author: EDWARD WEINFELD, District Judge.

text:
    Tanyah Naomi AMARNARE, Plaintiff, v. MERRILL LYNCH, PIERCE, FENNER & SMITH INC., Defendant.
    No. 83 Civ. 4742.
    United States District Court, S.D. New York.
    Oct. 10, 1984.

      Tanyah Naomi Amarnare, pro se.
    Mary E. Baker, Thomas W. Smith, New York City, for defendant.
   OPINION

EDWARD WEINFELD, District Judge.

In this action against the defendant, Merrill Lynch, Pierce, Fenner & Smith Inc. (“Merrill Lynch”), the plaintiff, Tanyah Amarnare, alleges that Merrill Lynch was her “joint employer” with Mature Temps, Inc. (“Mature Temps”), not named as a defendant, and that Merrill Lynch violated Title VII of the Civil Rights Act of 1964 by discharging her from her temporary job because of her sex (female), race (black), and national origin (Afro-American). She worked for Merrill Lynch as an administrative assistant for two weeks, from April 14 to April 30, 1981.

Merrill Lynch moves, pursuant to Fed.R.Civ.P. 12(b)(1), (2), and (6), to dismiss the amended complaint for failure to state a claim upon which relief can be granted and, pursuant to Rule 8(a)(2), for failure to show that the plaintiff is entitled to relief. The essence of the motion, however variously stated, is that the relationship of employer and employee did not exist between Merrill Lynch and Amarnare; that in fact the plaintiff was employed by Mature Temps, an employment agency that provides temporary personnel to business concerns such as Merrill Lynch; and that Merrill Lynch so engaged her but discharged her after two weeks because her services were unsatisfactory. In sum, Merrill Lynch claims that plaintiff worked for it as an independent contractor and that no direct employment relationship between plaintiff and Merrill Lynch was contemplated by either of them. Accordingly, it is urged that the plaintiff’s claim is not covered by Title VII.

In resisting the motion, the plaintiff alleges that, although during the brief period of her service Mature Temps paid her salary, Merrill Lynch controlled her work hours, work place, and work assignments; hired, trained, and supervised her; and ultimately discharged her. She also alleges that no white male or white female was terminated in the manner she was terminated. As a further and separate claim, plaintiff alleges that during the two-week period she applied for a permanent position at Merrill Lynch and was turned down because of the company’s discriminatory policy against women and blacks.

Merrill Lynch and Amarnare, who appears pro se, have both submitted affidavits in support of their respective positions on this motion. For purposes of this motion, the allegations in the amended complaint and the plaintiff’s supporting affidavits must be accepted as true, and no claim may be dismissed “unless it appears beyond doubt that the plaintiff can prove no set of facts in support of [her] claim[s] which would entitle [her] to relief.” Under this stringent standard, the defendant’s motion to dismiss the amended complaint must be denied with respect to both the claim of unlawful discharge and that of unlawful refusal to hire plaintiff as a permanent employee.

THE CLAIM OF UNLAWFUL DISCHARGE

Title VII forbids an “employer” to engage in an “unlawful employment practice.” An “employer” is a person engaged in commerce who has employed fifteen or more persons during a specified period. Merrill Lynch does not deny that it qualifies as an employer under this definition. As such, Merrill Lynch is forbidden by Title VII “to fail or refuse to hire or to discharge any individual, or otherwise to discriminate against any individual with respect to his compensation, terms, conditions, or privileges of employment, because of such individual’s race, color, religion, sex, or national origin.” By its terms, this prohibition is not limited to employers who discriminate against their own employees. Indeed, it is significant that in providing a private right of action against a statutory employer Title VII does not refer to “employee” but to “the person aggrieved,” a term that has been construed “as comprehending individuals who do not stand in a direct employment relationship with an employer.” Amarnare alleges that Merrill Lynch and Mature Temps were her joint employers. This conclusion, if warranted, is sufficient to bring her action within the ambit of Title VII, though it is not necessary to do so. Even if Amarnare were an employee only of Mature Temps, she may invoke the statute on the ground that Merrill Lynch interfered with her employment opportunities with Mature Temps. The defendant’s motion to dismiss must be considered on both grounds.

First, whether the plaintiff was an employee of Merrill Lynch for purposes of Title VII is a question of federal law. The Court is required to analyze the “economic realities” of the situation “viewed in light of the common law principles of agency and the right of the employer to control the employee.” The “extent of the employer’s right to control the ‘means and manner’ of the worker’s performance is the most important factor.” Based on the allegations in the amended complaint and the supporting affidavits, there is no doubt that Merrill Lynch exercised complete control over Amarnare’s work assignments, the means and manner of her performance, and the hours of her employment. There is no suggestion but that Amarnare was subject to the direct supervision of Merrill Lynch employees in all respects and at all times during the two-week period in which she worked for the company. It is also clear from the defendant’s affidavits that Merrill Lynch had the right to discharge Amarnare and to request a replacement from Mature Temps if it found Amarnare’s services unsatisfactory.

When an employer has the right to control the means and manner of an individual’s performance, as Merrill Lynch allegedly had with regard to Amarnare, an employer-employee relationship is likely to exist. Factors other than control are then of marginal importance. In this case, the only other factor Amarnare alleges is that she was paid directly by Mature Temps rather than Merrill Lynch. This factor by itself is an insufficient basis on which to characterize plaintiff as an independent contractor. None of the Title VII cases, including those cited by the defendant, supports such a characterization. In most of those cases in which the plaintiffs were held to be independent contractors, the courts emphasized that the defendants exercised no control over the means and manner of the plaintiffs’ performances. The courts also emphasized the presence of one or more factors such as that the plaintiff owned his own equipment, paid his own operating expenses, hired his own employees to do the work in question, had entered into a contract that described him as an independent contractor, or reported his earnings for income tax purposes as “self-employment income.” There is no allegation that any of these factors were present in Amarnare’s case.

That plaintiff was paid directly by Mature Temps is not conclusive that she was solely its employee. That she was subject to the direction of Merrill Lynch in her work assignments, hours of service, and other usual aspects of an employee-employer relationship permits an inference that she was an employee of both Mature Temps and Merrill Lynch during the two-week period in question. Her status differs from that of most other Title VII plaintiffs in that her services were obtained through a temporary employment agency. At common law, the status of a person employed under such circumstances would be determined under the loaned servant doctrine, which provides that “an employee directed or permitted to perform services for another ‘special’ employer may become that employer’s employee while performing those services.” Federal courts have applied this common law rule in other contexts and held that a person whose salary is paid by one entity while his services are engaged on a temporary basis by another is an employee of both entities. The key factor in these loaned servant cases was the “special” employer’s exclusive right to. supervise the employee’s work during the period of temporary service. These cases lend further support to the plaintiff’s allegation that she was an employee of both Merrill Lynch and Mature Temps for purposes of Title VII.

Next, the plaintiff may also invoke Title VII on the alternative ground that Merrill Lynch allegedly interfered with her employment opportunities with Mature Temps. Several federal courts have held that Title VII permits suits against statutory employers “who are neither actual nor potential direct employers of particular complainants, but who control access to such employment and who deny such access by reference to invidious criteria.” Merrill Lynch allegedly has blocked plaintiff’s access to temporary employment through Mature Temps, and the Ninth Circuit has held that Title VII applies in this situation. In Gomez v. Alexian Brothers Hospital, the plaintiff practiced medicine under a professional corporation that proposed to the defendant hospital to operate its emergency room. Under the proposed contract, the plaintiff would serve as the director of the emergency room, although he would remain an employee of the professional corporation. After the hospital rejected the proposed contract on allegedly discriminatory grounds, the plaintiff was permitted to sue the hospital under Title VII for denying him the “opportunity to be employed by [the professional corporation] as director of defendants' emergency room.” The court reasoned:

The fact that plaintiff continues as an employee of [the professional corporation] does not mean the employment relationship between [the professional corporation] and plaintiff has not been interfered with. The conditions of plaintiff’s employment are different than they would have been had he not been discriminated against.

The same reasoning applies in Amarnare’s case. Even if she remains an employee of Mature Temps and continues to receive temporary assignments at other companies, she asserts a claim for loss of opportunity to work for Mature Temps as an administrative assistant at Merrill Lynch.

Merrill Lynch also argues that plaintiff has failed to allege facts sufficient to support a claim of unlawful discrimination. This argument has no merit. Amarnare has alleged that her work at Merrill Lynch was praised by two of her supervisors; that one of these supervisors later discharged her on the ground that her work was unsatisfactory; and that no other white employee, male or female, had been discharged by Merrill Lynch in the manner that she was discharged. Although these allegations do not state a claim of sex discrimination, in view of Amarnare’s assertion that no white women were treated as she was, they do state a prima facie case of race discrimination under Title VII. The elements of a prima facie case are (1) the plaintiff is a member of a racial minority; (2) she was qualified for the job she held; (3) she was discharged despite her qualifications; and (4) after her discharge, her position remained open and the employer sought someone with comparable qualifications to fill it. Amarnare’s race and her discharge are not in dispute, and she has raised a question of fact concerning her qualifications for the job of administrative assistant. Although she has alleged no facts concerning the fourth element, it cannot be said that she could not prove such facts at trial and she may not be denied the opportunity to do so by a motion to dismiss.

Finally, the defendant’s contention that the plaintiff has failed to make “a short and plain statement of the claim showing that the pleader is entitled to relief,” as required by Fed.R.Civ.P. 8(a)(2), merits little discussion. Rule 8 does not require that the facts on which a claim are based be set forth in detail, for these are to be ascertained in discovery. Rather, the defendant need only be given the factual premises of the case so that it can respond. In this case, the nature of the charge is clear: plaintiff alleges that Merrill Lynch discharged her from her temporary position as an administrative assistant because she is black and Afro-American and not because her work was unsatisfactory.

THE CLAIM OF UNLAWFUL REFUSAL TO HIRE

With respect to this claim, Amarnare stands in the position of a prospective employee of Merrill Lynch. Since Title VII expressly forbids a statutory employer like Merrill Lynch from refusing to hire prospective employees because of their race or national origin, the defendant’s jurisdictional objection has no merit.

