Lichine & Cie v. Lichine Estate

• Court: Court of Appeals for the First Circuit
• Decided: January 30, 1995
• Docket: 94-1918
• Status: Published

Opinion

USCA1 Opinion

UNITED STATES COURT OF APPEALS
                                FOR THE FIRST CIRCUIT

                                 ____________________

        No. 94-1918

                                ALEXIS LICHINE & CIE.,

                                 Plaintiff, Appellee,

                                          v.

                     SACHA A. LICHINE ESTATE SELECTIONS, LTD, AND
                                    SACHA LICHINE,

                               Defendants, Appellants.

                                 ____________________

                     APPEAL FROM THE UNITED STATES DISTRICT COURT

                          FOR THE DISTRICT OF MASSACHUSETTS

                [Hon. Walter Jay Skinner, Senior U.S. District Judge]
                                          __________________________
                                 ____________________

                                        Before

                                 Selya, Circuit Judge,
                                        _____________
                            Coffin, Senior Circuit Judge,
                                    ____________________
                              and Stahl, Circuit Judge.
                                         _____________

                                 ____________________

            Stanley  S.  Arkin with  whom  Harry B.  Feder  was  on  brief for
            __________________             _______________
        appellant.
            Jonathan E.  Moskin with whom Robert  M. Kunstadt was on brief for
            ___________________           ___________________
        appellee.

____________________

                                   January 30, 1995
                                 ____________________



COFFIN, Senior  Circuit Judge.    In this  trademark case  a
                       _____________________

          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
                                 ___________________

               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

____________________

               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.

                                         -2-



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
                                  _________________

                  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.

                                         -6-



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.
                         ____    ______________________________

          748,  758 (1992), and  instead adhered to  the sterner ("grievous

          wrong")  standard of United States v.  Swift & Co., 286 U.S. 106,
                               _____________     ___________

          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
                                           ____
               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 
                                     __________

               Standard  governing  modification.   We  first  consider the
               _________________________________

          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
                                                    _____

          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.  
                            __

               Reaffirming the  need for flexibility emphasized  in Railway
                                                                    _______

          Employees v. Wright, 364  U.S. 642, 647-648 (1961), the  Court in
          _________    ______

          Rufo disavowed any "talismanic quality" in  the Swift language or
          ____                                            _____

          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
                       ____                                ____

          involving institutional  reform,  we  do  not read  it  as  being

          confined in principle  to such cases.  In our view, Rule 60(b)(5)

                                         -8-



sets forth the  umbrella concept of  "equitable" that both  Swift
                                                                      _____

          and Rufo apply to particular, widely disparate fact situations.
              ____

               Indeed, the Rufo Court quoted the basic distinction drawn in
                           ____

          Swift between decrees protecting "rights fully accrued upon facts
          _____

          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
                                                                __

          (quoting  from 286 U.S. at 114-15).  Swift illustrates the former
                                               _____

          and Rufo the latter.   We view this not as  a limited dualism but
              ____

          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
                                                   _____________

          195, 198 (7th Cir. 1993), viewing Rufo's flexible standard as "no
                                            ______

          less suitable  to  other types  of equitable  case[s]," but  also

          share  the concerns voiced in  cases like W.L.  Gore & Assocs. v.
                                                    ____________________

          C.R. Bard, Inc., 977 F.2d 558, 560-62 (Fed. Cir. 1992), about the
          _______________

          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
                       _____

          Rufo, we apply Rule 60(b)(5) having  in mind that we are  dealing
          ____

          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
                         ___

          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
                    __

          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
                                                                     ______

          States  v. Boch  Oldsmobile, Inc.,  909 F.2d  657, 660  (1st Cir.
          ______     ______________________

          1990).

               Application of standard.  Having set forth our approach,  we
               _______________________

          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,
                              
          ____________________

               2 Arguably,  a different approach might  be appropriate when
          such cases involve issues more laden with a public interest, such
          as antitrust.

                                         -10-



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.
                                           _____________________     ______

          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
                 ____

          Friendly's opinion in New York State Ass'n for Retarded Children,
                                ___________________________________________

          Inc.  v. Carey, 706 F.2d  956 (2d Cir.  1983), which foreshadowed
          ____     _____

          Rufo.  See 112 S. Ct. at 758-59 & n.6.  
          ____   ___

               In   Tetra  Sales,   the  court   declined  to   follow  the
                    ____________

          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
                                     _________________________      _______

          Industries,  418 F.2d  31,  35 (2d  Cir.  1969), in  which  Judge
          __________

          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
                       ___

          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

-12-



against his interest in using his own name.  The principal  cases

          cited  give him little  comfort.  E.  & J. Gallo  Winery v. Gallo
                                            ______________________    _____

          Cattle Co., 967  F.2d 1280,  1288-89 (9th Cir.  1992), allowed  a
          __________

          family  member to continue using his name in a limited fashion on

          a different  product --  cheese, not  wine.   Taylor Wine  Co. v.
                                                        ________________

          Bully  Hill Vineyards, Inc., 590 F.2d 701, 703-04 (2d Cir. 1978),
          ___________________________

          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.
                                                      _________________

          Showtime/The  Movie Channel,  832 F.2d  1311, 1315-1317  (2d Cir.
          ___________________________

          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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