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Court of Appeal, First District, Division 2, California.

Mario RADDAVERO et al., Plaintiffs and Appellants, v. HARRY'S HOFBRAU CATERING et al., Defendants and Appellants.

No. A068929.

Decided: January 09, 1997

 Mark G. Bonino, Red Wood City, for Appellant. Gordon J. Finwall, San Jose, for Respondent.


This is an action for trade name infringement and unfair competition.   It was brought in three causes of action, two asserting violations of various provisions of the California Business & Professions Code,1 and one under section 43(a) of the federal Lanham Act.   After a 9-3 jury verdict in favor of the defendants, the trial court (1) granted plaintiffs' motion for a new trial, (2) denied plaintiffs' motion for a judgment notwithstanding the verdict (judgment NOV), and (3) entered a permanent injunction in favor of the plaintiffs.   In the course of the trial, the trial court also denied defendants' motions for nonsuit (4) on the issue of whether the trade name at issue was “protectable” and (5) on the Lanham Act cause of action for alleged lack of an adequate impact upon interstate commerce.   Defendants appeal from the trial court's actions numbered (1), (3), (4) and (5) above and plaintiffs cross-appeal from action number (2).   We affirm the trial court in all respects except number (2), as to which we reverse.


Defendants own and operate six well-known restaurants, all doing business under the name of “Harry's Hofbrau.”   The restaurants are located in Redwood City, San Jose, Palo Alto, Mountain View, San Leandro and Palm Springs.   The first of these was opened in 1954 in Redwood City by one Harry Kramer.   He sold it to his son, defendant Larry Kramer (Kramer), in 1968;  it is that restaurant and its progeny with which this case is concerned.

In the 1970s defendants began operating a catering business through their restaurants.   It was called “Hofbrau Catering.”   The first advertisements for this service began appearing in the Yellow Pages in 1976.   This service was specifically advertised as the catering division of Harry's Hofbrau Restaurant.   Indeed, in the 1970s the telephone number for Hofbrau Catering was the same as that for the Redwood City Harry's Hofbrau restaurant.2

In 1980, the corporate defendant which owned Harry's Hofbrau restaurant in Redwood City sold the Hofbrau Catering business to a company named Roslen, Inc. (Roslen).  The sale specifically included the “trade, business name, to wit, ‘Hofbrau Catering,’ goodwill and other intangible assets of said business.”   It also included a non-compete clause committing the seller not to compete in the catering business for five (5) years.3  The defendants' officer most responsible for this sale, Kramer, testified that the sale was arranged so that he could focus on expanding the restaurant chain.4  Roslen, which is not a party to this litigation, operated Hofbrau Catering out of a building adjacent to the Redwood City Harry's Hofbrau for several years.   These premises were leased by Roslen from defendants with the understanding that Roslen would relocate to premises away from the restaurant in 1985.

In any event, the catering business was listed in the telephone book under both Hofbrau Catering and Harry's Hofbrau Catering, listings as to which there was testimony the defendants never objected.5  However, there was also testimony that one of the principals of Roslen asked-but was denied-the right to purchase and use the name “Harry's Hofbrau Catering.”

In late 1984, Roslen sold the Hofbrau Catering business, including its “business name, goodwill, and other intangible assets” to plaintiffs in this litigation.   The primary reasons for this sale were apparently the expiration of that company's lease on its premises in early 1985 and a divorce between two of the principal shareholders of Roslen.   Plaintiffs, who were experienced in the restaurant and catering business, continued to operate Hofbrau Catering from the building adjacent to Harry's Hofbrau restaurant until March 1985, when operations were moved to another Redwood City location.   It remained in that location until 1992, and then moved twice more to other locations in Redwood City. Hofbrau Catering supplies food similar to that served at defendants' restaurants, but also offers a broader range of food and hors d'oeuvres.

In 1989, nine years after selling their catering business to Roslen, defendants reentered the catering business under the name Harry's Hofbrau Catering and began advertising in the Yellow Pages and elsewhere.   In 1992, defendants spent $23,000 on advertising brochures for the restaurants' catering service;  these brochures were placed in each of their restaurants.   Plaintiffs produced evidence at trial showing that the business of Hofbrau Catering had increased significantly in the years subsequent to their acquisition of the business from Roslen and prior to the emergence of Harry's Hofbrau Catering.   However, the evidence also showed that, after that emergence, plaintiffs' gross sales declined significantly.   At trial, the parties stipulated that Hofbrau Catering, plaintiffs' business, and Harry's Hofbrau Catering, the business re-commenced by defendants in 1989, are in “direct competition.”

