
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                                         -3-          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                                         -4-          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                                         -5-          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:                                         -7-                    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                                                                    ____                                         -9-          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          ___________________                                         -11-          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.               ________                                         -13-
