Sea-Roy Corp v. Parts R Parts Inc ( 1999 )

UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
SEA-ROY CORPORATION;
AMERAMAX CONTRACTORS
EQUIPMENT AND SUPPLIES,
INCORPORATED,
Plaintiffs-Appellants,
TRIMM, INCORPORATED; CHRIS R.
SMITH,
Counter-Defendants-
Appellants,
v.
No. 98-1028
PARTS R PARTS, INCORPORATED, a/k/a
P.R.P., Incorporated; RAMMAX
MASCHINENBAU, GMBH; MULTIQUIP,
INCORPORATED; SUNBELT EQUIPMENT
& RENTALS, INCORPORATED,
Defendants-Appellees,
and
FARYMANN DIESEL, GMBH; KRACHT,
GMBH,
Defendants.
SEA-ROY CORPORATION;
AMERAMAX CONTRACTORS
EQUIPMENT AND SUPPLIES,
INCORPORATED,
Plaintiffs-Appellants,
TRIMM, INCORPORATED; CHRIS R.
SMITH,
Counter-Defendants-
Appellants,
v.
No. 98-1546
PARTS R PARTS, INCORPORATED, a/k/a
P.R.P., Incorporated; RAMMAX
MASCHINENBAU, GMBH; MULTIQUIP,
INCORPORATED; SUNBELT EQUIPMENT
& RENTALS, INCORPORATED,
Defendants-Appellees,
and
FARYMANN DIESEL, GMBH; KRACHT,
GMBH,
Defendants.
Appeals from the United States District Court
for the Middle District of North Carolina, at Durham.
William L. Osteen, Sr., District Judge.
(CA-94-59-1)
Argued: October 29, 1998
Decided: March 4, 1999
Before WILKINSON, Chief Judge, WILLIAMS, Circuit Judge,
and THORNBURG, United States District Judge for the
Western District of North Carolina, sitting by designation.
_________________________________________________________________
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Affirmed by unpublished per curiam opinion.
_________________________________________________________________
COUNSEL
ARGUED: Carey Paul DeDeyn, SUTHERLAND, ASBILL &
BRENNAN, L.L.P., Atlanta, Georgia, for Appellants. Alan Mitchell
Wiseman, HOWREY & SIMON, Washington, D.C., for Appellees.
ON BRIEF: John A. Chandler, SUTHERLAND, ASBILL & BREN-
NAN, L.L.P., Atlanta, Georgia, for Appellants. Michael G. Cowie,
Joseph A. Ostoyich, HOWREY & SIMON, Washington, D.C., for
Appellees.
_________________________________________________________________
Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).
_________________________________________________________________
OPINION
PER CURIAM:
Defendant RAMMAX is a small German manufacturer of trench
roller compaction machines used in the construction industry. From
1981 through 1991, RAMMAX distributed its rollers in the United
States through plaintiff Sea-Roy Corporation, a small company com-
pletely owned by its founder and president, Chris Smith. In 1991, by
reason of payment arrearages, RAMMAX terminated the exclusive
agreement it had with Sea-Roy, and entered into an order-by-order
arrangement with Sea-Roy, as well as with another, larger U.S. distri-
bution company, defendant Multiquip, Inc. By the end of 1992, Sea-
Roy was indebted to RAMMAX for approximately $1.8 million.
RAMMAX then terminated Sea-Roy and entered into an exclusive
distribution agreement with Multiquip.
Three months later, Sea-Roy and two other companies owned and
controlled by Smith, plaintiffs AMERAMAX and Trimm, Inc., intro-
duced their own trench roller. This roller, in design and detail, was
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essentially a duplicate of the RAMMAX model previously distributed
by Sea-Roy.
In 1994, Sea-Roy filed suit against Parts-R-Parts, a distributor of
engines and parts used in production of the RAMMAX and Sea-Roy
rollers, alleging restraint of trade by Parts-R-Parts in refusing to pro-
vide certain parts Sea-Roy needed to produce its rollers. RAMMAX
and other defendants were added by amended complaint alleging con-
spiracy and other causes of action. Defendants other than RAMMAX
and Multiquip were previously dismissed and did not appear as par-
ties to the appeal.
