Dial One of the Mid-South, Inc. v. BellSouth Telecommunications, Inc.

IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT
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m 00-30537
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DIAL ONE OF THE MID-SOUTH, INC.;
HELP SERVICE COMPANY, INC.,
DOING BUSINESS AS DIAL ONE HELP SERVICE COMPANY;
AND
CAMPBELL’S PLUMBING AND HEATING, INC.,
DOING BUSINESS AS DIAL ONE CAMPBELL’S PLUMBING AND HEATING,

Plaintiffs-Appellees-
Cross Appellants,

VERSUS

BELLSOUTH TELECOMMUNICATIONS, INC.;
BELLSOUTH ADVERTISING & PUBLISHING CORPORATION;
AND
L.M. BERRY AND COMPANY,

Defendants-Appellants-
Cross-Appellees.

_________________________

Appeals from the United States District Court
for the Eastern District of Louisiana
_________________________
October 18, 2001
Before JOLLY, SMITH, and WIENER, awards and the sufficiency of the evidence
Circuit Judges. supporting them. Plaintiffs cross appeal the
refusal to consider goodwill damages.
JERRY E. SMITH, Circuit Judge:
II.
In this case brought under the Lanham Act Defendants’ first issue is the proper stan-
for infringement of the Dial One trademark in dard in applying the innocent infringer defense
New Orleans, judgment was for plaintiffs with in § 1114(2) of the Lanham Act, which limits
an award of actual damages. Defendants persons bringing actions under §§ 1114(1) and
challenge the standard used in applying the 1125(a) to injunctive relief if the defendant is
innocent infringer defense and the award of an “innocent infringer.” See 15 U.S.C.
damages. Plaintiffs cross appeal the decision § 1114(2). Specifically, defendants contend
to exclude evidence of loss of goodwill to the the district court erred in refusing to apply an
Dial One mark. We find no reversible error actual-malice standard to defendants’ conduct
and affirm. to determine their status as innocent infringers.
Instead, the court used a standard of objective
I. reasonableness, under which a defendant is an
Dial One of the Mid-South, Inc. (“Dial innocent infringer only if, regardless of state of
One”), is the franchise holder, and Help Ser- mind, its conduct is reasonable. The court
vice Company, Inc. (“Help”), and Campbell’s then rejected defendants’ innocent infringer
Plumbing and Heating, Inc. (“Campbell’s”), defenseSSfinding not objectively reasonable
are franchisees. U.A. Durr was once a Dial the conduct of failing to remove the incorrect
One franchisee but lost his franchise in January listing.
1998 when Dial One terminated the relation-
ship. Defendants BellSouth Telecommunica- Statutory interpretation is a process we re-
tions, Inc., BellSouth Advertising & Publishing view de novo. See Kemp v. G.D. Searl & Co.,
Corporation, and L.M. Berry and Company 103 F.3d 405, 407 (5th Cir. 1997). Our start-
are responsible for some part of the production ing point in divining the meaning of a statute is
and publication of the Yellow Pages and White the intent of Congress. See Castillo v. Cam-
Pages for southeastern Louisiana. In the May eron County, 238 F.3d 339 (5th Cir. 2001).
Yellow and October White pages for 1998, The best evidence of this intent is the language
Durr was listed as a Dial One franchisee in the of the statute. See Negonsott v. Samuels, 507
alphabetical section under Dial One, when in U.S. 99, 104 (1993).
fact he had lost his franchise.
On its face, “innocent infringer” suggests a
Dial One, Help, and Campbell’s sued for party who is without blame, but also may con-
damages, treble damages, and fees. The dis- note one who is without knowledge of a
trict court awarded the following damages: wrong or who has no improper motive. The
Dial One: $10,000 in lost franchise fees; latter interpretation suggests an unremarkable
Campbell’s: $45,000 in lost profits; and Help: legal scheme whereunder any “infringer” will
$100,000 in lost profits. Defendants appeal, be held accountable, but an “innocent infring-
challenging the construction of the innocent er” will not be subject to as stiff a penalty.
owner defense and the propriety of the damage Our task is to determine the legal significance

