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HEUER v. BASIN PARK HOTEL AND RESORT

August 12, 1953

HEUER ET AL.
v.
BASIN PARK HOTEL AND RESORT ET AL.



The opinion of the court was delivered by: John E. Miller, District Judge.

On November 15, 1951, plaintiffs filed their complaint against the defendant and alleged that he had been guilty of unfair competition; these allegations will be set out more fully hereinafter.

The defendant, on December 7, 1951, filed his answer denying that he had been guilty of unfair competition. At the same time the defendant filed his counterclaim against the plaintiffs and alleged that they had been guilty of unfair competition and had slandered and disparaged defendant's property.

Subsequently plaintiffs filed a motion for a more definite statement with reference to the slander portion of defendant's counterclaim, and on January 9, 1952, the Court entered an order requiring a more definite statement.

On February 16, 1952, defendant filed his amendment to the counterclaim, and on March 14, 1952, plaintiffs filed their reply to said counterclaim as amended.

The case was set for trial on March 11, 1953, but, upon learning that the defendant intended to introduce evidence of slanderous statements other than those alleged in the counterclaim, the Court granted the plaintiffs a continuance, and, in order to simplify the issues for trial, a pre-trial conference was conducted and the following order was entered by the Court:

"On this March 11, 1953, the date set for the trial of this cause but prior to the calling of the case for trial, a pre-trial conference was had, the plaintiffs appearing by Messrs. G. Byron Dobbs, Merle Shouse and Samuel W. Kipnis, their attorneys, and the defendant appearing by Messrs. Willis & Walker, his attorneys. A discussion of the issues for trial in this case was had and upon agreement of the parties the court finds:

"1. That the plaintiffs' cause of action is based upon a claim of unfair competition by the defendant in that the defendant in 1951 copied, in substance, advertising matter used by plaintiffs in the promotion of their business under the name of Happiness Tours and that the plaintiffs suffered damages to their business by reason of such unfair competition and by reason of the appropriation by defendant of such advertising matter as alleged and are entitled to recover damages and injunctive relief as prayed for in their complaint against defendant's use of advertising material that had acquired a secondary meaning.

"2. The defendant denies that he copied or otherwise appropriated to his use the advertising folders and material of plaintiffs or that the plaintiffs had originated any advertising folders and material, and, contends that the folders or advertising matter which plaintiffs contend was appropriated by him was in fact appropriated and used by plaintiffs without permission and illegally from prior folders and advertising matter originated by defendant and that defendant in no wise by acts or conduct expressly or impliedly gave plaintiffs permission to use the advertising matter which he contends that plaintiffs had used in their folders and advertising matter and that by reason of said alleged acts on the part of the plaintiffs, defendant has been damaged in his business which is that of the operation of the Basin Park Hotel, and that said advertising material and folders were his own and that the plaintiffs should be enjoined from using any such material in their travel folder which had acquired a secondary meaning in the promotion of their business in the conduct of travel tours.

"3. That the defendant contends that the plaintiffs subsequent to December 7, 1950 uttered and published of and concerning the hotel which he operated, to-wit, the Basin Park Hotel at Eureka Springs, Arkansas, slanderous and disparaging statements, to-wit: `The Basin Park was an old hotel and unsafe to stay in; that it was a broken down tenement house with no modern conveniences and very poor rooms and in the tenement section of town; that the Basin Park Hotel is an old dilapidated tenement house and in the lower part of Eureka Springs and that the Crescent Hotel is a large beautiful castle on which the owners have spent $150,000 to remodel; that the Basin Park Hotel is no longer in business; that the Basin Park Hotel was a broken down tenement house in the old part of town where several years ago the colored help for the Crescent Hotel was kept and that it was not a safe place for women to go —' and that defendant has been damaged by said utterances.

"And it appearing to the court that the contention of the defendant in reference to the claim for damages for alleged slanderous and disparaging statements have not been clearly and sufficiently alleged in his counterclaim, permission is granted the defendant to amend, within 30 days, his counterclaim by alleging specifically the dates and places of the utterances of the alleged slanderous and disparaging statements and the defendant is ordered and directed to furnish plaintiffs with names and addresses, so far as can be ascertained, of the persons to whom he claims the slanderous and disparaging statements were made, and the names or physical descriptions of the persons making such statements.

"It is further directed and ordered that the plaintiffs furnish to the defendant the names and addresses, so far as is possible to ascertain, of the employees in their business office in Chicago during the time from December 7, 1950 to the date of this order.

"The defendant is granted permission to further amend, within 30 days, his counterclaim to pray for an injunction enjoining plaintiffs from engaging in unfair competition with him by the use of advertising folders or matter which may be found to have been originated by the defendant and which had acquired a secondary meaning and which were being used without his express or implied permission.

"It is further ordered that the trial of this case upon its merits be continued until the next session of the court."

Following the entry of the above order by the Court, the defendant on April 8, 1953, filed his "Second Amendment to Defendant's Counterclaim" in which he alleged that agents of the plaintiffs made certain disparaging statements, concerning his hotel, to prospective customers thereof as well as to the defendant himself. The defendant prayed that plaintiffs be enjoined from disparaging his hotel and from using or distributing circulars or advertising material which he alleges were originated by him and had acquired a secondary meaning.

