USCA1 Opinion
UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT
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No. 94-1918
ALEXIS LICHINE & CIE.,
Plaintiff, Appellee,
v.
SACHA A. LICHINE ESTATE SELECTIONS, LTD, AND
SACHA LICHINE,
Defendants, Appellants.
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APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Walter Jay Skinner, Senior U.S. District Judge]
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Before
Selya, Circuit Judge,
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Coffin, Senior Circuit Judge,
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and Stahl, Circuit Judge.
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Stanley S. Arkin with whom Harry B. Feder was on brief for
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appellant.
Jonathan E. Moskin with whom Robert M. Kunstadt was on brief for
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appellee.
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January 30, 1995
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COFFIN, Senior Circuit Judge. In this trademark case a
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French wine grower and merchant seeks to modify a consent decree
that bars him from using his family name in his wine importation
business because of possible confusion with products offered by
the current owner of his late father's company. After an
evidentiary hearing, the district court accepted the
recommendation of the magistrate judge that the requested
modification be denied. The appeal requires us to consider both
the appropriate standard and the district court's exercise of
discretion in applying that standard. We affirm.
History of the Case
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In 1946 Alexis Lichine began to import French wines into the
United States. In 1951 he purchased Chateau Prieure-Cantenac, a
wine-growing chateau in the Haut-Medoc region near Bordeaux,
which he renamed Chateau Prieure-Lichine (CPL). In 1955 he
founded his own wine-trading company, Alexis Lichine & Cie.
(ALC), and in 1964 ALC registered "Alexis Lichine" with the U.S.
Patent Office. Shortly thereafter, in October 1964, Lichine sold
ALC and its mark to a company affiliated with a major
organization in the wine industry, Bass Charrington. Not
involved in the sale was CPL or its mark, which also had been
registered in the U.S. Patent Office in July 1964.1
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1 ALC was a "negociant," an enterprise that chooses and
buys wines from producers, and then stores, ages, bottles and
sells them under its own trademark. A chateau, on the other
hand, is restricted to selling only wines produced on its
premises.
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In the early 1980s, Alexis's son started his own wine
brokerage company, Sacha A. Lichine Estates Selections, and began
importing wines into the United States. Predictably, ALC brought
a trademark infringement suit. The court granted partial summary
judgment for ALC, concluding that the similarity of names was
such as to render confusion among customers likely.
In 1986, a consent decree was issued enjoining Sacha from
using the words Alexis Lichine "or any colorable imitation,"
including Sacha A. Lichine, S.A. Lichine, or Lichine, in
connection with the sale of any alcoholic beverage. ALC waived
several causes of action, as well as claims for damages and
profits. Both parties assumed their own costs and attorney's
fees, and waived appeal.
In 1987, Sacha, who had been estranged from his father,
returned to CPL. Alexis was by this time widely recognized in
the wine industry and had written authoritative books on French
wines, as well as his famous "Alexis Lichine's New Encyclopedia
of Wines and Spirits." When Alexis died two years later, Sacha
inherited the chateau.
In early 1990, the Bass Charrington interests sold ALC to
another giant, Pernod Ricard (Pernod). ALC is now one of three
entities managed by a Pernod subsidiary, Crus et Domaines de
France. Meanwhile, as shall be detailed later, Sacha had been
improving both the operations of CPL and his own reputation, and
wanted to expand his imports into the United States beyond the
10,000 or 11,000 cases of his own chateau's wine. In August 1991
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he requested relief from the burdens of the injunction, and in
April 1992 was allowed to seek modification under Fed. R. Civ. P.
60(b)(5).
Proceedings Below
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Appellant urged three reasons to modify the injunction to
permit him to use his name on certain bottles of imported wine:
the death of Alexis Lichine and his inheritance of his father's
shares in CPL; the decline in the quality of wines sold by ALC
and in ALC's reputation; and the improvements in CPL's capacity
and product and the rise in Sacha's own reputation. He sought to
demonstrate that a Sacha Lichine wine label no longer would
infringe on the trademark derived from his father's name and
that, in fact, his own name was now of greater significance in
the wine world than ALC's.
