Opinion ID: 699209
Heading Depth: 2
Heading Rank: 2

Heading: The Joint Advertising Claim

Text: 5 Friday's alleged in its complaint, among other things, that FVLP breached the Assignment Agreement by engaging in various forms of joint advertising. Joint advertising refers to advertisement materials that use Friday's marks in connection with other restaurant concepts. Article IV, paragraph 4, of the Assignment Agreement states: 6 In order to insure uniformity in use and to maintain the validity of the Marks, ASSIGNOR [defendants] shall display in connection with its Friday's restaurant-bar operation only such signs or advertising material as shall not be disapproved by ASSIGNEE [plaintiff]. Paragraph 9 provides that: 7 ASSIGNEE shall have the right to terminate the right herein reserved to ASSIGNOR if ASSIGNOR defaults in the performance of any undertaking given or breaches any of its obligations undertaken herein and such default or breach shall not be remedied within thirty (30) days after written notice thereof is delivered to ASSIGNOR. 8 Friday's alleged that it had disapproved of defendants' use of joint advertising, served written notice on defendants, and that defendants failed to cure the default within the time prescribed. 9 This action was tried without a jury before a magistrate judge upon the consent of the parties, pursuant to 28 U.S.C. Sec. 636(c). The magistrate judge made numerous findings of fact and conclusions of law and dismissed several of plaintiff's claims. Only the findings of fact regarding the joint advertising claims are relevant to this appeal. 10 The magistrate judge identified six instances of joint advertising by defendants and also identified two Notices of Default that Friday's sent to defendants, one on August 9, 1991 and the other on January 30, 1992. Each instance of joint advertising will be discussed as it relates to the two Notices of Default. 11 The magistrate judge found that [o]n August 9, 1991, FRIDAY'S issued its first 'Notice of Default' to FVLP in connection with joint advertising, regarding the use of an unauthorized menu in magazine format called Knife & Fork Menuzine. The Notice stated: 12 Use of the Knife & Fork Menuzine as the menu at the [Core] Restaurants is a failure to conduct operations in accordance with Friday's national standards, and an unauthorized display of advertising materials and therefore constitutes a default under the Agreement.... 13 The magistrate judge found that, [a]lthough not expressly stated in the Notice of Default, Friday's was objecting to the joint advertising in the Menuzine, which promoted Friday's along with several other restaurant concepts. 14 The court also found that, between August 1991 and January 1992, the Riese Organization used the T.G.I. Friday's marks along with the marks of its other restaurant concepts on coupons that offered twenty-percent discounts on meals to members of the American Automobile Association. Also during that time, the Riese Organization advertised a promotion entitled X Marks a Free Dinner in Cityguide, which is a magazine distributed to tourists in New York City. The advertisement offered a free entree with the purchase of a second entree at various Friday's restaurants as well as other restaurant concepts operated by the Riese Organization. 15 On January 30, 1992, Friday's issued its second Notice of Default to FVLP explicitly disapproving of FVLP's use of Friday's marks with those of other restaurant concepts, i.e., joint advertising. The January 30th Notice stated: 16 2) FVLP has deliberately used the Marks in advertising which has been disapproved by Friday's; to wit: use of the Marks in advertisements which include the marks of other restaurant concepts operated by the Riese Organization. 17 As provided at paragraph 9 of Article IV of the Agreement, FVLP has thirty (30) days after delivery of this notice within which to remedy the aforesaid defaults. In order to cure, we expect ... that you provide us with evidence reasonably satisfactory to Friday's that all advertising in which the Friday's mark is used with other restaurant concepts has been discontinued as well as your written undertaking that no such advertising will be conducted in the future. 18 The notice also advised FVLP that Friday's would terminate the Reserved Rights, pursuant to paragraph 9, if the defaults were not remedied within thirty days. FVLP's time to cure the joint advertising default was extended by judicial orders and then by agreement of the parties to May 22, 1992. 