Opinion
1:99CV0374
May 16, 2002
MEMORANDUM OPINION
I. INTRODUCTION
This matter is currently before the Court on Defendants Ri Ra, Madra Mor, Inc., Kevin Tremor, and Joseph McCabe's (collectively "Defendants") Motion to Strike [Document #18] which seeks to strike a portion of Mr. David Kelly's ("Mr. Kelly") declaration testimony. For the reasons explained below, Defendants' Motion to Strike is DENIED. Also before the Court is Plaintiff Ri Ra Holdings LLC's ("Plaintiff") Motion for an Order to Show Cause Why Defendants Ri Ra, Madra Mar, Inc., Kevin Treanor, and Joseph McCabe Should Not Be Held In Contempt and For Compensatory Damages [Document #10] [hereinafter "Plaintiff's Motion for an Order to Show Cause"] because of Defendants' alleged failure to comply with the Default Judgment and Permanent Injunction [Document #8] entered by this Court on August 17, 1999. For the reasons explained below, Plaintiff's Motion for an Order to Show Cause is DENIED.
Mr. Kelly is a principal of Plaintiff Ri Ra Holdings LLC.
II. FACTUAL AND PROCEDURAL BACKGROUND
The documents available to the Court indicate that sometime in 1998 Defendant Kevin Treanor ("Mr. Treanor") and Defendant Joseph McCabe ("Mr. McCabe") opened a restaurant and bar at 835 Beacon Street in Boston, Massachusetts. Their restaurant was named "Ri Ra." According to Defendants, Mr. Treanor and Mr. McCabe knew of no other American establishment operating under that name. Unbeknownst to Defendants, however, Plaintiff operated, and still operates, a chain of Irish pubs under the federally trademarked name "Ri Ra." Plaintiff operates two locations in North Carolina, as well as several others in the New England area.
Mr. Treanor and Mr. McCabe were aware of an establishment in Dublin, Ireland that used the "Ri Ra" name.
Plaintiff's North Carolina pubs are situated in Raleigh and Charlotte. Plaintiff's three New England establishments are in Burlington, Vermont, Providence, Rhode Island, and Portland, Maine.
According to Plaintiff, it was considering opening a Ri Ra location in the Boston area. For that reason, Plaintiff was concerned about Defendants' use of the "Ri Ra" name. Therefore, on May 7, 1999, Plaintiff filed suit against Defendants in this Court alleging trademark infringement, federal trademark dilution, false designation of origin, unfair competition, and deceptive trade practices. Because of their apparent "disbelief and confusion," Defendants did not contest the lawsuit. (Br. Defs. Opp'n Pl.'s Mot. Order Show Cause, at 2.) As a result of Defendants' failure to answer or otherwise respond to Plaintiffs Complaint, this Court ultimately entered a Default Judgment [Document #8] against Defendants on August 17, 1999. Shortly thereafter, the parties entered into a settlement agreement pursuant to which Defendants were to pay Plaintiff $8,000.00 and cease using the "Ri Ra" name in satisfaction of the Court's Default Judgment. Defendants eventually satisfied their monetary obligations to Plaintiff, prompting Plaintiff to file a Satisfaction of Judgment [Document #9] with this Court on February 15, 2001.
In an effort to comply with the Default Judgment and the settlement agreement, Defendants renamed their establishment "An Tua Nua." According to Defendants, they spent thousands of dollars to market the restaurant's new name. These expenditures ranged from hiring an artist to design and paint a new sign for the building, to printing new menus, changing the telephone listing, and locally publicizing the new name. Defendants claim that they took these steps because "it would be directly contrary to their self interest" to allow the public perception that their establishment was called "Ri Ra" to continue. (Id. at 3.) In short, according to Defendants, "[s]ince changing the name [of their establishment] to `An Tua Nua,' Mr. Treanor and Mr. McCabe have attempted to raise the public awareness of the [new] name of their small restaurant business." (Id.)
