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V & V FOOD PRODUCTS, INC. v. CACIQUE CHEESE CO.

February 4, 2003

V & V FOOD PRODUCTS, INC., PLAINTIFF,
v.
CACIQUE CHEESE CO., INC. AND V.F. GARZA & SONS DEFENDANTS



The opinion of the court was delivered by: Matthew F. Kennelly, District Judge.

MEMORANDUM OPINION AND ORDER

The parties are before the court on defendant's motion to modify a permanent injunction entered in 1988 by the late Judge Nicholas J. Bua. Following a trial on the issue of trademark infringement, Judge Bua issued an injunction prohibiting defendant Cacique, Inc.*fn1 from using the trademark "Ranchero" in Illinois, Indiana, Michigan, and Wisconsin. Cacique claims that changed circumstances render certain aspects of the injunction inequitable and asks the Court to modify the injunction to permit Cacique to conduct national, Spanish-language advertising of its Ranchero-brand products. Cacique requires Court permission to place national ads because they would air in the prohibited states. For the reasons stated below, Cacique's motion is granted.

BACKGROUND

Plaintiff V & V Food Products, Inc. and Cacique are both purveyors of Mexican-style cheeses. The present case has its origins in a 1986 dispute about the use of the words "Rancherito" and "Ranchero" as trademarks for a type of Mexican cheese called "queso fresco." In the mid-1960s, V & V began using "Rancherito" as a trademark for queso fresco in the Chicago area and obtained an Illinois trademark registration. In the mid-1970s, Cacique began operations in California and adopted the trademark "Ranchero" for its own queso fresco. In 1981, Cacique obtained a federal registration for its Ranchero mark and subsequently began expanding its sales into Latino markets in New York, Florida, and Texas. In 1986, V & V applied for federal registration of the Rancherito trademark but was denied based on Cacique's prior registration of Ranchero.

V & V then filed suit against Cacique for infringement of its right to use the Rancherito trademark. Cacique counterclaimed for infringement of its allegedly superior rights based on federal registration. The parties stipulated that Ranchero and Rancherito are confusingly similar trademarks. A jury found that Cacique's federal registration was invalid. Cacique moved for a judgment notwithstanding the verdict and asked the court to make additional findings regarding the parties' territorial rights in their trademarks.

The court granted Cacique's motion. V & V Food Products, Inc. v. Cacique Cheese Co., Inc., 683 F. Supp. 662 (N.D.Ill. 1988). Judge Bua stated that there were only two possible bases for the jury's finding that Cacique's federal trademark registration was invalid: "Either Cacique procured the trademark through fraud," a theory unsupported by any evidence, or "V & V had superior rights to the mark based on prior use." Id. at 665-66. Judge Bua observed that although V & V had exercised prior use in certain geographic markets, that use "[did] not warrant complete invalidation of Cacique's federal registration," which the court found Cacique had "acquired in good faith." Id. at 666. Instead, the court enjoined Cacique from using the Ranchero trademark in those states where V & V had established common law rights to "exclusive use" based on "prior market penetration" — Illinois, Indiana, Michigan, and Wisconsin. Id. at 667, 669. The court likewise enjoined V & V from using its Rancherito mark outside that four-state area because Cacique had "superior rights" there by virtue of its federal registration. Id. at 669.

Cacique conceded that V & V had achieved market penetration in the Chicago area but argued that V & V's penetration in the four-state area was otherwise de minimis. Judge Bua disagreed. In determining where V & V had established prior market penetration, Judge Bua examined gross sales and market share "in light of the size of the market being served and the prospects for growth." Id. at 668. Relying on "the limited size of the relevant market" (Mexican-Americans), the "small number of potential customers," and "the limited growth potential in these markets," Judge Bua found that V & V's $6,400 in yearly sales in Indiana, Wisconsin, and Michigan combined was a significant figure. He concluded that V & V's 37 distributor-customers in Illinois (excluding Chicago), 45 in Indiana, 21 in Wisconsin, and 39 in Michigan constituted sufficient market penetration to establish trademark rights in those states. Id. at 668, 669.

