Stephen W. Boney, Inc. v. Boney Services, Inc.

• Decision Date: 04 June 1997
• Docket Number: 96-55576,Nos. 96-55469,s. 96-55469
• Citation: 127 F.3d 821
• Parties: , 97 Cal. Daily Op. Serv. 7729, 97 Daily Journal D.A.R. 12,439 STEPHEN W. BONEY, INC., Plaintiff-Appellee, v. BONEY SERVICES, INC., Defendant-Appellant. STEPHEN W. BONEY, INC., Plaintiff-Appellant, v. BONEY SERVICES, INC., Defendant-Appellee. . Argued; Submission Deferred
• Court: U.S. Court of Appeals — Ninth Circuit

Page 821

127 F.3d 821

44 U.S.P.Q.2d 1225, 97 Cal. Daily Op. Serv. 7729,

97 Daily Journal D.A.R. 12,439

STEPHEN W. BONEY, INC., Plaintiff-Appellee, v. BONEY SERVICES, INC., Defendant-Appellant.

STEPHEN W. BONEY, INC., Plaintiff-Appellant, v. BONEY SERVICES, INC., Defendant-Appellee.

Nos. 96-55469, 96-55576.

United States Court of Appeals Ninth Circuit.

Argued; Submission Deferred June 4, 1997.

Resubmitted Sept. 23, 1997.

Decided Sept. 30, 1997.

Janice P. Brown and J. Scott Scheper, Seltzer, Caplan, Wilkins & McMahon, San Diego, California, for defendant-appellant-cross-appellee.

Henry G. Kohlmann, Arter & Hadden, Irvine, California, for plaintiff-appellee-cross-appellant.

Appeals from the United States District Court for the Southern District of California; William B. Enright, District Judge, Presiding. D.C. No. CV-95-00491-WBE.

Before: BROWNING, FLETCHER and KOZINSKI, Circuit Judges.

FLETCHER, Circuit Judge:

This case pits brother against brother in a battle for the family name. Tragically, we must resolve this family feud, though we suspect there is no real winner.

Steve Boney, through his corporate alter-ego Stephen W. Boney, Inc. ("SWB"), sued his brothers Stan and Scott Boney, through their corporate alter-ego Boney Services, Inc. ("BSI"), for trademark, trade name, and trade dress infringement. The district court granted summary judgment to BSI, finding that Stan and Scott had continuously used and controlled the name "Boney's Marketplace" since 1983 and therefore had priority over Steve's (or SWB's) use of the name. The district court subsequently denied BSI's motion for attorney's fees under the Lanham Act and SWB's motion for reconsideration under Fed.R.Civ.P. 59. BSI appeals the denial of attorney's fees; SWB cross-appeals the summary judgment entered against him. We have jurisdiction under 28 U.S.C. § 1291, and we affirm in part and reverse in part.

I. FACTS

The Boney family has owned and operated grocery stores in Southern California for decades. Henry Boney opened his first fruit stand in the 1940s, and his sons Stan, Scott, and Steve have carried on the tradition. In 1980, Stan and Scott created a corporation named Boney & Boney, Inc., to operate a market in El Cajon, California, under the name "Windmill Farms." They also created a partnership to operate a Windmill Farms market in Vista, California. Stan and Scott later created Boney & Boney/Vista, Inc., and transferred to it the partnership's interest in the Vista market. In 1982, Stan and Scott bought a market in Spring Valley, which they held through Boney & Boney, Inc., and operated as a "Windmill Farms" market.

In 1983, Stan and Scott decided to leave the Windmill Farms organization in order to have more quality and advertising control. They renamed their three Windmill Farms markets as Boney's Marketplace. Mike Darr (the Boneys' brother-in-law) and Farm Yard, Ltd., also renamed Windmill Farms markets they owned as Boney's Marketplace. Stan and Scott entered into a written "cooperative advertising/operating agreement" authorizing Darr and Farm Yard to use the trade name Boney's Marketplace and stating that Boney & Boney, Inc., owned all rights to the trade name. Stan and Scott continued to operate their three markets, maintaining the stores' existing appearance, and to market foodstuffs and vitamins under the Boney's Marketplace private label.

On July 1, 1988, Stan and Scott restructured their corporate entities. Boney & Boney, Inc., sold the right to the trade name Boney's Marketplace, including existing licensing agreements regarding that name, to a limited partnership called Boney's Services, Ltd. Boney's Services, Ltd., then entered into licensing agreements with Mike Darr (president of the El Cajon store) and Norman Frazier (president of the Vista store), granting them non-exclusive licenses to use the trade name Boney's Marketplace.

In 1985, Steve Boney opened a market in Pacific Beach, and another, in Escondido, in 1986. Steve operated both of these markets under the name Boney's Marketplace. In October 1986, Steve incorporated the Escondido store as Stephen W. Boney, Inc.