Despite Defendants' efforts to publicize the "An Tua Nua" name, Plaintiff somehow learned that Defendants, after entry of the Default Judgment and Permanent Injunction, continued to display three signs that bore the "Ri Ra" mark. First, Defendants displayed their daily specials on an A-frame board, placed on the sidewalk, that had "Ri Ra" printed across the top. Second, the "Ri Ra" insignia was painted on the exterior facade, over the door to the restaurant. Finally, a small sign bearing the name "Ri Ra" was displayed behind the bar. According to Plaintiff's Memorandum, these signs demonstrate "Defendants' continued infringements and contempt of the Court's 1999 [O]rder." (Pl. Ri Ra Holdings LLC's Mem. Supp. Mot. Order Show Cause, at 4.) Plaintiff further argues that the signs contributed to the enduring confusion between Defendants' establishment and Plaintiff's chain of Irish pubs. As a result, pursuant to its Motion for an Order to Show Cause, Plaintiff seeks an order to force Defendants to demonstrate why they should not be held in contempt. Plaintiff also seeks compensatory damages to fund a corrective advertising campaign as well as attorneys' fees.
Defendants, of course, maintain that the signs were left unintentionally. They claim that the A-frame special board was overlooked, that the painted sign over the door was left due to a painter's error, and that the small sign behind the bar was a gift. Over time, according to Defendants, the fact that these three signs remained was simply forgotten. Defendants further claim that they were not notified of Plaintiff's objection to the three signs prior to the filing of Plaintiff's Motion for an Order to Show Cause. Had Defendants been so notified, they argue that they would have alleviated the problem without resort to the judicial process. Notably, after receiving notice of Plaintiff's Motion, Defendants removed or painted over the signs to which Plaintiff objects. According to Defendants, Plaintiff was not harmed by the presence of the three allegedly insignificant signs. In light of the fact that the signs have been removed, as well as Defendants' argument that Plaintiff suffered no harm, Defendants maintain that they should not be subject to a contempt order and should not be forced to pay for a corrective advertising campaign.
Plaintiff filed the aforementioned Motion for an Order to Show Cause [Document #10] on September 21, 2001. In support of its Motion, Plaintiff included a declaration of Mr. Kelly, a principal employee with Plaintiff. Upon reviewing the declaration, Defendants filed a Motion to Strike [Document #18] on November 26, 2001, seeking to strike a portion of Mr. Kelly's declaration as inadmissible hearsay. The Court will consider each of these Motions, beginning with Defendants' Motion to Strike.
III. DISCUSSION
A. Defendants' Motion to Strike
As previously stated, Defendants' Motion to Strike seeks to strike a portion of the declaration testimony of Mr. Kelly. Mr. Kelly's declaration was attached to, and submitted along with Plaintiff's Motion for an Order to Show Cause. In his declaration, Mr. Kelly stated that he was seeking prospective employees to work in Plaintiff's "Ri Ra" pubs. In an effort to recruit these potential employees, Mr. Kelly placed an advertisement in the April 16, 2001 edition of The Irish Emigrant, a periodical circulated in the Boston area. According to Mr. Kelly's declaration, at least four of the individuals that responded to the advertisement "confusingly identified "Ri Ra" with Defendants' bar at 835 Beacon Street, Boston, Massachusetts." (Id., Ex. D, at 2.) Pursuant to its Motion to Strike, Defendants claim that Mr. Kelly's statement regarding the prospective job-seekers' confusion should be stricken from his declaration because it is offered to prove confusion, and as such, is inadmissible hearsay. Defendants further claim, as alternative arguments, that the quoted language from Mr. Kelly's declaration should be stricken because it is ambiguous, irrelevant, and because it is lacking in credibility. Notably, Defendants offer no authority for the proposition that the Federal Rules of Evidence even apply in the context of a declaration attached to a motion to show cause. That point notwithstanding, Defendants' arguments regarding their Motion to Strike are not persuasive.
Mr. Kelly's original declaration stated that Plaintiff was seeking employees for a "Ri Ra" location that was possibly opening in Boston. Mr. Kelly's subsequent supplemental declaration stated that Plaintiff was seeking applicants for all of Plaintiff's existing "Ri Ra" locations. The Court does not consider these two positions to necessarily be inconsistent with one another. Further discussion of this point is included below in conjunction with the Court's consideration of Defendants' additional argument that Mr. Kelly's Declaration lacks credibility.
At least one trial court within the Fourth Circuit has stated that a contempt order must be based on credible and admissible evidence. Major v. Orthopedic Equip. Co., 496 F. Supp. 604, 616 (E.D. Va. 1980).