Plaintiffs sought to go to trial on claims of breach of contract, tor-
tious interference with contractual relations, trademark infringement
under the Lanham Act, violations of the Sherman Antitrust Act and
Robinson-Patman Act, and defamation and unfair competition. RAM-
MAX and Multiquip counterclaimed alleging trademark infringement
and debts due on Sea-Roy's open account. Defendants also presented
a "piercing the corporate veil" claim against Sea-Roy and owner
Smith.
Prior to trial, the district court granted defendants' motions for
summary judgment on all of the plaintiffs' claims except breach of
contract. The court also granted summary judgment in favor of defen-
dants on the trademark infringement counterclaim, reserving only the
issues of willfulness and damages for the jury. At the close of plain-
tiffs' evidence on the breach of contract claim, the district court
granted judgment as a matter of law for the defendants. The only
issues to reach the jury were the defendants' issues of piercing the
corporate veil, willfulness of infringement, and damages. The jury
returned a verdict against the plaintiffs on each of these issues.
Plaintiffs filed an extensive appeal, asserting as error the following:
1) the grant of summary judgment in favor of the defendants on the
trademark infringement claim; 2) dismissal of plaintiffs' motion for
judgment as a matter of law on defendants' counterclaim to pierce the
corporate veil; 3) the award of damages in deutschemarks rather than
dollars; 4) the exclusion of evidence concerning the amount due on
plaintiffs' open account; 5) the district court's instructions to the jury
on the plaintiffs' "willingness"; 6) the district court's denial of plain-
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tiffs' motion for judgment as a matter of law on the calculation of
plaintiffs' profits; 7) the district court's granting of defendant's
motion for judgment as a matter of law on plaintiffs' breach of con-
tract claim; 8) the district court's exclusion of plaintiffs' evidence as
to lost profits; and 9) the district court's granting of Multiquip's
motion for summary judgment dismissing plaintiffs' tortious interfer-
ence with contract claim.
This Court has jurisdiction pursuant to 28 U.S.C.§ 1291.
We review a district court's granting of summary judgment de
novo. See Wiley v. Mayor and City Council of Baltimore, 48 F.3d 773(4th Cir. 1995). The Court must consider all the pleadings and allega-
tions in a light most favorable to the non-moving party and decide
whether there is a genuine issue of material fact to be submitted to the
trier of fact. Fed. R. Civ. P. 56(c). If the Court finds the evidence
insufficient to support a reasonable jury verdict in favor of the non-
moving party, the district court's granting of summary judgment must
be affirmed. See Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 251-
52 (1986).
We also review a district court's grant or denial of a Motion for
Judgment as a Matter of Law de novo as a question of law. See Tools
USA & Equip. Co. v. Champ Frame Straightening Equip., Inc., 87
F.3d 654, 656 (4th Cir. 1996).
Accordingly, this Court will review de novo the issues as to sum-
mary judgment and judgment as a matter of law.
Plaintiffs concede that RAMMAX is a registered trademark and
that registration establishes "prima facie evidence of the registrant's
right to use the mark," and a "strong presumption of validity" as well.
Pizzeria Uno Corp. v. Temple, 747 F.2d 1522, 1529 (4th Cir. 1984).
Plaintiffs contend, however, that an issue of material fact exists as to
whether the name RAMMAX was generic.
A trademark only becomes generic when it is proved by a prepon-
derance of the evidence that consumers no longer view it as indicative
of the product's source, but rather as synonymous with the entire class
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of products, regardless of manufacturer. Id. at 1529 n.4. The court
below ruled as a matter of law that the plaintiffs failed to demonstrate
an issue of material fact sufficient to overcome the presumptive valid-
ity of the RAMMAX name. The court's analysis began with the plain-
tiffs' own admission that they had no right to use the RAMMAX
name, and proceeded through the factors outlined by this Circuit in
Sara Lee Corp. v. Kaiser-Roth Corp., 81 F.3d 455 (4th Cir. 1996).
We find no error in its conclusion.
The test for trademark infringement is the "likelihood of confusion"
of the consumer; actual confusion is not required. Id. at 463.
To ascertain the likelihood of confusion between two trade-
marks, we consider a number of factors. These factors
include:
(1) the distinctiveness of the senior mark;
(2) the similarity of the two marks;
(3) the similarity of the goods or services that the
marks identify;
(4) the similarity of the facilities employed by the
parties to transact their business;
(5) the similarity of the advertising used by the
parties;
(6) the defendant's intent in adopting the same or
similar mark, and
(7) actual confusion.