The allegation that Merrill Lynch denied the plaintiff’s application for permanent employment also states a Title VII claim in view of the allegations supporting her claim of unlawful discharge. If Amarnare could prove facts that show she was discharged from her temporary position because of her race and national origin, then it could be inferred that race and national origin were also factors in the defendant’s alleged decision to deny her application for permanent employment, provided she made such application. Amarnare alleges that she filed an application with the receptionist. Defendant states that it has no record of having received such an application. Whether her application ever reached the attention of the defendant’s officials in charge of hiring and whether they acted upon it need not now be answered. The claim of unlawful refusal to hire on a permanent basis raises questions of fact and therefore is sufficient to withstand a motion for dismissal.

The defendant’s motion to dismiss the amended complaint is denied with regard to the claims that Merrill Lynch discharged Amarnare from her temporary job and refused to hire her for a permanent job because of her race and national origin. The motion is granted, however, insofar as those claims are based upon allegations of sex discrimination.

So ordered.

      . 42 U.S.C. §§ 2000e to 2000e-17 (1982).

      . Amarnare claims that she was discharged without warning or an opportunity to respond to the charge that her work was unsatisfactory. She also claims that she was discharged without cause.

      . The defendant has not moved for summary judgment under Fed.R.Civ.P. 56(b) nor has it filed an accompanying statement of material facts as required by Local Rule 3(g). However, the factual assertions in the pleadings and affidavits, which in a number of instances are sharply disputed, are referred to as background information.

      . Gardner v. Toilet Goods Ass'n, 387 U.S. 167, 172, 87 S.Ct. 1526, 1529, 18 L.Ed.2d 704 (1967).

      . Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 102, 2 L.Ed.2d 80 (1957) (footnote omitted).

      . 42 U.S.C. § 2000e-2(a)(l) (1982).

      . Id. § 2000e(b).

      . Id. § 2000e2(a)(l) (emphasis added).

      . Id. § 2000e-5(f)(l).

      . Sibley Memorial Hosp. v. Wilson, 488 F.2d 1338, 1341 (D.C.Cir.1973).

      . Merrill Lynch and Mature Temps are not so cooperative with one another as to constitute a consolidated or integrated enterprise; as such, they are not "joint employers” under Title VII in the strict sense of that term. See Baker v. Stuart Broadcasting Co., 560 F.2d 389, 391-92 (8th Cir.1977); Linskey v. Heidelberg Eastern, Inc., 470 F.Supp. 1181, 1183-84 (E.D.N.Y.1979). However, this does not mean that Amarnare could not have been an employee of both concerns simultaneously, see Beaver v. Jacuzzi Bros., Inc., 454 F.2d 284, 285 (8th Cir. 1972) (per curiam), and her use of the term "joint employer” in the amended complaint is understood in this light.

      . See Cobb v. Sun Papers, Inc., 673 F.2d 337, 339 (11th Cir.), cert. denied, 459 U.S. 874, 103 S.Ct. 163, 74 L.Ed.2d 135 (1982).

      . Id. at 341; see Hickey v. Arkla Indus., Inc., 699 F.2d 748, 751 (5th Cir.1983); Unger v. Consol. Foods Corp., 657 F.2d 909, 915 n. 8 (7th Cir.1981), cert. granted, vacated, and remanded on other grounds, 456 U.S. 1002, 73 L.Ed.2d 1297 (1982); Lutcher v. Musicians Union Local 47, 633 F.2d 880, 883 (9th Cir.1980); Spirides v. Reinhardt, 613 F.2d 826, 831-32 (D.C.Cir.1979).

      . Spirides, 613 F.2d at 831. The D.C. Circuit has indicated that other factors to be considered include:
      (1) the kind of occupation, with reference to whether the work usually is done under the direction of a supervisor or is done by a specialist without supervision; (2) the skill required in the particular occupation; (3) whether the "employer" or the individual in question furnishes the equipment used and the place of work; (4) the length of time during which the individual has worked; (5) the method of payment, whether by time or by the job; (6) the manner in which the work relationship is terminated, i.e., by one or both parties, with or without notice and explanation; (7) whether annual leave is afforded; (8) whether the work is an integral part of the business of the "employer"; (9) whether the worker accumulates retirement benefits; (10) whether the "employer" pays social security taxes; and (11) the intention of the parties.

        Id. at 832.

      . See id. at 831-832.

      . See Gutierrez v. Aero Mayflower Transit Co., 22 Fair Empl.Prac.Cas. (BNA) 447, 448-49 (N.D.Cal. Apr. 27, 1979); Takeall v. Werd, Inc., 23 Fair Empl.Prac.Cas. (BNA) 947, 948 (M.D.Fla. Mar. 8, 1979); Smith v. Dutra Trucking Co., 410 F.Supp. 513, 516-17 (N.D.Cal.1976), aff'd, 580 F.2d 1054 (9th Cir.1978) (mem.); Mathis v. Standard Brands Chem. Indus., Inc., 10 Empl.Prac.Dec. (CCH) ¶ 10,306, at 5246-47 (N.D.Ga. Feb. 20, 1975).
      In Spirides v. Reinhardt, 486 F.Supp. 685, 687-88 (D.D.C.1980), the district court did not mention control in finding that plaintiff was an independent contractor but emphasized the parties' contract, which described plaintiff as such, and plaintiffs tax returns, which listed her earnings as "self-employment income.” In Dumas v. Town of Mount Vernon, 436 F.Supp. 866, 870, 872-73 (S.D.Ala.1977), the district court held that CETA workers, who were trained by and worked full-time for the defendant but who were hired and paid by CETA, were not the defendant’s employees for purposes of Title VII because defendant did not control them. On appeal, however, the Fifth Circuit, though not deciding this question, noted that “there was no evidence in the record to support a finding of control or lack of control.” 612 F.2d 974, 979 n. 5 (5th Cir.1980). The district court opinion had not mentioned supervision.

      . See Spirides, 486 F.Supp. at 688; Gutierrez, 22 Fair Empl.Prac.Cas. at 448-49; Smith, 410 F.Supp. at 516-17; Mathis, 10 Empl.Prac.Dec. at 5246-47.

      . Maynard v. Kenova Chem. Co., 626 F.2d 359, 361 (4th Cir.1980) (per curiam) (citing Restatement (Second) of Agency § 227 (1958)).

      . See Maynard, 626 F.2d at 361-62 (Manpower temp was an employee of special employer for purposes of state workers' compensation law); Jacuzzi Bros., 454 F.2d at 285 (same involving Kelly Girl temp); St. Claire v. Minnesota Harbor Serv., Inc., 211 F.Supp. 521 (D.Minn.1962) (same involving Manpower temp).

      . Sibley Memorial Hosp., 488 F.2d at 1342 (footnote omitted); Pao v. Holy Redeemer Hosp., 547 F.Supp. 484, 494 (E.D.Pa.1982); Puntolillo v. New Hampshire Racing Comm’n, 375 F.Supp. 1089, 1092 (D.N.H.1974).

      . 698 F.2d 1019 (9th Cir.1983).

      . Id. at 1021.

      . Id.

      . See McDonnell Douglas Corp. v. Green, 411 U.S. 792, 802, 93 S.Ct. 1817, 1824, 36 L.Ed.2d 668 (1973).

      . See Conley, 355 U.S. at 45-46, 78 S.Ct. at 102.

      . See Obradovich v. Federal Res. Bank, 569 F.Supp. 785, 788 (S.D.N.Y.1983).

      . See Ferguson v. Mobil Oil Corp., 443 F.Supp. 1334, 1336 (S.D.N.Y.1978), aff’d, 607 F.2d 995 (2d Cir.1979) (mem.).

      . See 42 U.S.C. § 2000e-2(a)(l) (1982); see also Mathis, 10 Empl.Prac.Dec. at 5246.


source: Caselaw Access Project

author: URBOM, Chief Judge.

license: Public Domain

text:
    Marvin C. WESTCOTT, Plaintiff, v. UNITED STATES DEPARTMENT OF AGRICULTURE, John Block, Secretary of the United States Department of Agriculture, Bruce Gustafson, Vinston D. Carlson, and Charles Leff, Defendants.
    No. CV83-L-474.
    United States District Court, D. Nebraska.
    Nov. 1, 1984.

      Michael Johanns, Lincoln, for plaintiff.
    Theodore Grossman, Dept. of Justice, Washington, D.C., for defendants.
   URBOM, Chief Judge.

According to the record before me, the plaintiff, Marvin C. Westcott, owns farms in Nuckolls and Phelps counties in Nebraska. He made an application to the Agricultural Stabilization and Conservation Services Committees of these two counties to combine his farms as one farming unit; the combination was approved by both county ASCS committees in February of 1983. On March 16, 1983, the Phelps county ASCS committee reviewed the combination and again approved it, but on March 24, 1983, upon further review, it concluded that the farms must be decombined. At about the same time, the Nuckolls county ASCS committee made the same decision. The plaintiff appealed to the Nebraska State ASCS committee, which determined that the farms would remain divided for the 1983 program. By a letter dated April 14, 1983, the state committee informed the plaintiff that:

“... combination of the farms represents an advantage to meet conservation use requirements without contributing an equivalent reduction in production. It also appears that prior operators on two of the farms were changed to share producers for the purpose of meeting single farm operator rules for combination of farms. The combination of these farms is not in the best interest of the program.”
(part of filing 18)

The plaintiff then appealed the findings of the state committee to the Deputy Administrator, State and County Operations, of the United States Department of Agriculture. On May 5, 1983, the deputy administrator informed the plaintiff that the decision of the state committee was affirmed, thus ending the appeal rights under 7 C.F.R. Part 780. This was the final determination of the Department of Agriculture.

The plaintiff subsequently filed this lawsuit, challenging the decombination of his farms. He is seeking relief in the form of an injunction preventing the defendants from enforcing the provisions of two amendments to the handbook used by the county ASCS committees, a judgment directing the defendants to combine his farmland into one farming unit, and money damages.

The defendants have filed a motion to dismiss or in the alternative for summary judgment, filing 18.

I. Reviewability

The defendants claim that 7 U.S.C. § 1385 precludes judicial review of the determination of the committees and the deputy administrator that the plaintiffs farms should remain decombined. Section 1385 provides:

“The facts constituting the basis for ... any payment under the wheat, feed grain, upland cotton, and rice programs authorized by the Agricultural Act of 1949 and this chapter, any ... price support operation, or the amount thereof, when determined in conformity with the applicable regulations prescribed by the Secretary or by the Commodity Credit Corporation, shall be final and conclusive and shall not be reviewable by any other officer or agency of the Government.”

