author: WILLIAM E. MILLER, Circuit Judge.

text:
    BITUMINOUS FIRE & MARINE INSURANCE COMPANY, Appellant, v. IZZY ROSEN’S, INC., Appellee.
    No. 73-1313.
    United States Court of Appeals, Sixth Circuit. .
    Argued Nov. 27, 1973.
    Decided and Filed March 21, 1974.

      Eugene C. Gaerig, Memphis, Tenn., on brief, for appellant.
    Thomas R. Prewitt, and Edward M. Kaplan, Memphis, Tenn., on brief, for appellee.
    Before PHILLIPS, Chief Judge, and CELEBREZZE and MILLER, Circuit Judges.
   WILLIAM E. MILLER, Circuit Judge.

This appeal is from a judgment in favor of appellee, Izzy Rosen’s, Inc., against appellant, Bituminous Fire & Marine Insurance Company, for failure to take over the defense, and otherwise fully to insure appellee, in an action brought against it for slander and false arrest. The insurance company denied coverage, and this action followed.

In 1962 Harry Rosen, acting for ap-pellee, purchased a multi-peril insurance policy from United States Fidelity & Guaranty Company through the insurance agency of Ronald Gruenewald. When that policy was about to expire, Gruenewald was ill, so Rosen purchased another policy from a different agent. In December of 1968 Gruenewald again solicited Rosen’s business and was successful. This policy was issued by appellant. Subsequently, in December of 1969, an action was brought against ap-pellee by one Shelton for false arrest and slander, and appellee requested appellant to defend on its behalf. Appellant denied that the policy it had issued to appellee covered such personal injury risks as slander, libel and false arrest. The action against appellee was eventually settled for $9,000.00.

Appellee instituted the present action in the court below, on the basis of diversity of citizenship, seeking the funds which it had paid in settlement and also the attorney’s fees expended in its defense. Three alternative theories of liability were presented: (1) That the insurance policy covered slander and false arrest, and therefore, appellant owed a duty to defend and insure; (2) that if the policy did not provide coverage, the court should reform the policy to provide coverage and award damages due to mutual mistake; and (3) that damages should be awarded against appellant because of the negligence of its agent, Gruenewald.

At trial Harry Rosen testified that one of his concerns, as he considered which insurance policy to buy, was whether his company would be protected from any liability that might arise from the arrest of any person in the store whom an employee might accuse of illegal activity. Shoplifting and forgery had always been problems, but the civil unrest that occurred in the wake of the assassination of Dr. Martin Luther King, Jr. seemed to aggravate the problem. Rosen stated that he told Gruene-wald: “Ronnie, there is one thing that concerns me now, and that is liability coverage, and I want full liability coverage.” He testified that the agent replied: “You’ve got full liability coverage; you’ve got a very complete policy.” Rosen took the policy to his downtown store but never read it.

Gruenewald testified that Rosen’s major concern had been with the possible theft of a large amount of merchandise. Consequently, the policy contained a very high limit on damage or theft of property. However, Gruenewald denied that Rosen asked for “full liability protection” or that he (Gruenewald) made the statement that such protection was provided. In fact, he testified that at the time the policy was written, specific coverage for false arrest, libel and slander were not common risks covered by insurance policies. Most people in the retail trade had told the agent, as he testified, that they did not wish to pay the high premium for this type of policy.

At the conclusion of the appellee’s case, and again after all of the evidence had been presented, appellant moved for a directed verdict. Both motions were denied. The court then instructed the jury on such general matters as the preponderance of the evidence, the burden of proof and the credibility of witnesses. It gave no instructions on any legal principle or standard to be applied to the facts which the jury should find. Four special interrogatories were submitted to the jury which it answered as follows:

1. Did Harry Rosen at the time the Bituminous Fire & Marine Insurance Company policy was delivered by Ronald Gruenewald, tell Mr. Gruene-wald that he wanted full liability protection ?

Answer: No.

2. Was it the intention of the plaintiff acting through Harry Rosen that the policy issued by defendant and delivered by Mr. Gruenewald include coverage for libel and slander, false arrest, false imprisonment, and malicious prosecution?

Answer: Yes.

3. Did Mr. Gruenewald assure Mr. Rosen that the Bituminous Fire & Marine Insurance Company policy which he delivered would give Izzy Rosen’s, Inc., full liability protection?

Answer: No.

4. Did Mr. Gruenewald know or should he have known as an experienced insurance agent that it was the intention of Mr. Rosen that the policy delivered by Mr. Gruenewald was intended to include coverage for libel and slander, false arrest, false imprisonment and malicious prosecution?

Answer: Yes.

To the conclusions of the jury, the court added separate findings of fact of its own. It found that Harry Rosen was not experienced in insurance matters. Additionally, it found that Gruenewald, although he had not defrauded Rosen, “was negligent with regard to the intent of Rosen to obtain full coverage, including personal injury protection.” The court then applied what it believed to be the law to its own findings of fact and the answers by the jury to the interrogatories :

If the agent of the insurer delivers to the insured a policy which is known or should be known to be defective with regard to certain coverage, such conduct is a representation that the policy contains coverage for the purpose intended. If the insured is ignorant of the omitted coverage and has no special competence or experience in insurance matters, he is privileged to rely upon that representation without reading or being charged with knowledge of the contents of the policy.

Henry v. Southern Fire and Casualty, 46 Tenn.App. 335, 364-365 [330 S.W.2d 18] (1958).

Because Harry Rosen as agent of the plaintiff intended to include coverage for libel, slander and false arrest, and because Gruenewald as agent for the defendant insurance company knew or should have known that Ro-sen intended full coverage, the defendant is liable for the amount paid Shelton plus the expenses incurred in the State Court litigation less the amount of the cost of the coverage for personal injury protection.

As already mentioned, the conclusion of the district court and that of the jury was that Gruenewald, as appellant’s agent, either knew or should have known that appellee intended to have full liability coverage. The agent, according to the court’s separate finding, was “negligent” in not writing such coverage into the policy, and his negligence was imputed to the appellee. As support for its decision, the court relied principally upon the Tennessee Appeals Court decision in Henry v. Southern Fire & Casualty Co., 46 Tenn.App. 335, 330 S.W.2d 18 (1958).

In Henry the issue was whether a certain trailer which the insureds used in their logging operation was actually covered by the policy despite a clause that excluded coverage on all trailers not specifically described in the policy. This particular trailer was not so described. However, there was evidence that the insured had requested a liability policy that would cover the entire operation of its business. The insurance agent, Dr. Cox, was familiar with the business and assured the owners that they had full liability coverage. At the conclusion of the evidence the trial judge sustained a motion to dismiss. On appeal the court of appeals reversed, holding that the plaintiff’s evidence, if believed by the jury, was sufficient to support a cause of action. The opinion appears to rest upon the theory of estoppel to rely upon an exclusion from coverage contained in the policy although mistake or negligence may be the basis for the estoppel. This explains the district court’s quotation from the Henry opinion set forth and the wording of interrogatory No. 4. What the court overlooked, however, was that in Henry there was a specific exclusionary clause while in the present case there is neither an insuring agreement as to the risks involved nor an exclusionary clause.

An important clarification of Henry appears in E. K. Hardison Seed Co. v. Continental Casualty Co., 56 Tenn.App. 644, 410 S.W.2d 729 (1966). There an action was brought against the insured by one of its customers on the ground that seeds which were warranted to produce green lima beans actually produced white ones. When requested to defend the action, the insurance company refused because the policy did not pro-, vide coverage for breach of warranty. In spite of testimony that insured had both requested and been assured of full coverage, the trial court dismissed the case. The court of appeals affirmed, finding no basis for an action either on the policy as written or for reformation of the contract. Furthermore, the court held that although an insurance company might be estopped from asserting an exclusion in the policy which the agent negligently failed to remove, neither es-toppel nor waiver would serve to write into the policy coverage which was not there originally.

So, in order for there to be a recovery on the basis of an estoppel, a paramount condition must be met, the acts of the agent relied on for the es-toppel and the estoppel arising on account of these acts must result in a liability which would be within the insuring clauses of the contract. 410 S.W.2d at 733.

When the Hardison and Henry decisions are read together it is clear that under Tennessee law a showing that an insurance agent told the insured that his policy contained full liability coverage is sufficient to estop the insurance company from relying on an exclusion in the policy to deny coverage. Similarly, if the agent mistakenly or negligently wrote a policy for the insured which the agent either knew or should have known did not provide the coverage that the insured wanted and needed, then the insurance company may not assert the exclusionary clauses. Henry v. Southern Fire & Casualty Co., 46 Tenn.App. 335, 330 S.W.2d at 32 (1958); See Vulcan Life Ins. Co. v. Segara, 216 Tenn. 154, 391 S.W.2d 393 (1965); Imperial Casualty & Indemnity Co. v. Carolina Casualty Ins. Co., 402 F. 2d 41, 45-47 (8th Cir. 1968). But we have been unable to find any case in which a Tennessee court has used the doctrines of estoppel or negligence to write into an insurance policy coverage that was not specified in the contract. Instead, the cases are limited to the situation in which an insurance company is estopped to assert an exclusionary clause, thereby permitting the insured to rely on the coverage provisions in the policy.

It follows that the district court was in error in disposing of the case upon the basis of the Henry decision which, as we have pointed out, postulates an estoppel to assert an exclusionary provision of a policy of insurance.

In its conclusions of law the district court found that the policy of insurance as written could not be construed to provide coverage for false arrest, false imprisonment, for malicious prosecution. With this determination we are in agreement. The insuring language in the policy was: “The company (appellant) will pay on behalf of the insured (appellee) all sums which the insured shall become legally obligated to pay as damages because of bodily injury .” As the district court correctly concluded, such a policy contemplates “some injury to the body of a physical nature in order to come within the definition of ‘bodily injury’ ”. Provident Life & Accident Ins. Co. v. Campbell, 18 Tenn.App. 452, 79 S.W.2d 292 (1934). We agree with the district court that the evidence is insufficient to support a finding that the state court plaintiff suffered any bodily injury within the meaning of the policy which would require the appellant to pay the amount of the state court judgment.

