doubt on the validity of the accounting theory of 'projection' which seeks to establish that a relatively shall number of increased admissions in each of the five years involved would necessarily bring in proportionately very much larger dollar profits than shown from the customers who actually did come to plaintiff's establishment.

If all the defendant's increased admissions as shown by plaintiff's proof be attributed to the unfair advertising practices from 1950 to...