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LAUREL CAPITAL GROUP, INC. v. BT FINANCIAL CORP.

April 15, 1999

LAUREL CAPITAL GROUP, INC., LAUREL SAVINGS BANK, PLAINTIFFS,
v.
BT FINANCIAL CORPORATION, LAUREL BANK, DEFENDANT.



The opinion of the court was delivered by: D. Brooks Smith, District Judge.

      MEMORANDUM OPINION AND ORDER

Before the court are cross-motions for summary judgment. Plaintiffs Laurel Capital Savings Group, Inc. and Laurel Savings Bank ("Plaintiffs") have requested partial summary judgment on their trademark infringement action under the Lanham Act, 15 U.S.C. § 1125(a). Defendants BT Financial Corporation and Laurel Bank ("Defendants") have filed a competing motion for summary judgment. For the following reasons, I will grant the Plaintiffs' motion for partial summary judgment and deny the Defendants' motion. As explained infra, the precise geographic scope of the parties' respective rights in the mark at issue will be addressed subsequently at the remedial stage of this action. Hence, the geographic scope used to resolve the present motions will not be law of the case for purposes of crafting an appropriate remedy.

I. FACTS

A. The Plaintiffs

The predecessor to Laurel Savings Bank, known as Laurel Savings Association, was formed in 1981 when Peoples Savings Association merged with Allison Park Savings and Loan Association. Id. at 2. In May 1981, a committee consisting of two directors from each of the merged institutions was appointed to choose a name, preferably one associated with Pennsylvania. The committee initially chose "Mountain Laurel" after the state flower, but shortened it simply to "Laurel" and named the new entity "Laurel Savings Association." Dkt. no. 43, Exh. 2, at 4-5. At the time, the committee was unaware of any other banking institutions using the name "Laurel" in any fashion. Id. at 7-8. The name was approved by the combined entity's board in mid-December 1981 and used beginning in early January 1982.*fn2 Id. at 6.

Between 1982 and 1995, Laurel Savings Association operated as a state-chartered savings association at the same six branches now operated by the Plaintiffs. Dkt. no. 40, Exh.1, at 3. It offered a variety of banking services to Pittsburgh-area individuals and commercial customers including mortgage loans, installment loans, checking accounts, certificates of deposit, passbook, club and money market accounts, night depository services, U.S. Savings Bond sales and redemptions, travelers' checks, money orders and retirement accounts (IRA, KEOGH, SEP). Dkt. no. 57, Exh. 1, at 4. ATM services were made available to individuals and commercial customers in 1983, credit card merchant charge services to commercial customers in 1984, and credit card and safety deposit boxes to individuals and commercial customers in 1987. Id. In addition, as of 1982, Laurel Savings Association branches were authorized to offer commercial real estate lending and, to a limited extent, non-interest bearing demand deposit accounts and interest bearing negotiable order of withdrawal ("NOW") accounts. Dkt. no. 60, Exh. 4, at 1-2.

As a savings association, Laurel Savings was subject to regulation by the Office of Thrift Supervision ("OTS") and required to pay annual OTS assessment charges. Dkt. no. 57, Exh. 1, at 3. In January 1995, in an effort to avoid further OTS charges, Laurel Savings Association converted to a state-chartered stock savings bank, thereby becoming subject instead to regulation by the Federal Deposit Insurance Corporation ("FDIC"). Accordingly, Laurel Savings Association changed its name to Laurel Savings Bank to reflect the change in its charter. Id. at 5. The conversion, however, did not alter the institution's range or type of services, or its customer base. Id. at 4-5; Dkt. no. 40, Exh. 1, at 2.

Laurel Savings Bank, currently holding over 35,000 customer accounts, primarily serves individuals and businesses proximately located near its six branch offices. Dkt. 40, Exh. 1, at 4, 12-13. Its customers hale mostly from Allegheny and southern Butler Counties. These branch offices, however, do serve individuals who, while residing in the nearby contiguous counties of Armstrong, Beaver, Washington and Westmoreland, find it convenient to bank in the Allegheny southern Butler area. Id. at 12-13. Laurel Savings Bank uses the color green and a stylized "L" logo in its marketing materials. See e.g., Dkt. no. 42, Exhs. K, M, O.

Over the years, while continuing to operate at the same six branch offices, Laurel Saving Bank's business has grown at a moderate pace. See Dkt. no. 40, Exh. 1, at 4. Its current assets exceed $212,000,000, up from $177,729,000 in 1994. Id. Laurel Savings Bank has considered acquiring or opening new branch offices in Allegheny and Westmoreland Counties, but has yet to do so. Id.

