VISA Intern. Service Ass'n v. Bankcard Holders of America

• Decision Date: 21 March 1986
• Docket Number: Nos. 83-2429,84-2795,s. 83-2429
• Parties: , 229 U.S.P.Q. 288, 4 Fed.R.Serv.3d 950 VISA INTERNATIONAL SERVICE ASSOCIATION, Plaintiff-Appellant, Cross-Appellee, v. BANKCARD HOLDERS OF AMERICA, Direct Mass Marketing, Inc., Beneficial National Life Insurance Company, Miles MacIntyre, an individual, and David Reichberg, an individual, Defendants-Appellees, Cross-Appellants.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1472

784 F.2d 1472

54 USLW 2584, 229 U.S.P.Q. 288, 4

Fed.R.Serv.3d 950

VISA INTERNATIONAL SERVICE ASSOCIATION, Plaintiff-Appellant, Cross-Appellee, v. BANKCARD HOLDERS OF AMERICA, Direct Mass Marketing, Inc.,

Beneficial National Life Insurance Company, Miles MacIntyre,

an individual, and David Reichberg, an individual,

Defendants-Appellees, Cross-Appellants.

Nos. 83-2429, 84-2795.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted July 10, 1985.

Decided March 21, 1986.

Peter Anderson, Wynne S. Carvill, Thelen, Marrin, Johnson & Bridges, San Francisco, Cal., John P. Sutton, Inc., Limbach, Limbach & Sutton, San Francisco, Cal., for plaintiff-appellant, cross-appellee.

Michael M. Rosenbaum, Budd, Larner, Kent, Gross, Picillo, Rosenbaum, Greenberg & Sade, Newark, N.J., for defendants-appellees, cross-appellants.

Appeal from the United States District Court for the Northern District of California.

Before POOLE and REINHARDT, Circuit Judges, and KELLER, ^* District Judge.

KELLER, District Judge:

VISA International Service Association ("VISA") appeals from the district court's denial of its application for further discovery pursuant to Federal Rule of Civil Procedure 56(f), and from the corresponding entry of summary judgment against it. We reverse the denial of the Rule 56(f) application and the entry of summary judgment.

Bankcard Holders of America ("BCH") has filed a cross-appeal from the district court's denial of attorneys' fees and requests a further award of attorneys' fees based on its prosecution of the cross-appeal. We affirm the district court's denial of attorneys' fees and deny the request for attorneys' fees on appeal.

Background

BCH, an association whose membership is comprised of holders of bank credit cards, mailed offers of various kinds of insurance to holders of VISA credit cards. VISA sued BCH for trademark infringement, claiming that BCH's use of the VISA name and logo on its mass mailings misled consumers into believing that VISA was connected with BCH's offer of insurance.

In March 1981, VISA and BCH entered into a Settlement Agreement, which was implemented by means of a Stipulated Judgment. In essence the two documents provided that BCH could use the VISA name to indicate membership requirements of BCH or means of payment. BCH was prohibited, however, from using the VISA name in a way that would cause public confusion by suggesting that VISA had sponsored or approved the offering. An exemplar of permissible use of the VISA mark was attached to the Settlement Agreement. The Stipulated Judgment provided that the court retained jurisdiction to effectuate and enforce it.

In April 1982, VISA returned to district court seeking relief from the Stipulated Judgment under essentially two theories, each of which has two components:

a. Rescission or modification of the Stipulated Judgment, on the ground that it was causing injury to the public because of confusion.

b. Enforcement or clarification for purposes of enforcement, on the ground that BCH was violating the terms of the Stipulated Judgment.

BCH moved for summary judgment on VISA's claim for rescission or modification. VISA filed an application pursuant to Rule 56(f) to stay the summary judgment motion and to compel responses to interrogatories and requests for production which remained outstanding at the time of the summary judgment motion. The discovery requests sought, inter alia, lists of recipients of mailing kits and purchasers of insurance, the kits and policies themselves, and any evidence of communications from insurance commissioners regarding the mailings.

In August 1983, the court granted BCH's motion for summary judgment on the basis that VISA had failed to show any substantial harm to the public. In the same order, the court denied VISA's rule 56(f) application to stay summary judgment and compel discovery. The court also denied BCH's counterclaim for attorneys' fees.

The court then referred the enforcement issue to the magistrate for resolution in a contempt hearing, and adopted the magistrate's findings that, although BCH had arguably violated the Stipulated Judgment, its action did not rise to the level of contempt because of the vagueness of the terms of the Stipulated Judgment.

