Tanner Motor Livery, Ltd. v. Avis, Inc.

• Decision Date: 22 April 1963
• Docket Number: No. 18357.,18357.
• Citation: 316 F.2d 804
• Parties: TANNER MOTOR LIVERY, LTD., a corporation, also known as Tanner Motor Livery, Appellant, v. AVIS, INC., a corporation and Avis Rent-A-Car System, Inc., a corporation, Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

316 F.2d 804 (1963)

TANNER MOTOR LIVERY, LTD., a corporation, also known as Tanner Motor Livery, Appellant, v. AVIS, INC., a corporation and Avis Rent-A-Car System, Inc., a corporation, Appellee.

No. 18357.

United States Court of Appeals Ninth Circuit.

April 22, 1963.

COPYRIGHT MATERIAL OMITTED

Tudor Gairdner, Jack E. Hildreth and William F. Peters, Los Angeles, Cal., for appellant.

Adams, Duque & Hazeltine, James S. Cline and Alan Wayte, Los Angeles, Cal., for appellee.

Before HAMLEY, BROWNING and DUNIWAY, Circuit Judges.

DUNIWAY, Circuit Judge.

Tanner Motor Livery, Ltd., (Tanner) appeals from an order which (1) dissolves a preliminary injunction previously issued at its request and against Avis, Inc. (Avis) and Avis Rent-A-Car System, Inc. (System) and (2) grants, at their request, a preliminary injunction against Tanner. Federal jurisdiction is predicated upon diversity of citizenship.

Certain facts are not disputed. System is a subsidiary of Avis. Avis owns certain registered trademarks: "Avis Rent-A-Car System," and "Avis." Since 1947, Tanner has been a licensee of Avis in southern California. In 1956, and since, it has been so licensed as an exclusive licensee, by separate agreements, to operate rent-a-car and rent-a-truck businesses, using Avis' marks, in twelve cities in southern California and in Las Vegas, Nevada. Thereafter, it became similarly licensed in 1960 and 1961 in six additional southern California areas. Avis claims that, pursuant to power to do so, reserved in the agreements, it terminated Tanner's rights under each of the agreements, for cause. The validity of this termination is vigorously contested by Tanner. The termination was announced in a letter dated May 31, 1962, which states: "The termination is based on your failure to pay fees under the Exclusive License Agreement referred to." The letter cites paragraphs 3.1, 3.11 and 4.1 of the agreement. Paragraph 3.1 requires that Tanner report to Avis, by the 20th of each month, "the sum of all total time and mileage charges less all customer discounts * * * during the preceding month." Paragraph 3.11 requires that it pay certain fees monthly. Avis relied upon a further provision (paragraph 9 of the contracts), that "Except in the case of failure to pay fees required * * * or to make true reports under Section 3.1," Tanner could cure violations during 30 days following receipt of intention to terminate. Tanner claimed that it was not in default, and that its breaches, if any, were waived. Following some negotiations, Avis extended the time of termination from July 31, 1962, to August 15, 1962. This involved no waiver by either party of its rights, if any.

Beginning August 16, Avis, through its subsidiary, System, started to operate an "Avis" rent-a-car business in parts of Tanner's territory, or, as Avis claims, former territory. At the same time, Tanner continued to operate as before, using the Avis name. It is unquestioned that the southern California territory is a very valuable one, and that the exclusive right to operate in that territory as an Avis licensee is also very valuable. Important, if not essential, to the conduct of the business are such matters as listings in telephone and other directories, space in airport terminals and other locations, advertising, and the other familiar paraphernalia of such a business. Avis notified the telephone companies and various others in the area that Tanner was no longer authorized to use its name, and sought to have System listed as the "Avis" operator. It was endeavoring to obtain space for System at the Los Angeles International Airport. It shifted certain automobiles to the southern California area, and placed orders for the purchase of others. In short, Tanner was trying to continue to operate as an Avis licensee, and Avis was trying to prevent its doing so and to get its subsidiary, System, established in the business in Tanner's place. This was the state of affairs when this action was filed.

On October 4, 1962, Avis and System filed their complaint. It alleges many of the foregoing facts, and asks for a permanent injunction, preventing Tanner from using the Avis names or marks, requiring return to Avis of all of its forms and advertising matter in Tanner's possession, and requiring Tanner to notify the post office, Western Union, the telephone companies, etc., that all "Avis" messages must go to System or other Avis licensees. There was also a request for a preliminary injunction, but no steps were taken to obtain one. The district court for the Southern District of California, Central Division, does not use the master calendar system, and the case was assigned, when filed, to Judge Thurmond Clarke.

