Appeal from an order entered in the United States District Court for the Southern District of New York, Charles Brieant, Jr., District Judge, denying an application for a citation of civil contempt. Reversed and remanded.
Before Kaufman, Chief Judge, and Smith and Oakes, Circuit Judges.
Imitation may be the sincerest form of flattery, but the makers of Louis Vuitton leather goods have not been pleased by the recent flood of counterfeit Vuitton handbags in the New York area. The French corporation, whose pocketbooks are sold for upwards of $200, is facing stiff competition from midtown retailers, whose bogus merchandise is available for $50 or less. To protect its trademark*fn1 and profits, Vuitton has brought 35 suits in the district courts of this Circuit, in the hope that anyone who desires the cachet a Vuitton bag bestows on its owner will have no alternative but to purchase the genuine article. This is an appeal from an unsuccessful skirmish in Vuitton's legal campaign.
The instant litigation was commenced on September 29, 1978, against Carousel, a handbag store on East 42nd Street in New York City. Vuitton alleged that Carousel had engaged in unfair competition and trademark infringement by offering counterfeit products to the public. Negotiations with Solomon Mizrahi, Carousel's proprietor, resulted in a consent decree forbidding the store "and all those acting in concert or participation with it" from selling sham Vuitton leather goods. Solomon Mizrahi was not personally named in the injunction. Judge Brieant, who has presided over the bulk of the Vuitton litigation in the Southern District of New York, approved the consent decree on October 17, and it was filed the following day.
On the succeeding Saturday, Marc Jaffe, a vigilant Vuitton attorney, noticed a brummagem bag in the display window of "Helou", a store on Broadway. Discreetly questioning the Helou sales staff, Jaffe discovered that more bags could be obtained at "Mirage", a shop on 34th Street. An employee of the professional shopping service engaged by Vuitton was able not only to purchase a counterfeit Vuitton pocketbook at Mirage, but also to ascertain that additional merchandise was available.
A visit to the New York County Clerk's Office revealed that Mirage was owned by a partnership consisting of Solomon, Maurice, and Joseph Mizrahi. Vuitton then moved to cite the Mizrahis for both civil and criminal contempt of the October 17 injunction, on the theory that the three partners were acting in concert with Carousel. The plaintiff also asked for damages based on the number of sales made by the Mizrahis in violation of the consent decree, and attorney's fees as well.
At the hearing on the contempt motion, the three defendants claimed that they were never served with the injunction and accordingly could not be held in contempt.*fn2 Judge Brieant stated that in the absence of personal service or an admission of service, he would not cite the Mizrahis for contempt. The district judge did provide Vuitton with the solace of a limited remedy, however, for he broadened the scope of the injunction to include Mirage and the three Mizrahis personally.*fn3 Vuitton has now appealed Judge Brieant's refusal to find the defendants in civil contempt, and asks for damages and attorney's fees.
We believe that Judge Brieant should have held an evidentiary hearing to determine whether the defendants were bound by the injunction of October 17. Accordingly we reverse and remand to the district court. Should Vuitton establish that the Mirage sale violated the terms of the decree, and that, with respect to any of the defendants, (1) he had actual knowledge of the terms of the injunction, and (2) he was acting in concert with Carousel, the judge will consider whether plaintiff has not earned the right to an order in civil contempt and an award of proven damages.
Rule 65(d) of the Federal Rules of Civil Procedure provides:
Every order granting an injunction . . . is binding only upon the parties to the action . . . and upon those persons in active concert or participation with them who receive actual notice of the order by personal service or otherwise.
This Rule codifies the long settled principle that personal service of an injunction is not required so long as those whom the plaintiff seeks to hold in contempt had actual notice of the decree. See, e. g., United States v. Hall, 472 F.2d 261 (5th Cir. 1972); Universal Athletic Sales Co. v. Salkeld, 376 F. Supp. 514, 516 (W.D.Pa.1974), Vacated on other grounds, 511 F.2d 904 (3d Cir.), Cert. denied, 423 U.S. 863, 96 S. Ct. 122, 46 L. Ed. 2d 92 (1975). Cf. Fidelity Mortgage Investors v. Camelia Builders, Inc., 550 F.2d 47, 51 (2d Cir. 1976), Cert. denied, 429 U.S. 1093, 97 S. Ct. 1107, 51 L. Ed. 2d 540 (1977). Judge Brieant thus did not have discretion to require service of process as a condition of citing the Mizrahis for civil contempt and granting compensatory damages, if proven.*fn4 It is clear, of course, that Solomon had actual notice of the terms of the October 17 injunction, since he signed the consent decree on behalf of Carousel. The record before us, however, does not reveal whether Joseph or Maurice Mizrahis had such notice, and Joseph or Maurice may not be held in contempt unless Vuitton establishes that this requirement of Rule 65(d) has been satisfied.*fn5
A court of equity cannot, of course, bind the world at large through a broadly worded injunction. Nevertheless, American jurisprudence has rejected Lord Eldon's view that only a party to the suit may be bound by a decree, Iveson v. Harris, 32 Eng. Rep. 102 (Ch.1802), in favor of a more pragmatic stance that protects the rights of both the plaintiffs and those to whom the order is addressed.*fn6 See generally O. Fiss, Injunctions 620-702 (1972); Dobbs, Contempt of Court: A Survey, 56 Cornell L.Rev. 183, 249-61 (1971). Rule 65(d) articulates the standard for determining the reach of the injunction. Before any of the Mizrahis may be held ...