B. The Defendants

Defendant BT Financial Corporation is a bank holding company headquartered in Johnstown, Pennsylvania. Dkt. no. 50, Exh. C, at 2. Defendant Laurel Bank, a wholly owned subsidiary of BT Financial, traces its roots back to the First National Bank of Ebensburg, a commercial bank which opened its first branch office in Cambria County in 1897. Id. By 1974, the First National Bank of Ebensburg had grown considerably through new branch offices and acquisitions. Id.; Dkt. no. 50, Exh. D, at 9-11. As the Bank grew, however, there was increasing concern that the regionality of the "Ebensburg" name no longer reflected its geographic service area. Dkt. no. 50, Exh. C, at 3. Thus, in 1974, the First National Bank of Ebensburg changed its name to "The Laurel National Bank" and adopted Pennsylvania's state flower, the Mountain Laurel, for use in its marketing endeavors. Id. at 3. The name change was extensively advertised in various media, through open house events, and a campaign to give away 10,000 laurel bush seedlings. Id.

The Laurel National Bank was acquired by defendant BT Financial Corporation on January 1, 1985. Dkt. no. 50, Exh. C, at 3. It immediately converted to a state charter so as to be subject to the same federal regulator as BT Financial's other commercial subsidiary, the Johnstown Bank and Trust Company. Id. The conversion had no impact on Laurel National Bank's range of powers and services, but it did require the Bank to drop "National" from its corporate name. Id. Thereafter, it carried on its commercial banking business as "Laurel Bank," a BT Financial affiliate.

Meanwhile, from its headquarters in Johnstown, BT Financial continued to expand westward. In 1991, BT Financial acquired Peoples Federal Savings Bank of New Kensington. Dkt. 43, Exh. 6, at 25. It began to operate Peoples' branches in Tarentum and Natrona Heights in Allegheny County, New Kensington and Lower Burrell in Westmoreland County and Sarver in Butler County as branches of the Johnstown Bank and Trust Company ("JBT"). Id. In 1993, BT Financial acquired First South Financial Corporation and began to operate First South's six branches in Allegheny County (Brookline, Brentwood, Pleasant Hills, Mount Oliver, Carson Street in Pittsburgh's South Hills and McCandless Township in Pittsburgh's North Hills) and one in Washington County (Donaldson's Crossroads) as branches of another BT Financial subsidiary, Fayette Bank. Id. at 25-26.

On October 10, 1997, BT Financial consolidated its three affiliate commercial banks — Fayette Bank, JBT and Laurel Bank — into one institution. BT Financial proposed to call the consolidated entity "Laurel Bank." Dkt. no. 50, Exh. C, at 3. "Laurel" was chosen to reflect the institution's wide geographic distribution and to capitalize on the goodwill and customer recognition associated with the name. Id. As a result of the consolidation, the newly formed Laurel Bank had seventy-two branch offices in twelve counties: Allegheny, Armstrong, Butler, Fayette, Westmoreland, Somerset, Bedford, Blair, Cambria, Indiana, Greene, and Washington.*fn3 Prior to the consolidation, Laurel Bank had operated at twelve branch offices located across three counties — Blair, Cambria and Indiana — variously 70 to 100 miles east of the Pittsburgh metropolitan area.

C. The Litigation

In March 1997, the Plaintiffs learned of defendant BT Financial's plan to merge Fayette Bank, JBT, and Laurel Bank into an institution named "Laurel Bank." Dkt. no. 40, Exh. 1, at 12. Concerned because some of the Fayette Bank and JBT branch offices were located in or near areas already served by Laurel Savings Bank,*fn4 Plaintiffs notified BT Financial of their prior use of the "Laurel" mark in those areas. Id. at 19. In spite of the Plaintiffs' continued assertion in a series of letters of its superior rights in the mark, Dkt. no. 42, Exhs. FF, GG, and HH, defendant BT Financial consummated its October 10, 1997 consolidation and began the process of renaming and advertising the merged institution's new name. Dkt. no. 42, Exhs. II, JJ, KK (print and billboard name change advertisements). The new Laurel Bank put out a small number of advertisements and erected a few billboards in the Pittsburgh area, using the color green and a stylized "L" logo similar to that of Laurel Savings Bank. See id.

On November 19, 1997, Plaintiffs filed suit under the Lanham Act, seeking a preliminary and permanent injunction to prevent Defendants from using the "Laurel" mark or any similarly confusing mark in connection with banking services in the Pittsburgh area. Dkt. no. 1. On December 2, 1997, the parties entered a consent decree preliminarily enjoining the Defendants, pending a trial on the merits, from using "Laurel" or any confusingly similar mark or logo in the six-county area of Allegheny, Armstrong, Beaver, Butler, Washington, and Westmoreland Counties ("the six-county area"). Dkt. no. 33, at 2 ("Amended Consent Decree"). Discovery ensued and on June 15, 1998, both parties filed motions for summary judgment along with extensive sealed supporting exhibits. Dkt. nos. 38, 48. I turn now to these competing motions.