On October 29, 20 days after service of summons upon it, Tanner filed its answer. It also filed a counter-claim, in which it alleged that the licensing agreements were in effect, that it had the exclusive right to use the Avis marks in the territories involved, that it had built up a very valuable business as an Avis licensee, and that Avis and System were endeavoring, without justification, to destroy it. It sought damages, declaratory relief, moneys allegedly collected for it by Avis from customers and not paid over, and a preliminary and permanent injunction restraining Avis and System from competing with it and from advising others that they, rather than Tanner, are the only authorized Avis operators in the territory.

At the same time, Tanner filed a notice of motion and motion for a temporary restraining order and for a preliminary injunction, which latter was set for hearing on November 9, 1962, ten days later, in compliance with local rules. (Rule 3 (b)). Affidavits and points and authorities were filed in support of the motions. Judge Clarke was away on an extended vacation, and Chief Judge Peirson M. Hall issued a temporary restraining order, prohibiting Avis and System from attempting to prevent a telephone company from listing Tanner as an Avis licensee in its directories, and to have themselves so listed.

On October 30, Avis and System filed an application for a modification of the temporary restraining order, and this was denied on the same day by Chief Judge Hall.

On November 5, Avis and System filed a notice of motion and motion, with a supporting affidavit, for continuance until November 21 of the hearing on Tanner's motion for preliminary injunction. They obtained an order from Judge William C. Mathes shortening the notice of motion period, the motion being set for hearing on November 7. The motion was based upon the contention that, because Avis' main office, officers and records were in New York, additional time was required to obtain evidence, particularly an affidavit of one Morrow, Avis' Vice President and General Manager. On November 7, Tanner filed opposing affidavits and authorities. The motion for continuance was heard and denied by Chief Judge Hall on that day.

On November 9, the motion for preliminary injunction was heard. Additional affidavits were filed in support of the motion. Tanner also showed that Morrow was in Los Angeles on November 7, endeavoring to get a lease at the airport. There was also some testimony as to Avis' and System's activities in the area. No other evidence was offered by Avis or System, on the ground that they were not able to offer any. This, in spite of the facts (1) that Avis gave notice of termination on stated grounds, on May 31, over five months before, (2) that Avis filed the complaint on October 5, over a month before, and (3) that Morrow had been in Los Angeles two days before, on the very day when counsel sought a continuance on the ground that time was needed to obtain his affidavit.

On November 14, Chief Judge Hall made and filed his findings of fact and conclusions of law, and preliminary injunction, restraining Avis and System from interfering with Tanner's business as Avis' licensee, and from conducting a competing business until final hearing or further order of the court. It indicated that while the injunction was in effect, Tanner should comply in all respects with the contracts.

On November 19, a Monday, Judge Clarke returned from his vacation. That morning, Avis and System filed their reply to Tanner's counterclaim, and obtained from Judge Clarke an order to show cause, returnable two days later, on November 21, why Chief Judge Hall's preliminary injunction should not be dissolved and a preliminary injunction issued in favor of Avis and System. This order was issued by Judge Clarke at 9:10 a. m. on November 19. In support of this order and application, four affidavits and a memorandum of points and authorities were filed. One affidavit, by Morrow, attempted to show numerous breaches by Tanner of the license agreement, including several that were not mentioned in Avis' notices to Tanner of termination. One "affidavit," that of Cline, Avis' and System's attorney, which sought to show that the hearing before Judge Hall was a "default" hearing, because Cline had been unable to obtain necessary affidavits, is not sworn to, but purports to be made "under penalty of perjury," a procedure not known to the federal courts.

On November 21, when the matter came on for hearing, Tanner filed two memoranda in opposition, one dealing with the merits of the motions, and the other urging that the matter should be heard before Chief Judge Hall. It also objected to having the matter heard on only two days' notice. Judge Clarke overruled the objection, stating that Judge Hall was in Kansas and could not "physically or mentally hear this case." (The statement would have been correct if the word "today" had been added to it. Judge Hall returned in time to have heard the matter if the usual 10 day notice, normally required by local rule, had been given.) Avis and System then offered in evidence a telegram from a telephone company in Palm Springs, stating that, unless the preliminary injunction were modified, it could...