Id. (quoting Pizzeria Uno, 747 F.2d at 1527). Courts routinely grant
relief where the likelihood of confusion is obvious. See Lone Star
Steakhouse & Saloon, Inc. v. Alpha of Virginia, Inc. , 43 F.3d 922, 925
(4th Cir. 1995). The district court used the above seven factors, and
two additional factors, 8) the quality of the infringer's product, and
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9) the sophistication of the relevant consuming public, in reaching its
decision.
Factors 1, 3, 4, 5, 6, and 8 (six of nine) were uncontested by the
plaintiffs, although these factors support a finding of infringement.
Factor 1, the distinctiveness of the RAMMAX mark, is established by
the fact that the name is a fanciful term "specifically invented to iden-
tify a company and its products," and thus it is entitled to the widest
possible protection of the law. Sara Lee, 81 F.3d at 465. Factors 3
(goods), 4 (facilities), 5 (advertising), and 8 (quality), are uncontested
and established by the facts that marks of both plaintiff AMERA-
MAX and defendant RAMMAX are used on the same goods (trench
rollers), manufactured and sold in similar facilities, the goods are
nearly identical, the goods are of comparable quality and are sold in
direct competition with each other, and they are advertised in the
same publications in a similar manner. Thus, the district court con-
cluded correctly that the "parties are fierce competitors in the same
industry, offering virtually identical products to the same class of con-
sumers by similar means." (J.A. at 2634.)
Factor 6, the infringer's intent, is established in this case by both
plaintiffs' admissions and conduct. Plaintiffs' witness Smith testified
that he "could have sold [his roller] under any name that was open,"
but that he specifically chose a name to build upon the RAMMAX
mark, already established among consumers with a good reputation,
and that he admittedly copied the RAMMAX's roller piece by piece,
including the orange color, so as to associate plaintiffs' machine with
the RAMMAX machines. Also, being a "second comer" to the market
where RAMMAX was first, the plaintiffs had a duty to"so name and
dress [their] product as to avoid all likelihood of consumers confusing
it with the product of the first comer." Osem Food Indus. Ltd. v. Sher-
wood Foods, Inc., 917 F.2d 161, 165 (4th Cir. 1990). The district
court correctly found that the plaintiffs' failure to distinguish their
product from that of RAMMAX weighed in favor of intentional
infringement.
Factor 2, the similarity of the two marks, is also clear in this case.
Although the names, "AMERAMAX" and "RAMMAX", are not
identical, they are very similar in both appearance and sound. The two
words share five common letters, in the same sequence, and are pro-
7
nounced similarly. Both marks are presented, on virtually identical
products, in virtually identical type styles, being all-capital, block let-
ters.
In light of these facts, the district court was correct in finding that
the two marks are very similar and thus this factor weighs in favor of
finding a great "likelihood of confusion." All the factors in the analy-
sis weigh in favor of a great likelihood of confusion, and a finding of
infringement on the part of the plaintiffs. The district court was, there-
fore, correct in finding for the defendants on the cross claim for trade-
mark infringement.
North Carolina adheres to the "mere instrumentality" rule in pierc-
ing the corporate veil claims. Glenn v. Wagner , 313 N.C. 450, 453,
329 S.E.2d 326, 329 (1985). To pierce a corporate veil, one must
prove that the subject individual: 1) controlled or dominated the sub-
ject corporation; 2) used that control to commit a wrong or unjust act,
and 3) caused injury or loss to the complaining party. Id. at 455, 329
S.E.2d at 330. Further factors considered in determining whether to
pierce a corporate veil include: 1) inadequate capitalization; 2) non-
compliance with corporate formalities; 3) complete domination and
control of the corporation so that it has no separate identity, and 4)
excessive fragmentation of a single enterprise into separate corpora-
tions. Id. at 455, 329 S.E.2d at 330-31.
Plaintiffs argue that the jury verdict in favor of the defendants on
their "piercing the corporate veil counterclaim" fails as a matter of
law.
