Appeal from the District Court of the United States for the Northern District of Illinois, Eastern Division; John P. Barnes, Judge.
Before SPARKS, KERNER, and MINTON, Circuit Judges.
In this case twenty-five plaintiffs sued appellant, a corporation, and six individuals alleged to have operated furniture stores in Chicago under various names. They prayed for a preliminary injunction and also a permanent injunction to enjoin the defendants from operating as a corporation under the name "Grand Rapids Furniture Company," or any name using the words "Grand Rapids," and from using in any manner whatever any such name or corporate entity. The complaint was verified, and appellant, the Illinois corporation, filed its motion to strike the complaint on the ground that it failed to state a claim on which relief could be granted. The cause was submitted for hearing on that motion and upon plaintiffs' application for a preliminary injunction. No oral testimony was heard, nor were any affidavits filed in support of the motion.
The court made findings of fact which are mere recitals of allegations found in the verified complaint. They are substantially as follows: Each plaintiff is a citizen of the State of Michigan and each defendant is a citizen and resident of the Northern Federal District of Illinois; the value of the matter in dispute exceeds the sum of $3,000 exclusive of interest and costs.
The Furniture Manufacturers Association of Grand Rapids, Michigan, is an association of furniture manufacturers including the other plaintiffs, and all the other plaintiffs are and for many years have been engaged in the city of Grand Rapids in the business of manufacturing and selling furniture, in which business they have invested several millions of dollars in the erection of plants and in advertising their products throughout the United States.
The city of Grand Rapids is a large and important center of the furniture industry in the United States, which fact is generally known to the public, and furniture manufactured in that city has for many years enjoyed a wide-spread popularity, good will and demand throughout the United States, and the words "Grand Rapids furniture" have acquired in the trade a special significance; and furniture made in that city is held by a large part of the purchasing public to be superior in design, workmanship and value to furniture usually purchased elsewhere, and among the purchasing public many prefer Grand Rapids furniture to that made elsewhere. "Grand Rapids furniture" is, and the public understands it to be, furniture manufactured in the city of Grand Rapids, Michigan. The method of marketing the goods of the individuals and corporations named as plaintiffs (except the trade association) is consistently by sales to consumers through established dealers; and by adherence to this practice of marketing only through dealers and refusing to sell goods direct to customers, the plaintiffs have secured for themselves the confidence and good will of dealers throughout the United States. By reason of these facts plaintiffs have acquired the good will of the furniture purchasing public and furniture dealers for Grand Rapids furniture of the value of many millions of dollars.
Appellant has never had a factory in Grand Rapids, Michigan, but was organized by the individual defendants with the intent and for the purpose of deceiving the public and leading prospective purchasers to believe that the defendants had some connection with a Grand Rapids furniture factory and sold Grand Rapids furniture, and that such purchasers were deriving some benefit by purchasing direct from Grand Rapids, through the defendant company, which company has engaged in selling at retail, cheap, inferior furniture not manufactured in Grand Rapids, and much, if not all, of which is known to the furniture trade by the term of depreciation, "Borax."
The individual defendants have operated furniture stores in Chicago from time to time under various fictitious and corporate names at some fifteen specified locations and under ten specified fictitious or corporate names including "Grand Rapids Upholstery Company." The individual defendants, who are the incorporators of the corporate defendant, are all members of the same family, and could not be located by the Marshal at their usual places of residence in Chicago. Whereupon plaintiffs applied for a temporary restraining order without notice, based upon the Marshal's return that he was unable to find one of the individual defendants at his usual hotel residence, and that he had left his forwarding address which proved to be a vacant store. None of the officers of that corporation could be found at the addresses registered with the Secretary of State. After issuance of the temporary restraining order the defendant corporation appeared by counsel and filed its motion to strike the complaint.