The cases cited by the defendants, however, show that this section is not a complete bar to judicial review. In Gross v. United States, 505 F.2d 1271 (Ct.Cl.1974), the court interpreted this section to mean that the factual determinations of an agency are not subject to review by the judiciary and that “the decision of the agency based on such factual determinations are also entitled to finality and are not subject to judicial review, except as to questions of law, or allegations and proof by the plaintiff that such decisions were arbitrary or capricious.” Id., at 1279 (emphasis added). In Elliott v. United States, 179 F.Supp. 758, 759 (U.S.D.C.Neb.1959), another case cited by the defendants, the court was concerned with the Soil Bank Act, 7 U.S.C. §§ 1801 et seq. Tit. 7 U.S.C. § 1809 contained provisions and language limiting review by other officers and agencies of the government that were very similar to 7 U.S.C. § 1385. In interpreting this provision the court stated that it would follow the directions of Congress and “refuse to review either the facts constituting the basis for payment or the amount thereof authorized under the Soil Bank Act.” Id., at 762. The court went on to note an exception to the no-review provision when there is a deprivation of constitutional rights. Id.', accord, Prosser v. Butz, 389 F.Supp. 1002, 1005 (U.S.D.C.Ia.1974). Because the plaintiff has alleged that the acts of the individual ASCS committee members were arbitrary and capricious and that there has been a deprivation of Fifth Amendment rights, I conclude that § 1385 does not prevent judicial review of this case.

The Gross and Elliott cases are significant, because they stand for the proposition that § 1385 does not prevent an agency from reviewing its own decisions. Gross, supra, at 1278; Elliott, supra. This supports my conclusion that the final decision of the department in this case is that the farms should remain separate. This is contrary to the plaintiffs claim that the decision of the county ASCS committees to combine the farms is the final decision that should be upheld unless one of the conditions of § C.F.R. § 719.3(d) is met, thus requiring a reconstitution of the combined farms.

II. Department of Agriculture as a Party

The defendants contend that the Department of Agriculture is not a proper party to this lawsuit, because it is not a statutory entity, i.e., Congress has not given it the authority to sue or be sued. The clearest statement of this prohibition against suing the Department of Agriculture is found in United States Department of Agriculture v. Hunter, 171 F.2d 793 (C.A. 5th Cir.1949). The defendants cite North Dakota-Montana Wheat Growers’ Ass’n v. United States, 66 F.2d 573 (C.A. 8th Cir.), cert. denied, 291 U.S. 672, 54 S.Ct. 457, 78 L.Ed. 1061 (1933), showing that this is the rule of law in the Eighth Circuit. The plaintiff has failed to rebut the assertion that the Department of Agriculture cannot be sued, and I have found no authority contrary to that relied upon by the defendants. The Department of Agriculture will be dismissed as a defendant.

However, the Secretary is a person and “if he by affirmative act exceeds his lawful authority or threatens to do so, to the injury of established rights, he may be enjoined, for in such circumstances he is not truly representing the Government.” United States Department of Agriculture v. Hunter, supra, at 795. The status of the claims against the Secretary and the other individual defendants is discussed below.

III. Sovereign Immunity

The defendants allege that the doctrine of sovereign immunity is a bar to this lawsuit.

“The United States, as sovereign, is immune from suit save as it consents to be sued ... and the terms of its consent to be sued in any court define that court’s jurisdiction to entertain the suit.” United States v. Testan, 424 U.S. 392, 399, 96 S.Ct. 948, 953, 47 L.Ed.2d 114 (1976), quoting United States v. Sherwood, 312 U.S. 584, 586, 61 S.Ct. 767, 769, 85 L.Ed. 1058 (1941)

The terms of congressional consent to the United States’ being sued “must be strictly observed and exceptions thereto are not to be implied.” Testan, supra, 424 U.S. at 399, 96 S.Ct. at 953; Soriano v. United States, 352 U.S. 270, 276, 77 S.Ct. 269, 273, 1 L.Ed.2d 306 (1957).

The defendants allege that the present lawsuit is against the property of the Commodity Credit Corporation and that the real parties in interest are the Commodity Credit Corporation and the United States. The basis of this allegation is that any PIK payments are to be made out of the Commodity Credit Corporation’s inventories. 7 C.F.R. § 770.3. The Commodity Credit Corporation Charter Act provides that the CCC:

“May sue and be sued, but no attachment, injunction, garnishment, or other similar process, mesne or final, shall be issued against the Corporation or its property ... Any suit by or against the United States as the real party in interest based upon any claim by or against the Corporation shall be subject to the provisions of [this subsection] to the same extent as though such suit were by or against the Corporation ...”
15 U.S.C. § 714b(c)

The defendants claim that this language prevents any injunction from . issuing against the Commodity Credit Corporation or the United States as the real party in interest to the lawsuit.

A case dealing with similar statutory language is United States v. Mel’s Lockers, Inc., 346 F.2d 168 (C.A. 9th Cir.1965), where it was held that the Small Business Administration was an unincorporated agency of the federal government and entitled to full sovereign immunity unless waived by Congress. The applicable statute provided that the administrator of the Small Business Administration may “sue and be sued ... but no attachment, injunction, garnishment or other similar process, mesne or final, shall be issued against the Administrator or his property.” 15 U.S.C. § 634(b). The court stated that “this language is too clear for misunderstanding that there is no waiver by Congress as to injunction suits.” Id., at 170.

It is the plaintiff’s contention that the defendants were acting beyond the scope of their authority and that, therefore, the doctrine of sovereign immunity does not apply even in the absence of a waiver. Berends v. Butz, 357 F.Supp. 143,149 (U.S.D.C.Minn.1973). His argument is that the Department of Agriculture promulgated new “rules” in the form of amendments to the handbook used by the county committees, without complying with the notice and comment provisions of the Administrative Procedure Act. The amendments at issue are CM-7 and CM-10. (Exhibits H and I of filing 1) To determine whether these amendments are subject to the notice and comment provisions of the APA it first must be determined whether they are substantive rules or merely interpretations of such rules and therefore excluded from the notice and comment requirements. A finding that these amendments are rules is the linchpin of the plaintiffs case: if the amendments are merely interpretative rules, the notice and comment provisions are inapplicable, the defendants have not acted beyond the scope of their authority, and injunctive suits are barred.

The Administrative Procedure Act at 5 U.S.C. § 552 provides:

“(a) Each agency shall make available to the public information as follows:
(1) Each agency shall separately state and currently publish in the Federal Register for the guidance of the public—
(A) descriptions of its central and field organization and the established places at which, the employees (and in the case of a uniformed service, the members) from whom, and the methods whereby, the public may obtain information, make submittals or requests, or obtain decisions;
(B) statements of the general course and method by which its functions are channeled and determined, including the nature and requirements of all formal and informal procedures available;
(C) rules of procedure, descriptions of forms available or the places at which forms may be obtained, and instructions as to the scope and contents of all papers, reports, or examinations;
(D) substantive rules of general applicability adopted as authorized by law, and statements of general policy or interpretations of general applicability formulated and adopted by the agency; and
(E) each amendment, revision, or repeal of the foregoing.
* * * * # *
(4)(A) In order to carry out the provisions of this section, each agency shall promulgate regulations, pursuant to notice and receipt of public comment, ...”

Tit. 5 U.S.C. § 553 concerns rule making by administrative agencies of the government. Section 553(b) provides:

“General notice of proposed rule making shall be published in the Federal Register, unless persons subject thereto are named and either personally served or otherwise have actual notice thereof in accordance with law ...
• * * * * * *
“Except when notice or hearing is required by statute, this subsection does not apply—
(A) to interpretative rules, general statements of policy, or rules of agency organization, procedure or practice; or
(B) when the agency for good cause finds (and incorporates the finding and a brief statement of reasons therefor in the rules issued) that notice and public procedure thereon are impracticable, unnecessary, or contrary to the public interest.”

Section 553(c) requires that agencies give interested persons an opportunity to present to the agency their views on the proposed rule. This is generally referred to as the comment requirement.

To determine whether the amendments were interpretative of previous rules and are therefore exempt from the notice and comment provisions of the APA, one must first look at the regulations they were supposedly interpreting. The regulations for the Payment In Kind Program are set out in 7 C.F.R. Part 770 (1984). The regulation at § 770.2 requires that a farmer “comply with all of the requirements of any other acreage reduction or paid diversion program established by the Department for any commodity included in the contract.” 7 C.F.R. Part 719, concerning the constitution and reconstitution of farms, applies to “any program administered by the Agricultural Stabilization and Conservation Service through State and county committees.” 7 C.F.R. § 719.2. Part 719 clearly applies to the PIK program. Section 719.-3(b) provides:

“... [A] farm shall include all land operated by one person as a single farming unit except that it shall not include land under any of the following conditions:
* >K * sfc * >jc
(6) Land constituting a farm which is declared ineligible to participate in a program under the regulations governing the program.”

7 C.F.R. § 719.3(a) provides:

“Land which has been properly constituted under prior regulations shall remain so constituted until a reconstitution is required under paragraph (d) of this section”

Section 770.2 requires compliance with the Paid Land Diversion Program, described in 7 C.F.R. Part 713, as a condition of participating in the PIK program. Section 713.22 (1983) provides:

“(b) A producer who is determined by the State committee, or the county committee with the approval of the State committee, to have knowingly (1) adopted any scheme or device which tends to defeat the purpose of the program ... shall refund to the Commodity Credit Corporation all payments received by such producer with respect to the program.”

The deputy administrator delineated the purpose of the PIK program in his May 5, 1983, letter denying the plaintiff’s appeal of the state ASCS committee’s decision which affirmed the decombination of the farms. He said:

“The basic concept of the production adjustment program, including the voluntary payment-in-kind (PIK) program, is to reduce production of program commodities in order to bring supplies more in line with demand____ For the program to be effective, we believe the conservation use acreage must be almost equally productive to the land remaining to be cropped on the farm. In this respect, we do not believe it to be in the best interests of the PIK program to permit farm combinations which would increase the potential of having less productive land designated as conservation use acreage.”

The plaintiff does not dispute that the reduction of production is one goal of the PIK program. Plaintiff’s brief, p. 3.

The plaintiff has two farms that are all irrigated acreage base and one tract that is all dryland acreage base; the dryland farm is in a different county than the two others. The defendants claim that if the farms were combined as one farming unit, the plaintiff could designate more dryland acreage for conservation use purposes and retain a larger percentage of the irrigated acreage for production, allowing him to produce more grain on the same number of producing acres than if the farms remained decombined. The defendants claim that combining the tracts would be counterproductive to the purpose of PIK, which is to reduce production.

