ReBath LLC v. HD Solutions LLC

          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 ...