I. Enforcement of the Stipulated Judgment

In general, a party entering into a settlement agreement with respect to a trademark will be held to his contract unless enforcement of the contract would result in injury to the public through confusion. If the party seeking rescission can show some injury to the public, as opposed to mere injury to the party's business, ¹ then the court is to balance the "public interest against confusion, one of the significant purposes of trademark law, against the interest in enforcing contracts...." T & T Manufacturing Co. v. A.T. Cross Co., 449 F.Supp. 813, 827 (D.R.I.), aff'd, 587 F.2d 533 (1st Cir.1978), cert. denied, 441 U.S. 908, 99 S.Ct. 2000, 60 L.Ed.2d 377 (1979). Thus, the determination whether to rescind or modify is essentially a factual inquiry into the degree or extent of public confusion. ²

Even if VISA were not entitled to rescission or modification of the Stipulated Judgment based on evidence of public injury, VISA would still be entitled to enforcement of its terms and to that degree of clarification necessary to secure meaningful enforcement. See Vertex Distributing, Inc. v. Falcon Foam Plastics, Inc., 689 F.2d 885, 892 (9th Cir.1982). Because the Stipulated Judgment used the test of public confusion to circumscribe BCH's use of the VISA marks, enforcement and clarification also require a factual inquiry into public confusion. ³

In short, the factual inquiry relating to public confusion was a predicate to virtually every form of relief sought by VISA. The Stipulated Agreement in this case expressly provided that the court retained jurisdiction "for further orders and directions as may be necessary or appropriate for the construction and effectuation of this final judgment and the Agreement...." Even absent such express language, a district court retains the inherent equitable power to rescind, modify, clarify or enforce a stipulated injunction. Fed.R.Civ.P. 60(b); see, e.g., System Federation No. 91, Railway Employees' Department v. Wright, 364 U.S. 642, 646-47, 81 S.Ct. 368, 370-71, 5 L.Ed.2d 349, 352-53 (1961). In this case, the district court's retention of jurisdiction necessarily included a commitment to allow an examination of the factual basis for a claim of public confusion. It is within this context that the denial of the Rule 56(f) application must be examined.

II. Rule 56(f)

We review the denial of a Rule 56(f) application under the abuse of discretion standard. Alghanim v. Boeing Co., 477 F.2d 143, 149 (9th Cir.1973). Because VISA's ability to establish its case for rescission or modification is so heavily dependent upon its ability to probe the facts and circumstances relating to public confusion and injury, we hold that it was an abuse of discretion to deny outright VISA's Rule 56(f) request for discovery of BCH's mailing lists and customer responses, which constituted the most probative evidence of such confusion.

In granting summary judgment against VISA on its claim for rescission or modification, the district court held that "plaintiff has made no showing of any significant or substantial harm to the public" and that, therefore, no rescission could be had under the reasoning of T & T, supra.

The court then denied VISA's Rule 56(f) application for discovery on two grounds: (1) the insufficiency of VISA's showing of public harm; and (2) the interest in the finality of settlements.

The interest in finality, by itself, does not appear to constitute a valid basis for denying a Rule 56(f) application, especially in a case such as this, where the court is required to weigh the nature and degree of public confusion in determining whether to enforce or modify a stipulated judgment.

Therefore, the determinative inquiry is whether the district judge could reasonably have concluded that VISA had failed to make a sufficient showing that further discovery would raise a triable issue of fact as to public confusion. The cases construing Rule 56(f) suggest that the denial of a Rule 56(f) application is generally disfavored where the party opposing summary judgment makes (a) a timely application which (b) specifically identifies (c) relevant information, (d) where there is some basis for believing that the information sought actually exists. Summary denial is especially inappropriate where the material sought is also the subject of outstanding discovery requests.

In Zell v. Intercapital Income Securities, Inc., 675 F.2d 1041 (9th Cir.1982), for example, a shareholder sought discovery of the nature of lawsuits against a corporation on the ground that they affected the accuracy of proxy statements relating to that company. This Court reversed as premature the district court's grant of summary judgment against the shareholder in face of the shareholder's request for discovery, where nothing in the record precluded the possibility that relevant information might be discovered. ⁴

The courts which have denied a Rule 56(f) application for lack of sufficient showing to support further discovery appear to have done so where it was clear that the evidence sought was almost certainly nonexistent or was the object of pure speculation. See Exxon Corp. v. FTC, 663 F.2d 120 (D.C.Cir.1980) (Rule 56(f) application properly denied where "there [were] simply no facts in the record" to support existence of object of plaintiff's proposed discovery, and where defendant's evidence affirmatively indicated nonexistence of object of discovery); Schlesinger v. Central Intelligence Agency, 591 F.Supp. 60, 64-65 (D.D.C.1984) (Rule 56(f) application denied where mere allegation of factual dispute specifically rebutted by moving party's affidavit).

Public confusion, the object...