Time Out, Inc. v. Karras

• Decision Date: 22 May 1991
• Docket Number: 16999,Nos. 16991,s. 16991
• Citation: 469 N.W.2d 380
• Parties: TIME OUT, INC., and Alpha Corporation, Plaintiff and Appellee, v. Chris KARRAS, Defendant and Third Party Plaintiff and Appellant, v. Gus CUSULOS, Third Party Defendant and Appellee.
• Court: South Dakota Supreme Court

Page 380

469 N.W.2d 380

TIME OUT, INC., and Alpha Corporation, Plaintiff and Appellee, v. Chris KARRAS, Defendant and Third Party Plaintiff and Appellant, v. Gus CUSULOS, Third Party Defendant and Appellee.

Nos. 16991, 16999.

Supreme Court of South Dakota.

Argued Feb. 12, 1991.

Decided April 24, 1991.

Rehearing Denied May 22, 1991.

Steven Sanford, Cadwell, Sanford & Deibert, Sioux Falls, for plaintiff and appellee.

Scott G. Hoy, Carlsen & Hoy, Sioux Falls, for defendant and third party plaintiff and appellant.

John L. Wilds, Sioux Falls, for third party defendant and appellee.

WUEST, Justice.

In 1975, Chris Karras (Karras) learned the Time Out restaurant and lounge in Sioux Falls, South Dakota was for sale. After some negotiations, Karras offered to purchase the business for $105,000. This offer was accepted. Karras was only interested in the restaurant portion of the business, however, and did not want to operate the bar. He approached Chris Christopolos (Christopolos) about purchasing the lounge. The parties agreed that Christopolos would purchase the bar for $83,000 and Karras would purchase the restaurant for $22,000, totalling the $105,000 purchase price.

While working out their business arrangement, the parties realized that if Karras were to purchase the restaurant and bar and then sell the bar to Christopolos, separate hearings on the liquor license would have to take place and an additional transfer fee would have to be paid. With this understanding, the parties negotiated a new offer with the seller, which provided that G & C Realty (a partnership of Christopolos and Gus Cusulos) and Karras would jointly purchase the business. Contemporaneously, G & C Realty and Karras entered into an agreement to divide the assets purchased, Karras acquiring the restaurant assets and G & C Realty acquiring the bar assets. Shortly thereafter, G & C Realty purchased the entire building and entered into a lease agreement with Karras for the restaurant. Both parties used the name "Time Out" in their business operations; the bar was called the "Time Out Lounge" and the restaurant was called the "Time Out Steakhouse and Restaurant."

Christopolos sold his interest in G & C Realty to Gus Cusulos (Cusulos) in 1980. In November 1983, G & C Realty (comprised solely of Cusulos) agreed to sell the lounge assets to Time Out, Inc., a South Dakota corporation. The purchase agreement between Time Out, Inc. and G & C Realty granted to Time Out, Inc. the exclusive right to use the name "Time Out Lounge," as well as all logos, trademarks and copyrights owned and utilized by G & C Realty. G & C Realty then leased the lounge portion of the building to Time Out, Inc.

In 1984, Karras incorporated the restaurant. He obtained a trademark from the State of South Dakota in the name "Time Out Steakhouse and Restaurant" and the logo of a referee signaling time out.

The lease from G & C Realty to Karras expired on November 30, 1985, without any legal right of Karras to extend or renew the term. Prior to expiration of the lease, Cusulos suggested to Christopolos that he might operate the restaurant after Karras vacated the premises. Christopolos and Cusulos reached an agreement whereby Cusulos would lease the entire business property to Time Out, Inc., and Time Out, Inc. would then sub-let the restaurant portion of the business to Alpha Corporation, comprised of Christopolos and his son, George.

Karras learned of this new business arrangement with Alpha Corporation (Alpha) and inquired of Christopolos whether he intended to continue to use the Time Out name. Christopolos informed Karras that he did.

The morning after Karras vacated the restaurant, there was discovered substantial damage. Alpha contends this damage was caused maliciously by Karras and resulted in expense and lost income for Alpha.

Karras moved his restaurant to a nearby building in 1986 after his lease expired. He advertised and operated this new restaurant as the Time Out Steakhouse and Restaurant.

Time Out, Inc. commenced an action for damages against Karras. Karras, through an amended counterclaim, alleged an infringement of his business name and trademark rights and joined Cusulos as a third-party defendant. The trial court granted summary judgment to Time Out, Inc. on the name and trademark issues, which was reversed and remanded on appeal to this court. See Time Out, Inc. v. Karras, 392 N.W.2d 434 (S.D.1986) (hereafter Time Out I).