Except when interrupted at various times by various proceedings, including a Federal Trade Commission prosecution, Federal Code Authority hearings and its findings of fraud, a stipulation entered into with the Chicago Better Business Bureau agreeing to cease fraudulent practices, including the practice of claiming to be a branch of or affiliated with the "Grand Rapids Furniture Company," of Grand Rapids, Michigan, and the practice of claiming that the furniture advertised and sold by the defendants was manufactured in Grand Rapids, Michigan, when such was not the fact, and other alleged interruptions, the defendants through the medium of the defendant corporation have falsely represented to the public: That their store was a branch of the "Grand Rapids Furniture Company" of Grand Rapids, Michigan; that their store was a sales outlet for a furniture factory at that city, and that their factory was there; that purchases of furniture from them were purchases of "Grand Rapids furniture" direct from the factory at Grand Rapids; and the defendants have engaged in false, fraudulent and misleading advertising; have deliberately and fraudulently substituted other furniture for the furniture purchased by their customers from them; have engaged in the making of false and fraudulent representations with respect to the quality of the furniture sold by them; and have sold as "Grand Rapids furniture" inferior furniture at prices which gave the purchasers a false idea of the value of genuine "Grand Rapids furniture."
The defendants have formed corporations under the name "Grand Rapids Furniture Company" with the intent to mislead and defraud the public by using the words "Grand Rapids" and the words "Grand Rapids furniture" in their advertising and leading the public to believe through the medium of newspaper and radio advertising, store signs, window displays, and otherwise, that stock in their store was made up of products of the factory located in the city of Grand Rapids, Michigan, and the defendants have engaged in each and all of such practices well knowing of the existence of the plaintiff, "Grand Rapids Furniture Company," and that the name "Grand Rapids" is a common law trade name of great value to the plaintiffs. Defendants have irreparably injured the plaintiffs by profiting from the use of the name "Grand Rapids" in making sales to members of the public and potential customers of one or more of the plaintiffs and by leading a large section of the public to believe that the "Grand Rapids furniture" is a shoddy and inferior product and that those who sell "Grand Rapids furniture" are dishonest. By these practices the defendants have irreparably injured the good will which plaintiffs have established with dealers in Chicago and throughout the country who are and who might become customers of plaintiffs.
From time to time the defendants have closed out their business at a particular location after a going out of business sale, and then opened up at some other location. They are now in the process of one of such transformations, the Chicago newspapers having refused to carry their advertising because of their fraudulent practices, and have held a going out of business sale. However, they have opened up, or are about to open, a furniture store in Los Angeles, California.
Unless the defendants are enjoined they will reopen a furniture business, or furniture businesses, either at some other location or locations in Chicago or elsewhere and will continue their practices as above stated. The plaintiff, Furniture Manufacturers Association of Grand Rapids, will be further damaged by such conduct, and its purposes defeated and its prestige weakened if the products of the Grand Rapids factories are confused with the products of other factories, and the business methods of its members are confused with the business methods of the defendants; the plaintiff, "Grand Rapids Furniture Company" will be damaged by the use by the defendant of that name, which was adopted by defendants for the purpose of carrying out the fraudulent practice above referred to; and the reputation, popularity and good will of Grand Rapids furniture sold by plaintiffs will be irreparably injured, inasmuch as the plaintiffs have no remedy at law.
Upon these facts the court concluded that it had jurisdiction over the "Grand Rapids Furniture Company" and also of the subject matter, inasmuch as this suit is one of general equity cognizance. The court further concluded that the complaint stated a claim on which relief could be granted and justified the issuance of an interlocutory or preliminary injunction; that unless such injunction was granted the plaintiffs would sustain immediate and irreparable injury and that they had no remedy at law. Hence the court concluded that plaintiffs were entitled to an interlocutory or preliminary injunction as prayed in their verified bill. It accordingly overruled the motion to strike the complaint and issued its order restraining the appellant, its agents, employees and associates from committing the acts complained of until the further order of the court, conditioned upon the filing of a protection bond by plaintiffs in the sum of $2,500, which was immediately filed by ...