Summary
trebling compensatory damages when holding a party in contempt based on noncompliance with an injunction, which required only refraining from copyright infringement and where no affirmative actions were necessary to comply with the injunction
Summary of this case from In re Residential Capital, LLCOpinion
Civil Action No. 99 Civ. 10175 (JSM)
August 27, 2002
Norman Zivin, Cooper Dunham L.L.P., New York, NY, for Plaintiff.
Thomas I. Sheridan, III, Torys LLP, New York, NY, for Defendant.
There are some people who can not take no for an answer. In some circumstances such persistence may be considered a virtue. However, when the "no" is incorporated in an injunction, the failure to refrain from the prohibited conduct constitutes contempt of Court and is subject to sanction. Such is the case here.
This case has been before the Court on numerous occasions and has been the subject of a number of opinions. Familiarity with those opinions is assumed.
On December 16, 1999, the Court entered an order granting a preliminary injunction enjoining Defendants from selling packaged pasta sauce under the name "Patsy's" during the course of the litigation. (Sheridan Aff. Ex. C at 7.)
Thereafter, Defendants filed a motion to modify the preliminary injunction to permit use of these names for sauces using labels which they contended would not violate Plaintiff's trademark rights. After a conference with the Court at which Plaintiff objected to the Defendants' proposed labels, the motion was withdrawn. (Maldonado Decl. Exs. 4 and 6, Ex. 7 at 102.)
On February 21, 2001, the Court granted plaintiff's motion for summary judgment and denied Defendants' cross-motion for summary judgment. (Sheridan Decl. Ex. B at 28.) On April 18, 2001, the Court entered Final Judgment, including a permanent injunction, which enjoined Defendants and those acting in concert or participation with them,
from manufacturing, importing, distributing, advertising, promoting, selling, or offering for sale to the consuming public sauces or other packaged food products bearing plaintiff's trademark PATSY'S or plaintiff's trade dress as shown in the photograph attached as Exhibit B to the Complaint (hereinafter "trade dress"), or any colorable variations thereof or any confusingly similar trademark or trade dress.
(Sheridan Decl. Ex. A at 2).
In or about February 2002, Defendants began offering for sale and selling bottled pasta sauce having labels which are confusingly similar to Plaintiff's labels. (Brecevich Decl. ¶ 9; Scognamillo Decl. Ex. 4; Dellaventura Decl. ¶ 3 Ex. 1.) The revised labels use the same type of script and the same color as that of Plaintiff's trade dress. In addition, Defendants sell their sauce in a bottle that is almost identical in shape to that used by the Plaintiff.
Defendants admit to having purchased at least 1,320 bottles of pasta sauce bearing the revised labels. (Brecevich Decl. ¶ 8.) Defendants' sauce is sold for at least $5 per bottle (Maldonado Decl. Ex. 7 at 94, and Ex. 8 at 35-36.) Defendants do not keep any records of the number of sauce bottles sold or the sales price. (Id.)
Prior to selling pasta sauce in bottles bearing the revised labels, Defendants did not seek a declaration from the Court that its proposed label would not violate the injunction nor did they file any motion to amend the final judgment. (Contempt Tr. at 10, 13.)
Defendants have continually attempted to take advantage of Plaintiff's goodwill (Contempt Tr. at 8) and throughout this case the individual Defendants who are the principals of the corporate Defendant have lied and submitted fraudulent documents to the Court. Their contempt for the Court, inherent in their perjury and obstruction of justice, has continued in their blatant violation of this Court's injunction. The Court finds that their violation of its injunction was willful and in bad faith.
A Court has the power to hold a party in contempt where there is (1) a clear and unambiguous order, (2) clear and convincing proof of a party's non-compliance with that order, and (3) a failure to reasonably and diligently comply with the order. Drywall Tapers and Pointers Local 1974 v. Local 530 of Operative Plasterers Cement Masons Int'l Ass'n, 889 F.2d 389, 394 (2d Cir. 1989), cert. denied, 494 U.S. 1030 (1990); New York State Nat'l Org. for Women v. Terry, 886 F.2d 1339, 1351 (2d Cir. 1989), cert. denied, 495 U.S. 947 (1990). The permanent injunction is clear and unambiguous. See Wella Corp. v. Wella Graphics, 874 F. Supp. 54, 56 (S.D.N.Y. 1994).