In October 1985, Stan and Scott (as Boney & Boney, Inc., and Boney & Boney/Vista, Inc.), Mike Darr, and Steve entered into a cooperative advertising agreement. This agreement contained the following provision:

All rights to use of the "Tradename" [Boney's Marketplace] shall remain with Boney [Stan and Scott's corporations], except that, Steve and Darr shall also have the right to use of the "Tradename" at locations that do not compete with any current or future locations of the Parties.... The right to the "Tradename" shall expire three calendar months after any of the parties sell their store(s) and/or stop contributing to the weekly advertising budget.

Stan and Scott also retained the right to terminate any store's right to use the trade name in response to delinquency or default in contributing to the advertising budget.

In September 1986, Steve sold the Pacific Beach store. In 1989, Steve opened a store in Denver, Colorado, to which he shipped goods bearing the Boney's Marketplace trademark. He subsequently sold the Denver store. Steve has continuously owned and operated the Escondido store since 1986. He sells goods at that store bearing the Boney's Marketplace trademark, including specialty breads baked from trade secret recipes.

Events that transpired between 1989 and 1994 are somewhat unclear. Immediately before and immediately after Stan and Scott's 1988 corporate restructuring, four Boney's Marketplace stores were associated with Stan and Scott and used the trade name with Stan and Scott's permission. Steve owned and operated the Escondido store. Boney's Services, Ltd., merged with BSI. Steve, through SWB, opened two new stores in the San Diego area. Stan and Scott and their associates opened several new stores. Relations between Steve and his brothers deteriorated; their conflict focused on their respective rights to the Boney's Marketplace name.

II. PROCEDURAL HISTORY

In March 1994, SWB's attorney wrote to BSI's attorney, expressing the position that the 1985 cooperative advertising agreement was not a true trademark license agreement, that Stan and Scott never had the "exclusive" right to the Boney's Marketplace name or mark, and that Steve had established common law trade name and trademark rights within his business area. Steve also submitted a trademark registration application to the United States Patent and Trademark Office.

On April 14, 1995, SWB filed a complaint in the district court against BSI. The complaint alleged seven causes of action for violations of the Lanham Act, 15 U.S.C. §§ 1116, 1117, 1120, and 1125(a), and of California unfair competition law. Cal. Bus. & Prof.Code §§ 14330, 17203; Cal. Civ.Code §§ 3426.2-3426.4. ¹

BSI moved to dismiss the complaint or alternatively for summary judgment in their favor. SWB filed a motion under Fed.R.Civ.P. 56(f) to stay consideration of the summary judgment motion pending additional discovery. After a hearing on these motions, the district court granted summary judgment to BSI.

The district court found that BSI was the successor to Boney & Boney, Inc., and that its use of the trade name dated to 1983, prior to Steve's first use in 1985. The district court further found that Boney & Boney, Inc., had not abandoned the mark or granted a "naked license" to BSI. Accordingly, the district court concluded that Stan and Scott had superior rights to the Boney's Marketplace name and mark. The district court also found that BSI's use of the trade dress predated SWB's use. The court dismissed the false affidavit claim for lack of standing, since SWB failed to show it had been damaged by any alleged misstatements. The court declined to exercise supplemental jurisdiction over SWB's state-law claims and dismissed them without prejudice. The court also declined to allow additional discovery, finding that SWB had failed to make the requisite showing of known material facts and that further discovery would not affect the outcome.

SWB moved for reconsideration under Fed.R.Civ.P. 59(a). BSI filed a motion for attorney's fees under Section 35(a) of the Lanham Act, 15 U.S.C. § 1117(a). The district court denied both motions. This appeal and cross-appeal followed.

III. BSI'S ATTORNEYS FEES APPEAL

A. STANDARD OF REVIEW

We have not previously articulated the standard of review for awards or denials of attorney's fees under the Lanham Act. In Magnuson v. Video Yesteryear, 85 F.3d 1424, 1427 (9th Cir.1996), and Transgo, Inc. v. Ajac Transmission Parts Corp., 768 F.2d 1001, 1027 (9th Cir.1985), we reviewed awards of attorney's fees under the Copyright Act under an abuse of discretion standard. Abuse of discretion also is the standard of review for attorney's fees decisions under other provisions. See Nelson v. Pima Community College, 83 F.3d 1075, 1080 (9th Cir.1996) (standard of review for general attorney's fees award); United States v. 87 Skyline Terrace, 26 F.3d 923, 927 (9th Cir.1994) (standard of review for attorney's fees decisions under Equal Access to Justice Act).

Under the Lanham Act, an award of attorney's fees is within the district court's discretion. 15 U.S.C. § 1117(a) ("The court in exceptional cases may award reasonable attorney fees to the prevailing party.") (emphasis added). We therefore conclude that the district court's denial of a motion for attorney's fees under the Lanham Act should be reviewed for an abuse of discretion. See Burger King Corp. v. Pilgrim's Pride Corp., 15 F.3d 166 (11th Cir.1994) (trial court has discretion to grant or deny attorney's fees under Lanham Act). However, we review de novo the district court's legal analysis and interpretation of the Lanham Act, and whether the district court applied the correct legal standard. See Schwarz v. Secretary of Health & Human Servs., 73 F.3d 895, 900 (9th Cir.1995).

B. ATTORNEYS FEES UNDER THE LANHAM ACT

BSI...