2
of the term “innocent.” presses the intent of only a single member of
Congress. The risk in giving conclusive
On this issue of first impression in this weight to a statement of only one member of
circuit, we conclude that the proper standard Congress is particularly acute here, where the
for evaluating whether an infringer is innocent common-sense definition of “innocent” and the
is objective reasonableness. First, there is no requirements of constitutional actual malice
constitutional mandate to protect this type of are difficult to reconcile.
speech under the heightened actual malice
standard. Second, there is no strong evidence Finally, Congressman Kastenmeier may
that, in extending the language of § 1114(2) to have had the mistaken belief that Sullivan re-
§ 1125(a) of the Lanham Act, Congress in- quires the meaning of “innocent” he advanced
tended anything other than correction of a pre- in his remarks. He apparently was under the
vious oversight in omitting that language from impression that enforcement of the Lanham
§ 1125(a). Third, the premise of conflicting Act by private parties trying to protect their
legislative history is based on an art ificial trademarks may overstep constitutional
conflict between the First Amendment and limitations on the regulation of speech. See
private enforcement of the Lanham Act. Fi- 134 CONG. REC. 31,850 (1988).
nally, the logic of the actual malice standard is
not appropriate in this context. There is no such tension, however, for
commercial speech that is false does not re-
Defendants urge us to read “innocent” in ceive First Amendment protection.2 Ac-
§ 1114(2) to mean “without constitutional ac- cordingly, we decline to rely on this shard of
tual malice.” They premise this argument on legislative history to read a constitutional ac-
remarks by the co-sponsor of an amendment to tual malice standard into § 1114(2).3
the Lanham Act in 1988, expressing a desire
for “innocent” to incorporate the “actual mal- Moreover, Sullivan does not support defen-
ice” standard from N.Y. Times v. Sullivan, 376 dants’ position that the actual malice standard
U.S. 254 (1964). See 134 CONG. REC. 31,
851 (1988) (statement of Congressman
Kastenmeier). 1
(...continued)
sec. 132, § 43(a), 102 Stat. 3935, 3946 (1988).
Defendants’ reliance on a statement by a
2
co-sponsor highlights the problems with using See Ibanez v. Fla. Dep’t of Bus. & Prof’l
legislative history to determine Congressional Regulation, 512 U.S. 136, 142 (1994); Procter &
intent. First, the legislation Congressman Gamble Co. v. Amway Corp., 242 F.3d 539, 557
Kastenmeier was addressing was merely a bill (5th Cir. 2001), cert. denied, 70 U.S.L.W. 3074
to extend the innocent infringer defense from (U.S. Oct. 1, 2001) (No. 01-29).
one section of the Lanham Act to another; it 3
The official commentary to the bill provided
made no substantive change in the words “in- by the Senate Judiciary Committee remarks only
nocent infringer.”1 Second, this history ex that section 32(2) corrects a “typographical error.”
Senate Comm. on the Judiciary, Trademark Law
Revision Act 1988-Satellite Home Viewer Act of
1
See Trademark Law Revision Act of 1988, 1988, S. Rep. No. 100-515, at 38, reprinted in
(continued...) 1988 U.S.C.C.A.N. 5600.

