Opinion ID: 521946
Heading Depth: 1
Heading Rank: 2

Heading: The Pits

Text: 9 Until the time of the falling out between the two sides of the family, Matusa, Inc., and the other companies were apparently run as one family business, described by the district court as a loose knit strada of corporations. (R7-160 Ex. 1-4). However, beginning in late 1981, the loose knit strada fell apart at its corporate seams. The resulting factions, Inc. and United on the one hand and Matusa, Licorera and Limited on the other, ceased to deal with each other as family members with a common interest. On October 15, 1982 Matusa gave written notice to Inc. of a number of purported breaches of its obligations under the franchise agreement. The letter stated that if Inc. failed to rectify its noncompliance with the sub-franchise agreement within thirty days as provided for in the contract, Matusa would terminate the sub-franchise. 4 10 Matusa asserted several grounds for termination of the sub-franchise. First, Inc. began making its own substitute formula using commercially purchased extracts and concentrates in place of the prune and vanilla bean macerations which Matusa maintains are indispensible components of the secret formula required to make Matusalem rums. Second, the Abascals incorporated a Canadian corporation, Ron Matusalem Canada, Ltd., for the sale and distribution in Canada of a liqueur under the Matusalem trademark and logo. 5 Matusa claimed that the sales in Canada violated the sub-franchise agreement because Inc.'s franchise territory did not encompass Canada, and because Inc. was required to obtain Limited's permission to make such sales and to pay royalties to Matusa, both of which it failed to do. Third, Matusa claimed that Inc. effectively repudiated its franchise rights by filing a United States trademark application to register Ron Matusalem, claiming that it was the owner of the trademark, and by refusing to assign or abandon its application to register Matusa's trademark once Matusa demanded that it do so. 11 On July 19, 1982 Matusa sent Inc. a letter stating that its sub-franchise was terminated for failure to cure the alleged breaches within the 30 day period. Thereafter, in an effort to cut off the defendants' business, Matusa notified United's suppliers that the sub-franchise had been terminated. Matusa filed suit on August 18, 1983 seeking to enjoin Inc. and United from making any further use of the Matusalem trademarks. Matusa also sought damages and an accounting for breach of contract, trademark infringement, unfair competition, injury to business reputation and misappropriation of trade secrets. After an eight day bench trial, the district court issued oral findings of fact and conclusions of law. The court concluded that the plaintiff had failed to prove any violations by the defendants sufficient to warrant the termination of the sub-franchise. The court ruled that the franchise would be enforced, that Inc. was thus required to act in strict compliance with its terms, and that Inc.'s pending trademark applications must be transferred to Matusa. The court also ruled that sales made through Limited in Central America must stop because that territory belongs to Inc. under its sub-franchise. To the extent that money had been invested in the production and sale of Matusalem rums in Latin America by Matusa or one of its licensees, the court ruled that Inc. would have to reimburse the developer for these expenses. Matusa appeals, contending that the district court erred in finding that no terminable breach of the sub-franchise occurred. Matusa also claims that the court was without jurisdiction to order that all sales of Matusalem products by parties other than Inc. cease, because the enforcement of that order would affect parties not before the court. We now address each of these issues in turn.