USCA1 Opinion

UNITED STATES COURT OF APPEALS

FOR THE FIRST CIRCUIT
____________
No. 95-1677

WILLIAM E. DONOGHUE,

Plaintiff - Appellant,

v.

IBC USA (PUBLICATIONS), INC., ET AL.,

Defendants - Appellees.

____________________

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF MASSACHUSETTS

[Hon. Reginald C. Lindsay, U.S. District Judge]

___________________

____________________

Before

Boudin, Circuit Judge,

_____________

Bownes, Senior Circuit Judge,

____________________

and Keeton,* District Judge.

______________

_____________________

Michael Arthur Walsh, with whom James S. Shorris and Choate,

____________________
________________
_______
Hall & Stewart were on brief for appellant.
______________
Steven S. Konowitz,
__________________

with whom Konowitz & Greenberg was

_____________________

on

brief for appellees.

____________________

November 28, 1995

____________________
____________________

Of the District of Massachusetts, sitting by designation.

KEETON, District Judge.

KEETON, District Judge
______________

This is an

appeal by William

E. Donoghue ("Donoghue"), Plaintiff-Appellant, from a Preliminary

Injunction of limited

court erred in its

scope.

Donoghue asserts that the district

interpretation of contract documents executed

by the parties and asks this court to expand relief to, or nearer

to, the

full scope

conclude that if the

the error was

this appeal.

abuse

he

requested in

district court.

district court committed any error

harmless in relation

Also, we conclude

its discretion

the

in

to the issues

Preliminary Injunction entered.

of law,

before us

that the district court did

fashioning the

limited

We

scope of

in

not

the

We therefore affirm the district

court's order.

To avoid uncertainty that

might otherwise exist

about

the

effect of the district court's order (and our affirmance) on

further proceedings in this

of

the bases

our affirmance and explicitly note certain conclusions of the

district

relate

court upon

to

which we

issues that

are

factual issues that would be

the district court

full

case, we explicitly state

opportunity

do not
___

at

rely.

least potentially

mixed-legal-

more appropriately decided, both in

and on appeal, after

for

These conclusions

discovery

and

the parties have

development

of

evidence

bearing upon the factual elements of the legal-factual mix.

are

open to de novo
_______

consideration in the

They

district court during

further proceedings there, as well as on appeal.

-22

had a

I.
I.

A.
A.

Background Facts
Background Facts

Before July 1989

Before July 1989

Donoghue

expert on money

and through

is

an investment

markets and mutual

number of

corporate

adviser

funds.

well-known

Acting

entities, he

as an

individually

has

marketed

advice for more than twenty years in books, newsletters, columns,

on-line services, and

public appearances.

One of his

business

entities

was The

corporation

Donoghue Organization,

of which

Donoghue was

Inc., a

the sole

Massachusetts

stockholder.

flagship publication was

Donoghue's MoneyLetter--a
______________________

newsletter introduced by

Donoghue in 1980.

Its

semi-monthly

In 1986, Donoghue's
__________

MoneyLetter was voted "Best Financial Advisory Newsletter" by the

___________

Newsletter Association.

B.
B.

Documents Dated July 28, 1989

Documents Dated July 28, 1989

Simultaneously,

signed by Donoghue

"as

of"

were executed.

Though

in September 1989, these agreements were made

July 28, 1989.

Agreement ("SPA")

two documents

They

were

called the

and the Personal Services

Stock Purchase

and Non-Competition

Agreement ("PSA").

The Stock Purchase Agreement

was signed by Donoghue as

sole shareholder of The Donoghue

Organization, Inc. and Mary Ann

Bonomo as Vice

USA (Publications), Inc.

USA").

President of IBC

Under the

purchased

terms of the SPA, Defendant-Appellant

all 10,000

shares

of Common

Stock

Organization, Inc. from Donoghue for $2,000,000.

-33

of The

("IBC

IBC USA

Donoghue

The Personal Services and Non-Competition Agreement was

also signed

the

PSA,

by Donoghue and Mary Ann Bonomo.

Donoghue

became

part-time

agreeing

to devote approximately

time

editorial,

to

Under the terms of

employee

one-third of

promotional,

and

involving the MoneyLetter publication.

___________

other

of IBC

USA,

his professional

activities mainly

The initial term of

the

PSA was set at five years, with one five-year extension available

at the option of IBC USA.

A central subject of dispute

in this litigation is the

scope and extent of the right of IBC USA and its new wholly owned

subsidiary, IBC/Donoghue, Inc., also a Defendant-Appellee, to use

Donoghue's

name.

The

contractual

rights

of the

Defendants-

Appellees are controlled by the SPA and the PSA.

A provision of the SPA declares:

The rights
Donoghue"
always

to use
and

the name

variations

been the

"William E.
thereof

property of

have

the Seller

[Donoghue], not the Company [The Donoghue

Organization,

Inc.],

and

Buyer's

[IBC

USA's] rights to the use of such name are

governed

by

the

Personal

Services

Agreement.

SPA cl. 3(m).

The

PSA

elaborates

on the

"William E. Donoghue" stated above in

provision appeared

bracketed

as one

insertions and

rights

the SPA.

to

use the

The relevant PSA

long paragraph, reproduced

spacing that we

here with

have inserted

reading.

Use of Employee's Name.

______________________

name

In consideration

to aid

of the payment of the amounts provided on

Exhibit

11

hereto [royalty

payments of

-44

$1,000

per

adjustment

year

plus a

in years

shall have the right

cost-of-living
and 5],

IBC/USA

until July 29, 1994

to use the

name William E.

variations

thereof

on or

Donoghue and
in connection

with any and all of the existing products

and services of

IBC/USA or The

Organization, Inc.

now bearing that name

Donoghue

and

any other

IBC/USA

or

products and

The

Donoghue

services of
Organization,

Inc. developed hereafter during

the term

of the Personal Services Agreement;

provided, however, that

for products

services developed after the

during

the

term

of

IBC/USA shall obtain

Employee to
name
that

as

the

use of

the

shall

withheld

reasonably

Employee's

Employee agrees

and

granted for products and

Employee

Agreement,

the approval of the

approval

unreasonably

date hereof

this

aforesaid, and

such

or

not

be

shall

be

services unless

explains that

such

products or services would violate clause

8 [the non-competition
not be consistent

clause] or

would

with the provisions of

Exhibit 12 [Donoghue's written investment

philosophy] or of a quality comparable to
that

of

products

other

IBC/USA

or

or

services

affiliated
then

using

Employee's name.