3
should apply to the speech at issue. The Su- district court’s conclusion that this conduct
preme Court has not held whether the actual was not objectively reasonable is not clear
malice standard applies to commercial speech; error.
in a suit by a product manufacturer against the
author of a product review, Bose Corp. v. III.
Consumers Union of the United States, Inc., Defendants appeal the damages, which are
466 U.S. 485, 515 (1984) it declined to decide premised on a calculation of lost profits.4 Our
whether that standard was appropriate. The review of the sufficiency of evidence
Court has held, however, that matters not of supporting an award of damages is only for
public concern are not judged under the actual clear error.5 Additionally, § 1117 of the Lan-
malice standard. See Dun & Bradstreet, Inc. ham Act gives the district court broad
v. Greenmoss Builders, Inc., 472 U.S. 749, discretion over the amount of damages. See
760 (1989). 15 U.S.C. § 1117. The court is limited only by
principles of equity and is restricted from mak-
Although the trademark at issue in this case ing any award that is punitive instead of merely
was certainly a matter of public consumption, compensatory. Id.
the improper listing of a service repair business
is hardly a matter of public concern such that There is no indication the court made any
the improper listing should be protected. In award premised on penalizing the defendants
fact, the interest of the public is probably best instead of compensating the plaintiffs.
protected by allowing the suit to proceed with- Although the sufficiency of the evidence sup-
out an actual malice defense, so as to promote porting the damages is not overwhelming, we
accuracy in this type of speech. Allowing the defer in large part to the district court’s
suit under a lesser standard will in no way evaluation. The court took account of
trigger the concerns of SullivanSSthat possible uncertainty in the estimates of future
defamation law will undercut important First profits, whether evidence was corroborated,
Amendment freedoms. Accordingly, we con- whether the harm from the infringing listing
clude that the district court correctly an- would continue beyond the actual period of
nounced that the proper standard for analyzing infringement, and possible variability of profit
the innocent infringer defense under the Lan- margins. This demonstrates a weighing of the
ham Act is objective reasonableness.
4
Whether defendants in fact were innocent Defendants appropriately call our attention to
infringers under this test is a question of fact, this court’s recent decision in Logan v. Burgers
which we review only for clear error. See St. Ozark Country Cured Hams, Inc., No. 00-30652,
Martin v. Mobil Exploration & Producing, 2001 U.S. App. LEXIS 20309 (5th Cir. Sept. 12,
Inc., 224 F.3d 402, 405 (5th Cir. 2000). 2001). That case, however, is inapposite. It deals
with proving Lanham Act damages through de-
Defendants do not contest the error in printing
fendants’ profits, while the instant case concerns
the false listing for Durr, nor do they contest damages for plaintiffs’ lost profits.
knowledge of the cessation of the Durr-Dial
One franchise agreement. Defendants had 5
See FED. R. CIV. P. 52(a); Boston
notice of the change and failed to remove the Professional Hockey Ass’n, Inc. v. Dallas Cap &
Dial One reference in the phone books. The Emblem Mfg., Inc., 597 F.2d 71, 75-76 (5th Cir.
1979).

4
factors sufficient to support the award. There any suggestion of the possibility of such proof
is no clear error. is offered at trial. See Seatrax, Inc. v. Sonbeck
Int’l, Inc., 200 F.3d 358, 370 (5th Cir. 2000).
IV. There is nothing to indicate that plaintiffs of-
On cross-appeal, plaintiffs raise the issue of fered any evidence of damage to the goodwill
damage to the goodwill of the Dial One of the Dial One mark. Although there was
trademark. In ruling on a motion in limine, evidence of consumer confusion, this evidence
the court refused to admit evidence of damage was never tied, at trial, to the claim of loss of
to goodwill. Plaintiffs renewed their objection goodwill.
at trial but did not offer specific proof
regarding loss of goodwill. We review rulings AFFIRMED.
on motions in limine for abuse of discretion.
See Buford v. Howe, 10 F.3d 1184, 1188 (5th
Cir. 1994).

The court based its decision on two
grounds. (1) that, because Dial One of the
Mid-South was not the owner of the federal
mark, it could not recover goodwill damages;
and (2) that there was a strong likelihood the
goodwill of the mark had not been harmed,
and thus no evidence on the issue was
required.

We offer no opinion on the ownership of
the mark or the feasibility of recovering good-
will damages where the plaintiff is only the li-
censee of the mark. Instead, we base our deci-
sion to affirm the ruling on the district court’s
determination that goodwill was not damaged;
we see no abuse of discretion in the finding
that the goodwill of the Dial One mark did not
suffer when a non-franchisee was erroneously
listed under the Dial One section of the phone
book. It was not unreasonable to find that the
improper listing had such a tenuous connection
to the goodwill of the Dial One mark that
there was no need for full evidentiary
treatment.

Our conclusion is reinforced by precedent
in this circuit refusing to consider the propriety
of a motion in limine where no evidence or

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