The trade dress of Defendants' revised labels is a colorable variation of the trade dress of the enjoined label. By selling pasta sauce in bottles bearing plaintiff's trademark PATSY'S followed by "Pizzeria" and bearing labels having a trade dress confusingly similar to the enjoined trade dress, Defendants have failed to comply with the permanent injunction in the Final Judgment. See Aurora Prods. Corp. v. Schisgall Enters. Inc., 176 U.S.P.Q. 184, 188 (S.D.N.Y. 1972), ("[O]ne who has been found to have intentionally infringed another's trademark and has been enjoined by the court from use of the infringing mark must thereafter `keep a safe distance' and will be held to a higher standard of conduct with respect to the adoption of a new mark than would have been applied in the first instance.").
Although Defendants claim to have relied on the advice of counsel, they did not receive any written opinion from counsel nor did counsel apparently consider the issue of whether Defendants' proposed labels were "confusingly similar" to Plaintiff'S trade dress. Counsel's memo to the files states only that he told Mr. Brecevich that the proposed labels "did not seem in any way objectionable from a trademark point of view because they quite clearly state that the name of the company is Patsy's Pizzeria, not Patsy's alone or Patsy' Restaurant." While this cryptic advice might provide a defense to a charge of willful trademark infringement, it would not even be sufficient to provide a defense to a willful trade dress infringement claim. Since the "opinion" in no way addresses the question whether the labels in question violates this court's injunction, it provides no defense to the charge that the Defendants willfully violated that injunction. Indeed, given how closely the Defendants' labels imitate the Plaintiff's trade dress, no competent attorney could have opined that the Defendant's labels and packaging did not violate the injunction. Unreasonable reliance on an incompetent opinion of counsel is insufficient to save defendants from a finding of contempt. In re Hayes Microcomputer Products, Inc. Patent Litig., 982 F.2d 1527, 1543 (Fed. Cir. 1992).
It is well-settled that monetary recovery for civil contempt may be compensatory as well as coercive. Terry, 886 F.2d at 1352; Perfect Fit Indus., Inc. v. Acme Quilting Co., 646 F.2d 800, 810 (2d Cir. 1981); Cancer Research Inst., Inc. v. Cancer Research Soc'y, Inc., 744 F. Supp. 526, 529 (S.D.N.Y. 1990); E.I. DuPont de Nemours Co. v. Schnur Cohan, Inc., 2 U.S.P.Q.2d 1772, 1775 (S.D.N.Y. 1986). In cases of willful noncompliance, compensatory damages may be trebled, and attorneys' fees related to the contempt motion also may be recovered. Vuitton et Fils S.A. v. Carousel Handbags, 592 F.2d 126, 130 (2d Cir. 1979); Perfect Fit Indus., Inc. v. Acme Quilting Co., 224 U.S.P.Q. 454, 462 (S.D.N.Y. 1984).
Since defendants' noncompliance with the injunction was willful, Plaintiff is awarded treble compensatory damages. While Defendants admit purchasing 1,320 jars of pasta sauce and selling some of them for $5 per bottle, Defendants kept no record of their sales of the sauce. Mr. Brecevich testified that Defendants sold only between fifty and one hundred bottles. The major problem with this testimony is that Mr. Brecevich has lied repeatedly to this Court and is a person who is totally unworthy of belief. Given the Court's experience with Mr. Brecevich, it would not credit his testimony as to any factual matter. In light of Defendants' failure to keep any records of its sales and Mr. Brecevich's total lack of credibility, it is not unreasonable to infer that Defendants sold the entire lot of 1,320 jars of sauce for $5 per jar for a total amount of $6,600. Plaintiff is awarded treble the amount of $19,800. 15 U.S.C. § 1117.
Defendants claim in their response to Plaintiff's Proposed findings of fact to still have 94 cases of the sauce. However, this factual claim is not supported by any sworn statement. Moreover, given Mr. Brekevich's total lack of credibility, even if the Defendants were to belatedly produce 94 cases of sauce, the Court would not be confident that they had not been recently purchased and were not part of the original 1,320 jars. Mr. Brekevich's lack of credibility also calls into question the truth of his assertion that he only sold the offending jars of sauce in his pizzeria.
In view of the defendants' demonstrated lack of respect for this Court and the orders of this Court, a coercive fine of $10,000 also is appropriate with the admonition that if there are future violations of this Court's orders, that fine will be increased tenfold.
Plaintiff also is entitled to an award of its attorneys' fees and expenses incurred in connection with this motion for contempt, in the amount of $110,338.35.
Defendants object that some of the time charges included in this amount are for services not directly related to the contempt motion. While this might be a valid objection in most cases, the Court has already determined that this is an exceptional case under the Lanham Act in which Plaintiff is entitled to all of its attorneys fees. See Patsy's Brand, Inc. v. I.O.B. Realty, Inc., et al., 60 U.S.P.Q.2d 1925 (S.D.N.Y. Oct. 1, 2001).
SO ORDERED.