ALC, on the other hand, contended that there had been no
unanticipated change of circumstances since the injunction, that
its reputation continued to be high, that its reliance on the
exclusive right to use of the Lichine name and reputation still
was strong, and that Sacha was suffering no hardship and was not
prohibited from merchandising wines in the United States under
other names.
Appellant presented evidence during the four day hearing
showing that he had invested some $3,000,000 on improvements to
his chateau. He added a new wine cellar, a visitors' center, a
sales shop and a helicopter pad, and also improved the sales
force, physical plant and vineyards. The harvest of 1989 was
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rated as particularly good. Appellant also had exhibited a
promotional flair, had been featured in a number of magazine
articles, had participated in prestigious fetes and cruises, and
now enjoyed a reputation in the wine industry independent of his
father's. In contrast, appellant's witnesses testified, ALC's
wines had sunk in recent years to lesser quality, "vin
d'ordinaire" status. Moreover, ALC's sales in the United States
had declined by some 50 percent between 1991 and 1993, a much
greater decline than had affected the general market of French
wine imports.
ALC's evidence was to the effect that Pernod Ricard, world
leader in the aperitif field and owner of some 50 companies,
bought ALC in 1990 before it was aware of appellant's effort to
modify the injunction. The purchase was part of its "main
thrust" in acquisitions to increase its presence in the wine
industry. Pernod officials testified to a current strategy to
"reconcentrate" on better wines and considered ALC to be basic to
that strategy.
As early as 1990, an ALC official in Bordeaux had
recommended that table wine should be "progressively erased from
the entire ALC's line" and that "A. LICHINE should return to its
original concept initiated by ALEXIS." A subsequent higher level
recommendation was made by the vice president in charge of
marketing and sales for Austin Nichols, the company charged with
carrying out the marketing plan involving ALC. He described his
recommended objective as effecting "a defined segmentation" with
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one entity (Cruse) representing "the most popular-priced volume-
oriented table wines" and Alexis Lichine representing the
"exclusive chateaus that we would have offered to us."
This recommendation, he further testified, was accepted and
reflected in a document entitled "Alexis Lichine -- Cruse --
1993." Under "Strategy" were these comments:
Reposition Alexis Lichine to a portfolio of mid to high
prices [sic] wines.
Reposition Cruse to include mainly low priced table
wines and mid-priced varietals with a limited line of
Petits Chateaux.
Notwithstanding these resolves, Pernod first needed to
dispose of its existing inventories of wines in a declining
market. As a result, little headway had been made with the new
strategy at the time of the hearing on Sacha's request for a
modification. Certain steps had been taken, however. Higher
priced wines were being marketed, promotional literature was
being pushed, wine writers were being wooed, ALC wines were
reaching a considerable number of restaurant wine lists,
participation in important wine promotions had taken place, and
entry into the airline market was underway.
The magistrate judge found that ALC had invested in ALC
wines, though not in large amounts; that the company had not
abandoned the mark, and indeed was dealing in wine "not devoid of
quality"; that, nevertheless, there had been a decline in both
quality and quantity of ALC wine sold in the United States since
1986; and that Sacha Lichine now was a well respected figure in
the wine industry, known for producing high quality wine.
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On the legal standard, however, the magistrate judge
specifically refused to apply the "more flexible" approach for
evaluating requests to modify consent decrees that was
articulated in Rufo v. Inmates of Suffolk County Jail, 112 S. Ct.
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748, 758 (1992), and instead adhered to the sterner ("grievous
wrong") standard of United States v. Swift & Co., 286 U.S. 106,
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119 (1932). Emphasizing the private commercial nature of this
litigation, the weight to be given the interest in the finality
of decrees, and the lack of extreme hardship to appellant, she
concluded that there was insufficient basis to dilute ALC's
property rights in the Alexis Lichine name.
The district court, in reviewing the magistrate judge's
report, faced two issues. The first concerned the testimony of
an appellant's witness, one Aaron, who had testified that the use
of a personal name was not significant for retail merchants but
would be "very important" for Sacha Lichine. The magistrate
judge mistakenly understood the testimony to be the converse.
