United States District Court, D. Arizona
ORDER
JOHN
J. TUCHI UNITED STATE DISTRICT JUDGE
At
issue are Plaintiff's Motion for Contempt and Request for
Sanctions for Defendants' Violation of Preliminary
Injunction (Doc. 38, Mot.), to which Defendants filed a
Response (Doc. 45, Resp.) and Plaintiff filed a Reply (Doc.
49, Reply); and Defendants' Motion for Leave to File
Sur-Reply (Doc. 50), to which Plaintiff responded in
opposition (Doc. 52). For the reasons that follow, the Court
grants both Defendants' Motion for Leave to File
Sur-Reply-and will consider Defendants' proposed
Sur-Reply (Doc. 50 Ex. A) in resolving Plaintiff's
underlying Motion-and Plaintiff's Motion for Contempt.
I.BACKGROUND
Plaintiff
is a nationwide bathroom remodeling franchisor that licenses
its remodeling system to franchisees who operate their
businesses using the ReBath service marks. (Doc. 1 at 2.)
Defendant HD Solutions (“HD”) is a former
franchisee of Plaintiff's located in San Antonio, Texas,
who operated under the ReBath trade name for 12 years.
Defendant Jason Hicks is a principal and co-owner of HD.
(Doc. 36 at 2.) Following a dispute resolved through
arbitration, the parties terminated their franchise
relationship on June 30, 2019. (Resp. at 4.) Defendants
immediately rebranded and began operating a competing
remodeling company, Legacy Bath and Kitchen
(“Legacy”). (Resp. at 4.)
Plaintiff
filed a Complaint against Defendants on August 1, 2019, and
moved for a Temporary Restraining Order (“TRO”)
(Doc. 2) on the same day. Plaintiff sought an injunction
against what it alleged was Defendants' wrongful use and
infringement of ReBath's service marks. (Doc. 2 at 2.) At
an August 2 telephonic hearing, the Court granted
Plaintiff's TRO Motion and issued a formal Order on the
matter on August 5. (Doc. 17.) The parties later stipulated
to convert and extend the TRO to a preliminary injunction.
(Doc. 24.) The Preliminary Injunction Order adopted the TRO
provisions verbatim. (Doc. 26, PI.)
The
Preliminary Injunction enjoined Defendants, their employees
and agents, and those in active participation or concert with
Defendants, from directly and indirectly:
1. Associating with the RE-BATH® trade name, trademarks,
business and proprietary materials;
2. Using the RE-BATH® trade name, trademarks, domain
names, websites (including www.rebathsa.com),
advertisements, brochures, business cards, pamphlets,
marketing pieces, photographs, customer reviews, proprietary
materials in any manner whatsoever;
3. Accessing and/or redirecting www.rebathsa.com to
any website other than www.rebath.com other than to
disable www.rebathsa.com for the pendency of this
Stipulated Preliminary Injunction Order, or pending further
Order of this Court; and
4. Operating Legacy Bath & Kitchen in any other manner
that gives the impression that it was or is affiliated with
ReBath, including but not limited to referring to Legacy Bath
& Kitchen as “formerly ReBath.”
(PI at 3-4.)
Plaintiff
then filed the present Motion on September 18, requesting
that the Court issue an Order of civil contempt and impose
coercive and compensatory sanctions on the grounds that
Defendants violated and continue to violate the terms of the
Preliminary Injunction.
II.
LEGAL STANDARD
Federal
courts are imbued with inherent authority to enforce
compliance with their lawful orders by holding noncompliant
parties in contempt. Spallone v. United States, 493
U.S. 265, 276 (1990). A court may issue an order of civil
contempt against a party that “fail[ed] to take all
reasonable steps within the party's power to
comply” with a specific and definite court order.
In re Dual-Deck Video Cassette Recorder Antitrust
Litig., 10 F.3d 693, 695 (9th Cir. 1993). Willfulness on
the part of the contemnor is not required. See Id.
However, if the disobedience is based on a good faith and
reasonable interpretation of the court's order, no
contempt shall issue. Vertex Distrib., Inc. v. Falcon
Foam Plastics, Inc., 689 F.2d 885, 889 (9th Cir. 1982).
The
party moving for a civil contempt order must establish the
contemnor's violation by clear and convincing evidence.
United States v. Ayres, 166 F.3d 991, 994 (9th Cir.
1999). An alleged contemnor may defend against a finding of
contempt by demonstrating either substantial compliance with
the definite court order or a present inability to comply
with the same. Dual-Deck Video, 10 F.3d at 695;
Ayers, 166 F.3d at 994. Substantial compliance is
not negated by a few technical or inadvertent violations
...