II. APPLICABLE LEGAL PRINCIPLES

A. Subject Matter Jurisdiction*fn5

1. The Statutory Framework & General Principles

The federal district courts have original jurisdiction of all actions arising under the Lanham Act. See 15 U.S.C. § 1121. Under the Act,

  "[a]ny person who, on or in connection with any goods
  or services . . . uses in commerce any word, term,
  [or] name . . . which [is] likely to cause confusion
  . . . as to the affiliation, connection or
  association . . . or as to origin, sponsorship, or
  approval of his or her goods, services or commercial
  activities . . . shall be liable in a civil action by
  any person who believes that he [] is likely to be
  damaged by such act."

15 U.S.C. § 1125(a)(1).

"Use in commerce" is defined by the Act to mean "the bona fide use of a mark in the ordinary course of trade." 15 U.S.C. § 1127. Specifically, a service mark is used in commerce "when it is used or displayed in the sale or advertising of services and the services are rendered in commerce, or the services are rendered in more than one State. . . ." Id.

The Act also defines "commerce" to mean "all commerce which may lawfully be regulated by Congress." 15 U.S.C. § 1127. It is axiomatic that Congress may lawfully regulate, in addition to interstate commerce, purely intrastate activities which have a "substantial effect" on interstate commerce. See Rickard v. Auto Publisher, Inc., 735 F.2d 450, 453 n. 1 (11th Cir. 1984) (`in commerce' jurisdictional requirement requires only effect on commerce); Pure Foods v. Minute Maid Corp., 214 F.2d 792, 795 (5th Cir. 1954) (Lanham Act extends to activities local in nature which have substantial economic effect on interstate commerce); Mother Waddles Perpetual Mission, Inc. v. Frazier, 904 F. Supp. 603, 611 (E.D.Mich. 1995) (interstate commerce jurisdictional requirement may be met by showing that the defendant's use, while intrastate, substantially affected interstate business). Moreover, the Supreme Court has long advocated liberal construction of the Lanham Act's "in commerce" requirement, see Steele v. Bulova Watch Co., 344 U.S. 280, 283, 73 S.Ct. 252, 97 L.Ed. 319 (1952), which has been characterized as minimal. See Berghoff Restaurant Co., Inc. v. Lewis W. Berghoff, Inc., 357 F. Supp. 127, 130 (N.D.Ill. 1973); see also 3 J. Thomas McCarthy, McCarthy on Trademarks & Unfair Competition § 25:57 (4th ed. 1999) (hereinafter "McCarthy on Trademarks") ("It is difficult to conceive of an act of infringement which is not `in commerce' in the sense of the modern decisions. Thus, it may not be inaccurate to predict that the `use in commerce' requirement will not be much of an issue in future litigation, barring cases with unusual twists in the facts.").

The Act calls for an assessment of the defendant's "in commerce" use of the mark. See 15 U.S.C. § 1125 (any person that "uses in commerce" a mark likely to cause confusion (i.e., defendant) "shall be liable in a civil action to any person who believes that he or she is likely to be damaged by such act" (i.e., plaintiff)); see also Schroeder v. Lotito, 577 F. Supp. 708, 715 (D.R.I. 1983) (the improper use must be in interstate commerce). The courts, however, have repeatedly found jurisdiction where the defendant's use is solely intrastate, provided the plaintiffs business activities "involve" or "affect" interstate commerce. See e.g., Falcon Rice Mill v. Community Rice Mill, 725 F.2d 336, 343 n. 5 (5th Cir. 1984); Coca-Cola Co. v. Stewart, 621 F.2d 287, 290 (8th Cir. 1980) ("substantial effect" is present where "the trademark owner's reputation and good will, built up by use of the mark in interstate commerce, are adversely affected by intrastate infringement"); Burger King of Florida, Inc. v. Brewer, 244 F. Supp. 293, 297 (W.D.Tenn. 1965) (advertising by plaintiff put the mark in interstate commerce). Only those disputes which are "purely" intrastate fail to implicate the Lanham Act. See Jellibeans, Inc. v. Skating Clubs, Inc., 716 F.2d 833, 838 (11th Cir. 1983); Tax Cap Committee v. Save Our Everglades, 933 F. Supp. 1077, 1080-81 (S.D.Fla. 1996) (no Lanham Act jurisdiction where the mark, used in gathering petition signatures solely in Florida for political purposes, was not used in commerce).

When assessing the parties' activities, however, it is vital to understand the conceptual difficulty inherent in the wording of the Lanham Act. For the Act to apply, the mark itself must be used in interstate commerce; it is insufficient that the parties' business is, by its nature, interstate or is one that effects interstate commerce. Very few courts have taken notice of this distinction. It is perhaps best explained in Licata & Co., Inc. v. Goldberg, 812 F. Supp. 403 (S.D.N.Y. 1993):

  The Lanham Act's reach, while long, does not extend
  to the full outer limits of the commerce power. Its
  plain meaning — the Lanham Act utilizes the term "in
  commerce" rather than "affecting commerce" or the
  even broader "industry affecting commerce" — reflects
  a legislative judgment that for the statute to apply,
  the questioned advertising or statements, and not
  merely the underlying commercial activity, must be
  disseminated in commerce — i.e., not be purely local.