In April 1992, plaintiffs' counsel sent a letter to defendants demanding that they cease and desist using the name Harry's Hofbrau Catering or any other name confusingly similar to Hofbrau Catering.6  Defendants declined to cease and desist.   Shortly thereafter, on May 1, 1992, plaintiffs filed their complaint for injunctive relief and damages.   Via a first amended complaint filed in January 1994, plaintiffs asserted causes of action under (1) section 17200 et seq., (2) section 14400 et seq. and (3) section 43(a) of the Lanham Act (15 U.S.C. § 1125, subd. (a)).

A jury trial commenced on November 3, 1994, and concluded 11 days later.   By a nine to three vote, the jury returned its verdict in favor of defendants by answering “no” to the following first question on the special verdict form:  “Is the use of HOFBRAU CATERING and HARRY'S HOFBRAU CATERING at the same time likely to confuse the public?”

On November 10, 1994, while the trial was ongoing, the trial court heard and denied defendant's motion for nonsuit based on the premise that the name Hofbrau Catering was not a protectable trade name and that, therefore, the entire complaint should be dismissed.

On the last day of trial, November 14, 1994, the trial court heard and denied a defense motion for a nonsuit regarding the Lanham Act cause of action.   That motion was based on the alleged lack of any involvement in interstate commerce.   A week later, the court heard argument regarding the issuance of an injunction.   On December 15, 1994, it issued a Memorandum of Decision tentatively enjoining defendants from using the name Harry's Hofbrau Catering or any other name likely to cause confusion with Hofbrau Catering.

On December 27, 1994, plaintiffs filed a motion for judgment NOV and, in the alternative, for a new trial.   On February 7, 1995, the trial court issued its order denying the motion for judgment NOV but granting the motion for a new trial.   In support of the new trial order, the court stated:  “Numerous witnesses testified to the frequent incidence of confusion of the two names by customers and suppliers alike, and Defendants' managing officer testified to several such instances.”

On February 10, 1995, the permanent injunction and the trial court's Statement of Decision were filed.

On February 15, 1995, defendants appealed from the issuance of the new trial order and permanent injunction and also from the earlier orders of the trial court denying their motions for nonsuit and to dismiss the Lanham Act cause of action.   On March 16, 1995, plaintiffs filed a cross appeal from the trial court order denying their motion for judgment NOV.


As noted in the introductory section of this opinion, there are five (5) issues presented via this appeal.   We shall deal with them in the order there listed.

A. Defendants' Appeal from the Order Granting a New Trial

 This is not a close issue;  the reason it is not implicates our standard of review.   The law is clear that an order of a trial court granting a party a new trial after a jury verdict may and will not be disturbed by an appellate court absent a showing of a clear abuse of discretion by the trial court.   Our Supreme Court has stated this rule as follows:  “The determination of a motion for a new trial rests so completely within the court's discretion that its action will not be disturbed unless a manifest and unmistakable abuse of discretion clearly appears.   This is particularly true when the discretion is exercised in favor of awarding a new trial, for this action does not finally dispose of the matter.   So long as a reasonable or even fairly debatable justification under the law is shown for the order granting the new trial, the order will not be set aside.”  (Jiminez v. Sears, Roebuck & Co. (1971) 4 Cal.3d 379, 387, 93 Cal.Rptr. 769, 482 P.2d 681.)

After reciting this same passage, one court of appeal added the following:  “Renowned California legal scholar, B.E. Witkin, describes the rule and its reason as follows:  ‘The trial judge is familiar with the evidence, witnesses and proceedings, and is therefore in the best position to determine whether, in view of all the circumstances, justice demands a retrial.   Where error or some other ground is established, his discretion in granting a new trial is seldom reversed․  Review is limited to the inquiry whether there was any support for the trial judge's ruling, and the order will be reversed only on a strong affirmative showing of abuse of discretion.  [Citations.]’  (8 Witkin, Cal. Procedure (3d ed.1985), Attack on Judgment in Trial Court, § 135, p. 538.)”   (Sandco American, Inc. v. Notrica (1990) 216 Cal.App.3d 1495, 1506, 265 Cal.Rptr. 587;  see also Mosesian v. Pennwalt Corp. (1987) 191 Cal.App.3d 851, 858, 236 Cal.Rptr. 778;  Hata v. Los Angeles County Harbor/UCLA Medical Center (1995) 31 Cal.App.4th 1791, 1800, 37 Cal.Rptr.2d 630.)

 Which leaves only the question as to whether there was any “manifest and unmistakable abuse of discretion” by the trial court in this case.   There clearly was not:  as noted above, both at the time of his original issuance of the permanent injunction and at the time of his grant of the motion for a new trial, Judge Knight was very clear that the evidence was overwhelming that the reentry of defendants into the San Mateo County catering business under the Harry's Hofbrau Catering name was and is likely to cause confusion with the business which they had sold in 1980.   The evidentiary support for this viewpoint seems substantial:  many witnesses (including even the catering manager for the defendants' catering business) testified to the confusion among customers and potential customers between the two catering businesses.   And evidence was admitted of checks, invoices, mail and even telephone calls intended for one catering company received by the other.