This brings us to the consideration of CM-7 and CM-10. CM-7, dated June 1, 1983, stated that reconstitutions should be denied by county ASCS committees if they determine (1) that the reconstitution was requested in anticipation of or because of the PIK program and (2) that the reconstitution is not in the best interest of the PIK program. (Exhibit H to filing 1). At page 2 of this document the county committees were instructed to consider all relevant factors in determining what was in the best interest of the program, including the types of crops raised on the tracts, the productive capability of the tracts (the ratio of dryland to irrigated land or bottom land to upland, etc.), and the farmer’s intention regarding the designation of land for conservation purposes.

CM-10 (Exhibit I of filing 1) ordered the county ASCS committees to review all re-constitutions of farms for the 1983 crop season, considering the criteria of CM-7. The county committees were directed to:

“B Withdraw the approval of any re-constitutions that:

1 Appear to be devices to meet requirements for conserving use under the acreage reduction or PIK programs without contributing an equivalent reduction in production.
2 Appear to be devices that allow producers to realize windfalls in the form of unwarranted program payments.
3 Appear to be any other scheme or device that tends to defeat the purpose or reduce the effectiveness of the acreage reduction or PIK programs, and are therefore contrary to the best interests of the programs.”

The defendants allege that the contents of the two amendments are interpretations of the regulations contained in the Code of Federal Regulations. A review of some of the pertinent regulations is helpful in determining whether this is true. Some general guidelines for the county ASCS committees to use in determining what land constitutes a farm are set out in 7 C.F.R. § 719.4; such factors as ownership, whether the land is farmed as a single farming unit, and who actually controls the farming operation are listed. These do not purport to be an exhaustive list of the factors to be considered. Section 713.22(b) provides that farmers who adopt a “scheme or device” to defeat the purpose of a program must return any money paid to them under that program. The purpose of Parts 713 and 770 of the Code of Federal Regulations is to reduce production of specified crops. I find that CM-7 and CM-10 are merely interpretative of these regulations and are compatible with the broad purposes of the PIK program. The portion of CM-10 set out above makes it clear that this amendment tracked the language of some of the regulations mentioned in this paragraph. It is also clear that CM-10 was giving examples to clarify CM-7’s admonition to avoid reconstitutions that are not in the best interest of the PIK program.

The plaintiff claims that there is a genuine issue of fact as to whether CM-7 and CM-10 are interpretative or substantive rules. Plaintiffs brief, p. 15. Actually, it is a question of law for the court to decide.

The plaintiff argues that CM-7 and CM-10 are regulations that were promulgated in violation of the APA, citing Texaco, Inc. v. Federal Power Commission, 412 F.2d 740 (C.A. 3rd Cir.1969), and Pharmaceutical Manufacturers Ass’n v. Finch, 307 F.Supp. 858 (U.S.D.C.Del.1970), for the proposition that because the directives had a substantial impact upon him, they therefore were regulations that must meet the procedural requirements of the APA. The Texaco case is easily distinguishable from the present case. In Texaco a commission issued an order that specifically stated that it amended a section of the Code of Federal Regulation; the issue was whether the notice and hearing provisions of the APA could be dispensed with as unnecessary under 5 U.S.C. § 535(b)(B). This provision of the APA is not at issue here.

In the second case cited by the plaintiff, the court stated that regardless of the label attached by the agency, “when a proposed regulation of general applicability has a substantial impact on the regulated industry, or an important class of members ... notice and an opportunity for comment should first be provided.” Pharmaceutical Manufacturers Ass’n v. Finch, supra, at 863. In the Finch case the FDA published new regulations in the Federal Register that were effective without any notice and comment opportunity. The regulations required in specific detail that certain types of clinical evidence be submitted by the drug manufacturers to show the effectiveness of drugs that were permitted on the market between 1938 and 1962. Proof of the effectiveness of those drugs was not previously required. If such evidence was not submitted, the drugs would be subject to summary removal from the market by the FDA. The court found the new regulations to be “pervasive in their scope and have an immediate and substantial impact on the way” the manufacturers conduct their everyday business. Id., at 864. The effect of the regulations did not stop with the manufacturers but extended to prescribing physicians and patients as well. The court held that because of the impact of the regulations upon the industry, the FDA had to comply with the notice and comment provisions of the APA before the rules could be effective.

The Finch case, too, is distinguishable. There, the FDA was imposing a regulation that had previously been applied only to new drug applications made in the year 1962 or later, on drugs that had been approved for sale under a prior and more lenient standard. The court said that this was a heavy burden to impose upon drug manufacturers and it therefore had to be done with notice and an opportunity for comment, giving as one reason the allegation that there were not enough qualified personnel in the country to do all of the testing necessary to prevent summary removal of these drugs from the market. This was especially true because researchers did not want to spend their time testing drugs whose effectiveness was not questioned by the medical profession. This is quite different from the case here, where the plaintiff is claiming that the amendments to the handbook had a significant impact because they affected the combination of his farms. I do not believe this is the type of impact the court had in mind in Finch when it concluded that the “substantial impact on the regulated industry” made the regulation subject to the notice and comment provisions of the APA.

In Berends v. Butz, 357 F.Supp. 143, 154 (U.S.D.C.Minn.1973), the court agreed with the Finch court that a directive that has a substantial impact upon those regulated is a rule and therefore the notice and comment provisions of the APA must be followed. . Berends, however, also is distinguishable. In Berends the plaintiffs were challenging only ministerial acts of the Secretary, not discretionary acts. The Secretary had exercised his discretion in designating certain areas as eligible for emergency loans. The effect of the designation by statute and regulation was that “emergency loans will be made available in the counties so designated.” Id., at 152 (emphasis by the court). Subsequently, the Secretary directed that emergency loan applications would no longer be accepted more than sixty days after the designation. Because of the timing, the effect of this directive was to prevent, without notice, the application for emergency loans in designated areas. A provision of the act at issue stated: “The benefits provided under this section shall be applicable to all loans qualifying hereunder.” P.L. 92-385, § 5. The benefit referred to was the availability of emergency loan funds that were unavailable commercially. The court ruled that the Secretary “must accept loan applications and consider them.” Id., at 150. The court found that accepting loan applications was mandated by the statutes and was not within the discretion of the Secretary. It is significant that the court did not rule that the loans had to be granted, but only that the applications had to be accepted and considered.

It is the mandatory language in the above statutes and regulations that distinguishes Berends from the present case. The plaintiff here is claiming that his farms must be combined. There is, however, no statutory language mandating that farms shall be combined when they are in different counties and one is all dryland acreage base and the other two are all irrigated acreage base.

I conclude that CM-7 and CM-10 are merely interpretative rules of regulations contained in the Code of Federal Regulations and as such are exempt from the notice and comment provisions of the Administrative Procedure Act. 5 U.S.C. § 553(b).

Government officials are immune to damage suits for discretionary acts done in the course of their official duties. Barr v. Mateo, 360 F.2d 564 (1959). If the action taken is “within the outer permimeter” of the defendants’ line of duty, then the privilege of governmental immunity applies. Id., at 575. The Eighth Circuit Court of Appeals has applied governmental immunity to members of county ASCS committees in Gross v. Sederstrom, 429 F.2d 96 (C.A. 8th Cir.1970), noting that the ASCS committees are given “broad responsibility for carrying out various government farm programs.” Id., at 99; 7 C.F.R. § 7.21. The decisions on farm combinations are within the discretion of the ASCS committees; therefore, governmental immunity protects the committee members from suit for damages. Furthermore, the only decision that could be subject to review is the deputy administrator’s final decision affirming the state ASCS committee’s determination that the plaintiff’s farms must remain separate. (Exhibit E to filing 1; 7 C.F.R. Part 780). The decisions of the county committees are not final. The concept of governmental immunity applies to the Secretary of the United States Department of Agriculture as well; because his actions were taken in the course of his duties, he also is immune from suit in this case.

IV. Denial of Ability to Bid

In his brief the plaintiff argues that if he had known that his farms would not be allowed to be combined, he would have made a bid for 100 per cent participation in the PIK program on at least one of his tracts, contending that because the determination that the tracts could not be combined was made after the cutoff for bidding for 100 per cent participation, he was precluded from making such a bid. Even accepting these allegations as true, they state no cause of action: there is no constitutional entitlement to PIK benefits. Starrh & Starrh Farms v. Cummings, 562 F.Supp. 415, 419 (U.S.D.C.E.D.Cal. 1983). And, because bids are competitive for 100 per cent participation, even if a bid were made, there was no guarantee that it would have been accepted. 7 C.F.R. § 770.5. If what the plaintiff is asserting is that the government should be estopped from determining that his farms cannot be combined because government officials told him after oral inquiries that his tracts met the requirements for combination, this also fails to state a cause of action. Schweiker v. Hansen, 450 U.S. 785, 101 S.Ct. 1468, 67 L.Ed.2d 685 (1981); Leimbach v. Califano, 596 F.2d 300 (C.A. 8th Cir.1979).

V. Due Process

The plaintiff also contends that the committee members deprived him of due process of law, in violation of the Fifth Amendment, by not following the regulations in the Code of Federal Regulations and by following CM-7 and CM-10, which he alleges were not properly promulgated. I have ruled that CM-7 and CM-10 were interpretative rules and did not need to be published and subject to comment before being used by the ASCS committees. There is no property interest involved in this case to which the Fifth Amendment can attach. The mere fact that a government program exists does not give a person a property interest in participating in the program. Berends v. Butz, supra, at 151; Simpkins v. Davidson, 302 F.Supp. 456 (U.S.D.C.S.D.N.Y.1969). In fact, the function of the ASCS committees and the Department of Agriculture appeals process is to determine whether one is entitled to participate.

Furthermore, in making the determination, the county ASCS committees, the sfate ASCS committee, and the deputy administrator more than met the minimum due process requirements of the Fifth Amendment. It appears that the plaintiff may not have been informed of one of the county committee meetings at which his farms were discussed, but he was able to present his views at all levels of the agency’s determination process.

I find that the Fifth Amendment claims are meritless and cannot be used to circumvent the governmental immunity afforded the defendants in this case.