With respect to Defendants' hearsay argument, the Court notes that in order for the hearsay rule to operate to exclude a particular statement, that statement must first be classified as hearsay. United States v. Pratt, 239 F.3d 640, 644 (4th Cir. 2001); Butters v. Vance Int'l. Inc., 225 F.3d 462, 467 n. 1 (4th Cir. 2000). According to the Federal Rules of Evidence, a statement is considered hearsay if it is "a statement, other than one made by the declarant while testifying at the trial or hearing, offered in evidence to prove the truth of the matter asserted." Fed.R.Evid. 801(c). In other words, if the statement is offered for any reason other than to establish the truth of the matter asserted therein, it is not hearsay and the hearsay rule is inapplicable. In Lyons P'ship. L.P. v. Morris Costumes. Inc., 243 F.3d 789 (4th Cir. 2001), the Fourth Circuit found that certain statements of misidentification that were offered to establish confusion were not hearsay. Id. at 804. The issue inLyons was whether a purple dinosaur costume marketed by the defendant violated the plaintiff's trademark of the popular "Barney" character. In order to prove its case, the plaintiff sought to submit the statements of several individuals that misidentified the defendant's dinosaur costume as Barney. The defendant objected, claiming that such statements were hearsay. In response, the Fourth Circuit stated that the statements were not offered "to prove the truth of the matter asserted — i.e., that the persons wearing the . . . costume were in fact Barney — but rather merely to prove that the [individuals] expressed their belief that those persons were Barney." Id. (emphasis in original).
The situation in the instant case is remarkably similar to that inLyons. Plaintiff is seeking to establish confusion, as was the plaintiff in Lyons. Pursuant to that end, Plaintiff has offered the declaration testimony of Mr. Kelly, stating that several individuals that responded to Plaintiff's advertisement mistakenly identified Plaintiff's "Ri Ra" with Defendants' establishment in Boston. Plaintiff has not offered these statements to prove the matter apparently asserted therein — that is, that Plaintiff's "Ri Ra" was, in fact, the establishment on 835 Beacon Street in Boston, Massachusetts. Rather, Plaintiff has offered the statements to establish the individuals' confusion, or belief, that the Plaintiff's "Ri Ra" was the location in Boston. As such, according toLyons, the statement included as part of Mr. Kelly's declaration does not qualify as hearsay, making the hearsay rule inapplicable. Consequently, Defendants' separate argument regarding Plaintiff's apparent use of the present sense impression exception to the hearsay rule is not persuasive. Because the statements included in Mr. Kelly's declaration are not hearsay, Plaintiff does not have to establish the applicability of a hearsay exception. Defendants' attempt to support its Motion to Strike with the hearsay doctrine therefore fails.
With respect to Defendants' argument that the statement taken from Mr. Kelly's declaration is ambiguous and irrelevant, the Court finds Defendants' claim to be without merit. In support of this claim, Defendants argue that the statement is ambiguous in that it may refer to Mr. Kelly's confusion, thereby making it irrelevant because Mr. Kelly is not a consumer in the Boston market. As a principal employee with Plaintiff, and the individual responsible for placing the advertisement for prospective employees, Mr. Kelly certainly would not have been confused about the difference between his "Ri Ra" pub and the Defendants' establishment in Boston. Therefore, Defendants' attempt to justify their Motion to Strike on the basis of ambiguity and irrelevance also fails.
Defendants' final alternative argument in support of its Motion to Strike is that Mr. Kelly's declaration is lacking in credibility. Defendants base this claim on the fact that Mr. Kelly submitted a supplemental declaration in which he gave a motivation for placing the advertisement that was different from the motivation given in his original declaration. According to Defendants, the fact that Mr. Kelly altered his identified motivation for placing the advertisement makes his declaration unreliable and the proper subject for their Motion to Strike. This Court finds Defendants' argument to be without merit. The Court notes that Mr. Kelly's additional declaration was intended as a supplement, and not an amendment, to his original declaration. In that regard, it is only natural that his motivations in placing the advertisement be read as consistent with one another, and not mutually exclusive. It is certainly possible that Mr. Kelly had a dual motivation in placing the advertisement. In any event, to the extent that Mr. Kelly's two declarations may be read as being inconsistent with one another in regard to the motivation behind the advertisement, such a reading would not strip the entire declaration of its credibility. As such, Defendants' attempt to support their Motion to Strike by challenging the credibility of Mr. Kelly's declaration fails.