Clearly the trial court did not abuse its discretion in granting the new trial motion.

B. Plaintiffs' Appeal from the Order Denying the Motion for Judgment NOV

 The standard of review of a trial court's order denying a post trial motion for the entry of judgment NOV is whether there is substantial evidence sustaining the jury's verdict.   As one court has put it, an appeal from a denial of a judgment NOV “is a challenge to the sufficiency of the evidence to support the jury's verdict and the trial court's decision.   The standard of review is essentially the same as when the trial court has granted the motion.”  (Stubblefield Construction Co. v. City of San Bernardino (1995) 32 Cal.App.4th 687, 703, 38 Cal.Rptr.2d 413;  see also Hasson v. Ford Motor Co. (1977) 19 Cal.3d 530, 546, 138 Cal.Rptr. 705, 564 P.2d 857;  Wright v. City of Los Angeles (1990) 219 Cal.App.3d 318, 343, 268 Cal.Rptr. 309, disapproved on another ground in Soule v. General Motors Corp. (1994) 8 Cal.4th 548, 574-580, 34 Cal.Rptr.2d 607, 882 P.2d 298.)

 The rule is easy to state but it is not easy to apply in this case.   As already noted, the trial court stated several times that there was little, if any, evidence to support the jury's verdict.   Thus, in its Memorandum of Decision following the jury verdict it stated:  “The overwhelming weight of the evidence, (indeed, there appears to be no substantial conflict on this point) is that the names ‘Hofbrau Catering’ and ‘Harry's Hofbrau Catering’ are confusing to the general public in this area and are likely to continue so.”   The court repeated this same conclusion several other times.   Indeed, even in its order denying the plaintiffs' motion for judgment NOV (but entering a permanent injunction as prayed for in their complaint), the court said:  “Numerous witnesses testified to frequent incidents of confusion of the two names by customers and suppliers alike, and Defendants managing officer testified to several such instances.   There was virtually no evidence in contradiction on this point.”  (Emphasis added.)   The court reiterated its “overwhelming weight of the evidence” phraseology in its Statement of Decision.   Our own examination of the record supports these conclusions, i.e., reveals no substantial evidence contradicting the existence of that confusion.7  The only conflict in the evidence is as to the nature of that confusion and who or what was responsible for it.

Pointing to the trial court's statements and the substantial evidence they adduced in support of their case, plaintiffs urge that the trial court erred in denying their motion for a judgment NOV.   Defendants, as might be expected, urge that there was substantial evidence supporting the jury verdict.   However, when we examine the specifics cited by defendants, they are almost entirely evidence relating to a totally different type of confusion, i.e., confusion between the plaintiffs' catering business and the defendants' restaurant business, or “vertical” confusion.   Thus, several times in their briefs to the trial court, defendants cited to pre-trial deposition testimony by plaintiff Mario Raddavero that the emergence of defendants' catering business, Harry's Hofbrau Catering, resulted in “less confusion” in the marketplace.   But when this testimony is examined, it is clear that what that witness was referring to was the extent of any confusion between his catering business and the defendants' restaurant, Harry's Hofbrau.   The clear import of his testimony was that any confusion as to whether the food his catering business distributed came from defendants' restaurants was lessened by the emergence of defendants' catering business.   But this was not the issue framed by the first amended complaint and what the trial was supposed to be about.   That issue was, and only was, whether there was confusion between the two competing catering businesses, i.e. “horizontal” confusion.

The search for substantial evidence to support the jury verdict with respect to that type of confusion is made even more difficult by defendants' briefs to this court, which provide practically no assistance on this issue.   In those briefs, defendants again argue that such confusion as existed in the marketplace (a) substantially predated their creation of “Harry's Hofbrau Catering,” (b) related solely to the connection (or lack thereof) between plaintiffs' catering business and defendants' restaurants, (c) was capitalized on by plaintiffs, and (d) was finally “clarified” by the emergence of defendants' catering business in 1989.   In support of this contention, they thrice quote to this court the Mario Raddavero deposition testimony noted above.

There are two major, indeed insurmountable, problems with this argument.   In the first place, the entire thrust of the plaintiffs' first amended complaint, the complaint upon which the case went to trial, was the alleged substantial similarity between the names “Hofbrau Catering,” which was sold by the defendants in 1980, and “Harry's Hofbrau Catering” established by them nine years later in direct competition with the former.   And a basic premise of plaintiffs' complaint was that they had purchased that business in 1984 “with the intent and expectation of deriving profits in part from the existing goodwill of HOFBRAU CATERING, due in substantial part to its affiliation with the HARRY'S HOFBRAU restaurants.”   Thus, the first basic problem with defendants' key contention both below and here is that it is fundamentally non-responsive to the gravamen of the complaint.