Neither, in our opinion, is the appellee entitled to recover the amount paid in settlement of the state court claim upon the theory of a reformation of the policy because of mutual mistake or fraud — one of the alternative theories advanced by the appellee in its complaint. In Tennessee, the reformation of a contract is an equitable remedy, applicable where there is a mutual mistake of the parties, or a mistake of one party induced by the other’s fraud. Pittsburg Lumber Co. v. Shell, 136 Tenn. 466, 472, 189 S.W. 879 (1916); Marron v. Scarbrough, 44 Tenn.App. 414, 314 S.W.2d 165 (1958); McMillan v. Great Southern Corp., 63 Tenn.App. 732, 480 S.W.2d 152, 155 (1972, cert. denied by Sup.Ct. Tenn.1972).

In its separate findings the district court specifically stated that the insurance agent was “not guilty of fraud in his dealings with Harry Rosen.” No finding of fact was found on the question of mutual mistake. It is evident to us that the district court was of the opinion that there was insufficient evidence in the record to permit the appellee to prevail by invoking the equitable remedy of reformation. Our own examination of the record leads us to the same conclusion.

As a further basis for recovery of the amount paid in settlement of the state court claim, appellee alleged in its complaint that the appellant was “negligent in law” in failing to include in the said policy of insurance a provision against liability for slander, false arrest, false imprisonment, and malicious prosecution. In response to this claim, the appellant, in its answer, specifically pled that the appellee was guilty of contributory negligence in failing to ascertain that the policy delivered to it did not provide for such coverage. Hence, the pleadings raised the question as to whether Tennessee recognizes an independent tort action for the negligent failure of an insurance company, or its agent, to include within the policy certain types of coverage expected by the insured. We find it unnecessary to decide this question in the present case for it is clear to us from the record that a separate tort theory of liability, although initially pleaded by the appellee, was waived or abandoned by it before and during the trial. This is clear for several reasons. First, although the ap-pellee at the request of the court submitted three special interrogatories to be submitted to the jury for its consideration, none of them was directed to the theory of an alleged liability in tort based upon negligence. Second, when the court in its instructions failed to charge the jury on such a theory of liability, which would have required it to define the necessary elements of a negligent tort action, such as a duty on the part of the insurance company to exercise the care and caution of an ordinary prudent person under the same or similar circumstances, the necessity of a breach of duty by the company, the necessity that any breach be the direct or proximate cause of any injury suffered by the insured, no objection whatsoever was interposed by the appellee to these omissions from the charge. It is abundantly clear, therefore, that this alternative ground may not be considered by us on appeal to support the verdict in ap-pellee’s favor. In Lively v. Elkhorn Coal Co., 206 F.2d 396, 399 (1953), this Court, speaking through Circuit Judge Shackelford Miller, specifically held that where a plaintiff submitted no instructions upon issues allegedly raised by the pleadings and failed to except to the failure of the district court to so charge, these issues could not be considered on appeal.

The District Judge apparently considered the evidence insufficient to sustain this theory of the case. By his instructions to the jury appellant’s recovery, if any, was in connection with damages resulting from the alleged breach of contract. The case was submitted on that theory alone. Appellant requested no instruction on the theory of the case which he now urges upon us, took no exception to the failure of the Trial Judge to so instruct the jury, and did not obtain a ruling on such a theory. The question is not before us on this review. Rule 51, Rules of Civil Procedure, 28 U.S.C.A.; Stilwell v. Hertz Drivurself Stations, 3 Cir., 174 F.2d 714, 715; Pan-American Life Ins. Co. v. Fowler, 5 Cir., 174 F.2d 199, 202; Chesapeake 6 Ohio Ry. Co. v. Thomason, 6 Cir., 70 F.2d 860, 863; Helvering v. Tex-Penn Co., 300 U.S. 481, 498, 57 S.Ct. 569, 81 L.Ed. 755; Cold Metal Process Co. v. McLouth Steel Corp., 6 Cir., 170 F.2d 369, 380. See National Bank of Commerce in Saint Louis v. Laughlin, 305 Mo. 8, 264 S.W. 706, 717.

There can be no question in the present case that the district court tried the case and submitted it to the jury upon the assumption either that the plaintiff had abandoned the separate tort theory of negligence, or that such a cause of action for negligent failure of an insurance company to provide certain risks in a policy is not recognized in Tennessee, or that this theory was not supported by substantial evidence in the record. Although the court in its separate findings did state that the agent was “negligent with regard to the intent of Rosen to obtain full coverage, including personal injury protection,” this finding obviously was intended by the court in the Henry sense of estoppel derived from the jury’s affirmative answer to interrogatory No. 4. That this is true is supported by the court’s conclusion of law No. VI, which was clearly taken verbatim from certain language in the Henry decision, as already pointed out. Perhaps even stronger evidence of the court’s thinking that a theory of common law negligence was no longer in the case is that neither in the special interrogatories submitted to the jury nor in its instructions to the jury did the court include the essential ingredients or elements which the jury would have been required to find to support a tort action grounded upon negligence, including duty, breach, proximate cause, the measure of damages, etc. Also, that the court did not have such a tort theory in mind is evidenced by the total failure to mention either in the special interrogatories or in the jury instructions the defense of contributory negligence which obviously would have had substantial evidence in its support. Thus, Rosen admitted in his testimony that he was very much concerned about the type of coverage he now insists upon and that he relied solely upon the representation of the agent (a representation, incidentally, which the jury found was not actually made), without even bothering to read the policy or to have his attorneys check it for him.

Since neither of the theories advanced by the appellee for recovery of the amount of the state court action ($9,000.00 as the result of an out-of-court settlement), nor the Henry theory relied upon by the court, finds support in the record, the district court should have directed a verdict in favor of the appellant at the conclusion of all the proof with respect to such liability claim.

The case, however, stands on a different footing insofar as the appellee seeks recovery of the expenses in the aggregate amount of $2,129.30 incurred in defending the state court action. Under Coverage C of the policy the insurance company was required to defend any suit against the insured seeking damages on account of bodily injury or property damage, “even if any of the allegations of the suit are groundless, false or fraudulent.” In his declaration against appellee-insured in the state court, plaintiff Shelton claimed damages for bodily injury as well as for false arrest, his declaration alleging that he had been treated “with force and alarm, forcibly and violently seized, assaulted and laid hold of . . . . ”

The rule in Tennessee is that the duty of an insurance company to defend its insured is determined by the allegations in the complaint or pleading asserting a claim against the insured. The district court correctly so held, citing Dempster Bros. v. U.S.F & G Co., 54 Tenn.App. 65, 388 S.W.2d 153 (1964); American Indemnity Co. v. Sears Roebuck Co., 195 F.2d 353 (CA 6 1952). In response, the insurer insists that it should not have been forced to defend the claim because this would have involved it in a conflict of interest. This contention is without merit in view of the express terms of Coverage C of the policy, defining the insurance company’s duty to defend based upon the allegations of the suit against the insured. The district court held, despite the allegations of the state court declaration, as we have stated, that the injury to Shelton did not arise from bodily injury within the terms of the policy, a finding which appears to be supported by the record.

The judgment of the district court is therefore, affirmed in part and reversed in part. The action is remanded to the district court for entry of judgment, denying appellee a recovery of the amount paid in settlement of the state court judgment but awarding the appellee a recovery against the appellant in the amount of $2,129.30, the undisputed amount incurred in defense of the state court action. Costs in the court below will be taxed in the discretion of the district court.

      . As the court stated in E. K. Hardison Seed Co. v. Continental Casualty Co., supra:

      While in a proper case a bill may reform a written policy after loss has actually happened, Phillips v. North River Insurance Co., 14 Tenn.App. 356, it is fundamental that the same rules applying generally to the reformation of a written instrument by a court of equity apply to the reformation of an insurance policy. So that a court of equity will not reform a policy except upon clear, cogent and convincing evidence of both the mistake and of the antecedent agreement with respect to which the mistake was made. Jones v. Jones, 150 Tenn. 554, 266 S.W. 110; Battle et al. v. Claiborne, 133 Tenn. 286, 180 S.W. 584; Myrick v. Johnson, 25 Tenn. App. 483, 160 S.W.2d 185; Hayes v. Travelers Ins. Co., 10 Cir., 93 F.2d 568, 125 A.L.R. 1053. This, of course, implies there must have been an antecedent agreement that was not incorporated in the written instrument to be reformed and that a mistake was made in the integration of the formal contract, and not with respect to the treatying between the parties during which their minds were meeting on the contract’s contents. 410 S.W. 2d at 732.


source: Caselaw Access Project

author: WEBSTER, Circuit Judge.

license: Public Domain

text:
    NATIONAL LABOR RELATIONS BOARD, Petitioner, v. GARNER TOOL AND DIE MANUFACTURING, INC., Respondent.
    No. 73-1292.
    United States Court of Appeals, Eighth Circuit.
    Submitted Nov. 13, 1973.
    Decided March 11, 1974.

      John H. Ferguson, Atty., Lit. Services, National Labor Relations Board, Washington, D. C., for petitioner.
    William H. Bruckner, Lincoln, Neb., for respondent.
    Before MEHAFFY, Chief Judge, MOORE , Senior Circuit Judge, and WEBSTER, Circuit Judge.

       LEONARD P. MOORE, Senior Circuit Judge, Second Circuit, sitting by designation.

   WEBSTER, Circuit Judge.