The evidence supporting the jury verdict is substantial. From the
evidence presented, the jury could find that Smith, owner of Sea-Roy,
fraudulently conveyed assets to AMERAMAX, a wholly-owned sub-
sidiary, in order to prevent RAMMAX from recovering the debt owed
by Sea-Roy; that he personally controlled or dominated his three com-
panies; that funds of his companies were commingled; that the com-
panies routinely paid the debts of the others; that corporate funds
were used to pay Smith's personal debts; that his companies shared
offices, personnel, parts and accounting departments and the same
telephone and facsimile numbers; and that Smith still makes key com-
pany decisions. Such evidence was more than sufficient to support a
8
jury verdict against plaintiffs. See Atlantic Tobacco Co. v. Honeycutt,
101 N.C. App. 160, 168, 398 S.E.2d 641, 645 (1990).
Plaintiffs contend that the district court committed error in instruct-
ing the jury to award damages in deutschemarks rather than dollars.
This assignment of error is without merit. "The court should enter the
judgment in the currency the parties themselves selected for their
dealings, the currency in which the loss is felt." Matter of Oil Spill
by Amoco Cadiz, etc., 954 F.2d 1279, 1328 (7th Cir. 1992); see also
In re Good Hope Chem. Corp., 747 F.2d 806, 809 (1st Cir. 1984)
(award in deutschemarks); Mitsui & Co., Ltd. v. Oceantrawl Corp.,
906 F. Supp. 202, 203 (S.D.N.Y. 1995) (award in yen). The parties
in this case conducted their dealings in deutschemarks. The loss suf-
fered by RAMMAX, a German corporation, was felt in deutsche-
marks. The district court committed no error by instructing the jury
to award damages in the currency in which the parties themselves
chose to deal. The court's instructions clearly and fairly focused the
jury on the finding it was to make.
Plaintiffs next assign as error the exclusion of evidence concerning
the amount due on its open account.
This Court gives substantial deference to a lower court's decision
to exclude evidence and will reverse only on a showing of abuse of
discretion. See United States v. Achiekwelu, 112 F.3d 747, 753 (4th
Cir.), cert. denied, 118 S. Ct. 250 (1997).
After the trial had entered its second day, plaintiffs undertook to
introduce new summary exhibits purporting to establish "offsets"
showing RAMMAX owed plaintiffs money rather than the reverse.
Plaintiffs' contemporaneous financial records did not reflect such off-
sets, only their debts. Plaintiffs sought to introduce the summary "off-
sets" through an employee who testified he had no responsibility for
the records during the time frame in question. The plaintiffs had not
complied with the timetable for discovery established by Fed. R. Civ.
P. 26(a)(3), although the case had begun more than three years earlier,
and the records had been in their possession and available for summa-
tion the entire time. No meaningful advance notice had been pro-
vided. The district court found the late tender to be fundamentally
9
unfair to defendants and excluded the evidence. No clear abuse of dis-
cretion is shown.
The plaintiffs also assign as error the district court's instruction on
"willfulness" when discussing trademark infringement. The court
instructed as follows:
The Court has found as a matter of law that the use of the
name AMERAMAX does constitute trademark infringement
of RAMMAX's trademark. . . . The burden is upon RAM-
MAX to prove by the greater weight of the evidence that the
infringement was willful. I instruct you that the matter was
done willfully, if it was done knowingly, deliberately, and
intentionally as contrasted with accidentally, carelessly, or
unintentionally. The term willfully refers to the state of
mind with which one acts. Thus, you should determine
whether the infringement was willful.
(J.A. at 2530-31.) "It is not the appellate function to pick myopic fault
with trial instructions. The question is whether the charge focused the
eye of the jury clearly and fairly on the finding it was to make."
Nelson v. Green Ford, Inc., 788 F.2d 205, 209 (4th Cir. 1986). While
it may be argued that an infringer must be found to have the specific
intent to cause confusion or deception before willfulness can be
found, there is no such explicit requirement in this Circuit. See
George Basch Co., Inc. v. Blue Coral, Inc., 968 F.2d 1532, 1537-41
(2nd Cir. 1992). Even if such were the rule, the instruction would
appear to be adequate since the jury is clearly focused on the finding
it is to make. The evidence demonstrates an intentional infringement,
and the similarity is in no respect a serendipitous coincidence of
marks and products of two different manufacturers. The jury was thus
properly instructed.
Plaintiffs next contend error for failure to grant judgment as a mat-
ter of law on their calculation of profits.