The court observed that the fact that the family name was
important to appellant nevertheless did not warrant modification
of the injunction. We might also observe that there was
testimony from the same witness and two others that a
considerable number of "negociants" did business under other than
personal or family names.
The more important ruling by the district court was directed
to the issue of the appropriate standard governing modification
of decrees. The court said:
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Even assuming that Rufo has liberalized the
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standards for the modification of decrees as argued by
the defendant, there is still a valid public policy in
favor of the finality of dispute resolutions. In my
opinion, the defendant has not offered sufficient
reason to overturn that policy.
Discussion
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Standard governing modification. We first consider the
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issue of the appropriate standard of review governing
modification of injunctions. Rule 60(b)(5) provides for relief
from a judgment when "it is no longer equitable that the judgment
should have prospective application." In Swift, which dealt with
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a request from meat-packers convicted of manipulating the
industry to soften an injunction's proscriptions against them,
the Supreme Court stated that a party seeking release from a
consent decree must offer proof of "hardship so extreme . . . as
to justify . . . saying that they are the victims of oppression,"
or, in other words, the party must make "a clear showing of
grievous wrong." Id. 286 U.S. at 119.
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Reaffirming the need for flexibility emphasized in Railway
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Employees v. Wright, 364 U.S. 642, 647-648 (1961), the Court in
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Rufo disavowed any "talismanic quality" in the Swift language or
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intent that modifications of consent decrees in all cases were to
be governed by the standard "actually applied" there. It stated
that Rule 60(b)(5) "permits a less stringent, more flexible
standard." Rufo, 112 S. Ct. at 758. While Rufo was a case
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involving institutional reform, we do not read it as being
confined in principle to such cases. In our view, Rule 60(b)(5)
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sets forth the umbrella concept of "equitable" that both Swift
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and Rufo apply to particular, widely disparate fact situations.
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Indeed, the Rufo Court quoted the basic distinction drawn in
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Swift between decrees protecting "rights fully accrued upon facts
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so nearly permanent as to be substantially impervious to change"
and decrees involving "the supervision of changing conduct or
conditions and are thus provisional and tentative." Id. at 758
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(quoting from 286 U.S. at 114-15). Swift illustrates the former
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and Rufo the latter. We view this not as a limited dualism but
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as polar opposites of a continuum in which we must locate the
instant case.
We therefore agree with cases like In re Hendrix, 986 F.2d
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195, 198 (7th Cir. 1993), viewing Rufo's flexible standard as "no
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less suitable to other types of equitable case[s]," but also
share the concerns voiced in cases like W.L. Gore & Assocs. v.
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C.R. Bard, Inc., 977 F.2d 558, 560-62 (Fed. Cir. 1992), about the
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importance of finality when a decree is based on a negotiated
bargain in a commercial case between private parties. Thus,
rather than saying either that there is an "institutional reform"
exception to Swift or a "private commercial party" exception to
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Rufo, we apply Rule 60(b)(5) having in mind that we are dealing
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with a decree arising from a commercial dispute and based on a
bargain voluntarily entered into by businessmen represented by
lawyers.
Such a decree is shielded from facile modification by a
rather formidable carapace. The public interest noted in Rufo is
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not a factor, see 112 S. Ct. at 758-59, other than the interest
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of the public in general and the business community in particular
in the stability of final agreements. Nor is it persuasive that
"it is no longer convenient to live with the terms of a consent
decree." Id. at 760. Therefore, in considering whether a decree
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arising out of commercial litigation between two private parties
should be modified,2 a court should look to such factors as the
circumstances leading to the decree (including the nature of a
party's initial wrongdoing), the quantum of hardship on the
burdened party, the duration of the burden thus far and the
prospect of its continuing, and the benefitted party's need for a
continuation of the decree. Such inquiries, however, must not
cast a judge in the role of umpire in a contest over the
performance or popularity of companies.
Of course, in reviewing the actions of the trial court, we
may reverse only for error of law or abuse of discretion. United
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States v. Boch Oldsmobile, Inc., 909 F.2d 657, 660 (1st Cir.
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1990).
Application of standard. Having set forth our approach, we
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have no difficulty in affirming the action of the district court.