The National Labor Relations Board seeks enforcement of its order directing that Garner Tool and Die Manufacturing, Inc. offer reinstatement to its former employee, Paul Hill, make him whole for any losses he incurred by reason of the discharge, cease and desist from unfair labor practices, and post appropriate notices. The Board’s order was based on the findings of the administrative law judge that the company unlawfully discharged employee Hill because of his suspected union activities, in violation of §§ 8(a)(1) and 8(a)(3) of the National Labor Relations Act. We have carefully reviewed the record as a whole and conclude that substantial evidence does not exist in this record to support the Board’s order; we therefore deny enforcement.

Because the Board’s position depends upon our accepting as true the inferences drawn from circumstantial evidence by the administrative law judge, a somewhat more detailed statement of the facts is required. Garner Tool and Die Company (“Company”) manufactures tools, dies, jigs, fixtures, molds and other items at its Lincoln, Nebraska plant. In addition to its office staff, made up of Edward Garner, president of the company, Phil Mullin, Garner’s son-in-law, and Garner’s wife, the company employs approximately 15 persons — 11 in its tool room and 4 in its production room.

Paul Hill had been employed in the company’s tool room for approximately six years. When the employees established a shop committee in 1970, Hill was elected chairman or spokesman of the group and met with President Garner at irregular intervals to discuss employee grievances and other problems. On October 13, 1971, Garner announced that the company would no longer order tools for employees costing less than $10.00. Hill objected to this policy change because certain tools (such as Allen wrenches) were constantly wearing out. Garner replied that he would buy a set of Allen wrenches for anyone who could not afford them. Hill was not satisfied with this response, asserting that the company should furnish these small tools without charge to the employees.

The employees were working a ten-hour day, from 6:00 a.m. to 4:30 p.m., when Garner announced on October 27 that the work day was being reduced to nine hours. Garner did not specify a starting-quitting time, but did indicate his preference for a 7:00 a.m.-4:30 p.m. work day because it would not look good to customers to see the shop empty so early in the afternoon. At a coffee break on the day of the announcement, some of the employees met and decided to continue starting at 6:00 a.m. Hill did not attend this meeting.

On October 28 and 29, most of the tool room employees reported at 6:00 a.m. and left at 3:30 p.m. Hill and a few others reported at 7:00 and worked until 4:30. At 3:45 p.m. on Friday, October 29, Mullin approached Hill in the tool room and said that Garner was infuriated because most of the employees had left an hour early. Hill said, “They came in at 6:00. They had worked the nine hours like he requested and they left.” Mullin then commented, in effect, that Garner did not want the employees coming in at 6:00 a.m., that they didn’t realize how good the company was to them, and they were always bickering about little things like the company policy on buying tools.

Then the following occurred according to Hill’s testimony:

When he brought up this deal about the Allen wrenches I said, ‘when you take a man that will invest $3,000.00 in tools to make another man money,’ and I said, ‘then some son-of-a-bitch wouldn’t buy them an Allen wrench,’ I said, ‘well, this is pretty chicken-shit.’

That ended the conversation and Mullin returned to the office.

About fifteen minutes later, Garner approached Hill and asked him what time he had come to work that day. Hill said 7:00 a.m. Garner asked what time he was coming to work on Monday, and Hill asked Garner what time he wanted him to come. Garner then asked Hill about the other employees, and Hill stated that he did not know when they were coming to work, but that it probably depended on when their group leader told them to report. Garner then returned to the office.

Again, at 4:35 p.m., according to Hill’s testimony:

Mr. Garner, came out.of the office and come over to the bench to my tool box, and put his arm on my back and patted me on the back and said that everything was o.k., that it is good to blow off steam, it was healthy to blow off steam, and everything was all right.

Some time that weekend, President Garner posted a notice informing the employees that effective Monday morning they were not to begin work before 7:00 a.m. Garner arrived at the shop at 6:50 a.m. on Monday, November 1, and discovered that the employees present had been working for some time. Each employee was asked if he had seen the notice, and when they replied yes, he suspended them for the remainder of the day. Hill arrived at 6:55 a.m. as the other men were leaving, and Garner summoned him to the office. Garner informed Hill that he was being laid off for one week. Hill asked why and Garner stated, “You referred to me as a son-of-a-bitch.” Hill then said, “Ed, you told me yourself that you were a son-of-a-bitch to work for.” Garner replied “Yes, I don’t want to talk about it anymore, I don’t want to see your face around here until next Monday. You can come back then and work.”

That evening, the tool room employees met, decided to join the union, and all signed authorization cards. A union representative communicated that fact to Garner the following day and a meeting was set up for Friday, November 5. By letter dated November 4, 1971, Garner informed union representative Dean Kocina that the Friday meeting was cancelled and that all further communications regarding the union’s request for recognition should be addressed to the Midwest Employers Council, which Garner had engaged to represent the company in the matter.

On Friday, November 5, Garner contacted Hill and the following occurred, according to Hill’s testimony:

Mr. Garner, over the phone he says, ‘Paul,’ he says, ‘we are going to let you go.’ And I says, ‘for what reason?’ And he says, ‘any body that thinks of me in that manner,’ he says, 'we don’t have any place for them in the shop.’
So I said, ‘well, am I laid off or fired, or what?’ He said, ‘Yes,’ he just left it hanging. He said, ‘Yes,’ you could tell by his voice that he was upset or something. He said I could pick up my tools that night if I wanted to and I told him that I was leaving for a trip out of town and I would not be able to pick them up until early the following Monday morning.

When Hill picked up his tools on Monday morning, some of the other employees, upon learning what had happened, walked off the job. Beginning Wednesday, October 10, Garner conducted personal interviews with each of the employees in the tool room and ordered them to return to work the following day or never return. In discussing Hill’s discharge, Garner told employee Olson that Hill had been fired not only because of the events of the previous week but because Hill had stolen from the company in the past.

Garner told employee Hester that Hill had stolen company property in the past, but that he had paid for it and made amends; that Hill had been complaining about the company policy on tools; and that Hill was outspoken and was a rabble-rouser. Garner asked employee Knop what he would do if Hill called him an S.O.B. and Knop replied “Well, he has probably called me that before.” Garner then asked Knop what he would do if Hill called his dad that, and Knop replied that would probably be a different story. Garner explained to Knop that Hill had called him an S.O.B. and had “slammed” his office personnel on October 29; that when Garner hired Hill he had contacted his previous employer and they had told him that Hill probably couldn’t be handled but Garner decided to try anyway; and that Garner had been very upset about what Hill had said and hadn’t slept well because of it.

Employee Morack testified that Garner told him that the employees had acted before hearing both sides of the story. He told Morack that Hill had stolen from him in the past, that Hill’s prior employer had informed him that Hill was a trouble maker and an agitator, which he was, but that he had decided to give Hill a chance. Garner told Morack “that he dismissed Paul [Hill] for a week and said that he told him that he could just keep right on going if he wanted to because he didn’t know if he could work for him or not any more .”

The International Association of Machinists, Lodge 31, filed charges and this complaint thereafter issued by the Board alleging that Hill’s discharge was unlawful. There was no evidence in the record and no finding by the examiner or the Board of any anti-union animus by the employer. The examiner found no direct evidence that the company had actual knowledge of Hill’s union activities or that Hill was in fact a leader in the union organization effort.

The trial examiner held:

Upon all of the facts, including particularly the fact that Garner gave Hill false explanations both for his suspension on November 1 and his discharge on November 5, I conclude that Garner’s motive in both suspending and discharging Hill was one which he desired to conceal' — an unlawful motive — namely, a desire to rid himself of this outspoken’ advocate of the rights of the employees whom he suspected had led the employees not only in their concerted refusal to report for work at 7 a.m. but also with respect to their seeking union representation. Accordingly, Hill’s suspension on November 1 and his discharge on November 5 were illegally motivated. However, in view of the fact that the complaint did not put in issue the legality of Hill’s suspension on November 1, I make no findings in this regard and conclude only that Hill’s discharge on November 5 violated Section 8(a) (3) and (1) of the Act.

We hold that the record will not support a finding of knowledge that Hill was engaged in union activities, nor will it support a finding that Hill was discharged because Garner suspected such activities. Garner’s own explanations for discharging Hill, as related by all of the witnesses including Hill, were consistently based upon the S.O.B. comment and other past occasions for dissatisfaction brought to a head by the latest comment. No anti-union animus was demonstrated. The Board makes too much of Garner’s statement to Hill on Friday afternoon that it was good to blow off steam. It first infers that Garner knew of the S.O.B. incident at the time this statement was made and then infers upon this inference condonation of the S.O.B. remark, and from this concludes that some other reason must have motivated the discharge. While the Board is free to draw reasonable inferences from the evidence, direct and circumstantial, NLRB v. Melrose Processing Co., 351 F.2d 693, 699 (8th Cir. 1965), it may not build inferences upon inferences to reach a finding which is no more than educated conjecture. Assuming that Garner in fact knew that Hill had referred to him as an S.O.B., and assuming further that Garner’s conciliatory statement to Hill about letting off steam in fact referred to the S.O.B. comment, we cannot follow the Board’s final attenuation that this foreclosed any subsequent determination that Hill should be discharged.

The Supreme Court defined substantial evidence in NLRB v. Columbian Enameling & Stamping Co., 306 U.S. 292, 300, 59 S.Ct. 501, 505, 83 L.Ed. 660 (1939):

Substantial evidence is more than a scintilla, and must do more than create a suspicion of the existence of the fact to be established. ‘It means such relevant evidence as a reasonable mind might accept as adequate to support a conclusion . . . .’

Thus the Board’s findings may not rest on “suspicion, surmise, implications, or plainly incredible evidence.” Amyx Industries, Inc. v. NLRB, 457 F.2d 904, 907 (8th Cir. 1972); see also Universal Camera Corp. v. NLRB, 340 U.S. 474, 484, 71 S.Ct. 456, 95 L.Ed. 456 (1951). And, as we have previously stated, “ [c] ircumstances that merely raise a suspicion that an employer may be activated by unlawful motives are not sufficiently substantial to support a finding.” NLRB v. Ace Comb Co., 342 F.2d 841, 848 (8th Cir. 1965).

