Zwack v. Kraus Bros. & Co.

• Decision Date: 02 November 1950
• Docket Number: Civ. No. 58—182.
• Parties: ZWACK et al. v. KRAUS BROS. & CO., Inc.
• Court: U.S. District Court — Southern District of New York

93 F. Supp. 963

ZWACK et al. v. KRAUS BROS. & CO., Inc.

Civ. No. 58—182.

United States District Court, S. D. New York.

November 2, 1950.

Riegelman, Strasser, Schwarz & Spiegelburg, New York City (Laurence Rosenthal, New York City, of counsel), for plaintiffs.

Clarence P. Greer, New York City, for defendant.

MEDINA, District Judge.

Defendant has moved to dismiss the complaint pursuant to the provisions of Rules 12(b) (7) and 19, Federal Rules of Civil Procedure, 28 U.S.C.A.(,) on the ground that indispensable parties have not been joined.

This action is brought by John and Bela Zwack on behalf of J. Zwack & Co., a Hungarian partnership which manufactures and distributes alcoholic beverages under the trade-marks "Zwack", "J. Zwack & Co.", "J. Zwack", and "Zwack, J.". All of these marks are registered in the United States Patent Office.

Defendant is a New York corporation which, in 1933, entered an agreement with the partnership whereby defendant became the exclusive distributor of the partnership's products in the United States. Allegedly pursuant to other agreements, defendant secured registrations of the trade-marks in its own name but for the benefit of the partnership and subject to its directions and withheld part of the moneys due to the partnership on sales made since 1939, crediting those moneys to the partnership's account. Defendant's contract of exclusive distribution is not due to expire until 1960.

Plaintiffs allege that in 1948 the Government of Hungary seized the partnership's factory and confiscated it without compensation, and continued to operate it under its old name and to manufacture products to which the old trade-marks were affixed. Bela Zwack apparently remained with this governmentally owned enterprise in some capacity, but there is no competent proof before me that he did so or as to his present status or whereabouts. John Zwack left Hungary on November 18, 1948 because, he states, he had been informed that he was in danger of being "liquidated." Immediately after his departure he notified the defendant of what had occurred and requested the defendant to terminate its dealings with the individuals who were then operating the partnership business. This, it is alleged, defendant declined to do, and, it is claimed, defendant has continued to import and distribute the output of the factory.

Plaintiffs now sue on the partnership's behalf for trade-mark infringement, for an accounting, for specific performance of the agreement concerning the American trade-mark registrations, and to recover the sum of approximately $25,000 which, according to the allegations of the complaint, constitutes the deferred payments for goods sold by defendant since 1939.

Defendant's motion to dismiss is based on the contention that Bela Zwack, admitted by the plaintiffs to be a copartner, his wife Dora, claimed by the defendant to be also a copartner, the Hungarian Government, and the "presently existing firm of J. Zwack & Company of Budapest, Hungary," are indispensable parties. Since these parties are not subject to the jurisdiction of the Court, unless they should voluntarily appear, which on the record before me seems unlikely, it is apparent that to grant defendant's motion would be to deny the plaintiffs any remedy and this result a court will properly "strain" to avoid. See Bourdieu v. Pacific Western Oil Co., 1936, 299 U.S. 65, 70, 57 S.Ct. 51, 81 L.Ed. 42.

Two practical factors seem to me to be at the root of the indispensable party rule. First is the desirability of avoiding a determination which will affect the interests of persons who are not before the court. See Green v. Brophy, 1940, 71 App. D.C. 299, 110 F.2d 539, 541. Second is the desirability of protecting a defendant from a second liability on the same obligation should some court subsequently decide issues of fact in favor of the absent third party. Russian Reinsurance Co. v. Stoddard, 1925, 240 N.Y. 149, 147 N.E. 703. However, the rule is one fashioned in equity and the courts have taken care lest its application should result in inequity. Parker Rust-Proof Co. v. Western Union Telegraph Co., 2 Cir., 1939, 105 F.2d 976, certiorari denied 1939, 308 U.S. 597, 60 S. Ct. 128, 84 L.Ed. 500.

In so far as the first practical consideration is involved, much will turn on the substantiality of the asserted interests which, it is claimed, will be affected by the determination of the issues raised by the complaint. When the existence of interests in third persons is conceded, the problem is merely one of appraising the effect an adjudication in the pending action will have on those interests. Most of the indispensable party cases deal with such a situation. See cases cited in Baldwin v. Chase National Bank of New York, D.C.S.D.N.Y. 1936, 16 F.Supp. 918, 920. Where the very existence of such interests is...