Opinion ID: 521946
Heading Depth: 2
Heading Rank: 4

Heading: Injunction Against Matusa

Text: 36 Finally, Matusa argues that the district court erred by entering judgment against a party not before the court. The sub-franchise granted to Inc. in 1967 covered all areas of the world except those specifically reserved to Limited. By default, this arrangement left all of Latin America except Cuba within Inc.'s franchise. However, the court found that Limited had invaded Inc.'s territory by entering into business in Central America at a time when things were peaceful and that was agreed to. (R7-160 Ex. 1-20). 37 Because the contract must now be construed as an arms-length agreement, the court ruled that it would enforce the letter of the sub-franchise. Thus the court ruled that 38 to the extent sales have been made in Costa Rica and Central America through Limited, they were acquiesced in, but in the future, they will have to stop distributing in that area and that area will be allocated to Inc. under its franchise agreement. 39 (R7-160 Ex. 1-20). The court also ruled that if Inc. wished to operate in Latin America, the plaintiffs would have to be reimbursed to the extent of their investment, including all developmental costs and good will. At a post-trial hearing on December 8, 1987, Matusa argued to the court that it was not the plaintiff Matusa, but rather Limited, a party not before the court, which was doing business in Latin America. Thus, Matusa claimed that the order was invalid. The court rejected the argument and ruled in its final order that the plaintiff, its shareholders, directors, officers, employees, agents, licensees and sub-franchisees are ... perpetually enjoined from interfering with the rights of [Inc.] in any of the geographic areas granted to it under the sub-franchise. (R7-160 2-3). 40 Rule 65 of the Federal Rules of Civil Procedure provides, in part: 41 (d) Form and Scope of Injunction or Restraining Order. 42 Every order granting an injunction and every restraining order ... is binding only upon the parties to the action, their officers, agents, servants, employees, and attorneys, and upon those persons in active concert or participation with them who receive actual notice of the order by personal service or otherwise. 43 (emphasis added). The Supreme Court has held that a nonparty with notice cannot be held in contempt until shown to be in concert or participation. Zenith Radio Corp. v. Hazeltine Research, Inc., 395 U.S. 100, 112, 89 S.Ct. 1562, 1570, 23 L.Ed.2d 129 (1969). In that case the Court held that it was error to enter an injunction against Hazeltine, the corporate parent of HRI, the named counter-defendant, where Hazeltine was not a party to the suit and where the trial court made no finding that HRI and Hazeltine were one entity. 44 By the same analysis, the portion of the order in this case which enjoins Matusa from interfering with Inc.'s Latin American territory is binding only as to Matusa and those in active concert or participation with them. We express no opinion as to whether the order is therefore binding upon Limited, since the court made no factual finding on this question. The order states only that the injunction runs to the plaintiff and its shareholders, directors, officers, employees, agents, licensees and sub-franchises. We will leave to another day the delineation of the precise scope of the injunction. The district court has made a valiant effort to resolve both the legal questions presented and the intra-family squabbles. We assume all the individuals involved will attempt good faith compliance. 10 45 AFFIRMED.