The second defect in the argument is that it rather stubbornly ignores the basic proposition that the sole cause of any “vertical” confusion as to whether plaintiffs' catered food did or did not originate in defendants' kitchens was defendants' 1980 sale of their catering business, complete with its goodwill and trade name.   Thus, the type of confusion that defendants argue their 1989 reemergence into the catering business so helpfully “clarified” was manifestly attributable to-and only to-the 1980 transaction divorcing their restaurants and their catering business.   Put another way, defendants have no one to blame but themselves for any confusion in the marketplace as to whether “Hofbrau Catering” was or was not affiliated with their restaurants.   More importantly, they are simply not entitled to cure that self-created “confusion” by establishing a business with a name rather manifestly similar to the name they sold nine years earlier.   As federal Circuit Judge Stanley Barnes put it some decades ago “․ the seller of a trademark has a special duty to avoid confusion with a name he has sold.”   (Plough, Inc. v. Kreis Laboratories (9th Cir.1963) 314 F.2d 635, 639;  cf. Levitt Corp. v. Levitt (2d Cir.1979) 593 F.2d 463, 468 [where infringing party has previously sold his business, including the use of his name and its goodwill, “sweeping injunctive relief is more tolerable.”].) 8

We agree with the trial court's repeated finding that there was little if any evidence contradicting the existence of confusion in the marketplace between the two competing catering businesses.   We find, more specifically, that there was no substantial evidence as to a lack of such confusion.   Defendants' arguments to the contrary, when analyzed, are not really that there is evidence contradicting the existence of such “horizontal” confusion but, rather, that there is also evidence of the existence of “vertical” confusion, i.e., regarding whether plaintiffs' business was or was not related to defendants' restaurants.   But it is an utter and obvious non sequitur to suggest that the existence of some self-created “vertical” confusion negates (much less justifies) the creation and continuation of “horizontal” confusion.

We part company with the trial court only as to the consequence of these findings;  we conclude, unlike that court, that they mandate the entry of a judgment NOV as to the issue of liability (the only issue as to which plaintiffs moved for such a judgment).

C. Defendants' Appeal from the Entry of a Permanent Injunction

 Notwithstanding the jury verdict to the effect that the use by defendants of the name “Harry's Hofbrau Catering” was not likely to cause confusion, the trial court entered a permanent injunction against the use of that name finding, in its own Memorandum of Decision and subsequent Statement of Decision, that such usage was indeed likely to cause confusion.   Defendants contend that the entry of that injunction in the face of the jury verdict 9 denied them their right to a trial by jury.   The answer to this is that, as to two of the three causes of action before the court, defendants did not have a right to a trial by jury for the reason that those causes of action were and are purely equitable.

 Plaintiffs' first cause of action was under sections 17200 et seq., California's Unfair Competition Act.   In that pleading, plaintiffs specifically asked for both damages and injunctive relief.   However, it is now clear that that statute does not authorize a suit by a private party for damages.  (See Bank of the West v. Superior Court (1992) 2 Cal.4th 1254, 1266, 10 Cal.Rptr.2d 538, 833 P.2d 545 (Bank of the West );  Chatton v. National Union Fire Ins. Co. (1992) 10 Cal.App.4th 846, 863-864, 13 Cal.Rptr.2d 318;  Dean Witter Reynolds, Inc. v. Superior Court (1989) 211 Cal.App.3d 758, 774, 259 Cal.Rptr. 789 (Dean Witter );  Industrial Indemnity Co. v. Superior Court (1989) 209 Cal.App.3d 1093, 1096-1097, 257 Cal.Rptr. 655.)

Our 1989 opinion in Dean Witter was the second chronologically in the line of cases so holding.   In it, we noted that, although there was then one case holding to the contrary (United Farm Workers of America v. Superior Court (1975) 47 Cal.App.3d 334, 344, 120 Cal.Rptr. 904), the better view “denies compensatory damages as distinct from the equitable remedy of restitution.”   We went on to note that this was supported by the legislative history of the 1972 amendments to the false advertising act, and then concluded:  “The exclusion of claims for compensatory damages is also consistent with the overarching legislative concern to provide a streamlined procedure for the prevention of ongoing or threatened acts of unfair competition.   To permit individual claims for compensatory damages to be pursued as part of such a procedure would tend to thwart this objective by requiring the court to deal with a variety of damage issues of a higher order of complexity.”  (Dean Witter, supra, 211 Cal.App.3d at p. 774, 259 Cal.Rptr. 789.)

Shortly after those words were written their substance was endorsed by our Supreme Court in Bank of the West.

