Opinion
CIVIL ACTION NO. 3:01-CV-0045-G.
March 2, 2001.
MEMORANDUM ORDER
On January 16, 2001, the plaintiff HF Controls, LP ("HF Controls") filed a motion ("the motion") for an order to show cause why the defendant Forney Corporation ("Forney") should not be held in contempt for violating the court's temporary restraining order. This court granted the motion and set the show cause hearing for February 5, 2001. After consideration of the evidence adduced at the hearing and the applicable law, the court declines to hold Forney in contempt.
I. BACKGROUND
Forney is a manufacturer of boiler burners ("Burner Management Systems" or "BMS") and controls ("AFS/ECS Control Systems" or "AFS/ECS"). Plaintiff's Original Petition and Application for Temporary Restraining Order ("Original Petition"), attached as Exhibit C-1 to Notice of Removal, at 3. Forney's AFS/ECS Control Systems business consisted of the manufacture and sale of various types of software computer equipment used to automate and control power plants and other industrial plants and processes. See id. at 3-4. See also Transcript of Hearing on Motion for Order to Show Cause Before the Honorable A. Joe Fish ("Transcript") at 3. Forney sold its AFS/ECS business to HF Controls pursuant to an asset sale and purchase agreement. Original Petition at 4. HF Controls contends that Forney violated various provisions of the asset sale and purchase agreement. See id. at 7-19. In its original petition, HF Controls alleges breach of contract, misappropriation of trade secrets, conversion of funds, and unfair competition, among other things. Id. at 7, 10-11, 12, 15-17, 19.
HF Controls obtained a temporary restraining order in the 68th Judicial District of Dallas County on December 8, 2000 enjoining Forney from unlawfully competing with HFC. Temporary Restraining Order ("TRO"), attached as Exhibit A to Stipulation, ¶¶ 2, 5. The TRO was extended by agreement through January 19, 2001. Agreed Order, signed December 18, 2000, attached as Exhibit C-7 to Notice of Removal. On January 8, 2001, Forney removed the case to this court on the ground that it involves a federal question, namely, patent infringement. Notice of Removal ¶ 2. The parties subsequently agreed to extend the TRO until such time as this court rules upon HF Controls' motion to remand. Agreed Order, filed January 17, 2001.
On January 4, 2001, Forney discovered that, in violation of the TRO, it had inadvertently fabricated and shipped order number 911623 ("order 911623") to its customer Pyros. Letter dated January 11, 2001 ("January 11 Letter"), attached as Exhibit F to Stipulation, at 1. See also Defendant Forney Corporation's Response to Order to Show Cause ("Forney's Response") at 1. Forney prevailed upon Pyros to intercept order 911623, while it was still in Spanish customs, prior to shipment to the end user, Endessa Power, in the Canary Islands. January 11 Letter at 2. A flurry of communications between counsel for Forney and HF Controls ensued. Interpreting those communications as HF Controls' consent to ship order 911623, Forney in turn authorized Pyros to release order 911623 for shipment to the Canary Islands. Transcript at 29. HF Controls now seeks to hold Forney in contempt for this allegedly unauthorized shipment.
II. ANALYSIS
"Civil contempt can serve two purposes. It can be used to enforce compliance with a court's order through coercion, or it can be used to compensate a party who has suffered unnecessary injuries or costs because of contemptuous conduct." Travelhost, Inc. v. Blandford, 68 F.3d 958, 961-62 (5th Cir. 1995). Here, HF Controls does not seek to enforce compliance with the TRO, but rather seeks compensation for $32,105.35 in profits it claims to have lost by virtue of Forney's allegedly contemptuous conduct. Motion at 2. See also Travelhost, 68 F.3d at 962. As the movant for civil contempt, HF Controls "bears the burden of establishing by clear and convincing evidence: 1) that a court order was in effect, 2) that the order required certain conduct by the respondent, and 3) that the respondent failed to comply with the court's order." American Airlines, Inc. v. Allied Pilots Association, 228 F.3d 574, 581 (5th Cir. 2000) (quoting Martin v. Trinity Industries, Inc., 959 F.2d 45, 47 (5th Cir. 1992)), cert. denied, ___ S.Ct. ___, 2001 WL 178221 (Feb. 26, 2001). "Intent is not an issue in civil contempt proceedings; rather, the question is whether the alleged contemnors have complied with the court's order." Whitfield v. Pennington, 832 F.2d 909, 913 (5th Cir. 1987), cert. denied, 487 U.S. 1205 (1988). HF Controls has carried its burden of establishing a violation of the court's order by virtue of Forney's concession that it has engaged in conduct that violates the existing TRO. Forney's Response at 1.
The district court "has broad discretion in the assessment of damages in a civil contempt proceeding. The purpose is to compensate for the damages sustained." American Airlines, Inc. v. Allied Pilots Association, 53 F. Supp.2d 909, 939 (N.D. Tex. 1999) ( quoting Long Island Railroad Company v. Brotherhood of Railroad Trainmen, 298 F. Supp. 1347, 1350 (E.D.N.Y. 1969)), aff'd, 228 F.3d 574 (5th Cir. 2000), cert. denied, ___ S.Ct. ___, 2001 WL 178221 (Feb. 26, 2001) (No. 00-1016). HF Controls seeks as compensatory contempt damages an amount equal to the profit generated by the sale of order 911623. Motion at 2. Forney contends, and the court agrees, that HF Controls is only entitled to the profit from order 911623 as "damages sustained" if it prevails in the underlying action. Response at 7. If HF Controls' main cause is ultimately resolved unfavorably, HF Controls will no longer have any claim upon the profit generated by that order. See Norman Bridge Drug Company v. Banner, 529 F.2d 822, 828 (5th Cir. 1976) (discussing Worden v. Searls, 121 U.S. 14 (1887)); American Airlines, 53 F. Supp.2d at 939; United States v. United Mineworkers of America, 330 U.S. 258, 294-95, 304 (1947). Accordingly, this court, in the exercise of its discretion, declines to assess as compensatory contempt damages the profit generated by order 911623. If, in fact, HF Controls prevails in its underlying suit, then it will of course be entitled to damages resulting from Forney's admitted violation of the TRO. If HF Controls does not ultimately prevail, then the TRO will have been erroneously issued, and HF Controls will have no right to remedial relief of any sort. See United Mine Workers of America, 330 U.S. at 295, 304. It seems to the court that this result serves the interests of judicial economy by deferring a decision on damages arising from Forney's violation until such time as HF Controls' right to compensation has been finally determined.
HF Controls does not seek recompense for expenses or costs it has incurred in attempting to obtain compliance with the TRO or in filing the instant motion. Thus, this is not a case in which "the harm or injury that gives rise to the need for compensation [would] continue unredressed at the end of the underlying litigation." Petroleos Mexicanos v. Crawford Enterprises, Inc., 826 F.2d 392, 400 (5th Cir. 1987). See also Travelhost, 68 F.3d at 962.
III. CONCLUSION
HF Controls has carried its burden of demonstrating a violation of the court's order by virtue of Forney's admission thereto. Even so, the court declines to hold Forney in contempt, as HF Controls' right to the profit generated by order 911623 depends upon the outcome of the underlying suit.