Kane v. Roxy Theatres Corp.

MANTON, Circuit Judge.

The order appealed from in this consolidated cause denied the receiver’s application for an injunction restraining the Radio-Keith-Orpheum Corporation (hereafter referred to as R. K. 0.) from using the name “Roxy,” but granted a petition, filed by R. K. 0., which sought relief against the receiver for the Roxy Theatres Corporation to the extent of permanently enjoining and restraining the corporation and its receiver from using the name “Roxy” or any simulation or variation thereof, as the name or any part of the name of its theatre at Seventh avenue between Fiftieth and Fifty-First streets, borough of Manhattan, city of New York, or any other theatre, except that it or its receiver may use the corporate name of the appellant in or in connection with any theatre owned or operated by it, provided said corporate name, as so used, is not displayed conspicuously either within or without the theatre. It forbade the use of the name “Roxy,” “Roxy’s Gang,” “Roxy’s Program,” or “Rothafel’s Program” in connection with its motion picture, musical, or dance presentations or entertainment or in connection with radio broadcasts either within or without the theatre, and forbade advertising within or without the theatre using the name of Rothafel or Roxy in connection with the operation of the theatre.

Samuel L. Rothafel obtained, under the nickname of Roxy, a valuable reputation in the entertainment business. On June • 26, 1925, he, with others, organized the Roxy Theatres Corporation, and became its president and a director. A site was purchased at Fiftieth street and Seventh avenue in New York City, upon which a theatre was built-having a seating capacity of 6,000. It was called the Roxy Theatre. On May 15, 1928, the trade-mark “Roxy” was granted to the corporation on an application filed August 31, 1927. This application was signed by Rothafel as president of the corporation. He became the manager and conducted the business of the corporation under a contract of employment dated July 31, 1925. The name “Roxy” has continuously been used in the operation of the theatre, and a large business has been established. The name was conspicuously displayed on large signs, permanently placed on three sides of the building, and widely advertised in the daily newspapers throughout the metropolitan district. It was also widely advertised by broadcasting over the radio. In financing the building there were issued $4,250,000 of first mortgage bonds; $2,500,000 of second mortgage notes, which, together with the stock bore the title of the Roxy Theatre. The name had become strongly identified with and advertised in connection with this theatre.

The employment contract provided that Rothafel would render services to the corporation as the director of the motion picture theatre “about to be constructed * " * and to be designed and known as the Roxy Theatre,” at $2,009 a week plus 10 per cent, of the net profits. An option was granted to the corporation for an extension of the contract for five years. The contract provided:

“6. If for any reason whatsoever, whether by limitation of time or otherwise, this contract shall terminate, the Corporation, agrees that it shall not have the right to continue to use the name of ‘Roxy’ as part of the name of said theatre, except that if it shall continue such use of the name, it shall pay for the privilege and license of using such name, a sum equal to ten per cent (19%) of the net profits derived by the Corporation from the said theatre, the building and the operation thereof, computed as in this contract provided to be paid * * * as provided in subdivisions (b) (e) and (d) of Article 4 hereof, such payments and accounts to continue for so long a time, without limitation whatsoever, as the name ‘Roxy1 shall be used as part of the name of said theatre. * * * 8. Rothafel hereby grants to the Corporation the right, during the term hereof, to use his name and the name ‘Roxy’ and the name ‘Roxy’s Gang5 and ‘Roxy’s Program,’ and ‘Rothafel’s Program’ in connection with the business and operation of said theatre and said building, and also to use his portrait and physical likeness in connection therewith as well.”