On remand, the case was bifurcated into two separate jury trials: The first trial concerned the ownership of the business name and the validity of the trademark. The second trial concerned trademark infringement and damages claimed by the parties against one another. By stipulation, Alpha was added as an additional plaintiff after the first trial.

The first jury determined that Karras' trademark was valid and that Karras was the sole owner of the name "Time Out" and the logo of a referee signaling time out. In the second trial, the jury returned a verdict for Alpha and Time Out, Inc. on their property damage claims and returned a verdict on Karras' counterclaim of $0 compensatory damages and $50,000 punitive damages.

After the second trial and upon motion by counsel, the trial court excised the punitive damages because no compensatory damages had been awarded. The court also amended the judgment of the jury verdict so that Alpha could continue to use the name Time Out Lounge.

Karras appeals to this court and raises six issues:

I. Whether the trial court erred in its response to a jury question in the deliberations of this matter;

II. Whether the trial court erred in allowing the jury to hear evidence of the initial appeal in this case;

III. Whether the trial court erred in amending the judgment, permitting Alpha to continue to use the name "Time Out Lounge";

IV. Whether the trial court erred in directing a verdict in favor of Cusulos on the issue of conspiracy of joint tortfeasor liability with the owners of Time Out, Inc. and Alpha;

V. Whether the trial court erred in failing to grant Karras' motion for directed verdict against Alpha for damages claimed by Alpha; and,

VI. Whether the trial court erred in taking the jury verdict away from Karras without granting a new trial.

Time Out, Inc. and Alpha raise by notice of review:

VII. Whether the trial court erred in denying Time Out, Inc.'s motion for directed verdict in the first trial and Alpha's subsequent motion for judgment notwithstanding the verdict.

I.

Following extended deliberations by the second jury, a question was addressed to the trial judge: "What date did the Supreme Court of the State of South Dakota award Chris Karras sole ownership of the Time Out trademark and logo by overturning the Lower Court's ruling available from Court testimony?" Over Karras' objection, the trial court answered the question, stating: "A Jury on July 13, 1989, determined that Chris Karras has ownership rights to the trademark 'Time Out' and the logo of the referee signalling time out; and that Chris Karras obtained a valid trademark registration of 'Time Out Steakhouse and Restaurant' and logo." Karras requested the court's answer indicate the registration was valid as of 1984, but his request was denied.

Within moments of receiving the court's answer, the jury rendered its verdict. Karras was awarded $0 compensatory damages, $0 interest, and $50,000 punitive damages. Karras' subsequent motion for a new trial was denied. He argues the trial court's answer to the jury question was in error.

Trial courts have considerable discretion in responding to jury requests during deliberations, and on appeal, their decision will not be disturbed except for abuse of discretion. See SDCL 15-6-51(a); Gilbert v. Caffee, 293 N.W.2d 893 (S.D.1980); Beck v. Wessel, 90 S.D. 107, 237 N.W.2d 905 (1976); Wittmeier v. Post, 78 S.D. 520, 105 N.W.2d 65 (1960).

The jury's question was founded upon the faulty premise that the South Dakota Supreme Court had determined the validity of the trademark. ¹ It is also evidence the jury was considering the validity of the trademark--an issue adjudicated in the first jury trial. The trial judge's answer did nothing to correct the jury's faulty thinking, and indeed, may have confused the issue further. By instructing the jury that the validity of the trademark had been determined only a few months earlier, without also explaining the trademark was valid from its registration date in 1984, the trial judge may have unintentionally mislead the jury into thinking Karras' trademark had been infringed for only a few months. Such an analysis is consonant with the jury's award of punitive damages, but no compensatory damages. Under the circumstances, we find the trial court abused its discretion, and we reverse.

II.

During the second trial, a portion of Karras' appellate brief from his first appeal was admitted into evidence. It consisted of the brief's cover page, the signature page and the following text:

At this point it must be noted that Karras is not claiming the exclusive right to use the name Time Out in any other context than in the operation of a restaurant. Thus, a claim that the name Time Out Lounge is owned by plaintiff is not involved in this claim. This apparently was misapprehended by the lower court.

Karras contends admission of the brief was prejudicial error in two respects: (1) it confused the jury as to whether damages for trademark infringement were to be measured from the date of trademark registration or the time of appeal, and (2) inclusion of such evidence held Karras to previous arguments on the issue of trademark ownership that, at the time, had not yet been tried before a jury. He submits this evidence prompted the jury's question to the court inquiring into the time when Karras' trademark was adjudicated valid.

Although relevant, evidence may be excluded if its probative value is substantially outweighed by the danger of unfair...