Defendants presented an accounting expert who testified that the
plaintiff companies' internal financial records reflected that they had
earned a total of $4 million in profits from the infringement of defen-
dants' mark after deducting the cost of goods sold. Plaintiffs did not
10
challenge the admissibility of the expert's opinion or present rebuttal
evidence. Section 1117 of the Lanham Act states,"[i]n assessing prof-
its the plaintiff shall be required to prove defendant's sales only;
defendant must prove all elements of cost or deduction claimed."
Plaintiffs' duty in the calculation of damages is clear. They did not
avail themselves of the opportunity at trial to establish the elements
of cost and deduction now asserted. A de novo review establishes the
propriety of the district court's refusal to grant plaintiffs' motion for
judgment as a matter of law on infringement damages.
Plaintiffs likewise dispute the lower court's grant of defendants'
motion for judgment as a matter of law dismissing the breach of con-
tract claim.
The jury found that plaintiffs were indebted to defendants by fail-
ure to pay for goods received. (J.A. at 2647.) Plaintiffs agreed that
refusal to pay for goods received could constitute grounds for contract
cancellation. "When the buyer fails to pay the price as it becomes due,
the seller may recover . . . the price of the goods accepted." N.C. Gen.
Stat. § 25-2-709 (1994). "[T]he general rule governing contracts
requires that if either party commits a material breach of the contract,
the other party should be excused from the obligation to perform fur-
ther." Crosby v. Bowers, 87 N.C. App. 338, 345, 361 S.E.2d 97, 102
(1987); see also American Hot Rod Ass'n, Inc. v. Carrier, 500 F.2d
1269, 1273 (4th Cir. 1974) (citing Edgerton v. Taylor, 184 N.C. 571,
115 S.E. 156, 159 (1922)); McCurry v. Purgason , 170 N.C. 463, 87
S.E. 244, 246 (1915) (citing Ducker v. Cochrane , 92 N.C. 597(1885)). Plaintiffs' failure to pay for the rollers received under the
contract constituted an antecedent breach of the contract and justified
termination by defendants. See Leviton Mfg. Co., Inc. v. Butch Mfg.
Co., 37 N.C. App. 726, 728, 247 S.E.2d 1, 2 (1978). The lower
court's ruling was correct.
Nor does plaintiffs' claim that an oral modification of the contract
altered the terms of payment entitle plaintiffs to relief. The only evi-
dence to support this contention was Smith's own testimony concern-
ing an alleged phone call. There was no evidence to corroborate the
call and no mention to defendants concerning such a call when pay-
ment was demanded numerous times over a period of several months.
"Evidence of an oral agreement which modifies a written contract
11
should be clear and convincing. We do not think[plaintiffs' state-
ment] satisfies this requirement. The evidence, if allowed, would not
be sufficient for submission to the jury." Ford Motor Credit Corp. v.
Jordan, 5 N.C. App. 249, 253, 168 S.E.2d 229, 232 (1968) (citations
omitted).
We also conclude that the district court correctly dismissed plain-
tiffs' claim for tortious interference by defendant Multiquip. "Mul-
tiquip's actions were of the type expected in a hearty competitive
environment where rivals must continually market themselves as
offering a better product or service where justified in order to sur-
vive." (J.A. at 2594.) See also Waldrep Bros. Beauty Supply, Inc. v.
Wynn Beauty Supply Co., Inc., 992 F.2d 59, 63 (4th Cir. 1993).
To establish a claim for tortious interference with contractual rela-
tions, a plaintiff must prove: 1) a valid contract between the plaintiff
and a third person which confers upon the plaintiff a contractual right
against a third person; 2) the defendant knew of the contract; 3) the
defendant intentionally induces the third person not to perform the
contract; 4) in so doing, the defendant acts without justification; and
5) the plaintiff suffers damages as a result. See United Laboratories,
Inc. v. Kuykendall, 322 N.C. 643, 661, 370 S.E.2d 375, 387 (1988).
Multiquip could not have interfered with a contract which was not
breached. Multiquip simply sought RAMMAX's business and mar-
keted its superior financial condition and service. (J.A. at 2593.) This
it had a right to do. Given plaintiffs' admitted poor performance, it
was not surprising or improper for RAMMAX to select Multiquip as
its new exclusive distributor for its rollers.
The Court has examined the remaining issues presented by this
appeal and finds no reversible error.
For the reasons set forth above, the judgment of the district court
is
AFFIRMED.
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