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CORTEZ v. CMG WORLDWIDE INC.

March 27, 1997

JENESS CORTEZ; FRED STONE; PERLMUTTER PUBLISHING COMPANY, INC.; PETER CANZONE, Plaintiffs, against CMG WORLDWIDE INC., Defendant.


The opinion of the court was delivered by: KAHN

 Presently before the Court is defendant CMG Worldwide Inc.'s ("CMG") motion to stay. Oral arguments on this matter were heard on December 6, 1996 in Albany, New York and the Court reserved decision.

 I. FACTS

 Defendant CMG is an Indiana corporation that acts as an agent on behalf of corporations, organizations, and celebrities for the purpose of licensing to third parties the right to commercially use the trademarks and trade dress of its clients' properties. CMG also has the responsibility of protecting its clients against unauthorized use of the trademarks and trade dress of the properties. One of CMG's clients is Paulson Enterprises, the partial owner of the famous race horse "Cigar" and the racing stable "Brookside Farms." *fn1" CMG also represents the owners of the deceased race horses "Secretariat" and "Ruffian."

 Plaintiffs Jenness Cortez ("Cortez") and Fred Stone ("Stone") are artists who specialize in creating images of famous racing horses including Cigar, Secretariat, and Ruffian in racing scenes. In addition to depicting the horses, the artists also depict the famous jockeys who rode the race horses as well as the distinctively colored clothing worn by the jockeys and horses known as "silks" which are unique to specific horse stables. Perlmutter Publishing Company, Inc. ("Perlmutter") is a New York Corporation formed by Cortez and her husband Leonard Perlmutter to market the work of Cortez. Plaintiff Peter Canzone ("Canzone") is one of Stone's agents involved in distributing Stone's work.

 On May 15, 1996, CMG informed Stone that he must "cease and desist" from creating and selling images of the race horse Secretariat claiming that use of the name and likeness of the image violated the Lanham Act, 42 U.S.C. ยง 1125(a) and the Federal Dilution Act of 1995. On July 24, 1996, CMG threatened legal action against Cortez and Perlmutter on similar grounds. On August 9, 1996, CMG filed an action in Indiana State Court against Perlmutter and Cortez on three counts: (i) unfair competition and unjust enrichment, (ii) conversion, and (iii) violations of the Lanham Act, Trademark Dilution Act, and infringement of Trade Dress each with regard to Cigar and Brookside Farms. *fn2"

 The present action was filed by plaintiffs on August 28, 1996. Plaintiffs seek a declaratory judgment by this Court holding that there is no legal right to control the depiction or dissemination of the images of Cigar, Secretariat, or Ruffian, or the silks worn by the jockeys and horses. Plaintiffs further seek punitive damages and attorney's fees. Defendants have moved to stay this action pending the outcome of the Indiana State Court suit.

 II. DISCUSSION

 A. Abstention Under the Declaratory Judgment Act

 The Declaratory Judgment Act provides that:

 
In a case of actual controversy within its jurisdiction . . . any court of the United States, upon the filing of an appropriate pleading, may declare the rights and other legal relations of any interested party seeking such declaration, whether or not further relief is or could be sought. Any such declaration shall have the force and effect of a final judgment or decree and shall be reviewable as such.

 In exercising its discretion, a district court is bound to apply the factors set forth in Brillhart v. Excess Ins. Co., 316 U.S. 491, 86 L. Ed. 1620, 62 S. Ct. 1173 (1942). 115 S. Ct. at 2140. In Brillhart, the Court stated that a district court must "ascertain whether the questions in controversy between the parties to the federal suit, and which are not foreclosed under the applicable substantive law, can be better settled in the proceeding pending in state court." *fn3" 316 U.S. at 495. The factors a district court should consider are 1) "the scope of the pending state court action and the nature of the defenses open there," 2) "whether the claims of all parties in interest can satisfactorily be adjudicated in [the state] proceeding," 3) "whether necessary parties have been joined," and 4) ...


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