Although there appears to be no precedent on the point, we think it is clear that the same result obtains with respect to plaintiffs' second cause of action under sections 14400 et seq.,10 as to which plaintiffs also sought both injunctive relief and damages.   Section 14402 of that chapter authorizes a court to issue an injunction against the use of trade names “in violation of the rights defined in this chapter,” but neither that section or any other provision in the relevant article 11 says-or even hints-anything about any other form of relief, even restitutionary relief.12

 Where a statute authorizes only equitable relief, it is fundamental that there is no right to a jury trial.  (See, e.g., Southern Pac. Transportation Co. v. Superior Court (1976) 58 Cal.App.3d 433, 436-438, 129 Cal.Rptr. 912;  A-C Co. v. Security Pacific Nat. Bank (1985) 173 Cal.App.3d 462, 473, 219 Cal.Rptr. 62;  Wolford v. Thomas (1987) 190 Cal.App.3d 347, 353-354, 235 Cal.Rptr. 422;  Stell v. Jay Hales Development Co. (1992) 11 Cal.App.4th 1214, 1220-1221, 15 Cal.Rptr.2d 220, 7 Witkin, Cal. Procedure (3d ed.   1985) Trial, §§ 92, 93, pp. 91-92.)   Thus, the trial court was clearly correct in granting equitable relief and making the necessary findings of fact to support that relief, whether or not those findings agreed with the jury's findings.13  And this remains the case even if plaintiffs' third cause of action, for relief-including damages-under section 43(a) of the federal Lanham Act, was triable in whole or in part to a jury.  (See, as to this issue, L.L. Bean, Inc. v. Drake Publishers, Inc. (D.Me.1986) 629 F.Supp. 644, 646.)   Thus, if the jury's negative finding of fact regarding “confusion” in the marketplace had any relevance in the case, that relevance was limited to plaintiffs' claim for damages under section 43(a) of the Lanham Act. And, obviously, even that limited amount of relevance was vitiated by the trial court's grant of plaintiffs' motion for a new trial.

D. Defendants' Appeal from the Denial of Defendants' Motion for Nonsuit

Our standard of review of an order either granting or denying a motion for a nonsuit is a very limited and restricted one, a principle deriving from the nature of the motion itself.   As our Supreme Court has said, such a motion “allows a defendant to test the sufficiency of the plaintiff's evidence before presenting his or her case.   Because a successful nonsuit motion precludes submission of plaintiff's case to the jury, courts grant motions for nonsuit only under very limited circumstances․  [¶] In determining whether plaintiff's evidence is sufficient, the court may not weigh the evidence or consider the credibility of witnesses.   Instead, the evidence most favorable to plaintiff must be accepted as true and conflicting evidence must be disregarded.   The court must give to the plaintiff['s] evidence all the value to which it is legally entitled, ․ indulging every legitimate inference which may be drawn from the evidence in plaintiff['s] favor․ [Citations.]  [¶] In an appeal from a judgment of nonsuit, the reviewing court is guided by the same rule requiring evaluation of the evidence in the light most favorable to the plaintiff.”  (Carson v. Facilities Development Co. (1984) 36 Cal.3d 830, 838-839, 206 Cal.Rptr. 136, 686 P.2d 656.)

Defendants' motion for a nonsuit was based on the contention that the trade name “Hofbrau Catering” was not protectable as a matter of law because it was “generic” and hence not distinctive enough to warrant trade name protection.   The trial court disagreed, and held that the name “Hofbrau Catering” was either “arbitrary” or “suggestive” (in terms of its degree of “distinctiveness” under the law of trade names) and hence protectable.   The trial court also held that defendants were estopped from so contending by virtue of their status as the parties that originally sold that name.

 We conclude that we need not explore the extensive case law on the various degrees of “distinctiveness” of trade names.   Rather, we affirm the trial court's ruling on its alternative basis of “assignor estoppel.”   That principle, as applied here, means that defendants may not be permitted to challenge the protectability of a trade name that they themselves have sold for valuable consideration.

In this connection, it will be recalled that, in 1980, defendant J & H Kramer 14 sold the Hofbrau Catering business, specifically including the trade name “Hofbrau Catering,” to plaintiffs' assignor, Roslen.   That contract of sale provided that it “shall inure to the benefit of the ․ successors, and assigns of the parties hereto․”  Roslen, in turn, resold that asset to plaintiffs four years later, also for consideration.