Id. at 409; see also Blazon, Inc. v. DeLuxe Game Corp., 268 F. Supp. 416 (S.D.N.Y. 1965) (it is the transportation of the item with the mark on it rather than the general scope of the business which is determinative under the statute). Thus, we cannot base jurisdiction simply on the obvious fact that these parties, both banks, operate in or substantially affect interstate commerce.*fn6

What counts, then, are the steps taken by each party to place its mark in interstate commerce. Where the parties advertise beyond state borders or claim patrons residing outside the state, the courts have been very liberal in favor of finding jurisdiction. See Rickard, 735 F.2d at 453 n. 1 (buyers responding to the defendant's ads and the sellers which place them are occasionally from across state borders); Jellibeans, Inc., 716 F.2d at 838 (patrons from beyond state borders); Mother Waddles, 904 F. Supp. at 611 (defendant's radio ads broadcast out of state); see also Annotation, What Constitutes "In Commerce" Within the Meaning of § 32(1) of Lanham Trade-Mark Act (15 USCS § 1114(1)) Giving Right of Action for Infringement of Trademark "In Commerce", 15 A.L.R.Fed. 368 (1973 & Supp. 1998) (seemingly intrastate activity is sufficient where there are records of out of state patrons and proof of advertising in newspapers with interstate distribution).

With the foregoing principles in mind, I turn to the evidence of interstate use adduced by the Plaintiffs.

2. Application

Defendants have affirmatively used their mark in interstate commerce. First, and perhaps most importantly, they maintain an Internet website which prominently features and promotes defendant Laurel Bank's services in connection with the "Laurel" mark.*fn7 This website is accessible to customers worldwide. As the District Court for the Southern District of New York recently reasoned:

  Internet users constitute a national, even
  international, audience, who must use interstate
  telephone lines to access defendant's website . . .
  The nature of the Internet indicates that
  establishing a typical home page on the Internet, for
  access to all users, would satisfy the Lanham Act's
  "in commerce" requirement.

Planned Parenthood Fed., Inc. v. Bucci, No. 97-629, 1997 WL 133313, *3, 1997 U.S.Dist. LEXIS 3338, *10-12 (S.D.N.Y. Mar. 24, 1997), aff'd mem., 152 F.3d 920 (2d Cir.), cert. denied, ___ U.S. ___, 119 S.Ct. 90, 142 L.Ed.2d 71 (1998); accord Intermatic, Inc. v. Toeppen, 947 F. Supp. 1227 (N.D.Ill. 1996); 2 Jerome Gilson & Anne Gilson Lalond, Trademark Protection and Practice § 511[2] (1998) ("because Internet communications transmit instantaneously on a worldwide basis, there is little question that the `in commerce' requirement [of the Lanham Act] would be met in a typical Internet message"). Accordingly, Defendants' maintenance of a website prominently featuring the "Laurel" mark strongly supports Lanham Act jurisdiction.

Second, there are at least forty Laurel Bank accounts held by customers who reside outside of Pennsylvania. See Dkt. No. 68, Exh. A; Jellibeans Inc., 716 F.2d at 838 (district court finding of interstate contact not clearly erroneous where plaintiff drew patrons from out of state); Rickard, 735 F.2d at 453 n. 1 (buyers and sellers who used the parties' publishing services occasionally hailed from across state lines); University of Florida v. KPB, Inc., 89 F.3d 773, 776 n. 1 (11th Cir. 1996) (jurisdiction proper where 15% of student body from out-of-state). This fact also supports Lanham Act jurisdiction.

Third, Defendants engage in some interstate advertising, although its extent is very limited, and the fact that the Defendants' chosen publications are circulated beyond state borders appears to be merely incidental. Cf. Lobo Enterprises, 822 F.2d at 333 ("in commerce" requirement satisfied where service mark was significantly advertised in travel guides); Kampgrounds, 415 F. Supp. at 1291 (camping publications with national circulation). The Pittsburgh Post-Gazette, for example, is distributed outside of Pennsylvania. See Dkt. No. 68, Exh. B. Nonetheless, even small amounts of interstate advertising have been repeatedly cited as strong support for Lanham Act jurisdiction. See Mother Waddles, 904 F. Supp. at 611 ("[i]nterstate advertising is sufficient interstate activity for Lanham Act purposes").*fn8

Accordingly, these facts provide strong support for a finding that both parties use the mark in commerce in connection with their services. I therefore conclude that this court has ...


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