YI. Arbitrary and Capricious Conduct

The plaintiff has also alleged that the ASCS committee members acted in an arbitrary and capricious manner in determining that his farms could not be combined for purposes of the PIK program. As I pointed out earlier in this memorandum, the determination of the county committee is not a final decision of the Department of Agriculture, because the plaintiff appealed that decision; the final decision was that of the deputy administrator. In addition, the only evidence in the record to support an allegation of arbitrary and capricious conduct on the part of the committee members is that another person’s tracts were combined and that one of that person’s tracts was dryland and the other was irrigated. According to the plaintiff, the explanation given him of the differences in the cases was that one of that other person’s tracts had been inherited by him that year and it was believed that in the “normal sequence of events” he would have combined the tracts in the absence of any program. (Page 2 of plaintiff’s “Facts & Background,” a part of filing 18) The defendants, on the other hand, have shown that the ASCS committee members were performing a duty within their discretion in determining whether to approve the combination of the farms and that their decision was in conformance with the broad purposes of the PIK program, i.e., to reduce production of specific crops.

The defendants’ motion to dismiss or for summary judgment will be granted as to all defendants.


author: STAGG, Chief Judge.

text:
    PRECISION TUNE, INC. v. TUNE-A-CAR, INC.
    Civ. A. No. 84-2669.
    United States District Court, W.D. Louisiana, Shreveport Division.
    Nov. 21, 1984.

      Roy S. Payne, Blanchard, Walker, O’Quin & Roberts, Shreveport, La., for plaintiff.
    Robert C. Lowther Jr., Lowther & Boone, Many, La., for defendant.
   MEMORANDUM RULING

STAGG, Chief Judge.

Injunctive relief is sought by plaintiff under the provisions of the Lanham Act, 15 U.S.C. §§ 1114(1) and 1125(a). A hearing was held on Monday, October 29, 1984, and the law and evidence leads to the conclusion that injunctive relief is appropriate.

Precision Tune, Inc., offers automobile tuneups and specialized repair services through a series of franchise outlets located throughout the United States. To further its business, plaintiff has secured two certificates of registration from the United States Patent and Trademark Office. One certificate registers plaintiff’s name and logo consisting of a jagged line design. (See Exhibits P-5 and P-6.) The other certificate registers only the jagged line. In Louisiana, Precision Tune has outlets in Monroe, Alexandria and Baton Rouge. There are no Precision Tune outlets in the Shreveport-Bossier City area. Precision Tune stores are painted various shades of yellow. The exterior walls of the stores feature the jagged line design painted on all sides. The line is composed of five stripes appearing in the following order: orange, brown, yellow, brown and orange. .The angles in the jagged line appear at varying intervals on each store in order to accommodate the structural features of the store, such as work bays and doors. A descriptive sign is featured on the stores as well. It consists of a rectangular sign, also in yellow, which states on the left hand side, “Guaranteed Tuneup” and on the right side, “includes parts & labor.” The two statements are separated by a white oval containing the price of the tuneup. In addition, the store’s name and jagged line logo is displayed prominently on the building itself or on a mounted sign. In either case, the logo displays the words “Precision Tune” in orange against the yellow background. The jagged line design appears in orange, as well. (See Exhibits P-12, P-13 and D-l.)

Tune-A-Car, Inc. operates three outlets offering essentially the same type of service as Precision Tune. One of Tune-A-Car’s stores is located in Shreveport, another nearby in Bossier City, and a third franchise outlet operates in Texarkana. The exterior walls of Tune-A-Car’s buildings are painted white. Overlaid on this background is a single stripe which is painted around the exterior of the building in an uninterrupted jagged line pattern. The stripe consists of alternating colors of red, fading into orange, which fades into yellow, then back to red. On the front of Tune-A-Car’s buildings a rectangular sign features the words, “Guaranteed Tuneup Includes Parts and Labor” in the same configuration as the signs on Precision Tune’s outlets. The two phrases are similarly divided by a white oval advising customers of the price of the tuneup. Tune-A-Car’s business name is displayed on a mounted sign. The sign contains a vibrant yellow background with the words “Tune-A-Car” in black lettering. Jagged lines appear on either side of the business name. These jagged lines are painted red. (See Exhibits D-5, D-7 and P-2.)

Tune-A-Car’s first store opened in Shreveport in 1980. The other two stores opened in 1981. The president and sole shareholder of Tune-A-Car, Richard Copa, testified that his idea to use the color combinations appearing on Tune-A-Car stores resulted from his favorable impression of businesses in the western United States which were adorned in bright, eye-catching colors. Copa stated that the jagged line featured on his buildings is designed to reflect the electrical impulses which appear on the screen of oscilliscopes. An oscilliscope is an instrument which depicts on a screen changes in electric voltage or current. Copa explained that one “could not tune cars without an oscilliscope.” Copa further testified that, although he had seen Precision Tune outlets prior to opening his own business, he decided to use the jagged line as a symbol for the use of the oscilliscope in the performance of Tune-A-Car’s services. He explained he did not intend to copy Precision Tune’s logo, and views the two designs as dissimilar. Copa notes that the two designs feature a different number of stripes and use different color combinations. Relying on what he perceives to be noticeable distinctions between the appearance of both company stores, Copa has refused to redesign his logo and the exteri- or of his stores.

Precision Tune opened its first Louisiana store in 1976. Stephen Simmons, general counsel for Precision Tune, indicated that in 1984, Precision Tune operated approximately 230 stores in 26 states. The organizational structure of Precision Tune is such that more than 50 per cent of its revenue comes from the initial franchise fee of $15,000. Although Precision Tune, like Tune-A-Car, uses television, radio and newspaper advertisements, Precision Tune considers its logo as its primary advertising vehicle. In exchange for the franchise fee, the franchisee is offered the “sales, know how and use of Precision Tune’s marks and logo.” There are 11 stores in Louisiana, in all major cities except Shreveport. (See Exhibit P-9.) Simmons indicated that Precision Tune considers Shreveport a market area in which they would like to open a store. Precision Tune maintains that Tune-A-Car’s continued use of the jagged line design impedes its ability to expand into the Shreveport area. Simmons explained that Precision Tune does not believe that it would be wise to open an outlet in this area because it could not guarantee its franchisee exclusive use of Precision Tune’s registered mark, and would be asking the franchisee to compete against non-authorized use of the marks.

Simmons also explained that Precision Tune’s logo was designed to be a “fanciful representation of the lines appearing on an oscilliscope.” Several exhibits were introduced which reflect typical graphs exhibited on an oscilliscope. These graphs show that this scope produces both wavy flowing lines, as well as sharp angular lines.

Copa testified that removal of the jagged line logo from his buildings and signs would present substantial hardship both in terms of effort and expense.

Plaintiff contends that defendant’s use of the jagged line design results in an infringement upon plaintiff’s right to exclusive use of the design and also constitutes an infringement of trade dress under the Lanham Act. Injunctive relief, plaintiff argues, is appropriate under either 15 U.S.C. § 1114(1) or § 1125.

An injunction should issue only if plaintiff demonstrates:

1. A substantial likelihood that it will ultimately prevail on the merits;

2. The showing that the movant will suffer irreparable injury unless the injunction issues;

3. Proof that the threatened injury to the movant outweighs whatever damage the proposed injunction may cause the opposing party; and

4. The showing that the injunction, if issued, would not be adverse to the public interest.

Vision Center v. Opticks, Inc., 596 F.2d 111 (5th Cir.1979); Canal Authority v. Callaway, 489 F.2d 567 (5th Cir.1974). The pertinent provisions of the Lanham Act, 15 U.S.C. § 1114(1) states:

Any person who shall, without the consent of the registrant — use in commerce any reproduction, counterfeit, copy or colorable immitation 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; or, (b) reproduce, counterfeit, copy, or colorably immitate a registered mark and apply such reproduction, counterfeit, copy, or colorable immitation to labels, signs, prints, packages, wrappers, receptacles or advertisements intended to be used in commerce upon or in connection with the sale, offering for sale, distribution, or advertising those goods or services on or in connection with which such use is likely to cause confusion, or to cause mistake, or to deceive.

The test for infringement actions is the “likelihood” of confusion on the part of the consuming public. Exxon Corporation v. Texas Motor Exchange of Houston, 628 F.2d 500 (5th Cir.1980); Sun-Fun Products v. Suntan Research & Development, 656 F.2d 186 (5th Cir.1981); Kentucky Fried Chicken Corporation v. Diversified Packaging, 549 F.2d 368 (5th Cir.1977). The factors which the court must consider in evaluating the probability of confusion include:

1. The type of trademark;

2. The similarity of design;

3. Similarity of the products;

4. Identity of retail outlets and purchasers;

5. Similarity of advertising media used;

6. Defendant’s intent to infringe; and

7. Actual confusion.

Exxon, supra, at 504.

TYPE OF TRADEMARK:

Trademarks may be assigned one of four general classifications as being arbitrary and fanciful, suggestive, descriptive, or generic. Classification guides the court in determining the strength of the mark. As the Fifth Circuit has explained:

These were once conceived as distinct categories that are now commonly viewed as “central tones in a spectrum;” within this spectrum the strength of the mark and of its protection, increases as one moves away from generic and descriptive toward arbitrary marks.
Falcon Rice Mill, Inc. v. Community Rice Mill, Inc., 725 F.2d 336. The definitive attributes of the four categories were well explained in Sun Banks of Florida v. Sun Federal Savings & Loan, 651 F.2d 311 (5th Cir.1981), which stated:
A strong mark is usually fictitious, arbitrary or fanciful and is generally inherently distinctive. It is afforded the widest ambit of protection. See, Amstar Corporation v. Domino’s Pizza, Inc., 615 F.2d at 259, quoting Lunsford, Trademark Basics, 59 Trademark Rep. 873, 878 (1969). A descriptive mark tells something about the product: it is protected only when secondary meaning is shown. See, Vision Center v. Opticks, Inc., 596 F.2d 111 (5th Cir.1979), cert. denied, 444 U.S. 1016, 100 S.Ct. 668, 62 L.Ed.2d 646 (1980); Miss Universe, Inc. v. Patricelli, 408 F.2d 506 (2d Cir.1969), but see, Hesmer Foods, Inc. v. Campbell Soup Company, 346 F.2d 356 (7th Cir.), cert. denied, 382 U.S. 839, 86 S.Ct. 89, 15 L.Ed.2d 81 (1965) (barbecue beans used as description, not as trademark). In contrast to the above is the suggestive mark, which subtly connotes something about the service or product. Although less distinctive than a fictitious, arbitrary or fanciful mark and therefore comparatively weak mark, a suggestive mark will be protected without proof of secondary meaning. See, Soweco, Inc. v. Shell Oil Company, 617 F.2d 1178, 1184 (5th Cir.1980) (If used as trademark for refrigerators, the term penguin would be suggestive).
Lastly there are generic terms which communicate “information about the nature or class of an article or service,” America Heritage Life Insurance Company v. Heritage Life Insurance Company, 494 F.2d 3, 11 (5th Cir.1974), and therefore can never become a service or trademark.