Upon notice given by IBC/USA

on or

before July 29,

to Employee

1993, and whether

or

not the

otherwise
2(b)[the

term

of

extended
five

this Agreement
pursuant

to

year extension

IBC USA], after July

clause

option of

29, 1994 and

July 29, 1999, IBC/USA shall

is

until

continue to

have the right so to use the name William

E.

Donoghue

and variations

described above, subject to

thereof, as
the protocol

set forth in Exhibit 12

and provided (i) that employee

a

right

to

sit

on

the

will have
investment

committee and (ii) that IBC/USA shall pay

or

cause

to

be

paid

to

the Employee

royalties

at

the rate

of

five percent

-55

(5%) of gross revenues actually received,

net of refunds and cancellations,

from

the

sale

during

such

period

of

products and services including such name

in the name thereof.
. . . .

On January 2, 2000 (or January 2, 1995 if

IBC/USA

fails to

continue

right to

use

the Donoghue

name

as

herein),

IBC/USA

agrees

to

residual

rights, if

to

provided
assign

exercise the

all

of its

any, to use the name William

or

any

variation

registered or

thereof

by

concluded,

but

deemed

grant

to

interest,
right,
or

in

any

unregistered trademark, to

Employee, provided that an

continued use

E. Donoghue

agreement for

IBC/USA has
nothing herein
any

right,

or any agreement

not

been

shall be
title

or

to grant any

title or interest, to Employee in

to any

name

or mark

(registered or

unregistered)

or

portion

thereof

not

constituting the name William E. Donoghue

or a variation thereof.

PSA

cl. 11.

The

dispute between the

parties centers primarily

upon the interpretation of this clause and relevant statutes.

C.
C.

Developments Before Amendment of the PSA on July 21, 1994

Developments Before Amendment of the PSA on July 21, 1994

Notwithstanding the currently

the

clarity

and specificity

of

alleged deficiencies

the SPA

and

PSA, and

in

in the

performance of each party under these agreements, the first five-

year term of the PSA passed relatively uneventfully.

term,

IBC

USA

Organization,

articles

changed

Inc. to

the

corporate

name

IBC/Donoghue, Inc.;

to Donoghue's MoneyLetter
______________________

of

During this

The

Donoghue

Donoghue contributed

and performed

various other

duties under terms of the PSA.

-66

According

to clause

required to give notice

of

early July of

of

the

PSA, IBC

USA

was

to Donoghue one year before the last day

the term of the PSA if IBC

to extend the term of

2(b)

USA wished to exercise its option

the PSA for an additional five

1993, before

the one-year benchmark

years.

of July

In

28,

1993, IBC

USA initiated discussions with

possibility

of

amending the

PSA

Donoghue regarding the

before extending

it

for the

additional five-year term.

IBC

USA

proposed

to

restructure

the

compensation

provisions of the PSA, primarily to eliminate the 5% royalty that

would have first begun

commenced.

In

to accrue when the second

return,

incentive payments to

IBC USA

proposed

five-year term

to increase

Donoghue, based on the number of telephone

inquiries generated by his columns, appearances, and

record

is

unclear

various

about

how this

proposal,

or

books.

The

negotiations

relating to it, proceeded or whether any progress was made toward

amending the PSA.

In any event,

on July

16, 1993, IBC

USA gave

formal

notice

to Donoghue of its

clauses 2(b)

years,

desire to exercise

its options under

and 11 of the PSA to extend, for an additional five

to July 29, 1999,

the term of

(1) Donoghue's employment

and (2) the license to use his name.

D.
D.

Amendment of the
Amendment of the

PSA on
PSA on

July 21, 1994

July 21, 1994

and the Failure

and the Failure

of
of

Negotiations
Negotiations

Negotiations

regarding

an

amendment

of

continued as the first five-year term was coming to a

-77

the

PSA

close.

On

July 21, 1994, just before the end of the initial five-year

term

of the PSA, the parties executed a modification of the agreement.

This modification extended for one month the time period in which

IBC USA could use Donoghue's name without paying the 5% royalty:

IBC/USA will
use

the

continue to have

name

William

variations thereof
the

existing

E.

on or in

products

of

the right

to

Donoghue

and

connection with
IBC/USA

without

payment of the stated 5% royalty until August

31, 1994.

App.

at 00062.

Donoghue

In return for this

to send his

MoneyLetter
___________

employees to

Investment Committee

concession, IBC USA allowed

IBC USA's

weekly Donoghue's
__________

meetings during

the

month of

August, 1994.

This interim

provision delaying

royalty payments would begin to

Donoghue's consent.

would

begin

regarding

was

The

moved

permanent

unsuccessful.

The

the time when

accrue was itself modified, with

commencing date when

to

the 5%

October

amendment

to

31,

royalty payments

1994.

the

PSA,

Negotiations

however,

were

parties never agreed to any further amendment

of the PSA.

As the

October,

from

1994,

final interim

Defendants-Appellees removed

Donoghue's MoneyLetter,
_______________________

MoneyLetter.
___________

extension was

The name

of

the

making

the

about

to end

in

Donoghue's surname

new

title

corporate subsidiary

simply

remained

IBC/Donoghue, Inc., however, and MoneyLetter continued to contain

___________

references

newsletter.

to Donoghue

For

and

example,

his name

within

one section

of

the text

of

the

the newsletter

was

devoted to the "Donoghue Signal," a statistical measure of market

-88

performance.

Also, MoneyLetter
___________

IBC/Donoghue, Inc." on the

Donoghue was

listed in the

was

labeled as

"a service

bottom of the first page.

masthead as "Founder

of

William E.

& Contributing

Editor" of MoneyLetter.
___________

Defendants-Appellees

now

no

longer publish

with the name "William E. Donoghue" appearing in the

publication,

but

they

do

corporate name IBC/Donoghue

are

market

publications

name of the

in

is used within the title.