We have held that it is impossible for a discharge to be discriminatory without proof that the employer had knowledge of the employee’s union activities, Amyx Industries, Inc. v. NLRB, supra, 457 F.2d at 906; NLRB v. Ace Comb Co., supra, 342 F.2d at 848, and the Board always has the burden of proving such knowledge with substantial evidence. Amyx Industries, Inc. v. NLRB, supra; NLRB v. Melrose Processing Co., supra, 351 F.2d at 697. An exception to this rule is where the Board proves that the discharge was motivated by the employer’s belief or “suspicion” that the employee was engaging in union activities, notwithstanding the absence of actual participation. NLRB v. Clinton Packing Co., Inc., 468 F.2d 953, 955 (8th Cir. 1972); NLRB v. Ritchie Manufacturing Co., 354 F.2d 90, 98 (8th Cir. 1966). However, the burden of proof is unchanged; the Board must prove by substantial evidence that the real reason for the discharge was the employee’s suspected union activity.

It is not disputed that Hill could have been lawfully discharged because of his S.O.B. comment. We have consistently held that an employer may discharge an employee for good reason, bad reason or no reason at all, so long as the discharge is not motivated by unlawful considerations. NLRB v. Century Broadcasting Corp., 419 F.2d 771, 778 (8th Cir. 1969) ; NLRB v. Arkansas Grain Corp., 392 F. 2d 161, 167 (8th Cir. 1968); NLRB v. Ace Comb Co., 342 F.2d 841, 847 (8th Cir. 1965); Fort Smith Broadcasting Co. v. NLRB, 341 F.2d 874, 879 (8th Cir. 1965). We stated in NLRB v. Ace Comb Co., supra:

[Ojnce it is determined that disciplinary action is warranted the extent of the action taken is purely within the discretion of the employer, and the Board may not substitute its judgment for that of the employer. 342 F.2d at 847.

We must conclude from the whole record that the Board’s findings were the result of speculation unsupported by evidence, direct or circumstantial, sufficient to raise such speculation to the level of a reasonable inference of illegal conduct. We give deference to the Board’s ability to draw rational conclusions from the evidence, but in this case the conclusions are not supported by substantial evidence. S. W. Noggle Co. v. NLRB, 478 F.2d 1144 (8th Cir. 1973).

Application for enforcement is denied.

      . Only Hill testified with respect to his conversations with Garner. The company presented no evidence and neither Garner nor Mullin testified. The company rested on its position that General Counsel had failed to establish a prima facie case.

      . Sometime in 1968 or 1969 Hill had taken some materials and tools from the shop without paying for them. Believing Garner knew about this, he went to Garner, told him he had taken the material, and said he wanted to pay for it and make amends. Garner permitted him to pay for the material by making deductions from his cheek and Garner said it would never be mentioned again and that Hill had been forgiven. In a shop meeting two days after the occurrence, Garner explained the situation to the entire staff and told them that it should never be mentioned again, that it was completely forgotten.

      . The company asserts that this testimony was a direct contradiction of Hill’s testimony that he had been suspended on November 1 and discharged on November 5, and demonstrates that Hill was actually discharged on Monday, November 1. The examiner stated that he did not perceive the “direct contradiction” in the two statements, but in any event, could not accept Morack’s statement since Garner, who failed to testify, made these statements in an attempt to justify his discharge of Hill. To the extent there was a dispute, the examiner deemed Hill’s sworn testimony more credible than Morack’s double hearsay.

      . The company here asserts that it was denied due process because the complaint failed to allege illegality in the suspension, claiming the trial examiner’s disclaimer quoted above fails to negate the fact that finding the suspension illegal was essential to the examiner’s conclusion that the discharge was illegal. Since we find insufficient evidence in this record to support the Board’s conclusion, we need not reach the due process question.

      . Cf. NLRB v. Wal-Mart Stores, Inc., 488 F.2d 114 (8th Cir. 1973).

      . Garner had initially agreed to meet with the union representative on Friday, November 5. However, he changed his mind two days later in a letter characterized by the examiner as “quite unfriendly”, and decided to deal with the union through a management association. While these facts support an inference that Garner decided to change his tactical approach toward the union, this inference alone or in combination with the undisputed facts does not support the inference that Garner decided to discharge Hill as an anti-union tactic.

      . The fact that the company chose not to present any evidence has no effect on the Board’s burden of proof, and no inferences of wrongdoing can be drawn from the company’s failure to disclaim the Board’s allegations. NLRB v. Century Broadcasting Co., 419 F.2d 771, 776-777 (8th Cir. 1969).


author: CHOY, Circuit Judge:

text:
    John M. ENGLAND, Trustee in bankruptcy for Sunset Dodge, Plaintiff-Appellant, v. CHRYSLER CORP. et al., Defendant-Appellee.
    No. 71-2842.
    United States Court of Appeals, Ninth Circuit.
    Feb. 11, 1974.
    Rehearing Denied May 2,1974.

      Michael N. Khourie (argued); Royce H. Schulz, Thomas Paine, Broad, Khou-rie & Schulz, P. C., San Francisco, Cal., for plaintiff-appellant.
    William W. Schwarzer (argued); J. Thomas Roseh, Kenneth Drexler, Mc-Cutchen, Doyle, Brown & Enersen, San Francisco, Cal., Keith A. Jenkins, Chrysler Corp., Detroit, Mich., for defendant-appellee.
    Before WRIGHT and.CHOY, Circuit Judges, and JAMESON, District Judge.

       The Honorable William Jameson, United States District Judge for the district of Montana, sitting by designation.

   CHOY, Circuit Judge:

John M. England, trustee for the bankrupt partnership, Sunset Dodge, brought an antitrust action against Chrysler Corporation and two of its wholly-owned corporate subsidiaries— Chrysler Motors, its separate marketing entity, and Van Ness Dodge, a retail dealer located in San Francisco, California. The complaint charged the defendants with conspiring to restrain trade in violation of section 1 of the Sherman Act, 15 U.S.C. § 1 (1970), and discrimination in the provision of promotional allowances in violation of sections 2(d) and (e) of the Robinson-Patman Act, 15 U.S.C. §§ 13(d) and (e) (1970). The Robinson-Patman claims were tried by stipulation to the court which held for Chrysler. The Sherman Act charge was tried before a jury which returned a verdict for Sunset with actual damages to-talling $125,000. The district court then granted Chrysler’s motions for judgment n. o. v. and, in the alternative, a new trial. Sunset appeals both the Robinson-Patman and Sherman Act rulings. We affirm.

In early 1962, a privately owned Dodge-franchised automobile dealer on Van Ness Avenue, San Francisco’s “automobile row,” notified Chrysler that it was terminating business. Chrysler considered it essential to have a Dodge dealer in the same location. After a search for a private investor proved unsuccessful, Chrysler established Van Ness Dodge on the location in May, 1962. Van Ness was organized under a Chrysler program whereby it was expected the appointed manager eventually could, largely out of profits, buy out the parent corporation’s 100% interest in the dealership.

Chrysler anticipated that Van Ness would initially be a losing operation. Its forecast was correct, for Van Ness’ losses were substantial, as had been its predecessor’s. These losses were subsidized by Chrysler.

Sunset was a privately-owned partnership formed as a Dodge dealer in September, 1963. Located within two and one half miles of Van Ness, it succeeded another unsuccessful Dodge dealer which had failed on the same site. Shortly after its establishment, Sunset as well encountered financial problems. After incurring large losses, it ceased its short-lived existence in August, 1965.

Robinson-Patman Act Claims

Chrysler had a program for contributing monies to help defray promotional costs whenever a new dealer opened for business or whenever an established dealer relocated. Pursuant to this program, Chrysler gave Van Ness $24,000 when it commenced business in June, 1962, Sunset Dodge $2,325 when it opened in September, 1963, and Van Ness $10,500 when it relocated in September, 1965. Sunset contends these payments were discriminatory under the Robinson-Patman Act.

Sections 2(d) and (e) of the Act prohibit the provision of “anything of value” or the “furnishing [of] any services or facilities,” respectively, unless the thing of value, service, or facility is available on “proportionally equal terms” to, respectively, all other competing customers or all other purchasers. *****8 As this indicates, the advantaged and disadvantaged parties must be shown to be competing customers of the giver in order for there to be discrimination under these provisions. See FTC v. Simplicity Pattern Co., 360 U.S. 55, 79 S.Ct. 1005, 3 L.Ed.2d 1079 (1959); Tri-Valley Packing Ass’n v. FTC, 329 F.2d 694, 708-709 (9th Cir. 1964).

Given this requirement, the promotional allowance to Van Ness in September, 1965 could not discriminate against Sunset since Sunset was then no longer in existence. It would be purposeless to condemn this allowance when it could have no conceivable competitive significance to Sunset.

The opening advertising outlays pose a somewhat different, but related problem concerning the competing customers requirement. To be subject to the Act, the disadvantaged recipients (or non-recipients) must be customers of the giver “within approximately the same period of time” as the award is made to the favored party. Tri-Valley Packing Ass’n v. FTC, supra at 708; see Atalanta Trading Corp. v. FTC, 258 F.2d 365, 371-372 (2d Cir. 1958) ; Valley Plymouth v. Studebaker-Packard Corp., 219 F.Supp. 608, 610 (S.D.Cal. 1963); Viviano Macaroni Corp., 73 F.T.C. 313, 340-41 (1968); F. Rowe, Price Discrimination under the Robinson-Patman Act, § 4.2 at 48-50, §13.10 at 391-92 (1962). A “competing customer” is only one to whom an allowance could be offered at or near the time the allegedly discriminatory “thing of value” is given to the favored party. Where the allowances are awarded at the commencement of business, as in this case, the requirement means that both enterprises must have begun operations at reasonably contemporaneous times.

