New York Law Review

Tag: Trade Name

  • Marsh v. Levey, 55 N.Y.2d 864 (1981): Enforceability of Trade Name Restrictions Post-Dissolution

    Marsh v. Levey, 55 N.Y.2d 864 (1981)

    The filing of a certificate of dissolution of a corporation, without more, does not demonstrate abandonment of a trade name, especially when an agreement exists governing the rights to the trade name.

    Summary

    In a breach of contract action, the plaintiff, Marsh, sought to enforce a trade name restriction against the defendant, Levey, following the dissolution of a corporation. The defendant argued that the plaintiff waived any right to enforce the restriction by filing the certificate of dissolution. The Court of Appeals held that the dissolution, by itself, did not constitute abandonment of the trade name, particularly given the existence of an agreement between the parties governing its use. The Court reversed the Appellate Division’s order, granted judgment to the plaintiff on the issue of liability, and remitted the matter for further proceedings.

    Facts

    The plaintiff, Marsh, brought an action against the defendant, Levey, for breach of contract, seeking an injunction and damages related to the defendant’s use of a trade name. The plaintiff had the authority to enter into the contract of sale and was the distributee of all the corporation’s assets upon dissolution. The defendant’s sole defense was that the plaintiff’s filing of a certificate of dissolution waived any restriction on the defendant’s license to use the trade name.

    Procedural History

    The lower court ruled in favor of the defendant. The Appellate Division affirmed. The New York Court of Appeals reversed the Appellate Division’s order and remitted the case to the Supreme Court, Westchester County, for further proceedings, finding the defendant liable.

    Issue(s)

    Whether the filing of a certificate of dissolution of a corporation, without any further evidence, constitutes an abandonment of the corporation’s trade name, thereby relieving a party from contractual restrictions on the use of that trade name.

    Holding

    No, because the record did not support the assertion that the plaintiff abandoned the right to enforce the limitations on the use of the trade name. Further, the filing of a certificate of dissolution, without more, does not demonstrate abandonment of the trade name. Parties can alter common law rights concerning trade names through agreement.

    Court’s Reasoning

    The Court of Appeals reasoned that while rights in a trade name may be lost through abandonment, the defendant failed to demonstrate such abandonment by the plaintiff. The Court stated, “the record simply does not support defendant’s assertion that plaintiff abandoned whatever right existed to enforce the limitations on use of the trade name, nor can it be concluded, as defendant has argued, that the filing of a certificate of dissolution, without more, demonstrates abandonment of the trade name.”  The court emphasized the importance of the existing agreement between the parties, stating that the parties “could elect to alter those rights and have them governed instead by an appropriate agreement, which is apparently what the parties sought to do in this case.” The court distinguished this case from situations governed solely by common law principles of trade name usage. The court emphasized that parties are free to contractually alter their rights regarding trade names, and such agreements will be enforced. The court thereby reinforced the principle of freedom of contract and the enforceability of agreements governing trade name usage, even in the context of corporate dissolution. The decision provides clarity regarding the limited effect of a certificate of dissolution on trade name rights when those rights are also subject to contractual agreements.

  • Findlay v. Findlay, 18 N.Y.2d 12 (1966): Limits on Using One’s Own Name in Business When It Creates Confusion

    Findlay v. Findlay, 18 N.Y.2d 12 (1966)

    A person’s right to use their own name in business is not absolute and can be limited when such use tends to create confusion or diversion that harms the business of another, even without a showing of fraud or intent to deceive.

    Summary

    Two brothers, David and Walstein (Wally) Findlay, were involved in a family art business. David operated a gallery in New York City under the name “Findlay Galleries,” building a strong reputation. Wally, who operated a gallery in Chicago under a similar name, decided to open a gallery next door to David’s on East 57th Street, using the name “Wally Findlay Galleries.” David sought an injunction, arguing that Wally’s use of the name would cause confusion and divert customers. The court agreed, finding that Wally’s use of the “Findlay” name would inevitably lead to confusion, harming David’s established business and goodwill.

    Facts

    The Findlay art business was established in 1870 by the grandfather of David and Wally Findlay.
    Their father expanded the business, with David managing a New York branch and Wally a Chicago branch.
    In 1938, after a dispute, David sold the Chicago gallery to Wally, allowing him to use the name “Findlay Galleries, Inc.” in Chicago.
    David continued to operate his gallery on East 57th Street in Manhattan, building a strong reputation.
    In 1963, Wally purchased a building next door to David’s gallery and planned to open his own gallery under the name “Wally Findlay Galleries.”
    David objected, claiming it would cause confusion and damage his business.

    Procedural History

    The trial court issued an injunction preventing Wally from using the name “Findlay” on East 57th Street.
    The Appellate Division affirmed the trial court’s decision.
    Wally Findlay appealed to the New York Court of Appeals.

    Issue(s)

    Whether a person’s right to use their own name in business is absolute, or if it can be restricted when it causes confusion and harms the business of another.

    Holding

    No, because the right to use one’s own name in business is not unlimited and can be restricted when such use tends to produce confusion in the public mind and impairs the goodwill of an existing business.

    Court’s Reasoning

    The court emphasized that while individuals generally have the right to use their own name in business, this right is not absolute. It cannot be exercised in a way that injures the business of another or misleads the public. The court found that Wally’s use of the name “Findlay” next door to David’s established gallery would inevitably cause confusion. Customers looking for “Findlay’s on 57th St.” would likely enter Wally’s gallery by mistake, diverting business from David.

    The court noted that the present trend of the law is to enjoin the use even of a family name when such use tends or threatens to produce confusion in the public mind. The court cited World’s Dispensary Med. Assn. v. Pierce, 203 N. Y. 419, 425 stating that, “The defendant has the right to use his name. The plaintiff has the right to have the defendant use it in such a way as will not injure his business or mislead the public. Where there is such a conflict of rights, it is the duty of the court so to regulate the use of his name by the defendant that, due protection to the plaintiff being afforded, there will be as little injury to him as possible.”

    The court found that the objective facts of unfair competition and injury to plaintiff’s business were determinative, not the defendant’s subjective state of mind. The injunction was narrowly tailored to prevent the use of the name Findlay only on East 57th Street, minimizing the injury to Wally while protecting David’s business.