Rothafel continued employment under the 1925 contract until January 29, 1931, when a contract was made which provided that for the consideration of the sum of $5 and “of the mutual rescission to the extent herein provided,” the employment was canceled and terminated March 29, 1931. It provided for the exchange of releases and stated:

“Third. Rothafel hereby permits Corporation to continue the use of the name ‘Roxy’ on the theatre * ” * for the period between March 29, 1931 and September 11, 1932, but no longer. Rothafel waives his right to compensation for said use provided: (a) that the Corporation beginning with September 12, 1932 forever discontinues the use of said name ‘Roxy’ on the theatre, or in connection with its musical presentations, 'or in its corporate name, or in any manner 6r connection whatsoever, (b) That the Corporation on or before September 11, 1932, amends its corporate charter by deleting the word ‘Roxy’ from its corporate name. * *- jn -faQ eveI1(; 0f a breach by Corporation of any of the foregoing requirements, Rothafel shall be entitled to compensation for said use, in accordance with the provisions in this respect- contained in the contract annexed hereto as Schedule A (employment contract), but said compensation for any elapsed period shall be payable within ten (10) days after demand therefor by .Rothafel, and Rothafel shall also be entitled ;to enforce -any other rights and remedies against the Corporation that he may have, .both in law and in equity, by reason of said breach.”

On March 30, 1931, Rothafel entered into a -contract of employment with R. K. 0. and 'therein granted the use of the name “Roxy” ■for its new theatre at Forty-Ninth street and 'Sixth avenue, two blocks from the established Roxy Theatre; the name appearing in large electric signs and announced by advertisement. Both houses attract the same pub-■■lie, producing substantially the same form of entertainment.

RothafePs contract of employment with the appellant grants the privilege and licenses the use of the name “Roxy.” Paragraph 6 provides an exception and payment to Rothafel if the appellant should continue the use of the name “Roxy” after he left his association with it. The exception is not a provision for liquidated damages.' It is a license to continue on condition that payment be made as provided in the contract. Paragraph 8 does not contradict this. It deals with the privilege of using the names “Roth-afel” or “Roxy” in connection with the operation of the theatre. Such an operation might, indicate Rothafel personally was connected with it. When he left his association or the corporation’s employment, such right ceased, but the good will and use of the trade-name applied to the theatre and could be continued after he left the corporation provided payment was made pursuant to paragraph 6. Booth v. Jarrett & Palmer, 52 How. Prae. 169. This contract provided that Rothafel was to be continuously paid for the use of the name “Roxy” for so long a time, without limitation whatsoever, as the name “Roxy” shall be used as part of the name of said theatre. If the theatre was not to use the name “Roxy” after the contract had terminated, it was meaningless to provide for compensation for Rothafel as it did. We think it was within the contemplation of the parties that the appellant would continue to use the name “Roxy” after the termination of the contract of employment. The contract has no clause which would grant injunctive relief oh behalf of Rothafel in the event that the corporation should discontinue the use of the name “Roxy,” and there is no negative covenant which forbids its use. But article 10 of the contract contains a negative covenant and provides for injunctive relief in favor of the corporation. Article 8, we think, should be construed so as not to take from the corporation the right to use its corporate name. Amer. Steel Foundries v. Robertson, 269 U. S. 372, 46 S. Ct. 160, 70 L. Ed. 317; Higgins Co. v. Higgins Soap Co., 144 N. Y. 462, 39 N. E. 490, 27 L. R. A. 42, 43 Am. St. Rep. 769; Holmes, Booth & Haydens v. Holmes, Booth & Atwood Mfg. Co., 37 Conn. 278, 9 Am. Rep. 324.

The outstanding purpose of the contract of January 29, 1931, was to discontinue the Rothafel employment, but the rescission of his employment did not deprive the corporation of the right to use .the name “Roxy.” Holding, as we do, that the employment contract was the only source of the corporation’s rights the proper construction of the termination contract forces the conclusion that the parties did not intend entirely to rescind all the terms of the employment contract and affirmatively to deprive the corporation of its good will and its corporate name. The contract provides for the rescission of the first contract only “to the extent provided.” This is part of the consideration, and it presents the question of what part of the employment contract of July 31,1925, was left unreseind-ed. There continued the obligation to pay for the use of the name “Roxy” on the thea-tre, as provided in article 6 of the agreement of July 31, 1925, for it remained unreseind-ed. The corporation’s right existed to continue the use of the name on the theatre and to pay for such use. If the corporation discontinued the use of the name “Roxy” and amended its corporate charter by deleting the word “Roxy” from its corporate name, it was promised to have free use of the name “Roxy” for the period between March 29, 1931, and September 11,1932, but no longer. Article 3, upon which the appellee relied for the terms of cancellation, provides only that, in the event of a breach by the corporation of any of the requirements there mentioned, Rothafel would be entitled to compensation for such use in accordance with the provisions in this respect contained in the employment contract. But there was no promise in this agreement on the part of the corporation to discontinue the use of the name “Roxy.” The proper interpretation of article 3 permitted the corporation to use the name “Roxy” free of charge for the limited period therein mentioned. The contract’s purpose was to accelerate the expiration date of the employment agreement which Rothafel had with the corporation, and in return for that Rothafel permitted the corporation to use the name free of any liability to him to pay the contingent percentage, conditioned upon the performance of certain acts mentioned in article 3 by the corporation.