The doctrine of assignor estoppel is most clearly recognized in the field of patents, and the most recent case applying the principle derives from that area of the law.  (Diamond Scientific Co. v. Ambico, Inc. (Fed.Cir.1988) 848 F.2d 1220 (Ambico ).)   In that case, the defendants in a patent infringement case were a doctor who originally developed a type of vaccine and assigned the patent rights for it to his then employer, the plaintiff, and a corporation later formed by him which was marketing a similar type of vaccine.   Those defendants attempted to assert a defense of patent invalidity to the infringement action, but were precluded from doing so by the court's application of the doctrine of assignor estoppel.   In applying that principle, the court held that “an assignor should not be permitted to sell something and later to assert that what was sold is worthless, all to the detriment of the assignee.”  (Id. at p. 1224.)

The principle is also recognized, although not as clearly or precisely, in the law of trademarks and trade names.  (See McCarthy, McCarthy on Trademarks and Unfair Competition (3d ed.1996) § 18.04[2].) The leading case applying the principle in the trade name and trademark field is Marshak v. Green (S.D.N.Y.1981) 505 F.Supp. 1054, 1060-1061.   There, three members of a singing group assigned the rights to the registered trade name of the group to their manager.   One of these three members then left and founded a competing group with the same name.   When the manager-assignee sued for infringement of the trade name, defendant attempted to challenge the validity of the mark.   The court held that he could not do so, stating:  “Courts adhere to traditional common-law contract principles even in trademark cases as long as holding a party to his obligations is not inconsistent with the public policy of preventing confusion and deception as to the origin of goods or services.   Where a party, as here, applies for the benefits of service-mark registration and then receives such benefits over a period of time, he is estopped from challenging the validity of the mark under these traditional principles.”   (Id. at p. 1061.)

We have not found, nor have the parties cited to us, any California precedent on point.   But in the leading patent case on the subject, Ambico, the federal court noted that four justifications had been advanced to support the doctrine:  “ ‘(1) to prevent unfairness and injustice;  (2) to prevent one [from] benefiting from his own wrong;  (3) by an analogy to estoppel by deed in real estate;  and (4) by analogy to a landlord-tenant relationship.’ ”  (See Ambico, supra, 848 F.2d at p. 1224, quoting Cooper, Estoppel to Challenge Patent Validity:  The Case of Private Good Faith v. Public Policy (1967) 18 Case W. Res. L.Rev. 1122.)

The first of these two justifications are, of course, far too general to permit any citation to California law, but the latter two are not.   California recognizes estoppel by deed in Civil Code section 1106, the theory of which, Witkin states, is that “the grantor, having purported to convey title, will afterwards be estopped to deny that he had it.”  (4 Witkin, Summary of Cal. Law (9th ed.   1987) Real Property, § 212, p. 417.)   California also recognizes estoppel arising from a landlord-tenant relationship, i.e., that a tenant may not be heard to contest or challenge the title of his or her landlord.  (See 4 Witkin, op. cit. supra, § 570, pp. 745-746.)

Thus, both direct legal precedent and analogous legal doctrine support the application of the doctrine of assignor estoppel in this fact situation.   So, too, do basic principles of fairness and equity.   In 1980, one of the defendants sold the Hofbrau Catering business, specifically including that trade name, and received consideration for both.   Neither that defendant nor any of the others with which it is in privity should now be heard to assert that that trade name is now (because if now a fortiori then) valueless because it is “generic.”

E. Defendants' Appeal from the Trial Court's Denial of their Motion for Nonsuit as to Plaintiffs' Lanham Act Claim

 As noted previously, plaintiffs' third cause of action in their January 1994 first amended complaint 15 was for defendants' alleged violation of section 43(a) of the federal Lanham Act (15 U.S.C. § 1125, subd. (a)(1).) 16  This section provides a right of action to a person injured by the action of another's using “in commerce any word, term [or] name ․ which, [¶] (A) is likely to cause confusion ․ as to the affiliation, connection, or association of such person with another person, or as to the origin ․ of his or her goods ․ by another person․”

Seizing upon the term “in commerce” in that section, shortly before the case went to the jury the defendants moved to dismiss the Lanham Act cause of action on the ground that the plaintiffs had not introduced sufficient evidence of the involvement of either party in interstate commerce (obviously the type of commerce to which the act refers).   The court denied the motion, and defendants also appeal from this denial.

 This is another ground of appeal which is not difficult to resolve.   Section 45 of the Lanham Act itself provides that the term “commerce” as used therein “means all commerce which may lawfully be regulated by Congress” (15 U.S.C. § 1127) and the United States Supreme Court has held that, therefore, the Act has a “sweeping reach.”  (Steele v. Bulova Watch Co. (1952) 344 U.S. 280, 287, 73 S.Ct. 252, 256, 97 L.Ed. 319.)   As applied to the food service industry, the Act and similar far-reaching federal laws 17 have been held applicable to restaurants the purchases of which include a significant amount of merchandise which moves in interstate commerce.  (See, e.g., Daniel v. Paul (1969) 395 U.S. 298, 89 S.Ct. 1697, 23 L.Ed.2d 318;  Berghoff Restaurant Co., Inc. v. Lewis W. Berghoff, Inc. (N.D.Ill.1973) 357 F.Supp. 127;  Demetriades v. Kaufmann (S.D.N.Y.1988) 698 F.Supp. 521 (Kaufmann );  see, generally, McCarthy, op. cit. supra, §§ 25.15, 25.16.)

