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HYATT CORP. v. HYATT LEGAL SERVICES

January 3, 1985

HYATT CORPORATION, PLAINTIFF,
v.
HYATT LEGAL SERVICES, A PARTNERSHIP, AND JOEL HYATT, DEFENDANTS.



The opinion of the court was delivered by: Moran, District Judge.

MEMORANDUM AND ORDER

On April 5, 1983, this court denied plaintiff's motion for a preliminary injunction. The Seventh Circuit reversed, finding that defendant's use of the name Hyatt was a probable violation of the Illinois Anti-Dilution Act, Ill.Rev.Stat. ch. 140, § 22 (1981). See Hyatt Corp. v. Hyatt Legal Services, 736 F.2d 1153 (7th Cir.), cert. denied ___ U.S. ___, 105 S.Ct. 434, 83 L.Ed.2d 361 (1984). The circuit court remanded the action to this court "for entry of an injunction prohibiting the appellee from using the name Hyatt Legal Services. The appellee is to select promptly a new name . . ." The circuit court also ordered "further proceedings consistent with this opinion." Id. at 1160. Two issues remain to be decided before entering the injunction ordered by the Court of Appeals. First, what name would be appropriate for use by defendant. Second, whether the Constitution limits the permissible scope of the injunction premised on Illinois law.

Name

In its opinion, the Court of Appeals suggested that defendant select a new name for itself. 736 F.2d at 1160. Defendant seeks to use only a disclaimer. A disclaimer would aid in reducing consumer confusion, but confusion is not the issue here. The Seventh Circuit found dilution. Dilution occurs with repeated use of the same distinctive name. A name change must occur to maintain the distinctiveness of plaintiff's mark.

Defendant has proposed, as a possible new name, J. Hyatt Legal Services. Plaintiff has accepted that change with certain safeguards. First, that the word Hyatt never be used without the J. preceding it. Second, that the words J. Hyatt be the same size and type face as Legal Services on all promotional material. Third, that a disclaimer be used.

A disclaimer is not required. The Seventh Circuit specifically stated a disclaimer would probably not be required. 736 F.2d at 1160. As previously stated, a disclaimer would not protect the distinctiveness of plaintiff's mark. This court, however, requires all promotional material and letterheads to use J. Hyatt instead of Hyatt alone. This requirement does not extend to normal correspondence or business conversation. Finally, the court requires that the letter J. be the same size, type, and color as the Hyatt in all signs and promotional materials. The court finds no reason to require the words J. Hyatt to be the same size and type as Legal Services. The court finds that the new name, with the safeguards stated, appropriately effectuates the goals of Illinois' anti-dilution statute.

Scope

In its order remanding the action to this court, the Seventh Circuit suggests a nationwide preliminary injunction. The court stated that one reason for dilution of plaintiff's mark was the "nationwide scope of Hyatt Legal Services' business." 736 F.2d at 1159. The court also, in allowing defendant to choose a new name for itself, indicated a concern for ethical rules controlling the names of law firms in the states where defendant operates. Id. at n. 5. Defendant argues, however, that applying an Illinois law beyond its borders is unconstitutional. Defendant cites New York Life Insurance Co. v. Head, 234 U.S. 149, 34 S.Ct. 879, 58 L.Ed. 1259 (1914), and apparently raises due process arguments against a nationwide injunction, an issue not specifically discussed by the Court of Appeals.