Id. at 315.

Despite Simmons’ characterization of the mark as “fanciful,” Precision Tune cannot really claim its mark is truly arbitrary or fanciful. By Simmons’ own admission, Precision Tunes’ design is a stylized adaptation of the impulses reflected on an oscilliscope. Nor, as defendant contends, is the jagged line a generic mark. Generic terms “broadly suggest the basic nature of articles or services.” American Heritage Life Insurance Company, supra, at 11. The jagged line design does not describe in a broad fashion the nature of plaintiff’s services. Rather, it serves as a subtle indication of one of the instruments used in the tune up process and should more properly be classified as a suggestive mark. It is of no consequence that other businesses and service companies use a jagged line in their logo. Defendant has introduced numerous pages from telephone books which indicate that a variety of services employ a jagged line design as part of their logo. In some cases, the jagged line appears to be totally unrelated to the type of service rendered. See, Exhibit D-9E, Dallas telephone book, ad 4, El Cheapo Answering Systems. In other cases, the jagged line is used as a symbol of electricity. See, Exhibit D-9A, Shreveport telephone book, Camus Electric Company. It is of little import that companies other than those offering auto repair employ the jagged line. Precision Tune is concerned that a company offering similar services in a similar market is using its mark to divert its customers. Similarly, the fact that other infringers may exist is not dispositive in this case. As Mr. Simmons explained, Precision Tune has sought diligently to protect its mark against infringers in the same business. There is no reason to doubt that Precision Tune will continue to attempt to protect its mark in the future.

IDENTITY OF SERVICE AND CUSTOMERS:

Neither party disputes that the services offered by both companies are identical. Similarly, both companies seek to attract the same customers: the car-driving members of the public. See, Exxon, supra.

SIMILARITY OF DESIGN:

In gauging the similarity of appearance, it is the overall effect of the design rather than a consideration of the individual features which must be considered. Sun Banks, supra, at 318; Amstar Corporation v. Domino’s Pizza, Inc., 615 F.2d 252, 261; Armstrong Cork Company v. World Carpets, Inc., 597 F.2d 496, 501 (5th Cir.1979). Richard Copa makes much of the fact that the jagged line on his building has but one stripe, and Precision Tune’s design uses five stripes. Copa also finds a saving distinction in the use of different color combinations by the two companies. The court does not agree. Viewing pictures of the service outlets of both companies indicates that the design and colors employed by Tune-A-Car appear deceivingly similar. Indeed, if Tune-A-Car’s mounted sign were placed in front of a Precision Tune outlet, it would appear to be so harmonious with the Precision Tune building that a customer could easily assume he was visiting a Precision Tune outlet if he failed to note Tune-A-Car’s business name on the sign. Despite minor differences in the two designs of the outlets, the overall visual effect, leads to the conclusion that careful inspection is required to distinguish between a Precision Tune store and Tune-A-Car store. (For example, examine Exhibit D-l and quickly determine whose store is pictured.)

IDENTITY OF SERVICE FACILITIES:

It is true that Precision Tune does not operate in the Shreveport-Bossier City area. Generally, confusion of the public is unlikely when the registrant and the unauthorized user confine their activities to two distinct and geographically separate markets. American Foods, Inc. v. Golden Flake, 312 F.2d 619 (5th Cir.1963). On the other hand, if the evidence demonstrates that the registrant plans to expand into the unauthorized user’s trade market, the “expansion area doctrine” allows the registrant to avail itself of the protection of the Lanham Act. See, Sun Banks, supra. In Sun Banks, the court concluded that the registrant had presented sufficient evidence of its intent to expand into the trade area of the alleged infringer, thus entitling the registrant to claim the protection of the Act. Mr. Simmons’ statement that Precision Tune considers the Shreveport-Bossier City area a “target for development” is sufficient to establish the applicability of the expansion area doctrine in this case. Thus, for purposes of this suit, it is apparent that Precision Tune and Tune-A-Car are competing within the same market.

SIMILARITY OP ADVERTISING MEDIA:

As noted above, both Precision Tune and Tune-A-Car use television, radio and newspapers for purposes of promoting their services. This factor does not weigh as heavily in the likelihood of confusion equation because Precision Tune has not begun advertising in the Shreveport-Bossier City area. Nonetheless, in order to expand into this vicinity, Precision Tune would be employing the same advertising media as Tune-A-Car, within the same geographical area.

DEFENDANT’S INTENT:

If the evidence reveals that defendant specifically intended to copy plaintiff’s mark, this factor alone might be sufficient to allow the court to conclude that confusing deception exists. Amstar Corporation, supra, at 263; Chevron Chemical Company v. Voluntary Purchasing Groups, 659 F.2d 695 (5th Cir.1981). In the present case, there was no direct evidence to indicate that Copa set about the task of duplicating Precision Tune’s logo. Instead, Copa testified that he wanted to suggest oscilliscope patterns in eye-catching colors. The level of similarity in the two designs seems too high to be the product of coincidence, especially since Copa admitted having seen a Precision Tune outlet prior to creation of his design. As a credibility choice, the court rejects Copa’s denial of intent to copy the Precision Tune logo.

ACTUAL CONFUSION:

No evidence was introduced to demonstrate that consumers had been confused by the similarity between the two logos. Of course, even in cases of actual confusion, “countervailing circumstances which lessen the impact of asserted instances of confusion,” Sunbanks, supra, at 319, can be sufficient to overcome cases of actual confusion. Instead, the trial court must consider all evidence to determine whether the likelihood of confusion exists.

In this case, the likelihood of confusion is so strong that plaintiff’s ultimate probability of success on the merits is great. The single most persuasive factor in the equation consists of the uncanny resemblance of the designs employed in the signs used by both companies.

Words can easily describe the differences in the two designs, but the similarities are more difficult to articulate. The pictures introduced at the evidentiary hearing speak for themselves. Only upon careful consideration can the differences in the two logos be perceived. If the distinctions are difficult to find in an atmosphere of intense concentration, how much more complicated is the task faced by the average consumer who relies upon his memory of jagged lines and bright colors to select a tune up specialist. Moreover, the consumer’s failure to discriminate between the two companies may be exacerbated by the fact that the two symbols would not appear side-by-side in the market place, thus making careful examination improbable. See, Sun-Fun, supra, at 192.

In summary, the court concludes that the likelihood of confusion is great, and that Precision Tune has, therefore, demonstrated the requisite likelihood of success on the merits.

Before discussing the other factors which are prerequisites for injunctive relief, it is necessary to determine whether Precision Tune has demonstrated a likelihood of success on the merits of its claim for unfair competition under § 1125(a). That statute provides, in pertinent part:

Any person who shall affix, apply, or annex, or use in conjunction with any goods or services, or any container or containers for goods, or false designation of origin, or any facts, description or representation, including words or other similars tending falsely to describe or represent the same and shall cause such goods or services to enter into commerce, and any person who shall acknowledge the falsity of such designation of origin or description or representation caused or procure the same to be transported or used in commerce or deliver the same to any carrier to be transported or used, shall be liable to a civil action by any person doing business in the locality falsely indicated as that of origin or in the region in which said locality is situated, or by any person who believes he is or likely to be damaged by the use of any false description or representation.

An action for unfair competition under this statute allows a business to seek redress of what is commonly called trade dress infringement. That term has been defined as follows:

“Trade dress is a concept which embraces the total image of a given product, including advertising materials and marketing techniques used to promote its sales.” Falcon Rice Mill v. Community Rice Mill, 725 F.2d 336 (5th Cir.1984), citing John Wright, Inc. v. Casper Corp., 419 F.Supp. 292, 317 (E.D.Pa.1976), rev’d in part on other grounds sub nom. Donsco, Inc. v. Casper Corp., 587 F.2d 602 (3d Cir.1978).

The essence of an action for trade dress infringement lies in the prohibition against “palming off” ones product as that of another by employing deceptively similar packaging or trade dress. Falcon Rice Mill, supra, at 343 n. 6. As in trademark infringement cases, the crucial question is whether the contested trade dress creates a likelihood of confusion. Falcon Rice Mill, supra, at 343; Chevron Chemical Company, supra, at 703; Sun-Fun, supra, at 192; Amstar Corporation, supra, at 259. In unfair competition actions under § 1125, however, the scope of inquiry into similarity of design is considerably broader, since the court must consider overall trade dress of the product rather than mere similarity of design to a registered mark. Sun-Fun, supra, at 192.

In assessing whether an infringement has occurred, the court considers Chevron, Inc., supra, to be most persuasive. In that case, Chevron sought to deter Voluntary Purchasing Groups (“VPG”) from using a distinctive combination of white, yellow and red on its lawn and garden products’ packaging. For many years, Chevron had produced Ortho gardening chemicals, which it packaged in brown bottles covered by labels featuring a band of white above a band of yellow above a band of red. The brand name “Ortho” appeared on the white band in black, block letters. The name of the product was contained on the yellow band with general instructions featured on the red band. In 1976, VPG placed its “Hi-Yield” brand of garden products on the market. Hi-Yield also featured a brown bottle with a label containing white, yellow and red bands. Although the white and yellow stripes were slightly narrower than those contained on the Ortho products, that distinction and the brand name “Hi-Yield” were the only distinguishing features. In concluding that trade dress infringement had occurred, the court observed:

Ortho could not preempt the use of red and yellow, nor does it seek to do so. It seeks only to protect the combination of particular hues of these colors, arranged in certain geometric designs, presented in conjunction with a particular style of printing, in such fashion that, taken together, they create a distinctive visual impression.

Id. at 703.

The Chevron court employed the “digits” of confusion used in trademark infringement cases to determine whether or not VPG’s product might tend to confuse consumers. Obviously, the discussion of these factors above is applicable to Precision Tune’s claim of trade dress infringement. Indeed, the likelihood of confusion under § 1125 is greater than under plaintiffs trademark claims, since the strongest factor in this case is the similarity of design. Consequently, the court concludes that there is a likelihood that consumers would be confused by defendant’s attempt to “palm off” its establishments as those of plaintiff.