This requirement serves the purposes of the Act. It reflects the policy of the Act that a difference in the amount of the allowance should have some potential for injuring competition. Moreover, if disparate awards granted no matter how far apart in time could be subject to condemnation, the initial allowance would set the permanent level for future awards. Hence, the requirement that the favored and disfavored parties by competing customers at approximately the same time avoids pointlessly freezing the level of the allowances. See Atalanta Trading Corp. v. FTC, supra at 372.

It would stretch the imagination to conclude that Sunset and Van Ness were competing customers within the meaning of this term. Sunset was not established until sixteen months after Van Ness’ award. Moreover, the amounts were intended and, as far as the record shows, used for sendoff advertising which could have no more than a minimal persistent effect after the lapse of sixteen months. We, therefore, hold that there was no discrimination between Sunset and Van Ness as to the initial allowances because they were not competing customers at times reasonably contemporaneous with the more beneficial promotional award. Compare Hartley & Parker, Inc. v. Florida Beverage Corp., 307 F.2d 916, 921 (5th Cir. 1962) with Atalanta Trading Corp. v. FTC, supra at 371-372.

Sherman Act Claim

The theory of Sunset’s action is somewhat unusual. It does not contend that Chrysler and its conspirators acted intentionally to put Sunset out of business or to usurp the retail market. Compare Mt. Lebanon Motors, Inc. v. Chrysler Corp., 283 F.Supp. 453 (W.D.Pa. 1968), aff’d on other grounds, 417 F.2d 622 (3rd Cir. 1969). Rather, it argues Chrysler operated Van Ness in a manner reckless of profit so as to create intense pressure on Sunset to compete at a level that could not be profitable. The downward pressure on prices and terms of sale created by this would, it is argued, result in Van Ness and Sunset selling more of Chrysler’s cars, thus attaining “market penetration” for Chrysler. The wholesale profits that would thereby be generated would outweigh the losses Chrysler would sustain at the retail level. Chrysler did not manage Van Ness with the specific intent to so “squeeze” Sunset, the argument concludes, but its deliberate overemphasis on wholesale sales, through the unreasonable operation of Van Ness, led inevitably to an impossible competitive situation and the consequent demise of Sunset.

It may well be that the predominant emphasis on market penetration, which results in the deliberately reckless operation of a subsidized retailer and which has the inevitable effect of forcing competing and non-subsidized dealers to function at an unprofitable level, could, if proved, constitute an unreasonable restraint of trade. See Rea v. Ford Motor Co., 355 F.Supp. 842, 863-871 (W.D.Pa. 1972); cf. Industrial Building Materials, Inc. v. Interchemical Corp., 437 F.2d 1336, 1341-1343 (9th Cir. 1970). For purposes of this appeal, that will be assumed. We find, however, that Sunset has not proved, by sufficient evidence, that Chrysler’s conduct was culpable under this legal theory.

Under Sunset’s theory it is difficult to distinguish healthy from unhealthy competition, and mismanagement of a business from unreasonable, and therefore unlawful management. A business which through agressive sales tactics intensifies competition is not to be lightly condemned. The competition it creates is not necessarily pernicious even if competitors are “harmed” since competition is always hard on the contestants. Indeed, that is its benefit. Nor should extravagant management of a business alone amount to an antitrust violation; otherwise many unsuccessful businesses might be subject to the antitrust laws. The market conditions which prevailed between Van Ness and Sunset could have been the product of healthy competition and the losses incurred by Van Ness the product of unintentional mismanagement. Or they could possibly have been the result of a policy to operate Van Ness without regard to profit in order to impel two-dealer market penetration. Since it is difficult to distinguish the two and since it is only the latter that we assume is condemnable, Sunset should be required to prove the conduct was deliberate to sustain its case.

To be deliberate does not mean there must be specific intent to produce the unreasonable economic effect (e. g., to “squeeze” Sunset). It means that there must be evidence from which it may at least be inferred that the conspirator determined upon the course of conduct, as opposed to the result.

In this context, Chrysler’s conduct would be deliberate if it could be inferred that Chrysler determined to manage Van Ness regardless of retail profit. Yet there is no proof this was the case. Sunset did not show that Chrysler was relatively less concerned with Van Ness’ profitability than with its power to produce retail profits. Rather, all the evidence demonstrates that Chrysler wished the dealer to be successful. When, for example, Van Ness’ selling practices appeared unwise — the same selling practices, discussed below, which Sunset points to as evidence of predatory conduct — Chrysler consistently attempted to correct them. Indeed, Sunset failed even to prove that it would be profitable for Chrysler to manage Van Ness at a loss because sales to Sunset and Van Ness would produce wholesale profits that would exceed that loss, proof which would support an inference the conduct was deliberate.

Despite these critical gaps in proof, it is possible that consistent predatory practices themselves might support the inference that Chrysler deliberately engaged in a policy of market penetration reckless of retail profit. Sunset relies on three practices which, it argues, establish that Van Ness was managed in such a manner.

First, Sunset points to two misdeliv-ered shipments of automobiles as proof Chrysler wished to force cars on Sunset. Sunset had originally ordered the ears, but when the shipments were delayed, orally cancelled them. Nonetheless, they were delivered. While this is perhaps proof that Chrysler overzealously sold cars to Sunset, it is not germane to the supposed violation here: the reckless operation of Van Ness. To say that Chrysler oversold automobiles to Sunset simply is irrelevant to a claim that Van Ness was managed without regard to profit.

Second, Sunset relies on Van Ness’ supposedly excessive advertising expenditures as evidence of predatory management. From Sunset’s organization in September, 1963 until April, 1964, each dealer spent an average of approximately $4,500 per month on new car advertising. In May, 1964 Van Ness’ advertising expenditures rose substantially, and thereafter, consistently exceeded Sunset’s, though after November, 1964 the amounts Van Ness spent moderated somewhat.

As to the pre-May, 1964 expenses, there is evidence that Sunset planned to spend less then it did, but that the Van Ness advertising appearing at the time Sunset opened forced the latter to meet the competition. Sunset did not show, however, that these early Van Ness expenditures were out of line with what Van Ness had spent prior to Sunset’s entry into the market, or that they were greater than amounts spent by other San Francisco dealers. There is not much in this, therefore, that buttresses the jury’s verdict.

The evidence of excessive advertising, then, consists essentially of the post-April, 1964 expenditures which were, it is true, unusually high. However, this increase did not occur until well after Sunset had entered the market. Moreover, the post-April level was much reduced after November, 1964 so that the period of clear excess was short-lived. It can hardly be said that these few months of profligate promotional spending constitute substantial evidence supporting appellant’s theory.

Third, Sunset contends that Van Ness sold automobiles on unreasonably low terms. There is, however, no evidence that Van Ness engaged in these practices until at least the first quarter of 1964. Indeed, it is clear that Sunset, as its early advertisements indicated and as its repossession rate later confirmed, initiated the policy of selling on marginal terms. And Sunset’s selling prices were always less than Van Ness’. To be sure, Van Ness began accepting thm deals after a time, but when the repossession rates first revealed this, Chrysler attempted to correct the practices. Even though Van Ness may have been guilty of ill-advised business policies, then, there is no substantial evidence its thin deals were the result of a deliberate and unreasonable emphasis on market penetration.

Our review of the record therefore confirms the trial court’s assessment of the evidence. The district court’s ruling on the motion for judgment n. o. v. is affirmed.

Affirmed.

      . Appellant England will hereafter be referred to as Sunset Dodge or Sunset.

      . Section 2(d) & (e) of the Robinson-Pat-man Act, 15 U.S.C. §§ 13(d) & (e) (1970) provide:
      (d) It shall be unlawful for any person engaged in commerce to pay or contract for the payment of anything of value to or for the benefit of a customer of such person in the course of such commerce as compensation or in consideration for any services or facilities furnished by or through such customer in connection with the processing, handling, sale, or offering for sale of any products or commodities manufactured, sold, or offered for sale by such person, unless such payment or consideration is available on proportionally equal terms to all other customers competing in the distribution of such products or commodities.
      (e) It shall be unlawful for any person to discriminate in favor of one purchaser against another purchaser or purchasers of a commodity bought for resale, with or without processing, by contracting to furnish or furnishing, or by contributing to the furnishing of, any services or facilities connected with the processing, handling, sale, or offering for sale of such commodity so purchased upon terms not accorded to all purchasers on proportionally equal terms.

      . Some of these cases involve § 2(a) of the Act. The contemporaneous requirement also applies under this section. See F. Rowe, Price Discrimination under the Robinson-Patman Act, § 4.2 at 48-50 (1962).

      . It is clear that the competing customers requirement is not satisfied where there is a time span of sixteen months between the awards. A close case may pose a more difficult problem. Because the reasonably contemporaneous standard is a vague one, there is a risk that results in such cases may be arbitrary. It may be appropriate, then, to apply a standard within a standard to rationalize these results. While the competitive effect of disparate allowances is normally irrelevant under §§ 2(d) & (e), see FTC v. Simplicity Pattern Co., 360 U.S. 55, 79 S. Ct. 1005, 3 L.Ed.2d 1079 (1959), there may be no other reasonable standard by which to reach intelligible results in these cases. I-Ience, it may be proper in such cases — for this limited purpose only — to determine if the discrepancy in the allowances has some impact upon the competitive conditions existing between the favored and disfavored parties.

      . We are mindful of the trial judge’s duty not to invade the province of the jury. Therefore, we have drawn all inferences favorably to Sunset and have tested the evidence by a standard asking whether reasonable men might find that the facts amounted to a Sherman Act violation. See, e. g., Standard Oil v. Moore, 251 F.2d 188, 198 (9th Cir. 1957), cert. denied, 356 U.S. 975, 78 S.Ct. 1139, 2 L.Ed.2d 1148 (1958).