19 By letter dated May 15, 1992, FVLP acknowledged receipt of Friday's January 30th Notice of Default and specifically made reference to the disapproval of FVLP's joint advertising. The letter stated: 20 Pursuant to Article IV, paragraph 9 of the [Assignment] Agreement, this is to advise you that FVLP hereby cures this alleged default in that it hereby will discontinue such advertising and will not do so in the future. 21 The letter also advised that it should not be construed by Friday's in any way as an admission by FVLP that it was in default or in violation of the Assignment Agreement. Despite the assertion that FVLP would discontinue joint advertising, presumably by the date of its letter, May 15th, two more incidents revealed that FVLP continued to engage in joint advertising. 22 One instance was the 3-Point Play promotion, which involved the purchase of a Knicks baseball cap and a coupon booklet for $5.00. The promotion consisted of posters and table tents 3 that featured Friday's marks in conjunction with the names and marks of other restaurant concepts. The Kids Eat Free promotion was implemented at various restaurants in early 1992 and allowed children under twelve to eat for free. This promotion also involved posters and table tents that featured Friday's marks in conjunction with the names and marks of other restaurant concepts that participated in the promotion. 23 Plaintiff's Senior Vice-President of Marketing, Stephen Hickey, testified that the table tents and posters used by defendants for the Kids Eat Free and 3-Point Play promotions were not consistent with Friday's marketing efforts because they advertised Friday's competitors to customers eating in Friday's restaurants. According to Hickey, the use of joint advertising blur[red] Friday's image and made it appear as though all of the restaurants were one and the same. He also claimed that the table tents and coupons were not of the same graphic quality as Friday's advertisements, and that Friday's did not usually participate in discount coupons or dollar-off promotions. In sum, Hickey testified that the Riese Organization's use of joint advertising was inconsistent with Friday's efforts to build a distinct image as a restaurant that offers a unique casual-dining experience. 24 Following the May 22, 1992 deadline to cure the defaults, investigators for Friday's observed table tents and/or posters for the 3-Point Play and/or Kids Eat Free promotions displayed in every Core Restaurant except one, as well as at several other Riese-controlled concepts, such as Houlihan's and Tequila Willie's. These observations were made on May 26, May 29, and June 3, 1992. Based on the initial observations of its investigators, Friday's concluded that defendants had not remedied the joint advertising defaults. Accordingly, on May 28, 1992, Friday's sent FVLP a Notice of Termination of the Assignment Agreement, referring to the May 15th Notice of Cure and stating in part: 25 Your representations were not true, and the default has not been cured, in that you have prior to May 22, 1992 and thereafter continued to use Friday's trademarks and/or service marks in advertising which included other restaurant concepts operated by the Riese Organization. This letter is to notify you that the Agreement terminated as of May 23, 1992. 26 After it had issued the Notice of Termination, Friday's became aware of yet another incident of joint advertising. The Chase promotion involved coupons for a twenty-percent discount at defendants' Friday's restaurants as well as five other Riese-controlled restaurant concepts. The coupons were to be sent to Chase Manhattan Bank Visa and Master Card holders in their June, July and August monthly statements. Jane Clements, Director of Promotions for the Riese Organization, was in charge of this promotion, which was carried out by Calet, Hirsch & Spector (Calet Hirsch), an advertising agency, and Ross Roy Communications. 27 On May 22, 1992, Clements gave Calet Hirsch final approval for the layout and composition of the Chase coupon. Clifford Drozda, an employee of Calet Hirsch, testified that Calet Hirsch could have removed Friday's restaurants from the coupons to be mailed in June if they had been directed to do so on May 22. However, sometime in June, the coupons, which included the Friday's marks along with the marks of other restaurant concepts, were mailed to hundreds of thousands of Chase customers. Clements did contact Anthony Cottman of Ross Communications sometime in June and inquired as to whether it was possible to withdraw the coupons. Cottman informed her that, at that time, it was too late to withdraw the June mailings. Clements did manage to have Friday's marks removed from the subsequent mailings.