IBC/Donoghue's Money Fund Average,

___________________________________

anything

which

the

Examples

IBC/Donoghue's Mutual
______________________

Funds Almanac, and IBC/Donoghue's Money Fund Directory.

_____________
___________________________________

IBC

USA

has not paid Donoghue any royalties (under either the $1,000-per-

year or the 5% provision) since October of 1994.

E.
E.

Other Developments
Other Developments

The precipitating

event for the current

civil action,

however,

was not the use of Donoghue's

of any newsletter or

use

of Donoghue's

name in the name or text

the nonpayment of royalties but

name

and likeness

rather the

in promotional

materials

advertising MoneyLetter.
___________

In

December

1994,

IBC

USA

sent

direct

mail

advertisement for MoneyLetter to the general investing public and

___________

the

this

professional investment

mailing

was

sent

community.

featured

The envelope

photograph

of

in which

Donoghue

purportedly gesturing at advertisements of five large mutual fund

companies.

Above the photograph

and in quotation marks:

was a statement

in large type

"I'm sick and tired of investors getting

-99

ripped-off

by ads like these!"

There were similar statements in

smaller type below the photograph and on the back of the envelope

as well.

The district court found that Donoghue had neither made

nor authorized any of

v.

the statements on the envelope.

Donoghue
________

IBC/USA (Publications), Inc., 886 F. Supp. 947, 951 (D. Mass.

____________________________

1995).

The district court also found that, "[w]hile [Donoghue]

had

used strong language in the past to criticize techniques and

motives of financial planners and

criticized

mutual funds by name

envelope."

Id.
__

Inside

brokers, he had not previously

in the manner

the envelope was

portrayed on the

a letter, purportedly

signed by Donoghue, that further criticized the advertisements of

such mutual

Dreyfus

fund companies as Value

Corporation,

Stevens & Clark, Inc.

Berger

Line, Fidelity Investments,

Associates,

Inc.,

Id.
__

Donoghue received two written complaints

mail

Scudder,

Value Line

advertisement--from

Stevens &

Scudder,

The district court found that Donoghue had

not authorized this letter.

direct

and

Clark, Inc.

Berger

App.

regarding the

Associates,

at 00304-09.

threatened litigation against Donoghue

Inc.

and

Moreover,

and has since

filed an action in federal court for the Southern District of New

York

against IBC USA and IBC/Donoghue, Inc. claiming that it has

been

injured

"misleading"

by

the

"explicitly

statements in

false,"

the direct

00319.

-1010

"deceptive,"

mail campaign.

and

App. at

the date

April 24,

statements

mailing

Forbes magazine columnist's comment, published under

______

1995, publicly

attributed

to him

in

criticized Donoghue

this

and for continued promotion

for the

MoneyLetter promotional
___________

of the "Donoghue Signal" by

touting hypothetical results that would have been achieved had an

investor used the "Donoghue

1980, even though the

1988.

results

The

Signal" over a period commencing

"Donoghue Signal" was first

columnist observed

was inconsistent

that

with the

use of

in

introduced in

such "back-tested"

published views

of Donoghue

himself.

Approximately

Forbes
______

piece, on

May

two weeks after

8, 1995,

action, claiming infringement

Donoghue

the publication

commenced this

of the

civil

of the trademark in his name under

the Lanham Act, 15 U.S.C.

name and photograph in

(Count II);

III);

violation of Mass. Gen. L.

trademark infringement

breach

royalties

1125 (Count I); improper use of

of

contract,

(Count IV);

ch. 214,

under the common

including

and violation

the

3A

law (Count

obligation

of Mass.

his

Gen. L.

to

pay

ch. 93A

(Count V).

II.
II.

The District Court Decision

The District Court Decision

of Donoghue's Motion for Preliminary Injunction

of Donoghue's Motion for Preliminary Injunction

Based

1995,

along

with

restraining order

the court

upon counts I and

his

complaint,

II, Donoghue filed

motion

and a preliminary injunction.

to enjoin

the Defendants-Appellees

for

on May 8,

temporary

Donoghue asked

from distributing

any newsletter, publication or promotional materials:

-1111

upon which
any

the name

variation

William E.

thereof

Donoghue or

(including

but

not

limited to "Donoghue," the "Donoghue Signal,"

"IBC/Donoghue"
appears,

or

or
upon

"IBC/Donoghue,
which

any

Inc.")

picture

of

plaintiff William E. Donoghue appears . . . .

App. at 00073.

would

The only ways in which

the Defendants-Appellees

have been able to use Donoghue's name under this requested

injunction would have been

as a by-line for an

written

the masthead of

by Donoghue or in

article actually

MoneyLetter with the

___________

title "Founder & Contributing Editor."

After

entered a

than

a hearing

temporary restraining

Donoghue had

briefing by

requested.

the parties,

motion for a preliminary

fashioned

on May 10,

by the

1995, the

order of

On May

a more

limited scope

26, 1995,

after further

the district court

injunction.

district

district court

granted Donoghue's

The Preliminary Injunction

court, however,

like the

Temporary

Restraining Order that preceded it, was significantly narrower in

scope than Donoghue had requested.

Instead of granting a blanket prohibition on the use of

Donoghue's

name,

the

district

court focused

on

the

alleged

harmful activity of

the Defendants-Appellees.

As

a result, the

court required only that the Defendants-Appellees:

1.

refrain from distributing to any customer

or

potential

customer

or anyone

advertising or promotional
other material in
is

represented

commenting
and

any

William E.

any

materials or

any

which William E.
as criticizing

on any specific
other

else

material

Donoghue

or otherwise

person or entity
which

Donoghue as stating

represents
things which

are inconsistent with his views as stated

his previously published material;

-1212

in

2.

refrain from distributing to any customer

or potential customer or anyone else material

which

contains

William

E.

Donoghue's

photograph, portrait or likeness, without the

plaintiff's express prior written consent;

3.

refrain from distributing to any customer

or

potential

material

in

customer
which

or anyone

the

name

else

"William

any
E.

Donoghue" or any variation thereof appears in

the

title

of

defendants

the

pay

the

material,

unless

plaintiff

the

royalties

pursuant to [clause] 11 of the Personal Sales

[sic] Agreement.

