U-Haul Intern., Inc. v. Jartran, Inc.

• Decision Date: 03 July 1986
• Docket Number: No. 84-2801,U-HAUL,84-2801
• Citation: 793 F.2d 1034,230 USPQ 343
• Parties: , 230 U.S.P.Q. 343 INTERNATIONAL, INC., an Oregon Corp., Plaintiff-Appellee, v. JARTRAN, INC., a Florida Corporation, and James A. Ryder, Defendants-Appellants.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1034

793 F.2d 1034

55 USLW 2124, 230 U.S.P.Q. 343

U-HAUL INTERNATIONAL, INC., an Oregon Corp., Plaintiff-Appellee, v. JARTRAN, INC., a Florida Corporation, and James A. Ryder Defendants-Appellants.

No. 84-2801.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted Feb. 14, 1986.

Decided July 3, 1986.

William S. Hawgood, II, Streich, Lang, Weeks & Carson, Phoenix, Ariz., for plaintiff-appellee.

Kenneth R. Heitz, Irell & Manella, Los Angeles, Cal., for defendants-appellants.

Appeal from the United States District Court for the District of Arizona.

Before MERRILL, SNEED, and KOZINSKI, Circuit Judges.

SNEED, Circuit Judge:

U-Haul International, Inc. (U-Haul) sued Jartran, Inc. (Jartran) for false comparative advertising under section 43(a) of the Lanham Act, 15 U.S.C. Sec. 1125(a), and under the common law. The district court awarded U-Haul $40 million and attorney fees, as well as a permanent injunction against certain Jartran advertisements. U-Haul International, Inc. v. Jartran, Inc.,

                601 F.Supp. 1140 (D.Ariz.1984).  Jartran appeals on several grounds.  To facilitate our discussion of the issues raised by Jartran's appeal, our opinion is organized in the following manner.  In Part I of this opinion, we briefly discuss the factual background of the case.  In Part II, we modify the district court's resolution of the real-party-in-interest issue, requiring the district court, in effect, to supervise distribution of U-Haul's recovery to the various entities associated with U-Haul (the U-Haul System).  In Part III, we affirm the district court's finding of liability.  In Part IV, we affirm the district court's calculation of damages. 1   In Part V, we hold that the injunction is unconstitutionally overbroad.  In Part VI, we reverse the district court's holding under Florida law that James A. Ryder is the alter ego of Jartran.  Finally, in Part VII, we refuse to award attorney fees to U-Haul on this appeal.  Thus, as this organization reveals, we affirm in part, modify in part, reverse in part, and remand to the district court for further proceedings
                

I. FACTS

The U-Haul System has dominated the self-move consumer rental industry for many years. In mid-1979, Jartran entered that market on a national basis. It engaged in a nationwide newspaper advertising campaign comparing itself to U-Haul. The campaign lasted from the summer of 1979 to December of 1980 and included advertisements in forty-one states and the District of Columbia. While Jartran's revenues increased from $7 million in 1979 to $80 million in 1980, revenues of the U-Haul System declined for the first time in its history, from $395 to $378 million. The tremendous success of the advertisements is demonstrated not only by the financial growth of Jartran, but also by Jartran's receipt of the prestigious "Gold Effie" award, which the American Marketing Association awards annually in recognition of effective advertising campaigns.

The relations between U-Haul and the other entities that use the U-Haul trademark and make up what we designate as the U-Haul System are important to the understanding of the issues raised by this appeal. The plaintiff in this action, U-Haul International, Inc., owns the U-Haul trademark and operates both as a clearinghouse for distribution of U-Haul trucks and trailers and as a provider of accounting services to various entities. It does not, however, own the trucks and trailers. Most of these are rented to U-Haul by a variety of entities and individuals (the Fleet Owners). U-Haul's corporate parent is AMERCO, a holding company, which owns 100% of both U-Haul International, Inc. and the 97 U-Haul Rental Companies, each of the latter of which has an exclusive geographic region of service. The final members of the U-Haul system are the 6700 U-Haul Rental Dealers, local businessmen who have contracts with the geographically appropriate U-Haul Rental Company.

Each of these various parties receives a share of the revenue from any transaction in which it (or its equipment) is involved. The flow and allocation of revenue within the system is as follows. The Rental Dealers remit the proceeds to U-Haul, which allocates shares to the appropriate entities. Each Fleet Owner receives 35% of the gross rental income from its equipment. The share of the Rental Companies varies from 20-35%, depending on the type of transaction and the details of their individual contracts with U-Haul. Rental Dealers also receive a share between 20 and 35% of the gross rental income. Finally, U-Haul itself apparently receives 5-10% of the proceeds.