The Kaufmann case presents a good example of the application of this very liberal standard in a context similar to the instant one.   That case, as this one, was triggered by a combined Lanham Act-state unfair competition complaint, but one brought in federal court.   It involved the alleged misappropriation of architectural plans for a home in Scarsdale, New York.   There, as here, the Lanham Act count was brought under section 43(a) of that statute and there, as here, the defendant moved to dismissed that count, claiming a lack of any sufficient involvement in interstate commerce.   The court denied the motion.   In so doing, it first noted that by its very terms the statute was intended to reach “all commerce within the ambit of the Commerce Clause ․ as that clause has been construed by the courts.”  (Kaufmann, supra, 698 F.Supp. at p. 524.)   It then went on to note that the record revealed that the plaintiffs had listed their luxury homes “with multiple-listing real estate brokers, who have out-of-state offices, and that [plaintiffs] homes are often advertised in the New York Times (which, of course, enjoys wide interstate circulation)․  If true, these interstate contacts, although admittedly limited, would be sufficient to establish that plaintiffs are doing business interstate under the broad notions of interstate commerce that have held sway in this circuit in the past.  [Citations.]”  (Ibid.)

If the type of record before the court in Kaufmann establishes federal statutory jurisdiction, a fortiori that jurisdiction is present here.18  This record contains substantial evidence that both catering establishments made extensive purchases of goods from out-of-state manufacturers and producers, and the record in the court below includes detailed lists of such goods.   The trial court was clearly correct in denying defendants' motion to dismiss plaintiffs' Lanham Act cause of action.


The judgment and orders appealed from are affirmed save the trial court's order denying plaintiffs' motion for judgment NOV.   That order is reversed and the case remanded to the trial court for action consistent with this opinion.   That action would include, although not necessarily be limited to, (1) the entry of an order determining the issue of liability in plaintiffs' favor on all causes of action and (2) a trial on the issue of damages under the third cause of action.


1.   Unless otherwise noted, all statutory citations are to the Business and Professions Code.

2.   The parties do not dispute that “hofbrau” is simply Germanic for “beer house,” and that a hofbrau-style restaurant generally denotes one featuring a German-style cuisine featuring, e.g., carved turkey, ham, roast beef, mashed potatoes, desserts, etc.

3.   The non-compete clause did, however, permit the seller to continue catering to “institutional customers.”   There was testimony that it in fact did so during the five (5) year period.

4.   By approximately this same point in time, defendants had also set up and were operating other businesses ancillary to their restaurants, e.g., “Hofbrau Liquors,” “Hofbrau Bakery,” and “Hofbrau Meat Locker.”   None of these were sold at the same time that Hofbrau Catering was.

5.   In their brief, defendants contend that such listings were “[u]nknown to Kramer.”

6.   There was also evidence that plaintiffs reacted by filing fictitious business name certificates in Santa Clara and San Mateo Counties under the name “Harry's Hofbrau Catering.”   They later filed statements of abandonment of that name, apparently on the advice of counsel.

7.   Most of the over twenty witnesses who testified at the trial, including defendants' catering manager and Kramer himself, testified as to examples of confusion between the two catering businesses.   We have located no testimony directly denying the existence of any “horizontal confusion” in the relevant marketplace.

8.   Nor may defendants be heard to suggest that they should be permitted to add a bona fide first name to a similar business name, as it has repeatedly been held that “the mere addition of a first name [is] insufficient to prevent confusion.  [Citations.]”  (E. & J. Gallo Winery v. Gallo Cattle Co. (9th Cir.1992) 967 F.2d 1280, 1292.)

9.   We can find little in the record to explain the trial court's and the parties' pretrial understanding of the precise function of the jury in this case.   Although the court gave a “boilerplate” instruction to the jury which told it that it was to decide “all questions of fact,” it also hinted to the parties before the trial commenced that there might well be questions of fact which were for the court to decide, i.e., “the injunctive ․ portion of the cause of action․”  Plaintiffs' pretrial position seemed to be that the court would determine all equitable issues, and after the verdict came in the trial court made clear its view that this was indeed the case.   As matters turned out, as far as the issue of “confusion” was concerned, the trial court seems to have used the jury more or less in an advisory capacity relative to the injunctive causes of action;  of course, a court is always free to disregard the advice of an advisory jury.  (See 7 Witkin, Cal. Procedure (3d ed.   1985) Trial, § 111, p. 111.)