On April 25, 1953, plaintiffs filed a "Motion to Dismiss and Strike Defendant's Second Amendment to the Counterclaim and for a Trial by the Court of the Equitable Issues Herein," and on July 24, 1953, plaintiffs filed a motion for summary judgment in their favor on both the complaint and the counterclaim. The attorneys for the respective parties have filed briefs in support of and in opposition to the motions, and said motions are now before the Court for disposition.

The Court will first consider the plaintiffs' motion to dismiss and strike defendant's second amendment to the counterclaim and for a trial by the Court of the equitable issues. With respect to this motion, the plaintiffs contend that the second amendment does not comply with the pretrial order of the Court in that defendant has added new alleged disparging statements, contrary to the Court's order, and has prayed for injunctive relief "wholly different from that permitted by the Court"; and that a court will not enjoin the publication of disparaging or defamatory statements. Plaintiffs also contend that the alleged causes of action for unfair competition are equitable in nature and should be determined by the Court without the intervention of a jury. The defendant, on the other hand, contends that he has complied with the order of the Court, but he makes no contention with respect to the equitable nature of the unfair competition claims or to the right of injunctive relief against the uttering of disparaging statements.

In order to ascertain whether the second amendment to the counterclaim conforms with the Court's pre-trial order, it will be necessary to compare the counterclaim as it existed at the time of the order with the counterclaim as it appears subsequent to the second amendment. The original counterclaim was filed on December 7, 1951, and, as heretofore stated, on January 9, 1952, the Court ordered the defendant to make a more definite statement with reference to paragraph 14 of the counterclaim. On February 16, 1952, defendant amended paragraph 14 of the counterclaim to read as follows:

"Plaintiff in counterclaim would further allege that with the beginning of the sale by defendants in counterclaim of the Ozark Tours as hereinbefore alleged, that at the Chicago Tribune Travelers Show in March 1948, the defendants in counterclaim arranged a booth for their advertising, which booth was set up near plaintiff's in counterclaim booth, where he was making his advertising as hereinbefore alleged; that defendants in counterclaim were passing out literature and selling tours to the Crescent Hotel in Eureka Springs, with the use of the folder which they had copied from this plaintiff in counterclaim, at which time they began a vicious and unlawful system of slander and libel, through a Mr. Rotchford, brother of the defendant in counterclaim Anna Rotchford, and an agent in charge of defendants in counterclaim booth and advertising campaign, by publishing by means of oral statements made by the said Mr. Rotchford, brother of the defendant in counterclaim Anna Rotchford and by publication of oral statements made by the defendants in counterclaim and each of them, to the public interested in plaintiff's in counterclaim tours, the following statements which were false and untrue and calculated to damage the business of plaintiff in counterclaim: `The Basin Park Hotel is an old dilapidated tenement house at the lower part of Eureka Springs, and that the Crescent Hotel where we (Happiness Tours) are sending our customers, is a large beautiful castle on which the owners have just spent $150,000.00 to remodel it;' that at the same time and place and continuing thereafter, on each annual Chicago Tribune Travel Show, in 1949, 1950 and 1951, the defendants in counterclaim, in person and through their agents in charge of their booth, used this slanderous and libelous statement to divers persons, unknown to this plaintiff in counterclaim, with an additional false and fraudulent statement, that the Basin Park Hotel was no longer doing business."

The second amendment to the counterclaim, filed on April 8, 1953, reads as follows:

"Comes the defendants Basin Park Hotel and Joe M. Parkhill, (plaintiffs in counterclaim) and, by leave of Court, would further amend said counterclaim to allege, in addition to the allegations contained in the original counterclaim and the first amendment to paragraph 14, as follows:

"In respect to paragraph 14:

"That from a time prior and continuously since December 7, 1950, the plaintiffs, Happiness Tours, (defendants in counterclaim) have wilfully carried on and are carrying on a campaign of false disparagement against the hotel of plaintiff in counterclaim and the business and reputation thereof, specific examples of which are particularly hereinafter alleged; as follows:

"That about June, 1951, upon inquiry at the office of Happiness Tours in the City of Chicago by a prospective customer who stated specifically that he was interested in a tour to Eureka Springs and the Basin Park Hotel, said customer was told, falsely and wrongfully, by an agent of the person answering inquiries in said office of Happiness Tours, in effect, that, `the Basin Park Hotel in Eureka Springs, Arkansas, is a broken down tenement house, with no modern conveniences and very poor rooms; it has no facilities for entertaining guests, and is not a safe place for ladies to go.'

"That on another occasion, about May, 1951, another prospective customer called at the office of Happiness Tours in Chicago and inquired for a tour to Eureka Springs, Arkansas and the Basin Park Hotel, and was falsely and wrongfully informed by an employee and agent of said Happiness Tours who answered the inquiry in said office to the effect that, `The Basin Park Hotel is not a very good place to stay in; it is an old and dilapidated and an unsafe place to stay.'

"That about June, 1952, a prospective customer of said Basin Park Hotel inquired of the said Happiness Tours at their office in the City of Chicago for a tour to Eureka Springs and specifically to the Basin Park Hotel; that the officer, agent, servant and employee of said Happiness Tours on the occasion aforesaid answered said inquiry by falsely and wrongfully stating in substance: `There is only one Hotel in Eureka Springs that we would recommend. That is the Crescent Hotel which has been made into a castle high on the hill. The ...


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