The injunction states in relevant part:

Defendant[] Cacique . . . [is] hereby permanently enjoined from using in commerce in any of the states of Illinois, Indiana, Michigan and Wisconsin, any colorable imitation of the word RANCHERITO or the word RANCHERO in connection with the sale, offering for sale, distribution, or advertising of cheese or any other goods or services on or in connection with [which] such use is likely to cause confusion or to cause mistake or to deceive.
Permanent Injunction Order of June 1, 1988. The parties have lived under the injunction for almost fifteen years. Cacique sells its Ranchero-brand queso fresco in forty-six states; in Illinois, Indiana, Michigan, and Wisconsin, Cacique sells a queso fresco under the label "Cacique Queso Fresco." Cacique now moves for a modification of the injunction to permit Cacique to advertise its Ranchero-brand queso fresco in national media. Under the current terms of the injunction, Cacique cannot advertise Ranchero products nationally because any such advertisements would incidentally air in the four-state area where Cacique is prohibited from using and advertising products bearing its Ranchero trademark. The Court held an evidentiary hearing on Cacique's motion in December, 2002.

DISCUSSION

Cacique moves for modification of the permanent injunction pursuant to Federal Rule of Civil Procedure 60(b), which provides in relevant part:

On motion and upon such terms as are just, the court may relieve a party . . . from a final judgment, order, or proceeding for the following reasons: . . . (5) . . . it is no longer equitable that the judgment should have prospective application; or (6) any other reason justifying relief from the operation of the judgment.
Defendant's motion states that Cacique moves for modification pursuant to Rule 60(b)(6). But, because Cacique has not cited a single case relying on this subsection and because it relies on Rufo v. Inmates of the Suffolk County Jail, 502 U.S. 367 (1992) — a case articulating the standard for modification under 60(b)(5) — the Court treats Cacique's motion as a Rule 60(b)(5) motion. In Rufo, the Supreme Court announced that Rule 60(b) constitutes a "flexible standard" for modification. Id. at 380. The Seventh Circuit has interpreted this statement as permitting modification of an injunction "whenever the principles of equity require it to do so." Hendrix v. Page, 986 F.2d 195, 198 (7th Cir. 1993); id. ("Rufo assimilates the standard for modification to Fed.R.Civ.P. 60(b)(5). . . .").

As the Court applies this standard to the case at hand, it bears mentioning that the Supreme Court's characterization of Rule 60(b) as a "flexible standard" marked a significant change in the law. Prior to Rufo, courts operated under the presumption that the rule for modification was the "grievous wrong" standard articulated in United States v. Swift & Co., 286 U.S. 106 (1932): "[n]othing less than a clear showing of grievous wrong evoked by new and unforeseen conditions" was understood to warrant modification. Id. at 119. Rufo's flexible standard was intended to be less confining and more conducive to modification than Swift's "grievous wrong" standard. Hendrix, 986 F.2d at 198; cf. Rufo, 502 U.S. at 380 ("[T]he `grievous wrong' language of Swift was not intended to take on a talismanic quality, warding off virtually all efforts to modify consent decrees.").

Despite the admonition that courts exercise greater flexibility when entertaining requests for modification, "it does not follow that a modification will be warranted in all circumstances." Id. at 367. The party seeking to modify an injunction must establish that "a significant change in circumstances warrants" modification. Id. at 383. The change in circumstances can be "a significant change either in factual conditions or in law." Id. at 384.

A. Changed Factual Conditions

Factual change may warrant modification of an injunction "when changed factual conditions make compliance . . . substantially more onerous. . . . [or] when a decree proves to be unworkable because of unforeseen obstacles." Id. at 384. Although the changed circumstances need not have been unforeseeable at the time the injunction was issued, the changes cannot have been actually foreseen: "[o]rdinarily, . . . modification should not be granted where a party relies upon events that actually were anticipated at the time. . . ." Id. at 385; see id. (refusing to adopt an "unforeseen and ...


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