10.   The cause of action is actually under sections 14401 et seq., as section 14400 was repealed in 1990.

11.   Compare section 14494, which appears in a separate article of the same chapter dealing with “Names Other than Trade Names.”   That section makes clear (in contrast to section 14402 and its related sections) that actual damages are recoverable in a suit brought under that article.

12.   The trial court effectively denied plaintiffs any restitutionary relief, finding in its memorandum of decision that there was “no proof as to what percentages of any ․ profits from Defendants' catering business was due to a confusion of names.”   Contrary to the contention of plaintiffs' counsel at oral argument before this court, we think this holding of the trial court is clear and unequivocal and leaves no room for further litigation on the issue of ancillary equitable relief under the first two causes of action.

13.   Defendants argue that, since the trial court found that plaintiffs had some degree of “unclean hands” (deriving from their occasional “statements to customers which would lead the customers to believe they were dealing with Defendants”), it was required to deny injunctive relief.   This is not the law, for at least two reasons.   In the first place, unclean hands is not a defense “when the act sought to be enjoined is against public policy.”  (Jomicra, Inc. v. California Mobile Home Dealers Assn. (1970) 12 Cal.App.3d 396, 402, 90 Cal.Rptr. 696;  see, generally, McCarthy, McCarthy on Trademarks and Unfair Competition (3d ed.1996) § 31.17[2].) By virtue of the federal and state statutes at issue here, that rule clearly obtains.   Second, the trial court expressly conditioned its grant of injunctive relief upon plaintiffs' agreement “to cease and desist from making any false or misleading statements to customers, suppliers, or the general public concerning their present relationship with Harry's Hofbrau Restaurants.”   This was both an appropriate and permissible way for a court of equity to deal with the “unclean hands” issue.  (Ibid.)

14.   None of the other named defendants were sellers of the trade name or the other assets transferred by the 1980 agreement.   Plaintiffs nevertheless contend that, because all six of the Harry's Hofbrau restaurants are owned by corporations wholly or substantially owned by Kramer, they are in privity with the selling defendant.   Defendants do not dispute this contention.

15.   In a prior proceeding, plaintiffs petitioned for a writ of mandate to overturn an earlier trial court ruling denying them leave to amend to add this cause of action.   We issued an alternative writ, whereupon the trial court permitted plaintiffs to add this cause of action.  (No. AO63487, December 1, 1993.)

16.   State courts have concurrent jurisdiction with federal courts over actions brought under section 43(a) of the Lanham Act. (See Entex Industries v. Warner Communications (C.D.Cal.1980) 487 F.Supp. 46, 48;  Blue Bell, Inc. v. Farah Manufacturing Company, Inc. (5th Cir.1975) 508 F.2d 1260;  see, generally, Lee and Livingston, The Road Less Traveled:  State Court Resolution of Patent, Trademark, or Copyright Disputes (1988) 19 St. Mary's L.J. 703, 717-722, 734-736.)

17.   Perhaps the clearest example of the intent of Congress to subject restaurants which purchase goods moving in interstate commerce to federal regulatory law is the Civil Rights Act of 1964 (42 U.S.C. § 2000a, subd. (c)(2)), which provides, inter alia, that such establishments “affect commerce” if, among other things, “a substantial portion of the food which it serves ․ has moved in commerce.”   This has been defined to mean “ ‘anything more than a minimal or insignificant amount.’ ”  (See U.S. v. Lansdowne Swim Club (E.D.Pa.1989) 713 F.Supp. 785, 794.)

18.   Defendants rely on a decision by the United States Court of Appeals for the Ninth Circuit, Thompson Tank & Mfg. Co., Inc. v. Thompson (9th Cir.1982) 693 F.2d 991, 993 (Thompson ).   They suggest that Thompson holds the opposite of Kaufmann and the other authority cited above.   They are wrong;  Thompson affirmed a California federal district court decision which had dismissed a Lanham Act § 43(a) claim for lack of jurisdiction because that plaintiff “had not caused his goods to enter into commerce.”  (Id. at p. 992.)   The affirmance by the court of appeals, however, was on a quite different ground, to wit, that the defendant's “activities did not ‘affect’ the interstate commerce in which [plaintiff] was engaged” because the parties “are engaged in entirely different [product markets].”  (Id. at p. 993.)   In so holding, the court of appeals rather clearly implied that the trial court had used the wrong test (“engaged in interstate commerce”) whereas the correct test was “ ‘affects' interstate commerce.”  (Id. at pp. 992-993.)

HAERLE, Associate Justice.

KLINE, P.J., and LAMBDEN, J., concur.

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Docket No: No. A068929.

Decided: January 09, 1997

Court: Court of Appeal, First District, Division 2, California.

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