Having concluded that the plaintiff has demonstrated a likelihood of success on the merits under either claim, the question now becomes whether the remaining three factors required for the issuance of an injunction have been met. As noted above, Precision Tune is required to show that it will suffer irreparable injury unless the injunction issues. Mr. Simmons indicated that Precision Tune feels compelled not to open an outlet in the Shreveport-Bossier City area so long as Tune-A-Car is using the jagged line logo and the distinctive color combination employed by those businesses. Clearly, being deprived of an opportunity to expand its market creates an injury not susceptible of measurement in damages. As the court stated in Boston Professional Hockey Assn. v. Dallas Cap & Emblem Manufacturing, Inc., 510 F.2d 1004 (5th Cir.1975), “only a prohibition of the unauthorized use will sufficiently remedy the wrong.” So long as Tune-A-Car continues to employ the deceptively similar marks and trade dress, Precision Tune cannot attempt to open a franchise because it cannot guarantee its franchisee’s exclusive use of the mark. Accordingly, plaintiff has demonstrated a sufficient level of irreparable injury.

Precision Tune must also show that the injury it suffers without the injunction outweighs the damage the injunction will cause to Tune-A-Car. In balancing the threatened harm to be suffered by the two parties, it is apparent that the harm to Precision Tune is greater. If no injunction issues, Precision Tune is, for all practical purposes, prohibited from expanding into the Shreveport-Bossier City market area. Conversely, if the injunction issues, Tune-A-Car can continue to operate its business subject to the limitation that it may not use Precision Tune’s logo and col- or combinations.

Finally, Precision Tune is obligated to demonstrate that the injunction would not be adverse to the public interest. In reality, the public interest would best be served by the issuance of an injunction. Tune-A-Car could continue to offer its services while the public enjoys “interstate ... commerce free of unfair competition.” American Rice v. Arkansas Rice Growers Co-Op, 532 F.Supp. 1376 (F.D.Tex.1982), aff'd 701 F.2d 408 (5th Cir.1983).

As a result of plaintiff’s having met its burden of proof under the Vision Center test, the court concludes that the issuance of a preliminary injunction is appropriate.

Accordingly, defendant is hereby ENJOINED pendente lite from using, adopting, distributing, promoting, or in any way using to its advantage, the registered jagged-line design of plaintiff, or any other jagged line design or trade dress deceptively similar to that of plaintiff.

In addition, the provisions of this Ruling shall take effect thirty (30) days from this date.

An Order consistent with the terms of this Ruling shall issue herewith.


author: LOUGHLIN, District Judge.

text:
    Terry THEBERGE, et al. v. TRANSPORTATION SYSTEMS, et al.
    No. C84-472, 473-L.
    United States District Court, D. New Hampshire.
    Nov. 27, 1984.

      Randolph J. Reis, Brown & Nixon Professional Assoc., Manchester, N.H., for plaintiffs.
    Thomas N. Masland, Orr & Reno, Concord, N.H., for defendants.
   ORDER ON MOTION TO DISMISS

LOUGHLIN, District Judge.

The defendants, Transportation Systems and Market Research, Ltd. and British Railways Board filed a motion to dismiss civil actions # 84-472 and 473-L based upon the lapse of the former New Hampshire Statute of Limitations for wrongful death actions. RSA 556:11 (1974).

The motion to dismiss is one of limited inquiry by this court. This court follows the accepted rule that “The complaint should not be dismissed unless it appears that appellant could ‘prove no set of facts in support of his claim which would entitle him to relief’ ”. Jenkins v. McKeithen, 395 U.S. 411, 421-22, 89 S.Ct. 1843, 1848-1849, 23 L.Ed.2d 404 (1969), reh. denied 396 U.S. 869, 90 S.Ct. 35, 24 L.Ed.2d 123 (1969).

The pending motion to dismiss turns on whether the revised Statute of Limitations for wrongful death in New Hampshire should be given retrospective effect. The cause of action accrued on December 15, 1980 after the deaths of Bonnie M. York and James E. York. Under the then existing two-year limitation, the suit was untimely' as of December 15, 1982. RSA 556:11 (1974). The limitation period was extended to six years, effective August 9, 1983. Suit was filed by the administrators of the estates of Bonnie York and James York on July 11, 1984. Filing of the suit was well after the lapse of the then extant two-year limitation but within six years of the deaths of both deceased parties.

In an action based upon diversity of citizenship, 28 U.S.C. § 1332, this court must apply the laws of the forum State of New Hampshire,

[w]henever that law is authoritatively declared by a State, whether its voice be the legislature or its highest court ... (emphasis added)

Guaranty Trust Co. v. York, 326 U.S. 99, 112, 65 S.Ct. 1464, 1471, 89 L.Ed. 2079 (1944). Part I, Article 23 of the New Hampshire Bill of Rights, New Hampshire Constitution applied and states:

Retrospective laws are highly injurious, oppressive and unjust. No such laws, therefore, should be made ... for the decision of civil causes ...

Laws may be applied in a retrospective manner if it affects the remedy only and is not highly injurious, oppressive or unjust. Pepin v. Beaulieu, 102 N.H. 84, 90, 151 A.2d 230 (1959).

An initial inquiry is whether the retrospective application of RSA 556:10 (1984) effect a “remedy” or a “vested rights”. Generally, a statute which “... reduces or enlarges the time within which the action must be prosecuted is not within the prohibition of the Constitution as a retrospective law.” Willard v. Harvey, 24 N.H. 344 (1852). However, if a vested right to be free of liability arises upon the tolling of a statute of limitation and then a revised limitation revives the cause of action, a prohibited retrospective law may result. Willard v. Harvey, supra, 24 N.H. at 351; RocJcport v. Walden, 54 N.H. 167, 173 (1872); Herbert v. Herbert, 120 N.H. 369, 370, 415 A.2d 679 (1980).

The plaintiff cites some cases to support its claim that only a remedy is affected which is clearly distinguished because they refer to situations where the limitation was extended or shortened while an action was viable although not pending with a court of competent jurisdiction. Paul Norton v. Ronald Patten, 125 N.H. 413, 480 A.2d 190 (1984); State v. Cedric Preston, 119 N.H. 877, 409 A.2d 792 (1979); Lozier v. Brown Company, 121 N.H. 67, 70, 426 A.2d 29 (1981). In the case at bar, the action lapsed in 1982 which was before the effective date of the new statute of limitation in August, 1983. A valid expectation of freedom from liability could arise on the part of the defendant.

The plaintiff further claims that as a remedial statute, it is presumed to apply retroactively unless a contrary legislative intent is shown. In the present action, however, a vested right may exist and the authorities cited all refer to changes in statutes during pending litigation or while an action could still be brought, i.e., viable. Norton v. Patten, supra, (unintended limitation caused by reduction of the “age of majority”); In re Snow Estate, 120 N.H. 590, 419 A.2d 1095 (1980) (pending probate claim); Property Owners Association at Suissevalle, Inc. v. Sholley, 111 N.H. 363, 284 A.2d 915 (1971) (service of process modification during pending action); Pepin v. Beaulieu, 102 N.H. 84, 151 A.2d 230 (1959) (rule on calculation of interest on damages modified during pending action). The legislative intent may not be presumed to favor retroactive application of the statute RSA 556:10 (1984) when a vested right is at issue.

In determining whether the defendant’s right had vested, the federal court is bound by state law. The due process clause of the fourteenth amendment is not violated by a State’s more rigid interpretation of restrictive clauses on retroactive statutes. Chase Securities Corp. v. Donaldson, 325 U.S. 304, 312-13, 65 S.Ct. 1137, 1141-1142, 89 L.Ed.1628 (1944). Thus this court declines to apply the rule that a right may not vest by the mere passage of time unless it effects a claim of possession of real or personal property, or unless the defendant proves reliance upon the tolling of the statute of limitations. Chase Securities Corp. v. Donaldson, supra, at 313, 65 S.Ct. at 1142.

The authoritative New Hampshire law employs the concept of vested rights in the analysis of statute of limitations issues. Willard v. Harvey, supra; Rockport v. Walden, supra. A right vests for a potential party upon the tolling of the statute of limitation. The legislature may intend a new limitation period to be retrospective in spite of any vested rights if the result is not highly injurious, oppressive or unjust. Estate of Kennett v. State, 115 N.H. 50, 55, 333 A.2d 452 (1975). A countervailing fundamental right may weigh against the assertion of a vested right Norton v. Patten, supra, Opinion of the Justices, 115 N.H. 553, 345 A.2d 412 (1975).

Without clear evidence to the contrary, the revision of RSA 556:11 is presumed to apply prospectively. Harris v. Adams, 123 N.H. 167, 170, 459 A.2d 241 (1983).

The plaintiff argues that the deletion of the language, “and has not already become barred by the statute of limitations” from the revised statute, proves a retrospective effect was intended. The legislature is deemed to adopt judicial interpretations of a statute which is later revised Dover Housing Board v. Colbath, 106 N.H. 481, 213 A.2d 923 (1965). The court will not imply a legislative intent which is contrary to existing law on retroactive statutes without clear affirmatively stated words in the statute. The deletion may create an ambiguity.

Any ambiguity on the face of the statute may be resolved by the reports of the committees as an aid in construing the statute. Greenhalge v. Town of Dunbarton, 122 N.H. 1038, 1040, 122 N.H. 1038 (1982). The reports reveal that the sole purpose of the revision was to unify wrongful death limitation period with that of personal injury suits. New Hampshire House Judiciary Committee Minutes, Hearing on HB 671 (April 11, 1983); House Judiciary Committee, Executive Session on HB 671, (April 15, 1983); Senate Committee on Judiciary Hearing on HB 671, (May 3,1983). The legislative history is silent on retrospective application. The comments do not indicate that the change was made to prevent an oppressive or unjust situation. Absent such a situation, a retrospective application of the law would violate the New Hampshire Constitution.

The court declines to apply an equitable based exception to the tolling of the limitation period. Wrongful death actions did not exist at common law; therefore, it survives “only to the extent and in the manner provided by the legislature”. Hebert v. Hebert, 120 N.H. 369, 370, 415 A.2d 679 (1980). The statute of limitations is strictly applied based upon the interest of efficient administration of estates. Guevin v. New Hampshire Catholic Charities, Inc. 120 N.H. 501, 504, 418 A.2d 224 (1980); Desmarais v. People’s Gaslight Company, 79 N.H. 195, 196, 107 A. 491 (1919); Poffv. New England Telephone & Telegraph Co., 72 N.H. 164, 166, 55 A. 891 (1903).

Therefore, plaintiffs claim is time barred by the then applicable two-year statute of limitations. Defendants’ motion to dismiss is granted for both actions.