      . “Low terms” consist of selling cars witli low or no down payment, accepting questionable credit risks, accepting side notes for down payments, over-allowances on trade-ins, and the like. Such practices normally return to haunt the dealer because repossessions are later more likely to occur.

      . Van Ness’ retail profit per new car sold, the markup indicative of selling price, exceeded Sunset’s by $33 in 1963, $38 in 1964, and $43 in 1965.


text:
    FLAVOR CORPORATION OF AMERICA, Plaintiff-Appellee and Cross-Appellant, v. KEMIN INDUSTRIES, INC., and Rolland W. Nelson, Defendants-Appellants and Cross-Appellees.
    Nos. 73-1338, 73-1339 and 73-1519.
    United States Court of Appeals, Eighth Circuit.
    Submitted Oct. 19, 1973.
    Decided March 11, 1974.
    Rehearings and Rehearings En Banc Denied April 10, 1974.

      William E. Lucas, Chicago, 111., for Flavor Corp. of America.

      Donald H. Zarley, Des Moines, Iowa, for Kemin Industries, Inc.
    Before LAY, BRIGHT and WEBSTER, Circuit Judges.
   WEBSTER, Circuit Judge.

This is an appeal and cross-appeal from the order of the District Court granting limited injunctive relief in favor of appellee Flavor Corporation of America (FCA), holder of the registered trademark “PESTLUR”, and against appellant Kemin Industries, Inc. (Kemin), holder of the common law trademark “LURE”.

The trial court found that Kemin had adopted its “LURE” mark in good faith without prior knowledge of FCA’s “PESTLUR” and had acquired superior common law trademark rights in ten states prior to the registration of “PESTLUR”. “PESTLUR” was held to be a descriptive mark which had acquired a secondary meaning both before and after registration in Georgia and Florida. The court accepted a prior determination by the Court of Customs and Patent Appeals (CCPA) that the marks were so confusingly similar as to cause a likelihood of confusion, but found that Kem-in’s “LURE” mark as used in commerce infringed FCA’s “PESTLUR” only in Georgia and Florida. The court enjoined Kemin from using its “LURE” mark for animal and rodenticide feed flavorings in competition with “PEST-LUR” in those two states and later construed the order to prohibit Kemin from advertising in national periodicals which might reach potential customers there.

Both parties have raised numerous arguments on this appeal, but the principal issues are: (1) whether a finding of the Court of Customs and Patent Appeals in a trademark cancellation proceeding operates as collateral estoppel in a subsequent trademark infringement action; and (2) whether FCA’s “PEST-LUR” mark is descriptive of a flavoring additive for rodenticides designed to attract pests rather than a fanciful mark entitled to incontestable status under the Lanham Act, 15 U.S.C. § 1065. We conclude that the trial court’s determination of these issues was correct and affirm. Judge William C. Stuart’s well reasoned opinion is reported at 358 F. Supp. 1114 (S.D.Iowa 1973).

FCA and Kemin both manufacture flavor additives for animal feeds and rodenticides. The portion of their businesses devoted to rodenticide flavorings is very minor compared to their animal feed flavoring business. FCA was organized in 1946 and began producing flavorings for animal feeds for which it used the trademark “NECTAR”. In 1956, it added “PESTLUR”, a flavor additive for rodenticides and pesticides. FCA’s total sales of “PESTLUR” between 1956 and 1971, when this action was filed, amounted to $17,013.

Rolland Nelson worked as a regional sales manager for FCA from 1958 until the end of 1961, serving as acting sales manager for the entire operation during the last few weeks of his employment. Nelson left FCA to form Chemical Industries, Inc. in early 1962; the name was later changed to Kemin Industries. Kemin sold the same type products as FCA and was in competition for the same class of customers. At the outset of its operation, Kemin adopted the trademark “LURE” for its animal flavoring additives, which it used with specific animal, products, i. e., “PIG LURE”, “CATTLE LURE”, “CAT LURE”, etc. Kemin also produced “RAT LURE”, a flavoring additive for rodenticides, in direct competition with FCA’s “PESTLUR”. Sales of “RAT LURE” have been nominal and are insignificant even when compared to sales of “PESTLUR”.

“PESTLUR” was registered on the Principal Register of the Patent Office September 22, 1964. In October FCA sent a formal notice of infringement to Kemin. Kemin had registered its “LURE” mark with the State of Iowa in 1962, but had made no effort to register with the United States Patent Office until late 1964. Its application to register “LURE” on the Principal Register was denied because the mark was deemed merely descriptive of Kemin’s goods. In February, 1966 Kemin registered “LURE” on the Supplemental Register, whereupon FCA petitioned to cancel that registration. The Trademark Trial and Appeal Board (TTAB) granted the petition and cancelled the “LURE” registration, and on May 6, 1971 the CCPA found “no error” in the TTAB decision, affirming the cancellation order. Kemin Industries, Inc. v. Flavor Corp. of America, 440 F.2d 1375, 58 CCPA 1180 (1971). FCA promptly filed.this action in the Northern District of Illinois; venue was subsequently transferred to the Southern District of Iowa.

I

The first question presented on this appeal is whether, in an infringement action, Kemin is collaterally estopped from challenging factual determinations of the CCPA in the earlier cancellation proceeding. In cancelling the “LURE” registration, the TTAB held that flavoring additives for animal feed were in the same channel of trade as flavoring additives for rodenticides because they were promoted through a common trade publication and at least one company manufactured both products and would be a prospective purchaser of both products. The TTAB also held:

Insofar as the marks are concerned the phonetic equivalent of the word “LURE”, comprising [Kemin’s] mark, is the characterizing feature of [FCA’s] marks “PESTLUR” and “RO-DENTLUR”, and it is our opinion that this feature of similarity between the marks is such as would be reasonably likely to cause confusion or mistake or to deceive.

Kemin appealed to the CCPA pursuant to 15 U.S.C. § 1071(a), thereby waiving its right to a de novo hearing in federal district court under 15 U.S.C. § 1071(b). The CCPA affirmed.

Judge Stuart held the doctrine of collateral estoppel was applicable to those factual questions actually decided by the CCPA, and hence Kemin was estopped from challenging the CCPA’s holding that the marks were so confusingly similar as to cause a reasonable likelihood of confusion. 358 F.Supp. at 1121.

The doctrine of collateral estoppel is a corollary of the broader doctrine of res judicata. Restatement of Judgments, §§ 47, 48. The doctrines are premised on the well recognized principle that “public policy and the interest of litigants require that there be an end to litigation.” Kithcart v. Metropolitan Life Ins. Co., 119 F.2d 497, 500 (8th Cir. 1941), cert. denied, 315 U.S. 808, 62 S.Ct. 793, 86 L. Ed. 1207 (1942). The Supreme Court has on numerous occasions defined and distinguished these doctrines. In Southern Pacific R. R. Co. v. United States, 168 U.S. 1, 18 S.Ct. 18, 42 L.Ed. 355 (1897), the Court said:

The general principle announced in numerous cases is that a right, question or fact distinctly put in issue, and directly determined by a court competent jurisdiction, as a ground of recovery, cannot be disputed in a subsequent suit between the same parties or their privies; and even if the second suit is for a different cause of action, the right, question or fact once so determined must, as between the same parties or their privies, be taken as conclusively established, so long as the judgment in the first suit remains unmodified. of

168 U.S. at 48-49, 18 S.Ct. at 27.

In Commissioner of Internal Revenue v. Sunnen, 333 U.S. 591, 68 S.Ct. 715, 92 L.Ed. 898 (1948), after discussing the effect of res judicata, the Court further explained collateral estoppel:

But where the second action between the same parties is upon a different cause or demand, the principle of res judicata is applied much more narrowly. In this situation, the judgment in the prior action operates as an estoppel, not as to matters which might have been litigated and determined, but ‘only as to those matters in issue or points controverted, upon the determination of which the finding or verdict was rendered.’ Since the cause of action involved in the second proceeding is not swallowed by the judgment in the prior suit, the parties are free to litigate points which were not at issue in the first proceeding, even - though such points might have been tendered and decided at that time. But matters which were actually litigated and determined in the first proceeding cannot later be relitigated. Once a party has fought out a matter in litigation with the other party, he cannot later renew that duel. In this sense, res judicata is usually and more accurately referred to as estoppel by judgment, or collateral estoppel.

333 U.S. at 597-598, 68 S.Ct. at 719.

The parties in the instant appeal agree that res judicata is inapplicable because an infringement action and a cancellation proceeding are different

causes of action. Our inquiry is therefore limited to the applicability of the more narrow doctrine of collateral estop-pel. Professor Moore states:

The essence of collateral estoppel by judgment is that some question or fact in dispute has been judicially and finally determined by a court of competent jurisdiction between the same parties or their privies. Thus the principle of such an estoppel may be stated as follows: Where there is a second action between parties, or their privies, who are bound by a judgment rendered in a prior suit, but the second action involves a different claim, cause, or demand, the judgment in the first suit operates as a collateral es-toppel as to, but only as to, those matters or points which were in issue or controverted and upon the determination of which the initial judgment necessarily depended, (footnotes omitted)
1B J. Moore & T. Currier, Moore’s Federal Practice ¶ 0.441(2), at 3777 (2d ed. 1965).

The parties in this appeal are the same as those who appeared before the CCPA, it was within the CCPA’s jurisdiction to determine whether “PESTLUR” and “LURE” were so similar as to create a likelihood of confusion and to refuse registration, and the CCPA judgment is final. Therefore, two questions remain in determining whether to apply collateral estoppel: (1) whether the factual issue of likelihood of confusion is the same in both actions and (2) whether the CCPA is a court of competent jurisdiction to bind the parties in a subsequent action.