Donoghue v. IBC/USA (Publications), Inc., 886

________
_____________________________

In fashioning

this Preliminary

properly considered

Injunction,

(1) the likelihood of

the merits; (2) whether

F. Supp. at

the district

955.

court

Donoghue's success on

Donoghue would suffer irreparable injury

if the injunction were not granted; (3) the injury to Defendants-

Appellees

from

granting the

public interest

would be

See Keds Corp.

___ __________

injunction;

and

(4) whether

adversely affected by

the

the injunction.

v. Renee Intern. Trading Corp., 888 F.2d 215, 220

___________________________

(1st Cir. 1989).

We conclude that

the order of

proper in the circumstances of this case.

findings

and conclusions

this order, however,

of the

the district court

Some of the supporting

district court in

were possibly erroneous

A.
A.

Introduction
Introduction

arriving at

and, in our

they were prematurely decided, as explained below.

III.
III.

was

Contract Interpretation Issues

Contract Interpretation Issues

view,

When

consider

the

a court

meaning

looks

to the

of those

words

words

in

of a

the

document

context of

to

the

-1313

agreement, the search is for manifested meaning, not a

held belief or

parties

to the

intent of

bargain.

Schwartz, Inc., 193 N.E.

______________

one party, not

See
___

privately

communicated to

Rose-Derry Corp. v.
_________________

50, 52 (Mass. 1934).

other

Procter &
__________

Moreover, if the

parties execute two or more

that

the documents

court reads

as if it

documents, with a manifested

together express

their entire

the documents together, rather

stood alone.

intent

agreement, a

than construing each

FDIC v. Singh, 977

____
_____

F.2d 18, 21 (1st Cir.

1992).

In this

case, the

initial agreement was

the two documents dated July

manifest an

one

28, 1989.

By their own

understanding that together

integrated

agreement.

expressed in

they completely express

For example,

clause

2 of

reads:

Other Agreements.
_________________
Closing Seller
Personal

Simultaneously

and Buyer shall

Services

and

Agreement substantially in the

as

Exhibit

(the

terms they

with the

enter into a

Non-Competition
form attached

"Personal

Services

the SPA

Agreement").

App. at 00026.

Also, as previously noted, clause 3(m) of the SPA

explicitly states

governed

by the

together, as we

well,

when

that the

PSA.

rights to

Accordingly, we

understand the

searching for

use

Donoghue's name

read the

district court to

manifested

meaning

are

two documents

have done

relevant to

as

any

existing dispute between the parties.

B.
B.

The District Court's Interpretation of the Royalty Provisions

The District Court's Interpretation of the Royalty Provisions

-1414

The

order

statements of

for entry

of the

being interpreted as

significant

the district

court explaining

Preliminary Injunction

are subject

including several distinct and

rulings as a matter of law,

court's reasoned decision to

its

to

potentially

all made as part of the

grant the Preliminary Injunction in

the precise terms fashioned.

We

together.

discuss

these

rulings

separately

as

well

as

We have chosen the order in which we discuss them for

convenience only; we explicitly

consideration

is compelled

do not imply that this

by precedent or

logic.

order of

Indeed, we

conclude that the

several rulings are interrelated

make it appropriate for

deciding any.

a court to

Our separation of

consider all of them

the district court's

determination into four parts and our designation

as "First

in ways that

Ruling," "Second Ruling," "Third

before

combined

of those parts

Ruling," and "Fourth

Ruling" are our formulations made only to facilitate reference.

Moreover, the

not

that of

phrasing of these four

the litigants.

express what we understand

__

determinations

Each

of

We

have

rulings is ours,

chosen this

phrasing to

to be the substantive content

___________________

the district

court,

explicit and

of the

implicit.

of the parties to this appeal has chosen somewhat different

phrasings, which we find

to be ambiguous.

contrasting statements of the

Examples

include the

parties about whether the district

court

ruled that a use of Donoghue's

without

regard

obligation, or

to whether

the use

name was:

would

(2) permissible only on

(1) permissible

result in

a royalty

condition that royalties

-1515

be

paid,

explicitly

or (3)

permissible only

acknowledge a

on

condition that

royalty obligation

the user

(without, however,

stating the precise conditions that would determine the

fact and

the amount of the royalty obligation).

We

have chosen this

course of stating

our reading of

the meaning of the district court's rulings, including reasonable

inferences

about

declarations,

implicit

because the

responsibility is not

assumptions

scope of

limited to

partisan

descriptions of

the

examine

that

from

reasoning

as

well

this court's

choosing one or

district court's

the

as

explicit

authority and

the other

reasoning.

perspective

of

of

We

impartial

appellate review, and not through partisan lenses.

First
First

agreement of

to

Ruling.
Ruling.

The

district court

the parties was unambiguous--not

ruled

that

the

only with respect

the scope and extent of the rights of Defendants-Appellees to

use the name of William E. Donoghue but also with

respect to the

amount of royalties they would have to pay as a result.

Second
Second

Ruling.
Ruling.

The

district

court

ruled that

the

agreement unambiguously meant that Defendants-Appellees were free

to remove Donoghue's name from the name of a product and continue

to

use Donoghue's

name within

the text

of the product

and in

materials marketing the product.

Third
Third

Ruling.
Ruling.

The

district court

agreement unambiguously meant that, when

under the

Second

ruled

that

the

exercising their rights

Ruling, Defendants-Appellees

would

incur

no

obligation to pay any royalties during the second five-year term.

-1616

Fourth
Fourth

that

the

Donoghue's

Ruling.
Ruling

agreement

name

in

The district

authorized

the

court implicitly

Defendants-Appellees

corporate title

of

the

ruled

to

use

wholly-owned

subsidiary, IBC/Donoghue, Inc.

In reaching the Second

court

included,

as

steps

and Third rulings, the district

of

reasoning,

the

interpretation of clause 11 of the PSA:

[Clause]
pay the

11 only

requires the

plaintiff royalties for

plaintiff's name on

IBC/USA to
use of

revenues received

the
"from

following

the

sale

. . .

including

of

such

products

or

name in the name thereof."