This litigation commenced on June 16, 1980, when U-Haul filed suit seeking damages and an injunction against further advertisement. The district court granted a preliminary injunction on February 17, 1981. On July 21, 1982, we affirmed the injunction, rejecting Jartran's claim that the Lanham Act does not apply to false advertising except in the context of "palming off." U-Haul International, Inc. v. Jartran, Inc., 681 F.2d 1159, 1162 (9th Cir.1982) [ U-Haul I ]. On remand, in the spring of 1983, the district court tried the full case and found in favor of U-Haul under both the Lanham Act and the common law.

The district judge calculated damages with respect to each claim under two distinct methods. The first method relied on revenue projections for the U-Haul System as a whole. Those projections indicated that the U-Haul System experienced a substantial revenue shortfall because of the Jartran advertisements. Relying on this evidence, the district court awarded $20 million in actual damages. The second theory relied on the cost of the advertising campaign to Jartran, $6 million, and the cost of corrective advertising by the U-Haul System, $13.6 million. This also produced an award of $20 million. On the Lanham Act count, the district court doubled the $20 million under section 35 of the Lanham Act; on the common-law count, it awarded $20 million in punitive damages. Thus, the district court reached a $40 million verdict with respect to each claim. Only one recovery of full compensation is permissible, however. Because we affirm the calculation of the award based on advertising expenditures and the doubling of the award under section 35 of the Lanham Act, we need not address Jartran's challenges to the revenue shortfall calculation or to the award of punitive damages.

II. REAL PARTY IN INTEREST

Jartran, troubled by the U-Haul Systems structure, contends that U-Haul is not a real-party-in-interest for purposes of Fed.R.Civ.P. 17(a). In substance, it argues that U-Haul cannot recover damages for the thousands of other members of the U-Haul System that are not parties to this action. In response, U-Haul argues that this position has been waived by Jartran. We address this argument initially.

On January 26, 1981, the district court denied Jartran's motion to dismiss on this ground. U-Haul contends that Jartran should have challenged the district court's denial on its subsequent appeal from the preliminary injunction. U-Haul relies on law-of-the-case precedents, e.g., Munoz v. County of Imperial, 667 F.2d 811, 817 (9th Cir.), cert. denied, 459 U.S. 825, 103 S.Ct. 58, 74 L.Ed.2d 62 (1982); Alioto v. Cowles Communications, Inc., 623 F.2d 616, 618-19 (9th Cir.1980), cert. denied, 449 U.S. 1102, 101 S.Ct. 897, 66 L.Ed.2d 827 (1981).

We reject this claim. Jartran probably could not have raised the real-party-in-interest issue on the last appeal, which dealt with the propriety of the district court's injunction against false advertising. Jurisdiction over that appeal rested on 28 U.S.C. Sec. 1292(a)(1) (allowing immediate appeals from orders granting or refusing to grant injunctions). In ordinary circumstances, an appeal from the district court's denial of the motion to dismiss would clearly have been barred. See id. Sec. 1291 (allowing appeals from final orders; implicitly barring jurisdiction over interlocutory orders not described in Sec. 1292); Catlin v. United States, 324 U.S. 229, 236, 65 S.Ct. 631, 635, 89 L.Ed.2d 911 (1945). U-Haul seems to believe that Jartran's right to appeal the injunction under section 1292(a)(1) also gave the U-Haul I panel jurisdiction over the interlocutory denial of the motion to dismiss. To so hold would be unwise. As one commentator notes, "[O]n an appeal under Section 1292 the appellate court will be reluctant to delve any further into the merits than is necessary to resolve the particular questions made appealable by the statute." 10 C. Wright, A. Miller & M. Kane, Federal Practice and Procedure Sec. 2658.1, at 78 (2d ed. 1983) [hereinafter cited by authors' names only]; see Nelms In this case, the appellate court would have had no reason to consider the real-party-in-interest issue on the earlier appeal. U-Haul was the appropriate party in that appeal, which considered only the merits of the injunction. Lanham Act Sec. 43(a), 15 U.S.C. Sec. 1125(a), grants a cause of action to "any person who believes that he is or is likely to be damaged by the use of any such false description or representation." As the owner of the trademark, it was appropriate for U-Haul to seek under Lanham Act Sec. 43(a) to enjoin advertising that harmed U-Haul's trademark. The U-Haul I panel addressed only the propriety of the preliminary injunction. It would be senseless to penalize Jartran for not raising an issue that the U-Haul I panel would not have decided. We refuse to do so and turn to the merits of Jartran's claim.

v. United Association of Journeymen, 405 F.2d 715, 719 (5th Cir.1968); Alloyd General Corp. v. Building Leasing Corp., 361 F.2d 359, 363 (1st Cir.1966); 9 J. Moore, B. Ward & J. Lucas, Moore's Federal Practice p 110.25, at 269-70 (2d ed. 1985) [hereinafter cited as Moore's Federal Practice ].

The merits of Jartran's principal argument present us with a novel question. In one sense, U-Haul is obviously a real party in interest. It receives a portion of the...