It is true the directors authorized the officers to execute an agreement to amend the first contract so that it would terminate on March 29, 1931, but this resolution did not authorize cancellation completely by amendment, but only that the personal obligations should end on March 29, 1931, and the corporation for a time be relieved of the condition of paying compensation for the exercise of its license to use the name “Roxy” on the theatre. If the contract went further, it was without authority of the board of directors. The first paragraph provides that the executory rights shall cease as if March 29, 1931, had been the date of expiration originally provided. There is no express relinquishment of the license, and none may be implied, for the implication of negative covenants is not favored. Macloon v. Vitagraph, Inc., 30 F.(2d) 634 (C. C. A. 2). Moreover, a release and the destruction of an important trade-name and good will of the corporation which cost very considerable sums must plainly appear. Commerce Trust Co. of Baltimore v. Chandler, 295 F. 241 (C. C. A. 1); Matter of Timmis, 200 N. Y. 177, 93 N. E. 522. We think the intention was otherwise. The parties apparently recognized that the corporation might not discontinue the use of the name “Roxy” or change its corporate name. Failure to do either, the parties said in article 3, revived the obligation to pay compensation as provided in the old contract, except that payment could be accelerated by Rothafel’s demand.

We think it was not intended to end the license by this contract. The intention of the parties must be found within the language of the contract, and much of the testimony taken before the master was irrelevant. The right to the injunction must be found in the written contract. Under the circumstances, the use of the name “Roxy” by the appellant in its theatre and advertising was not a fraud upon the public. Booth v. Jarrett & Palmer, supra.

We think the appellant was entitled to some of the relief it prayed for. The name “Roxy” had become associated with the business of the appellant, and its use by the appellee on its nearby theatre should be pro-' hibited. The right to use the name granted to the corporation is a license. The continued use of the corporate name must be protected. American Steel Foundries v. Robertson, 269 U. S. 372, 46 S. Ct. 160, 70 L. Ed. 317. Whatever rights the appellee may have in the name “Roxy” necessarily are subject to the prior rights of the appellant. They may not use the name “Roxy” on a competing theatre. Holmes, Booth & Haydens v. Holmes, Booth & Atwood Mfg. Corp., 37 Conn. 278, 9 Am. Rep. 324; Higgins Co. v. Higgins Soap Co., 144 N. Y. 462, 39 N. E. 490, 27 L. R. A. 42, 43 Am. St. Rep. 769. It would he unfair competition to do so. It cannot do indirectly that which it could not do directly. The appropriation of the name “Roxy” by the appellee is equivalent to an appropriation of the corporate title of the appellant under the-circumstances, and equity will enjoin such unfair appropriation of good will. De Nobili Cigar Co. v. Nobile Cigar Co., 56 F.(2d) 324 (C. C. A. 1); Dobbs & Co. v. Cobbs Haberdasher, Inc., 226 App. Div. 372, 235 N. Y. S. 422.

The injunctive relief granted to the appellant will be limited to restraining the use of the name “Roxy” to designate the theatre which is in competition with the appellants. The appellee is not restrained from advertising its employment of “Rothafel” or “Roxy,” but it must do so in a manner which, will avoid confusing its theatre with that of the appellant.

Jurisdiction is sustained for this suit is ancillary to the main suit. Hume v. City of New York, 255 F. 488 (C. C. A. 2).

Decree reversed.