______________________

(Emphasis added.)
provision does

The plain language of this

not

require the

royalties for use of

payment

long as the plaintiff's

"the

name"

plaintiff's

of

the

royalties for

products.

that

that

products, as

name does not appear

argument

understanding

he

it

was

all uses of his

his

entitled

to

name does not

of [clause] 11.

principle,

extrinsic

evidence

when

contract

to

court

is

577 N.E.2d

283, 289

only

ambiguous."

Massachusetts Mun. Wholesale Elec. Co.

_________________________________________
Danvers,
_______

"As

considers

discern intent

term

The

was

alter the plain meaning

general

of

the plaintiff's name in

connection with the defendants'

in

services

v.

(Mass. 1991),

citing Merrimack Valley Nat'l Bank v. Baird,

______ ____________________________
_____
363 N.E.2d
v. Singh,
_____
Because

688 (Mass. 1977).

977 F.2d

[clause] 11

See also FDIC

________ ____

18, 24 (1st
is not

Cir. 1992).

ambiguous, this

court will not consider extrinsic evidence of

the parties' understanding.

Donoghue v. IBC/USA (Publications) Inc., 886 F. Supp. 947, 951-52

________
___________________________

(D. Mass. 1995).

Donoghue

conflict with both

contended that

interpretation

the PSA and the interim amendment

executed July 21, 1994.

however,

this

the district

was

in

to the PSA

In the next paragraph of its Memorandum,

court

rejected the

-1717

contention that

the

July 21, 1994 amendment was inconsistent with the court's reading

of the agreement.

The plaintiff
changed

by

Services

claims that [clause]

an

amendment

Agreement,

to

dated

That amendment allowed

July

and variations

connection

with

IBC/USA

without

royalty

until

the

existing

August

of

that the
on use
name

in

products

of

did

1994."

The

to be paid

plaintiff's name even

not appear

plaintiff,

reason to

stated 5%

amendment implies

in

the

defendants' publications.
the

or

5% royalty was required

of the

"continue

on

the

31,

plaintiff claims that this

there

1994.

name William E.

thereof

payment

Personal
21,

IBC/USA to

to have the right to use the

Donoghue

the

11 was

if the

title of

the

Otherwise, argues

would

have

include the phrase

with the existing products."

been

no

"in connection
The

court does

not agree with the plaintiff's analysis.

The

language of the amendment tracks the language

of
"use

[clause] 11,
the

name

William

variations thereof
any

and

all

which permitted
E.

on or in

of the

IBC/USA to

Donoghue

and

connection with

existing

products and

services

of

IBC/USA."

addition, "without
royalty"
_______

The

amendment's

payment of the

clearly

refers

provision of [clause] 11.

to

stated 5%
_________

the

royalty

Rather than change

the circumstances giving rise to the right to

receive a royalty, the amendment only forgave
the

payment

of

otherwise have
i.e.,
____

been due under

royalties

products

in

royalties

flowing

which

appears in the name.

the

name as

obligation

the

from

would

paragraph 11,
the

sale of

plaintiff's

name

IBC/USA's right to use

before continued.
was

which

suspended

for

The royalty
the

period

stated.

Id. at 952 (emphasis

__

in original).

Because IBC USA

had removed

Donoghue's name from the title of MoneyLetter, the district court

___________

concluded that

Donoghue was not

entitled to any

royalties even

though his name was being used in the text of MoneyLetter through
___________

reference to such things as the "Donoghue Signal."

-1818

On the

that

other hand,

the district court

the use of the corporate name

various

publications

IBC/Donoghue in the title of

(IBC/Donoghue's
Money Fund
Average,
______________________________________

IBC/Donoghue's Mutual Funds Almanac

____________________________________

Directory)
_________

also concluded

was an invalid use

and IBC/Donoghue Money Fund

_______________________

of Donoghue's name

under the PSA

unless royalties were paid.

___________________________

This "unless" clause

the district court

we have designated

made what

as its

Ruling--Defendants-Appellees were authorized by the

use Donoghue's

name in the

corporate title of

subsidiary, IBC/Donoghue, Inc.

have needed to

implies that

Fourth

agreement to

the wholly-owned

Were this not so, the court would

determine the appropriate measure

of damages for

breach of an obligation not to use Donoghue's name in a corporate

title

rather than

declaring, as

it did

in the

passage quoted

immediately below, that Defendants-Appellees could not escape the

obligation (or

Donoghue's

"requirement") of

name in this way

paying royalties if

and other conditions

for a royalty

obligation were satisfied:

The fact

that

the plaintiff's

name is

they used

now

part of the corporate name of the entity that

was

sold

defendants

to

IBC/USA

to

Agreement's

does

escape the

requirement

title

of the

The

plaintiff is thus

payment

of

these
of

the payment

of

plaintiff's name in

defendants' publications.
likely to

establishing that the use

titles

permit the

Personal Services
of

royalties for use of the

the

not

prevail in

of his name in the

publications
compensation

without

the

constitutes

unauthorized use in contravention of [clause]

11.

Id. at 953.
__

-1919

C.
C.

Procedures
Procedures

for Resolving
for Resolving

Disputes Over
Disputes Over

the Meaning
the Meaning

of an
of an

Agreement
Agreement

How is a court to proceed when confronted with disputes

between

Does

parties about

it matter

the meaning

that all

unambiguous, even

of

parties assert

though they seek very

an agreement

that the

they made?

agreement is

different rulings about

what the agreement unambiguously means?

In our

working

description

out an answer

of an

appropriate

to these questions in

procedure

for

this case, we need

not and do not purport to decide that the method we describe here

is appropriate for

all cases.

We do determine

that this method

is appropriate for our review of the four rulings of the district

court we have identified above.

In reaching

its First, Second, and

district court excluded all consideration of

In

Third rulings, the

extrinsic evidence.

support of this decision, the court cited "the parol evidence

rule"

as

described

in the

following

maxim.

"As a

general

principle, a court considers extrinsic evidence to discern intent

only when a

contract term

(Publications) Inc.,
___________________

886 F. Supp. at

Mun. Wholesale Elec. Co.

________________________

1991)).

"general

exception

Although the

principle,"

is ambiguous."

Donoghue v.
________

952 (quoting Massachusetts

_______ _____________

v. Danvers, 577 N.E.2d 283,

_______

maxim is

proceeding

acceptable

on

applies to the case at hand

IBC/USA
_______

the

as a

289 (Mass.

statement of

assumption

that

no

may lead to error, as the

case now before us illustrates.