A. Identity of Issues

The legal issue in a cancellation proceeding is the right to register a mark. 15 U.S.C. § 1052(d) provides that a mark may not be registered if it:

. [cjonsists of or comprises a mark which so resembles a mark registered in the Patent Office or a mark or trade name previously used in the United States by another and not abandoned, as to be likely, when applied to the goods of the applicant, to cause confusion, or to cause mistake, or to deceive. . . . (emphasis added)

A finding of likelihood of confusion in a cancellation proceeding requires cancellation of the registration; use of the mark is irrelevant. SCM Corp. v. Royal McBee Corp., 395 F.2d 1018, 55 CCPA 1179 (1968).

The issue in an infringement action is whether the use of the respective marks in commerce results in infringement. Under section 32 of the Lanham Act, infringement of a registered mark results when an unregistered mark, as used in commerce, is “likely to cause confusion, or to cause mistake, or to deceive.” See Sleeper Lounge Co. v. Bell Manufacturing Co., 253 F.2d 720 (9th Cir. 1958).

Whether the marks, as applied to their respective products, are likely to cause confusion must be determined in both proceedings. Since the fact of likelihood of confusion is singularly determinative in a cancellation proceeding and that fact is likewise one of the essential elements in an infringement action, the identity of issue requirement is met.

B. Court of Competent Jurisdiction

There is and can be no dispute that the CCPA is a court of competent jurisdiction to determine likelihood of confusion in a cancellation proceeding. The question is whether factual findings should be binding on the parties in a cause of action over which it could not have jurisdiction.

In John Morrell & Co. v. Doyle, 97 F. 2d 232 (7th Cir.), cert. denied, 305 U.S. 643, 59 S.Ct. 146, 83 L.Ed. 415 (1938), the court held that CCPA determinations were not entitled to collateral estoppel effect in subsequent infringement actions because the CCPA was not an Article III court. When Morrell was decided in 1938, the CCPA was merely an administrative arm of the Patent Office. Postum Cereal Co. v. California Fig Nut Co., 272 U.S. 693, 47 S.Ct. 284, 71 L.Ed. 478 (1927). Subsequently, however, in 1948, Congress enacted 28 U.S.C. § 1256, permitting certiorari review by the Supreme Court of decisions of the CCPA. In 1958, Congress made the CCPA an Article III court, 28 U.S.C. § 211. Finally, in Brenner v. Manson, 383 U.S. 519, 86 S.Ct. 1033, 16 L.Ed.2d 619 (1967), the Supreme Court reviewed the status of the CCPA and declared their decisions “final and binding in the usual sense.” 383 U.S. at 526, 86 S.Ct. at 1037. Postum was declared to have “no vitality in the present setting.” 383 U. S. at 527, 86 S.Ct. at 1038. The rationale for Morrell expired with Postwm.

We therefore hold that where the CCPA has found a likelihood of confusion between two similar marks in a cancellation proceeding, that fact is precluded from relitigation in a subsequent infringement action between the same parties under the doctrine of collateral estoppel.

II

The trial court held “PESTLUR” was a descriptive mark registered under 15 U.S.C. § 1052(f). FCA claims this finding was clearly erroneous because “PESTLUR” is a fanciful mark entitled to incontestable status under the Lanham Act. If “PESTLUR” is descriptive, FCA is only entitled to injunctive relief in those market areas where the mark has established a secondary meaning, either before or after registration.

Section 1052, 15 U.S.C., permits registration of any mark except those expressly excluded. Those excluded include marks that are merely descriptive of the goods, 15 U.S.C. § 1052(e). Part (f), however, permits registration of a mark otherwise excluded under (e) when the mark “has become distinctive of the applicant’s goods in commerce.” The section further provides:

The Commissioner may accept as pri-ma facie evidence that the mark has become distinctive, as applied to the applicant’s goods in commerce, proof of substantially exclusive and continous use thereof as a mark by the applicant in commerce for the five years next preceding the date of the filing of the application for its registration.

A mark on the Principal Register becomes incontestable five years after registration when the requirements of 15 U.S.C. § 1065 have been satisfied. An incontestable mark establishes “conclusive evidence of the registrant’s right to use the registered mark in commerce,” 15 U.S.C. § 1115(b), rather than merely prima facie evidence as provided for in 15 U.S.C. § 1115(a). However, “no incontestable right shall be acquired in a mark which is the common descriptive name of any article or substance, patented or otherwise.” 15 U.S.C. § 1065(4). Thus a descriptive mark which has been registered on the Principal Register because of its distinctive quality under § 1052(f) cannot become incontestable.

A distinctive mark is one which has acquired a secondary meaning. John Morrell & Co. v. Reliable Packing Co., 295 F.2d 314 (7th Cir. 1961); McCormick & Co. v. Summers, 354 F.2d 668, 53 CCPA 851 (1966); Jenkins Publishing Co. v. Metalworking Publishing Co., 315 F.2d 955, 50 CCPA 1218 (1963) ; cf. Roselux Chemical Co. v. Parsons Ammonia Co., 299 F.2d 855, 49 CCPA 931 (1962). Secondary meaning is a common law concept and the protection afforded a distinctive mark under the Lanham Act is substantially identical to that provided by the common law. Tillamook County Creamery Assoc. v. Tillamook Cheese and Dairy Assoc., 345 F.2d 158 (9th Cir. 1965); Schwinn Bicycle Co. v. Murray Ohio Mfg. Co., 339 F.Supp. 973 (M.D.Tenn.1971), aff’d per curiam, 470 F.2d 975 (6th Cir. 1972). At common law, a trademark was only entitled to injunctive protection in those market areas in which the mark had acquired a secondary meaning. See Sweetarts v. Sunline, Inc., 436 F.2d 705 (8th Cir.. 1971). Thus, if “PESTLUR” is descriptive, infringement exists and injunctive relief is appropriate only where the mark has acquired a secondary meaning.

'At * * si* =!:

The trial court did not explain why it found “PESTLUR” descriptive under 15 U.S.C. § 1052(f). Neither the application for registration nor the certificate of registration indicates whether “PESTLUR” was registered as a fanciful mark or as a descriptive mark permitted under § 1052(f). However, several factors in addition to the patently descriptive nature of the term itself demonstrate that this finding was not clearly erroneous:

(1) The affidavit accompanying the application asserts continuous use of the mark for eight years prior to registration. Since the Commissioner may base a finding of distinctiveness on evidence of five years continuous use in commerce, the requirements of § 1052(f) were or could have been satisfied by the affidavit.

(2) When Kemin sought to register “LURE” on the Principal Register in late 1964, registration was refused because the examiner found “LURE” to be merely descriptive of Kemin’s goods. The opinion of Examiner Paul P. Gralnick dated March 9, 1965 states:

Applicant has claimed that its product acts as an agent to make the animal feed more palatable. Applicant has also claimed that “animal feeds commonly have unpleasant tastes and unpleasant odors which the animals find offensive” and that its “goods serve to either indicate [sic] these unpleasant tastes and odors or to overcome them with a more desirable taste or odor.” These claims clearly support the view that applicant’s product will lure or tempt the animals to eat the feed to which the product has been added. As such, the mark sought to be registered is merely descriptive of applicant’s goods.

This refusal to register is made Final.

The examiner’s analysis of “LURE” is applicable to “PESTLUR”.

(3) The TTAB found that the phonetic equivalent of “LURE” was the dominating characteristic of the mark “PESTLUR”. “Pest” is no less a descriptive term than “cattle” or “pig” or “dog”, etc. The clever misspelling of a descriptive word does not eliminate its descriptive character, and combining two descriptive words to form one new word does not automatically render the new term fanciful.

We hold that the trial court’s finding that “PESTLUR” is a descriptive mark registered under § 1052(f) was not clearly erroneous.

Ill

Both parties have raised a substantial number of other issues. We have carefully considered the arguments and the record, and conclude that Judge Stuart’s findings of fact are not clearly erroneous and that the law was correctly applied in each instance. The nature and scope of relief has been vigorously challenged by both parties and requires some comment.

The trial court found that Kemin’s “LURE” had acquired a secondary meaning in ten states prior to the registration of “PESTLUR”; that “PEST-LUR” had acquired a secondary meaning in Georgia and Florida; and that the Lanham Act controlled in the remaining 38 states. The Lanham Act forecloses the possibility of “LURE” acquiring superior trademark rights over “PESTLUR” in those 38 states. 15 U. S.C. § 1072. As to them, the trial court also held:

[T]he Court finds sales of “PEST-LUR” have been so minimal, sporadic and declining in the states where it has been sold, that it has in fact not acquired a secondary meaning in any of these states and there has not been sufficient penetration into the market of any one to entitle plaintiff to the protection of injunctive relief.

358 F.Supp. at 1125.

Thus, under the order, Kemin is entitled to sell its “LURE” products in the Lan-ham Act states unless and until FCA’s “PESTLUR” acquires a secondary-meaning therein.

FCA argues that it is entitled to nationwide injunctive protection because of its “advertising” program and Kemin claims that FCA is entitled to none at all. FCA has from time to time mailed price lists and advertising circulars listing “PESTLUR” to potential customers throughout the nation. It now asserts that “PESTLUR” has acquired a secondary meaning nationally, notwithstanding the absence of sales within a given market area, because of this “advertising” activity. We find no authority to support this proposition and it is contrary to the common law concept that trademark rights are acquired only by actual use of a mark in commerce in connection with the goods. See Electronic Communications Inc. v. Electronic Components for Industry Co., 443 F.2d 487, 492 (8th Cir. 1971).