The sale transaction of 1964 was a bargained for, arm's length
transaction for, we assume, ample consideration. This was
followed by a lawsuit and a solemn consent decree, this also for
the substantial consideration of waiver of claims for damages,
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2 Arguably, a different approach might be appropriate when
such cases involve issues more laden with a public interest, such
as antitrust.
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profits, costs, and attorney's fees. A fairly short time has
transpired since the decree, and an even shorter time since
Pernod acquired ALC. And although Pernod and its subsidiary have
made little progress in rebuilding the fortunes of ALC, there
have been the obstacles of outside economic forces as well as the
dead weight of existing inventory. We cannot say that Pernod's
incipient strategy for ALC is a fabrication or without substance.
Finally, appellant cannot be said to be suffering to any
unconscionable degree.
Reading the transcripts of the several days of testimony, we
found ourselves in an unreal world. This seemed to have turned
into a trial of the efficacy of ALC's business operations.
Appellant could tweak the tail of the lion and boast his own
accomplishments. Much time was spent on sales figures, the
amount spent on promotion, the number of people hired, ratings
and image. One was tempted to feel that the issue was: who had
done the best job in promoting oneself and one's wines in the
past several years? But that is not the question. Unlike a
sporting event, the parties do not have the same starting points.
The trademark holder and his decree occupy a favored position.
The challenger faces a considerable task in establishing a
balance of equities favoring him.
There is an understandable paucity of cases involving the
modification of consent decrees entered into by two commercial
parties. We have found one, Tetra Sales (U.S.A.) v. T.F.H.
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Publications, Inc., 727 F. Supp. 92 (S.D.N.Y. 1989), which
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involved an effort by another trademark infringer who sought
relief from a decree. Although the court's decision was issued
before Rufo, it was required to adhere to the teaching of Judge
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Friendly's opinion in New York State Ass'n for Retarded Children,
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Inc. v. Carey, 706 F.2d 956 (2d Cir. 1983), which foreshadowed
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Rufo. See 112 S. Ct. at 758-59 & n.6.
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In Tetra Sales, the court declined to follow the
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recommendation of a magistrate that a consent decree be modified
to allow a publisher to adopt a format for book covers that
differed from that required by the decree. The court noted an
earlier trademark case, King-Seeley Thermos Co. v. Aladdin
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Industries, 418 F.2d 31, 35 (2d Cir. 1969), in which Judge
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Friendly cautioned that the power to modify should be "sparingly
exercised," but concluded that relief should be available if the
appellant there could show that the decree too narrowly limited
use of a trademark that had become generic. A two year period
since the decree was held "not such a long period of time that
the Court should rush to make changes in the carefully negotiated
agreement between the parties." 727 F. Supp. at 96. The court
further noted the presence of contested evidence and the need for
rigid restrictions to "bring some peace to a highly charged
situation," id. at 97, and held that defendant had failed to
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carry its considerable burden.
We feel similarly about this case.
We conclude by noting briefly appellant's contention that
the district court did not balance ALC's trademark interest
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against his interest in using his own name. The principal cases
cited give him little comfort. E. & J. Gallo Winery v. Gallo
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Cattle Co., 967 F.2d 1280, 1288-89 (9th Cir. 1992), allowed a
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family member to continue using his name in a limited fashion on
a different product -- cheese, not wine. Taylor Wine Co. v.
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Bully Hill Vineyards, Inc., 590 F.2d 701, 703-04 (2d Cir. 1978),
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wound up approving a very restrictive injunction, which also
embodied a disclaimer. The same court, more recently, has
evidenced deep skepticism of the utility of disclaimers and, in
any event, would require empirical evidence demonstrating their
effectiveness in avoiding confusion. Home Box Office v.
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Showtime/The Movie Channel, 832 F.2d 1311, 1315-1317 (2d Cir.
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1987).
In the case at bar, there was no argument or evidence
concerning the subject of disclaimers. The only "balancing"
suggested was a request that appellant be allowed to use his own
full name in a different label format. In light of the not-so-
old decree, which found that the use of the Lichine name would be
likely to cause confusion, we see no abusive lack of balancing on
the part of the court.
In sum, at this time, on this record, we cannot say that the
district court abused its discretion.
AFFIRMED.
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