One exception to the general principle is that

a court

may consider parol and extrinsic evidence for the very purpose of

-2020

deciding whether

ambiguous.

the documentary

expression of the

contract is

As this court has said once before:

In determining whether an ambiguity exists,

_____________________________

as a matter of

law, the [trier] may consider

parol and extrinsic evidence.

determines
contains

that

the

contract

no ambiguity, then

parol evidence

If the [trier]
in

question

no extrinsic or

is [to be considered

by] the

trier of fact . . . .

Boston Edison Co. v. F.E.R.C., 856

__________________
________

F.2d 361, 367

n.3 (1st Cir.

1988)(quoting Sunstream Jet Express, Inc. v. Int'l Air Service

_______ _____________________________
__________________

Co., 734 F.2d 1258, 1268 (7th Cir. 1984))(emphasis added).

___

A second exception to

the

recognition

that

the general principle flows from

ambiguity

is

not

an

characteristic of any set of words and phrases.

be ambiguous

in one

respect and

clear in

all-or-nothing

An agreement may

another.

The

legal

consequences that flow from a

determination of ambiguity in

respect do

apply to

not automatically

dispute over

one

another

matter as to which the agreement is clear.

In

clarity

other

of an

words,

agreement in

dispute about meaning must

between

the parties

which the

some

party claiming

relation to

Conversely,

by

about the

issue

allowed

to

actual dispute

the agreement

dispute

from

of potential

is relevant.

in

to

benefit

one kind

meaning of

not

party claiming

being

to

show that there is an

asserted clear provision

hypothetical

example,

as to

Clarity about

is

irrelevant.

benefit

from ambiguity

proffer

extrinsic

(for

evidence

supporting its interpretation) must show ambiguity in the meaning

of

the

agreement with

respect to

-2121

the

very issue

in dispute.

Demonstration of ambiguity

in some respect

not material to

any

existing dispute serves no useful purpose.

Because

dispute

that

ambiguity

has not

arisen

in

relation to

as

an

some

existing

hypothetical

controversy

immaterial, a court's determination regarding any ambiguity

will make a difference

to what are

in outcome must be made

the existing

genuine disputes

this understanding can

a court begin to

that

with sensitivity

between the

(real and not merely hypothetical controversies).

is

parties

Only by having

consider with precision

and

particularity

the

alternative

meanings

proposed

by

the

disputing parties.

Thus, if

either or both

of the parties

proposes that

extrinsic evidence should be received and considered by the court

or by the finder of

facts (the jury in a jury trial or the judge

as finder of facts in a nonjury proceeding), concrete proffers of

the proposed extrinsic evidence are important aids to the court's

performing

its function of

determining both whether

material ambiguity in the language

________

for that reason or

admissible

resolved by a

impossible for

of the agreement and whether,

for some other reason, extrinsic

and sufficient

to present

finder of facts.

a court

there is a

a genuine

It will sometimes

to determine

evidence is

dispute to

be

be virtually

with confidence whether

contract is ambiguous in a material respect

evidence

the

or whether extrinsic

should be admitted unless the court first knows what is

proffered

extrinsic

evidence,

and

what

is

the

alleged

ambiguity it allegedly addresses.

-2222

Although, at first glance, a court's proceeding in this

way may seem

to subvert

the "general principle"

and the

parol

evidence

rule

itself,

closer

examination

discloses

that

proceeding in this way

facilitates decisions consistent with the

principle,

itself,

the

foundations.

regarding

rule

key point

and

their

is that courts

underlying

policy

consider contentions

ambiguity or lack of ambiguity not in the abstract and

not in relation to hypothetical disputes that a vivid imagination

may conceive but

the

meaning

controversy.

of events that

instead in relation to

of

an

Often

agreement

as

concrete disputes about

applied

to

the existing controversy arises

was not foreseen and addressed

an

existing

from a turn

by the parties in

their negotiations.

When

invoking

standard

of

materiality

of

any

demonstrated ambiguity and reviewing proffered extrinsic evidence

to determine whether that standard of materiality has been met, a

court is proceeding

law and with the

in a way compatible both

views of distinguished commentators on

of contracts.

The Supreme Judicial

held that

contract] is

"[a

with Massachusetts

to

the law

Court of Massachusetts

be read

in

the light

of

has

the

circumstances of its execution, which may enable the court to see

that its words are

291 N.E.2d 407,

Judicial Court

really ambiguous."

409 (Mass. 1973).

In

Robert Indus.
_____________

v. Spence,
______

another case, the Supreme

affirmed the judgment of a trial court, observing

that "[t]he judge

quite properly

heard evidence to

aid in

the

construction of the agreement, even before he decided whether the

-2323

agreement was ambiguous."

Cullinet Software, Inc. v. McCormack &

_______________________
___________

Dodge Corp., 511 N.E.2d 1101, 1102 (Mass. 1987).

___________

These Massachusetts decisions comport with the views of

Professors Corbin and Farnsworth.

"The writing can not prove its

own

. .

completeness and

[parol evidence]

and weighed

accuracy .

rule seems to

before it can be

Corbin, Corbin on Contracts

. The

evidence that

exclude must sometimes

excluded by the rule."

the

be heard

Arthur L.

582 at 448-50 (1960), quoted in, E.

___________________

Allan Farnsworth, Contracts

_________

D.
D.

Unresolved
Unresolved

Issues
Issues

______ __

7.3 at 474 (2d ed. 1990).

Regarding
Regarding

Ambiguity
Ambiguity

and
and

Potentially
Potentially

Admissible Extrinsic Evidence in This Case.

Admissible Extrinsic Evidence in This Case.

The manifested meaning of the agreement of the parties,

as interpreted by

the district

Memorandum of Findings of

Part III.B above,

Donoghue had

passages from

Fact and Conclusions of Law

satisfied none

sought to

court in the

of the parties

quoted in

to this

bar the Defendants-Appellees

its

case.

from using

his name at all without permission and payment of the 5% royalty.