FCA relies on Agway Inc. v. Utah Cooperative Assoc., 170 U.S.P.Q. 298 (TTAB 1971), but that case is inapposite here. In that case, Utah, the holder of an incontestable mark, had started advertising in the disputed market area prior to actual entry, but before Agway began its use there. The Trademark Trial and Appeal Board said:

Considering the entire record, there is no doubt but that Agway was the first to use its mark in each of the states claimed in its application for concurrent use. On the other hand, the record shows that Utah was advertising its mark in this same area at the time Agway began its use therein. Moreover, at approximately the same time, Utah was involved in plans to expand the use of its mark on a nationwide basis and began carrying out these plans soon thereafter (New York to California). In our view, Utah has established that at the time Agway began use of its mark in its trading area, it could reasonably be expected that Utah would expand its business into that same area. . It has subsequently done so. Moreover, by its advertising and promotional efforts, its good will in “TOTAL” may well have preceded its actual use on the eastern coast of the United States.

170 U.S.P.Q. at 300.

We are not here concerned with an incontestable mark. We agree that advertising is an appropriate factor to consider in determining whether a mark has acquired secondary meaning, but advertising alone is not sufficient to satisfy the significant market penetration test of Sweetarts v. Sunline, Inc., 380 F.2d 923 (8th Cir. 1967) and 436 F.2d 705 (8th Cir. 1971), especially where, as here, the advertising consists primarily of price lists mailed sporadically to potential customers. The trial court properly considered the advertising factor and its conclusion that “PESTLUR” had not acquired a secondary meaning in the 38 states controlled by the Lanham Act is not clearly erroneous. Kemin, on the other hand, must accommodate its own advertising program to the District Court’s injunction, in order to avoid further infringement in Florida and Georgia. Modern marketing techniques permit such accommodation in most instances; in others Kemin must suffer the burden resulting from its infringement.

Kemin’s argument that its nominal sales of “LURE” in Georgia and Florida prior to the registration of “PESTLUR” should foreclose FCA from injunctive relief in those states is likewise without merit. As we noted in Part II above, no trademark rights accrue to a descriptive term unless that term has acquired a secondary meaning. In Sweetarts v. Sunline, Inc., supra, this court adopted a de minimus rule in determining whether a common law trademark was entitled to injunctive protection in a given market area. We there held that a significant penetration into a market must be shown before injunctive relief will be granted, and nominal or de minimus sales are not sufficient to justify that protection.

Affirmed.

      . Rolland W. Nelson, president of Kemin Industries, was individually named a defendant and joins Kemin as appellant-cross-appellee in this appeal.

      . “RODENTLUR” and “FISHLUR” were added to FCA’s product line- in 1961. A product bearing tbe “FISHLUR” mark was first sold in 1962. These two marks are not in issue here since the CCPA declined to consider these marks in' the cancellation case. Kemin Industries, Inc. v. Flavor Corp. of America, 440 F.2d 1375, 1377, 58 CCPA 1180 (1971).

      . See, e. g., Cromwell v. County of Sac, 94 U.S. 351, 353, 24 L.Ed. 195 (1877) ; Southern Pacific R.R. Co. v. United States, 168 U.S. 1, 48-19, 18 S.Ct. 18, 42 L.Ed. 355 (1897) ; Mercoid Corp. v. Mid-Continent Co., 320 U.S. 661, 671, 64 S.Ct. 268, 88 L.Ed. 376 (1944) ; Commissioner of Internal Revenue v. Sunnen, 333 U.S. 591, 597-598, 68 S.Ct. 715, 92 L.Ed. 898 (1948) ; Lawlor v. National Screen Service Corp., 349 U.S. 322, 326, 75 S.Ct. 865, 99 L.Ed. 1122 (1955) ; United States v. Utah Construction Co., 384 U.S. 394, 421-423, 86 S.Ct. 1545, 16 L.Ed.2d 642 (1966).

      . 15 U.S.C. § 1114(1) (a) provides:
      (1) Any person who shall, without the consent of the registrant — ■
      (a) use in commerce any reproduction, counterfeit, copy, or colorable imitation of a registered mark in connection with the sale, offering for sale, distribution, or advertising of any goods or services on or in connection with which such use is likely to cause confusion, or to cause mistake, or to deceive; ***** shall be liable in a civil action by the registrant for the remedies hereinafter provided.

      . Kemin has argued that under Judge Learned Hand’s analysis in The Evergreens v. Nunan, 141 F.2d 927 (2d Cir. 1944), cert. denied, 323 U.S. 720, 65 S.Ct. 49, 89 L.Ed. 579 (1945), likelihood of confusion is not an “ultimate fact” in an infringement action and therefore collateral estoppel should not apply. To the contrary, we agree with Judge Stuart’s conclusion that likelihood of confusion is an “ultimate fact” under the definition given it by Judge Hand — i. e., a factual conclusion essential to the result. 358 F.Supp. at 1121. Kemin also argues that the mark considered by the TTAB and COPA is not the same as the marks actually used in commerce because of the animal name prefixes. Judge Stuart found that the TTAB had before it and fully considered all the animal names, themselves unregistrable, which were used by Kemin in connection with its “LURE” mark. This finding is supported by the record, and Kemin is not entitled to a de novo mark by mark determination.

      . Accord: Libbey-Owens-Ford Glass Co. v. Shatterproof Glass Corp., 165 USPQ 335 (E.D.Mich.1970).

      . 15 U.S.C. § 1052(f) provides:
      (f) Except as expressly excluded in paragraphs (a)-(d) of this section, nothing in this chapter shall prevent the registration of a mark used by the applicant which has become distinctive of the applicant’s goods in commerce. The Commissioner may accept as prima facie evidence that the mark has become distinctive, as applied to the applicant’s goods in commerce, proof of substantially exclusive and continuous use thereof as a mark by the applicant in commerce for the five years next preceding the date of the filing of the application for its registration.

      . The precise effect incontestable status might have on the scope of injunctive relief is not certain. Compare Old Dutch Foods, Inc. v. Dan Dee Pretzel & Potato Chip Co., 477 F.2d 150 (6th Cir. 1973) and Burger King of Florida, Inc. v. Hoots, 403 F.2d 904 (7th Cir. 1968) with Tillamook County Creamery Assoc. v. Tillamook Cheese and Dairy Assoc., 345 F.2d 158 (9th Cir. 1965) and John Morrell & Co. v. Reliable Packing Co., 295 F.2d 314 (7th Cir. 1961). Since we find the trial court’s determination that “PESTLUR” is a descriptive mark not to be clearly erroneous, it is unnecessary to decide that question.

      . 15 U.S.C. § 1052(e) provides :
      No trade-mark by which the goods of the applicant may be distinguished from the goods of others shall be refused registration on the principal register on account of its nature unless it—
      (e) Consists of a mark which, (1) when applied to the goods of the applicant is merely descriptive or deceptively misde-scriptive of them, or (2) when applied to the goods of the applicant is primarily geographically descriptive or deceptively misdescriptive of them, except as indications of regional origin may be registrable under section 1054 of this title, or (3) is primarily merely a surname.

      . 15 U.S.C. § 1065 provides in part:
      Except on a ground for which application to cancel may be filed at any time under subsections (c) and (e) of section 1064 of this title, and except to the extent, if any, to which the use of a mark registered on the principal register infringes a valid right acquired under the law of any State or Territory by use of a mark or trade name continuing from a date prior to the date of the publication under this chapter of such registered mark, the right of the registrant to use such registered mark in commerce for the goods or services on or in connection with which such registered mark has been in continuous use for five consecutive years subsequent to the date of such registration and is still in use in commerce, shall be incontestable: Provided, That—

        (4) no incontestable right shall be acquired in a mark which is the common descriptive name of any article or substance, patented or otherwise.

      . A notable exception is the Lanham Act’s elimination of the good faith adoption defense. 15 U.S.C. § 1072 makes registration on the Principal Register constructive notice of the registrant’s claim of ownership. This exception has no significance in the instant case, however, since at the very latest Kem-in had actual notice within a month after the registration of “PESTLUR”. The effect is that in those state market areas not covered by the injunction EOA will be entitled to exclusive use of “PESTLUR” anytime it acquires a secondary meaning, regardless of whether Kemin’s “LURE” mark has previously acquired a secondary meaning.

      . “LURE” had been used for only two years at that time and therefore could not qualify for the benefits of § 1052 (f).

      . See 3 R. Callmann, The Law of Unfair Competition, Trade-Marks and Monopolies § 71.1(d), at 143-47 (3d ed. 1969) and cases collected therein.

      . The parties have argued that a considerable amount of bad faith, falsification and fraud has been practiced by each against the other with regard to these marks and their registration. The record amj)ly supports Judge Stuart’s conclusion that “neither party has conducted itself in an exemplary manner,” and also supports his conclusion that each party’s claims based on the misbehavior of the other are without merit. Principal among these is FCA’s claim that Kemin did not adopt the “LURE” mark in good faith without prior knowledge of “PESTLUR”. It is true that Rolland Nelson was a salesman for FCA when it was using “PEST-LUR” and Judge Stuart was singularly unimpressed with his testimony, but his conclusion that “LURE” was adopted in good faith was based on independent evidence, including the testimony of Nelson’s successor as sales manager at FOA that he was never aware of “PESTLUR”, and that conclusion is not clearly erroneous.
      FCA also challenges the trial court’s use of a chart showing the comparative sales of “PESTLUR” and Kemin’s “LURE” products in deb- mining market penetration and the existence of secondary meaning. These were the marks in issue and the total sales of the products bearing these marks constitute the appropriate basis for deciding these questions. Finally, FCA argues that the trial court misinterpreted its own injunction order by not holding Kemin in contempt for displaying “LURE” advertisements at a national industry trade show in Kansas City, Missouri. This argument is frivolous. The trial court has considerable discretion in construing its own orders and, in any event, the activity in Kansas City was clearly outside the scope of the order.

      . Nothing in the record suggests that the rodenticide portion of the animal feed market is substantial enough in any of the Lan-ham Act states to enable “PESTLUR” to acquire a secondary meaning in the immediate future.