In his initial declaration, Mr. Kelly stated that he placed the advertisement because he was seeking prospective employees for a "Ri Ra" location that was potentially opening in the Boston area. In his supplemental declaration, Mr. Kelly stated that he placed the advertisement to recruit employees for the existing "Ri Ra" locations.
In sum, the Court notes that each of Defendants' arguments in support of their Motion to Strike — the hearsay rule, ambiguity and irrelevancy, and insufficient credibility — is without merit. For that reason, Defendants' Motion to Strike [Document #18] is hereby DENIED.
B. Plaintiff's Motion for an Order to Show Cause
Plaintiff filed its Motion for an Order to Show Cause on September 21, 2001, pursuant to which Plaintiff seeks to have Defendants appear before this Court to demonstrate why they should not be held in contempt. Plaintiff bases its claim of contempt on the fact that Defendants, after this Court declared them to be in violation of Plaintiff's trademark and forbade them from using the name "Ri Ra" for their Beacon Street establishment, continued to display three signs that bore the "Ri Ra" mark. Notably, Defendants do not contest that the signs were displayed in their restaurant. In fact, defendants admit the presence of the signs, but argue that they were left unintentionally and by accident. Defendants did, however, promptly remove the signs after Plaintiff filed the instant Motion for an Order to Show Cause, claiming that they had previously been overlooked.
In dealing with a motion for an order to show cause, the first thing the Court must determine is whether the plaintiff seeks to hold the defendant in civil or criminal contempt. Major v. Orthopedic Equip. Co., 496 F. Supp. 604, 611 (E.D. Va. 1980). The distinction does not turn on the characterization given to the alleged act of misconduct that gave rise to the claim of contempt. Id. Rather, "[it] lies in the nature of the relief sought and the interests to be furthered by the relief" Id.; see United States v. Holland, 214 F.3d 523, 526 (4th Cir. 2000). If the purpose of the contempt proceeding is to coerce compliance to the Court's mandates, or to compensate the complainant for losses sustained, then the breed of contempt sought is civil. Holland, 214 F.3d at 526; In re General Motors Corp., 61 F.3d 256, 258 (4th Cir. 1995), cert. denied, 522 U.S. 814, 118 S.Ct. 61, 139 L.Ed.2d 24 (1997). If, however, the purpose is to punish the offending party for past disobedience, then the proceeding is criminal. Holland, 214 F.3d at 526. This test applies "regardless of whether the underlying court proceedings are civil or criminal." Id. In the instant case, Plaintiff's Motion for an Order to Show Cause was originally brought to both compel Defendants to remove the three signs and to recover damages for the harm allegedly suffered. As stated above, Defendants have already removed the contested signs. Plaintiff, however, still seeks to recover damages for the harm it claims the signs caused. In that regard, Plaintiff is not seeking any sort of punitive sanction against Defendants, but merely to recover compensation for its alleged loss. For that reason, this Court finds that Plaintiff seeks to hold Defendants in civil contempt. In re General Motors Corp., 61 F.3d at 259 ("Remedies [for civil contempt] include ordering the contemnor to reimburse the complainant for losses sustained and for reasonable attorney's fees.").
This determination is relevant because a sanction for civil contempt generally may not exceed the scope of the losses actually sustained by the injured party, "lest the contempt fine become punitive in nature, which is not appropriate in a civil contempt proceeding." In re General Motors Corp., 61 F.3d at 259 (internal quotation omitted). Moreover, unlike criminal contempt, willfulness is not an element of civil contempt. Id. at 258.
In order for this Court to hold Defendants in civil contempt, Plaintiff must establish the existence of four distinct elements:
1) a valid decree of which Defendants had actual or constructive knowledge;
2) that the decree was in Plaintiff's favor;
3) that Defendants, by their conduct, violated the terms of the decree and had actual or constructive knowledge of such violations; and
4) that Plaintiff suffered harm as a result.