The Defendants-Appellees, on the

other hand, contended that they

were

name freely in

licensed to use Donoghue's

any manner they

chose, as part of the official name of the wholly-owned corporate

subsidiary

they

as well as in publications.

would

"William

Donoghue,

incur

E.

royalty

Donoghue"

Bill Donoghue,

They also contended that

obligations only

(argued

as

if

including

Will Donoghue,

Billy

variations

only

"William

Donoghue, etc."

App. at 00683) were used in the title of a publication.

-2424

of

The

proffered interpretations

polar extremes;

the district

of the

parties are

court's interpretation,

at

though at

neither pole, is closer to Donoghue's proposed interpretation.

These possible interpretations do not exhaust

of

plausible

possibilities,

illustrate the

point, making

making any ruling as

however.

We

clear, however,

add

one

that

to the correct interpretation at

and do not mean our illustrative

the list

more

we are

to

not

this time

suggestion to be given any more

or different consideration in further proceedings than that given

to

other

plausible

interpretations

of

the

documentary

manifestations of the agreement of the parties.

The

possible

Defendants-Appellees

interpretation

we

suggest

is

that

were not free to change only the title of a

product and nothing more, then continue to use Donoghue's name as

before in the text

materials, and

of the product, or packaging,

thereby escape the royalty

had remained

or promotional

obligation they would

have had

if Donoghue's name

in the

title.

This

possible

turn of events was not explicitly addressed in the text

of either the SPA or the PSA.

In thinking about whether

as a

whole an implicit answer

occurred,

if

possibility

for each turn of

one may consider what

negotiator

during

had

there was in the transaction

events that has

most likely would have happened

explicitly

called

negotiations.

For

attention to

example,

such

suppose

negotiator for the parties now designated as Defendants-Appellees

had stated during negotiations

that they understood the proposed

-2525

agreement

obligation

to be

that

they would

no

any

royalty

if they just deleted the Donoghue name from the title

of the product and continued to use the

text of the product

can

longer have

reasonably

say

Donoghue name within the

and in advertizing the product.

it

understanding not previously

is

likely

this

Unless one

statement

expressed would have

of

an

been accepted

and negotiations would have proceeded unruffled, the reasoning of

the district court about what the parties' agreement in this case

unambiguously

Of

means is unpersuasive.

even greater

moment

in relation

controversy between the parties in this case

to the

existing

is that a reader of

the full text of the two documents executed by the parties

might

reasonably conclude that the parties had not explicitly addressed

another possible turn of events that later did

USA would

"Donoghue"

decide to

in

its

create a

wholly-owned

corporate name.

negotiations, had openly

occur -- that IBC

subsidiary and

Suppose

IBC USA,

stated that it would interpret

use

during

the two

documents together, as then drafted, to grant it the right to use

"Donoghue" in a new corporate entity's name (and to do so without

any royalty obligation as long as IBC USA and its

subsidiary did

not

include

reasonable

accepted

"Donoghue"

to

in

believe that

by Donoghue,

the

such

name of

a statement

without incident,

product).

would

Is it

have been

so negotiations

would

then have proceeded unruffled?

We believe that it is more appropriate at this time not

___

to determine whether

the agreement is ambiguous in

-2626

any material
________

respect, not to determine whether or not extrinsic evidence about

___

the manifested meaning may be received, and not to make any final
___

resolution

of

the

dispute

manifested meaning of

left

between

the agreement.

the

parties

about

Those matters are

the

better

to decision after the district court has before it proffers

of proposed extrinsic evidence that might be admissible and might

bear upon the final

is material to

hypothetical

decision

decision about meaning in some

an existing

dispute.

with

The

the benefit

controversy and not

district court

of a

precise

merely to

can

then make

focus on

extrinsic evidence proposed for admissibility

Also, the court

respect that

will have more assurance that

some

the

proffers of

and consideration.

the case is being

decided on the merits and in a way consistent with the objectives

underlying

the parol

evidence

rule and

the general

principle

regarding use of extrinsic evidence in determining the meaning of

an integrated agreement.

Thus, our affirmance of the district court's order does

not

imply

approval of

unambiguous and what

Appellees

parties

Three, and

as to the

Ruling Four).

should

a reasonable

record more fully.

We

We

that the

rights of

and as to

of the right to use

to royalties

had

reasoning

PSA is

Defendants-

their obligation to

(previously designated as Ruling

regarding the scope

rights

it means

to use Donoghue's name

pay royalties

Ruling

the court's

One, Ruling Two,

conclude that

the issues

Donoghue's name and the

not have

been

opportunity

to

decided before

develop the

explicitly do not make any rulings

___

the

factual

as to

-2727

the alleged ambiguity of the contract on any material issue or as

to

whether extrinsic

Those

decisions

evidence

must be

district

court, after

whatever

extrinsic

may

made, in

opportunity

evidence they

appropriately be

the

first instance,

for the

rely

received.

upon

parties to

to support

in the

proffer

their

various contentions.

IV.
IV.

Support for the Preliminary Injunction

Support for the Preliminary Injunction
on the Terms Stated
on the Terms Stated

A.
A.

Conduct Enjoined
Conduct Enjoined

Notwithstanding

conclusions

reached by

our

the

determination

district court

affirm the Preliminary Injunction

there

is

ample

support

that some

were premature,

as entered.

elsewhere

in

of

the

We do

the

we

so because

record

for

the

Preliminary Injunction as fashioned by the district court.

The

Appellees from

Preliminary

Injunction

(1) distributing

prevents the

Defendants-

materials in which

Donoghue is

represented as criticizing a specific person or entity or stating

things inconsistent

with his

published views;

(2) distributing

materials

with Donoghue's

photograph

or

likeness without

his

prior written consent; and (3) using Donoghue's name in the title

of a

publication

unless

royalty

prohibitions are not very

conclusions of law

have

determined

are

made.

onerous, and the findings of

of the

to be

payments

district court, apart

premature,

amply

fact and

from those

support granting

Preliminary Injunction to the extent allowed.

-2828

These

we

the

First,

nationally known

the district

court

found that

investment advisor who

expert in mutual and money market

Donoghue is

has a reputation

funds.

as an

As a result, the court

concluded that Donoghue's name was worthy of trademark protection

under the Lanham Act, 15

this

1125(a).