So Ordered.


author: GRADY, District Judge.

text:
    U.S. ENVIRONMENTAL PRODUCTS, INC., Plaintiff, v. INFILCO DEGREMONT, INC., Defendant.
    No. 84 C 7882.
    United States District Court, N.D. Illinois, E.D.
    Jan. 15, 1985.

      Paul H. Berghoff, Stephen F. Sherry, Allegretti, Newitt, Witcoff & McAndrews Ltd., Chicago, 111., for plaintiff.
    Francis A. Even, Carroll F. Palmer, Joseph E. Shipley, Fitch, Even, Tabin & Flannery, Chicago, 111., for defendant.
   MEMORANDUM OPINION

GRADY, District Judge.

This patent infringement suit is before the court on defendant’s motion to dismiss for improper venue and plaintiff’s motion for leave to file supplemental pleadings under Rule 15(d) of the Federal Rules of Civil Procedure. Plaintiff U.S. Environmental Products, Inc. is a Delaware corporation with a principal place of business in Illinois. Plaintiff provides sludge dewatering systems for sewage and water treatment plants. Defendant Infilco Degremont, Inc. is a New York corporation with a regular and established place of business in Naperville, Illinois. Plaintiff alleges that defendant has made, used and sold sludge filters (referred to as “DeHydro filter mats”) that infringe plaintiff’s patent. Defendant argues that venue in this judicial district is improper as it has not committed any acts of infringement within the district, as required by the patent venue statute, 28 U.S.C. § 1400(b). Plaintiff contends that as of October 30,1984, such acts have occurred and now seeks leave to file a supplement to its complaint of September 12, 1984, to so allege.

Venue in this case is governed solely by 28 U.S.C. § 1400(b), which states that a patent infringement suit may be brought “where the defendant has committed acts of infringement and has a regular and established place of business." 28 U.S.C. § 1400(b); see Fourco Glass Co. v. Transmirra Corp., 353 U.S. 222, 77 S.Ct. 787, 1 L.Ed.2d 786 (1957). Defendant Infilco concedes that it has a regular and established place of business in this district, but maintains that it has not committed any acts of infringement here. See Hunter v. FMC Corp., 190 USPQ 66, 68 (N.D.Ill.1975) (a defendant must both have committed acts of infringement and maintained a place of business in the district to establish venue).

The Seventh Circuit Court of Appeals, in Union Asbestos & Rubber Co. v. Evans Products Co., 328 F.2d 949 (7th Cir.1964), set forth the standard for determining venue in patent infringement cases, and clearly held that a completed sale within the district is not necessary to establish that an act of infringement has occurred here for venue purposes. “The test is less strict when venue is challenged, for otherwise a disposition of the venue question would also be one on the merits wherever venue was sustained.” Id., at 952. The court found that although there were no sales or deliveries of the allegedly infringing product within the district, two demonstrations of the product, in addition to the continuous solicitation of orders within the district, was a sufficient degree of selling activity to establish venue. Id.

Mere solicitation, however, is not an act of infringement under the venue statute. In Mid-Continent Metal Products Co. v. Maxon Premix Burner Co., 367 F.2d 818 (7th Cir.1966), the Court of Appeals found venue improper in Illinois over a case against an Indiana company that maintained an office in Chicago and solicited purchase orders here, but never displayed or demonstrated the allegedly infringing product. All orders received by the Chicago office were forwarded to the main office in Indiana for acceptance or refusal, accepted orders were filled directly from Indiana, and all customers were billed by the main office. Id. at 819. The solicitation, consultation and customer service activities conducted by the Chicago office did not constitute acts of infringement under § 1400(b). Id. at 820. Subsequent decisions have emphasized the demonstration of the allegedly infringing product within the district as one of the essential factors distinguishing mere solicitation from selling. See Knapp-Monarch Co. v. Casco Products Corp., 342 F.2d 622 (7th Cir.), cert. denied, 382 U.S. 828, 86 S.Ct. 64, 15 L.Ed.2d 73 (1965) (venue proper where independent sales representative maintained an office in Chicago, solicited orders and displayed product samples, but did not demonstrate product or approve and fill product orders); Minnesota Mining and Manufacturing Co. v. The Ansul Co., 201 USPQ 725 (N.D.Ill.1978) (venue improper where Wisconsin company maintained office and solicited orders here, but never brought product into Illinois for display or demonstration); Amperex Electronic Corp. v. Perry, 168 USPQ 615 (N.D.Ill.1970) (venue improper where New York company maintained small sales office in Illinois to solicit orders but did not distribute samples of product). The totality of the facts involved must be considered, however, when deciding whether a defendant is selling its product in this district or merely soliciting. Huey Co. v. Plan Hold Corp., 211 USPQ 888, 890 (N.D.Ill.1980).

In the case before us, defendant Infilco maintains an office in this district, and employs sales people and independent manufacturer’s representatives to solicit sales in Illinois. Infilco asserts, however, that none of these sales personnel are authorized to enter into sales contracts, and that all purchase orders are forwarded directly from here to the company’s main office in Richmond, Virginia, for approval. Memorandum in Support of Defendant’s Motion to Dismiss for Improper Venue, at 67. Without more, this activity would be insufficient to establish venue in this judicial district.

On November 11, 1984, we ordered that discovery proceed on the limited question of whether the DeHydro filter mat had been displayed or demonstrated in this district. Pursuant to that order, plaintiff took the deposition of Billy S. Wash-burn, consulting engineer for a proposed sewage treatment plant project in Cary, Illinois. The Cary project contractor plans to use defendant’s DeHydro mat, and in fact defendant Infilco and the contractor finalized a sales agreement for the DeHydro mat during the first week of December. Defendant’s Response to Plaintiff’s Motion to Supplement Complaint, at 8. Washburn testified that he was shown samples of the DeHydro mat on October 30, 1984, by defendant’s sales representative. Deposition Tr., at 8-10. This is the first time Wash-burn saw a sample of the DeHydro mat. Tr., at 8. On the basis of this testimony, plaintiff files its motion to supplement its complaint, contending that the display of the DeHydro mat samples to Washburn constituted display and demonstration of the product sufficient to establish venue.

Defendant responds that although the DeHydro mat samples were shown to Washburn, there was no actual demonstration of the product at that time, nor has there ever been a demonstration of the DeHydro mat in this district. Defendant compares the facts of this case to those decisions from this district holding that mere display of a product at a trade show or sales office without further demonstration is not an act of infringement. Knapp-Monarch Co. v. Casco Products Corp., supra, 342 F.2d at 624 (samples of the product were displayed at the sales office but were never demonstrated or used by the sales representative); Hunter v. FMC Corp., supra, 190 USPQ at 68 (exhibition and demonstration of a simulation of product at trade shows in the district insufficient to establish venue); Ropat Corp. v. Scovill Manufacturing, Inc., 182 USPQ 594 (N.D.Ill), aff'd, 506 F.2d 1404, 183 USPQ 769 (7th Cir.1974) (display of product at housewares show is mere solicitation).

We disagree. The product in this case was not simply displayed at the defendant’s office or a trade show, but was instead taken by defendant’s sales employee to a customer in this district for the express purpose of showing that customer the physical properties of the product in an effort to consummate a sale. It appears to us that the demonstration of a product is distinguished from mere display because the former may be more likely to ripen into an actual sale and thus “use” in this district. In this case, defendant Infilco has conceded that it engages in sales solicitation activities here, has used product samples in an effort to sell the DeHydro mat, and has in fact executed a sales contract with a purchaser in this district as of the first week of December. This completed sales contract, which contemplates the delivery of the product into this district at an early date, confirms for us that what took place at the October 30 meeting was substantially a demonstration of the DeHydro mat. The totality of these facts, we believe, indicates that defendant has committed an act within this district sufficient to establish venue.

CONCLUSION

We therefore hold that venue is proper in this judicial district. Defendant’s motion to dismiss is denied and plaintiff is granted leave to file a supplemental pleading to augment its venue allegations. Defendant is ordered to answer or otherwise plead to plaintiff’s complaint by February 5, 1985.

      . Under § 1400(b), a patent infringement suit may also be brought where a defendant resides. That provision is not in issue here as it is clear that defendant resides in New York.

      . Washburn testified that the purpose of this display was to convince the Cary project contractor to substitute a "new DeHydro filter mat” produced by defendant for the "old DeHydro filter mat” originally included in the Cary project specifications. Tr. 8. To this end, Washburn was shown a 6" by 6" piece of the old filter mat and a 2' by 2' piece of the new filter mat. Following this meeting, the project contractor did substitute the new mat in its specifications and contracted with defendant for purchase of the new mat. Defendant’s Response to Plaintiff’s Motion to Supplement Complaint, at 7. Defendant has asked us to find that even if venue is proper, the new DeHydro mat clearly does not infringe plaintiff's patent. Such a ruling would go to the merits of the case and it is thus premature to address the question, particularly since plaintiff asserts that both versions of the DeHydro mat infringe on its patent. Plaintiffs Reply Brief in Support of its Motion to Supplement Complaint, at 4.

      . Under Fed.R.Civ.P. 15(d), supplemental pleadings alleging transactions or occurrences that have happened since the date of the original pleading may be allowed, even though the original pleading is defective. This is true even when jurisdiction is lacking at the time the complaint was filed but the subsequent occurrences now confer jurisdiction. See Mathews v. Diaz, 426 U.S. 67, 96 S.Ct. 1883, 48 L.Ed.2d 478 (1976) (plaintiff may sue for denial of Medicaid benefits even though he did not apply for such benefits until after complaint was filed); Dan-Dee Imports, Inc. v. Well-Made Toy Manufacturing Corp., 524 F.Supp. 615 (E.D.N.Y.1981) (supplement to copyright infringement suit allowed even though assignment of copyright ownership was not recorded with the Copyright Office until after complaint was filed). Plaintiff’s motion to file a supplemental pleading based on the October 30 showing of the DeHydro mat samples is therefore proper.

      . Defendant emphasizes that no attempt was made to demonstrate the use of the product samples by pouring water over them. Defendant’s Response to Plaintiffs Motion to Supplement Complaint, at 6-7. It would be an overly technical application of the standard articulated in Union Asbestos to hold that venue should be determined by whether defendant has ever poured water over its filter mat samples in this district. See Uniroyal, Inc. v. Midland-Ross Corp., 185 USPQ 26, 28 (N.D.Ill.1974) ("a technical reading of the ‘demonstration’ language of Union Asbestos eschews the court’s holding in that case.”).