Ashcraft v. Conoco, Inc., 218 F.3d 288, 301 (4th Cir. 2000). Plaintiff must prove each of these four elements by clear and convincing evidence.Id.; In re General Motors Corp., 61 F.3d at 258 ("The burden is on the complainant to prove civil contempt by clear and convincing evidence."). If Plaintiff fails to make the requisite showing by clear and convincing evidence, then Defendants cannot be held in contempt. Accordingly, unless Plaintiff makes the necessary showing, as outlined above, there is no need to require Defendants to show cause why they should not be held in contempt. See Major, 496 F. Supp. at 611-14 (E.D. Va. 1980) (denying a motion to show cause because the party asserting the motion could not establish contempt by clear and convincing evidence). With that in mind, the Court will now consider Plaintiff's showing with respect to each of the four elements of civil contempt.
Plaintiff relies on an Eleventh Circuit case, Reynolds v. Roberts, 207 F.3d 1288 (11th Cir. 2000), cert. denied, 533 U.S. 941, 121 S.Ct. 2576, 150 L.Ed.2d 739 (2001), for the proposition that the Court should issue an order to show cause when a movant simply cites the injunctive provision at issue and alleges that the defendant has refused to obey the mandate. (Pl. Ri Ra Holdings LLC's Mem. Supp. Mot. Order Show Cause, at 6.) Reynolds is, of course, not controlling authority within the Fourth Circuit. According to Major, 496 F. Supp. 604, in order to succeed on a motion for an order to show cause, the plaintiff must carry his burden to establish contempt by clear and convincing evidence "with competent, credible and admissible evidence. . . ." Id. at 611-14 (denying a motion to show cause because the complainant could not establish contempt by clear and convincing evidence). This result is supported by the fact that even if a litigant makes the requisite showing for contempt, the determination of both whether to hold the adverse party in contempt and how, if found to be in contempt, to sanction him therefor, is dearly within the Court's discretion. In re General Motors Corp., 61 F.3d at 259 ("The appropriate remedy for civil contempt is within the [C]ourt's broad discretion."). In other words, if the complainant cannot make the requisite showing for contempt, there is no reason to require the alleged contemnor to appear and argue for the Court to exercise its discretion to not issue a contempt order.
Notably, the parties essentially do not dispute the existence of the first three elements of Plaintiff's showing of civil contempt. With respect to the first element, that Plaintiff establish the existence of a valid decree of which Defendants had actual or constructive knowledge, Plaintiff has plainly identified this Court's August 17, 1999 Default Judgment and Permanent Injunction, which enjoined Defendants from using the "Ri Ra" mark. The fact that Defendants changed the name of their Boston establishment in order to satisfy the Court's mandate demonstrates that they had knowledge thereof. Therefore, the Court must find that Plaintiff has satisfied the first element of its case for civil contempt.
The substance of the Court's August 17, 1999 Order states that Defendants . . . are permanently enjoined and restrained from . . . using in any manner the "Ri Ra" Trademark alone or in combination with any other mark, work, words, or designs, which so resemble the "Ri Ra" Trademark so as to be likely to be a copy thereof or to cause confusion, deception, or mistaken or in connection with, the manufacture, labeling, printing, promotion, advertisement, offer for sale or sale of any product or service not manufactured, labeled, printed, distributed, offered, sponsored or sold by Plaintiff Ri Ra Holdings. . . . (Defeault J. Permanent Inj. Against Defs. Ri Ra, Madra Mor, Inc., Kevin Treanor, Joseph McCabe [Document #8], at 5-6.); see (Pl. Ri Ra Holdings LLC's Mem. Supp. Mot. Order Show Cause, at 3.)
The second element of civil contempt requires Plaintiff to demonstrate that the decree which it claims Defendants violated operates in Plaintiff's favor. As noted above, the substance of the decree prohibits Defendants, due to the federal trademark protection enjoyed by Plaintiff, from using the "Ri Ra" mark. In that regard, Plaintiff has clearly demonstrated that the Court's mandate operates in its favor. Accordingly, the Court must also find that Plaintiff has satisfied the second element of its case for civil contempt.