Specifically

citing

court's decision in Boston Beer Co. v. Slesar Bros. Brewing

_______________
____________________

Co., 9 F.3d
___

that

U.S.C.

175 (1st

Donoghue's name

because

"[t]he

occasioned

Cir. 1993), the

had

district court

acquired "secondary

likelihood of

confusion

in

concluded

meaning."

And,

the public's

mind

by an unauthorized use of the plaintiff's name by the

defendants is clear . . . any unauthorized use of the plaintiff's

name by

the defendants would

plaintiff's

trademark

in

(Publications) Inc., 886

___________________

constitute an infringement

his

name."

F. Supp.

Donoghue
________

at 953.

v.

of the

IBC/USA
_______

Thus, Donoghue

was

likely to prevail on Count I of his complaint.

Second, the

district court

attributed to Donoghue

not

consistent with

philosophy.

in

Id.
__

Exhibit 12

found that

the statements

in the December 1994 direct

his

previous writings

mailing were

and his

investment

As there was a specific consistency requirement

to

the

PSA,

statements were unauthorized.

that Donoghue was

likely to

App.

at

00057,

such

attributed

Thus, the district court concluded

prevail on his

breach of

contract

claim (Count IV).

Third, the district

court concluded that Donoghue

was

likely to prevail on his claim that the Defendants-Appellees used

his name and photograph

in a manner that violated

Mass. Gen. L.

-2929

ch. 214

3A (Count II).

The section of the

statute quoted by

the district court reads:

Any person whose name, portrait or picture is

used within the commonwealth

for advertising

purposes or for the purposes of trade without

his written consent may
in the
using

bring a civil action

superior court against

his

name,

portrait

the person so

or

picture,

to

prevent and restrain the use thereof . . . .

Mass. Gen.

plaintiff

L. ch. 214

previously

picture, it is

3A.

The court found

authorized

the

clear that he does

IBC/USA (Publications), Inc.,

______________________________

that "[w]hile the

defendants'

not do so now."

886

F.

Supp.

at

use

of

his

Donoghue v.
________

954.

Thus,

Donoghue was likely to prevail on Count II.

Finally,

the

district

court

rejected

Defendants-

Appellees' affirmative defense that Donoghue had "unclean hands."

Under

the precedent of this

discretion

in deciding

circuit, a district

whether

plaintiff's alleged "unclean

to bar

hands."

recovery

court has wide

based upon

K Mart Corp. v.
_____________

Oriental
________

Plaza, Inc., 875 F.2d 907, 912 (1st Cir. 1989)(citing Codex Corp.
___________
______ ___________

v. Milgro Elec. Corp., 717

__________________

denied, 446
______

cannot

say

F.2d 622, 633 (1st Cir.

U.S. 931 (1984)).

that

the

Defendants-Appellees'

Given

district

unclean

the record before

court's

hands

1983), cert.
_____

finding

defense

us, we

regarding

was

clearly

erroneous.

Thus,

there

is

ample

support in

Preliminary Injunction as entered in this case.

determined that a few of

the

record

Although we have

the rulings made by the district

-3030

for a

court

were premature, these rulings,

if error either on the

merits or

because prematurely decided, were only harmless error.

B.
B.

Rejection of Other Injunctive Relief

Rejection of Other Injunctive Relief

Plaintiff-Appellant Donoghue has appealed the

the

district court

preliminary

however, that

because

injunction

he had

requested

the

one granted.

than

just as there is

a more

We

ample support in the

order of

sweeping

conclude,

record for

the relief

ordered in

the Preliminary

Injunction, so

also are

there sound reasons for not ordering relief of greater scope.

Donoghue contends that the Defendants-Appellees are not

allowed to use

promotional

requested

his name even in the text

materials; his

motion for a

that the district court

of publications and in

preliminary injunction

so order.

App. at 00072-73.

Donoghue admits, however, that Defendants-Appellees are permitted

to use his name in the title of publications as long

as they pay

him the required

Defendants-

Appellees

are

5% royalty.

permitted

to

He also

use his

admits that

name

in

the

text of

publication if his name is also in the title of that publication.

Thus, Donoghue's argument for greater injunctive relief

than that granted

Appellees

are not

can be

seen as an

permitted to use

argument that

his name

in the

Defendants-

text of a

product unless his

well.

And

because

name appears in the title

any use

publication requires a royalty

that any

of

his name

of that product as

in

the title

of

payment, Donoghue is thus arguing

authorized use of his name in the text of a publication

-3131

requires a royalty

payment.

The harm, then,

that Donoghue

is

seeking to prevent by his request for a more sweeping preliminary

injunction

is primarily,

if

not entirely,

delayed receipt

of

royalty payments--a kind of harm ordinarily redressed by an award

of monetary

damages.

"But

an

entitlement to

money

damages,

without more, rarely constitutes an adequate basis for injunctive

relief."

CMM Cable Rep., Inc. v. Ocean Coast Properties, Inc.,

_____________________
_____________________________

48 F.3d 618, 622 (1st Cir. 1995).

We conclude

error of law

irreparable

preliminary

court did not

or clearly erroneous finding

abuse its discretion

that

that the district

of fact, and

in determining that Donoghue

harm will

result from

injunction as broad as he seeks.

supportably determined

accrues during

that if

make any

did not

has not shown

failure to

enter a

The district court

an entitlement to

money damages

the pendency of this litigation, a monetary award

at the conclusion of the case will be an adequate remedy.

V.
V.

For the

that the record

Preliminary

reasons explained in Parts

before the

were erroneous as

on these

the four rulings

a matter of law.

rulings in

determine, however, for the

I-III, we conclude

district court when

Injunction and now before us

to determine whether

not rely

Conclusion
Conclusion

it ordered

the

is insufficient for us

identified in Part

III.B

Therefore, we explicitly do

reaching our

decision.

reasons stated in Part IV,

We

also

that the

order for entry of the Preliminary Injunction on the terms stated

-3232

was adequately supported by other findings and conclusions of the

district court.

law,

if any,

That

in the

being so, we conclude

four rulings

that the errors

identified were

of

harmless in

relation to the issues before us in this appeal.

The district court's order for entry of the Preliminary

Injunction is

AFFIRMED.
AFFIRMED

-3333