The Illinois anti-dilution statute provides for injunctive relief if there exists a likelihood of injury through dilution. See Ill. Rev.Stat. 140 § 22. The statute does not specify the scope of the injunction, but courts have extended its protections well beyond Illinois' borders. See Instrumentalist Co. v. Marine Corps League, 509 F. Supp. 323, 340 (N.D.Ill. 1981) (nationwide injunction), aff'd on other grounds, 694 F.2d 145 (7th Cir. 1982); National Football League Properties, Inc. v. Dallas Cap & Emblem Mfg., Inc., 26 Ill. App.3d 820, 327 N.E.2d 247 (1st Dist. 1975) (enjoining Texas manufacturer from producing certain products). See also Polaroid Corp. v. Polaraid, Inc., 319 F.2d 830 (7th Cir. 1963) (granting multistate injunction under Illinois' unfair competition and anti-dilution laws). The desire to extend nationwide an injunction based upon an Illinois law is understandable. As Judge Shadur, in Instrumentalist, supra, stated:

509 F. Supp. at 340.*fn1 This court, as Judge Shadur stated, certainly has the power to issue such an injunction by virtue of its jurisdiction over the parties. 509 F. Supp. at 340. However, when an interpretation of a law conflicts with the constitution, the "very essence of judicial duty" requires a court to apply the superior law to the case. Marbury v. Madison, 5 U.S. (1 Cranch) 137, 176, 2 L.Ed. 60 (1803). In the present case, the court believes there to be a conflict between an interpretation of the anti-dilution law which allows for a nationwide injunction and the commerce clause of the United States Constitution.

Since the court decided Cooley v. Board of Wardens, 53 U.S. (12 How) 299,13 L.Ed. 996 (1851), it has been well recognized that the commerce clause, U.S. Const. Art. 1, § 8, Cl. 3, places implicit limitations on the powers of states to regulate interstate commerce even in the absence of explicit congressional legislation in the area.*fn2 Traditionally, cases applying the negative or dormant commerce clause, as the implied limitations are referred to, involved discriminatory treatment of interstate commerce by a state. See e.g., City of Philadelphia v. New Jersey, 437 U.S. 617, 98 S.Ct. 2531, 57 L.Ed.2d 475 (1978); Hunt v. Washington State Apple Advertising Commission, 432 U.S. 333, 97 S.Ct. 2434, 53 L.Ed.2d 383 (1977). No such discriminatory treatment is involved in the present case. A nationwide injunction, however, seems to violate two other principles of commerce clause jurisprudence: (1) that states cannot directly regulate interstate commerce; and (2) that incidental regulations of interstate commerce cannot be excessive in light of local interests furthered by the law. See Edgar v. MITE Corp., 457 U.S. 624, 640, 102 S.Ct. 2629, 2639, 73 L.Ed.2d 269 (1982).

In Shafer v. Farmers Grain Co., 268 U.S. 189, 45 S.Ct. 481, 69 L.Ed. 909 (1925), the Court held that "a state statute which by its necessary operation directly interferes with or burdens [interstate] commerce is a prohibited regulation and invalid, regardless of the purpose with which it was enacted." Id. at 199, 45 S.Ct. at 485. Where a state law has inevitably and directly interfered with "the natural functioning of the interstate market, either through prohibition or through burdensome regulation," the law has been held to violate the commerce clause. Hughes v. Alexandria Scrap Corp., 426 U.S. 794, 806, 96 S.Ct. 2488, 2496, 49 L.Ed.2d 220 (1976). The commerce clause has also prohibited the application of a state statute to commerce that occurs wholly outside the state's borders, whether or not the commerce has effects within the state. See Edgar v. MITE Corp., 457 U.S. 624, 102 S.Ct. 2629, 73 L.Ed.2d 269 (plurality opinion of White, J.).

If the mandated injunction is spread nationwide, it may directly affect interstate commerce. Advertising is an inevitable and often vital aspect of interstate commerce. See generally Hunt v. Washington State Apple Advertising Commission, 432 U.S. 333, 97 S.Ct. 2434, 53 L.Ed.2d 383 (1977). The regulation of advertising within a state, such as occurred in Hunt, can impinge on interstate commerce and violate the commerce clause. A direct state injunction reaching advertising disseminated out of the state and intended for consumers out of the state would appear to be a direct interference with interstate commerce.*fn3 If that be so, the imposition of ...


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