The third element of civil contempt requires Plaintiff to show that Defendants violated the Court's decree and had actual or constructive knowledge of such violations. Defendants admit that the three signs were displayed, and they do not dispute that their presence was in violation of the Court's Default Judgment and Permanent Injunction. of course, as previously stated, Defendants claim that the three signs at issue were left accidentally. Willfulness, however, is not an element of civil contempt. In re General Motors Corp., 61 F.3d at 258. Defendants' argument that they did not intentionally violate the Court's decree is therefore of no avail. As long as Plaintiff can establish that Defendants had constructive knowledge that the signs were present in violation of the Court's decree, then the third element of its civil contempt case will be satisfied. In that regard, Plaintiff notes that Defendants placed their A-frame sandwich board on the sidewalk each day to advertise their daily specials. Also, the sign which Defendants claim was a gift was, according to Plaintiff, displayed directly behind the bar at defendants' Boston establishment. Finally, and perhaps most convincingly, the painted sign above the door to Defendants restaurant displayed the "Ri Ra" mark in large letters that spanned the entire width of the doorway. The Court notes that the presence of the three signs is relatively insignificant in light of the efforts to which Defendants went in publicizing "An Tua Nua" as the new name of their restaurant. Nevertheless, the prominence of the signs, particularly the large lettering displayed over the door to the restaurant, leads this Court to conclude that had Defendants exercised reasonable care, they would have noticed the disputed signs, and would have realized that their presence was a violation of the Court's Default Judgment and Permanent Injunction. Accordingly, this Court finds that Plaintiff has satisfied the third element of its civil contempt claim.
A person has constructive knowledge of a fact if he would have learned the fact by the exercise of reasonable care. Black's Law Dictionary 314 (6th ed. 1990).
With respect to the fourth element of civil contempt, that Plaintiff establish that it suffered harm as a result of Defendants' conduct, Plaintiff has failed to make the requisite showing by clear and convincing evidence. Plaintiff claims that it was harmed by the three signs because they contributed to the enduring public confusion between Defendants' establishment on Beacon Street and Plaintiff's chain of Irish pubs. In support of this claim of public confusion, Plaintiff presents an internet search that yielded a significant percentage of hits that referred to Defendants' establishment on Beacon Street as "Ri Ra." Plaintiff also included the declaration of Mr. Kelly which indicated that when he was seeking applicants to work for Plaintiff, he received at least four phone calls from prospective employees that identified the tern "Ri Ra" with Defendant's Beacon Street establishment. Plaintiff has failed to indicate, however, how this alleged public confusion translates into any sort of compensable harm.
Any public perception that remains regarding the identification of Defendant's restaurant as "Ri Ra" is most likely residual from the time when Defendants operated their establishment under the "Ri Ra" name. Plaintiff appears to recognize, at least with respect to the internet, that some public information is outdated. Plaintiff, however, argues that a significant portion of the confusion that remains is the direct result of Defendants' violation of the Court's mandate. Plaintiff offers no support for this contention, though. Further, the Court does not consider it plausible that the internet material that referred to Defendants' establishment as "Ri Ra" and the misperception of the potential job applicants that spoke with Mr. Kelly could have resulted from the presence of the three relatively insignificant signs that are at issue here. This is true particularly in light of the steps that Defendants took to publicize the new name of their restaurant. This Court therefore finds that Plaintiff has failed to establish by clear and convincing evidence that it was harmed by the presence of the three signs. Accordingly, Plaintiff has not made the requisite showing for this Court to hold Defendants in contempt. To the extent that Plaintiff argues that it should be compensated for any public confusion due to Defendants initial use of the "Ri Ra" name, this Court notes that such relief was accounted for as part of the Court's Default Judgment and Permanent Injunction and therefore merits no additional consideration in this proceeding.
Because this Court has determined that Plaintiff suffered no recognizable harm as a result of the presence of the three signs, there is no need for the Court to consider Plaintiff's request for compensatory damages in the form of prospective corrective advertising or Plaintiff's request for attorneys' fees. Accordingly, the Court, in its discretion, hereby orders that Plaintiff's Motion for an Order to Show Cause is DENIED.
IV. CONCLUSION
For the reasons stated above, Defendants' Motion to Strike [Document #18] is DENIED. Also, for the reasons stated above, Plaintiff's Motion for an Order to Show Cause (Document #10] is DENIED.
An Order consistent with this Memorandum Opinion shall be filed contemporaneously herewith.