Martin's Herend Imports v. Diamond & Gem

• Decision Date: 09 November 1999
• Docket Number: No. 98-20892,No. 98-20519,98-20519,98-20892
• Citation: 195 F.3d 765
• Parties: (5th Cir. 1999) MARTIN'S HEREND IMPORTS, INC., and HERENDI PORCELANGYAR, Plaintiffs-Appellees, V. DIAMOND & GEM TRADING UNITED STATES OF AMERICA COMPANY, JUDITH JUHASZ, and FRANK JUHASZ, Defendants-Appellants, MARTIN'S HEREND IMPORTS, INC. , and HERENDI PORCELANGYAR, Plaintiffs-Counter-Defendants- Appellees, V. DIAMOND & GEM TRADING UNITED STATES OF AMERICA COMPANY, JUDITH JUHASZ, and FRANK JUHASZ, Defendants-Counter-Claimants- Appellants, LOWELL T. CAGE, Trustee, Intervenor Defendant- Appellant
• Court: U.S. Court of Appeals — Fifth Circuit

Page 765

195 F.3d 765 (5th Cir. 1999)

MARTIN'S HEREND IMPORTS, INC., and HERENDI PORCELANGYAR, Plaintiffs-Appellees,

V.

DIAMOND & GEM TRADING UNITED STATES OF AMERICA COMPANY, JUDITH JUHASZ, and FRANK JUHASZ, Defendants-Appellants,

MARTIN'S HEREND IMPORTS, INC. , and HERENDI PORCELANGYAR, Plaintiffs-Counter-Defendants- Appellees,

V.

DIAMOND & GEM TRADING UNITED STATES OF AMERICA COMPANY, JUDITH JUHASZ, and FRANK JUHASZ, Defendants-Counter-Claimants- Appellants,

LOWELL T. CAGE, Trustee, Intervenor Defendant- Appellant.

No. 98-20519

No. 98-20892

IN THE UNITED STATES COURT OF APPEALS, FIFTH CIRCUIT

November 9, 1999

[Copyrighted Material Omitted]

[Copyrighted Material Omitted] Mark S. Lee (argued), Cara R. Burns, Manatt, Phelps & Phillips, Los Angeles, CA, for Plaintiffs-Appellees.

Thomas M. Fulkerson, Clements, O'Neil, Pierce & Nicksen, Houston, TX, for Herendi Porcelangyar.

John Russel Feather (argued), Houston, Tx, John Bennett White, IV, Wilson, Sheehy, Knowles, Robertson & Cornelius, Tyler, Tx, for Defendants-Appellants.

Appeals from the United States District Court for the Southern District of Texas

Before GARWOOD, SMITH, and BENAVIDES, Circuit Judges.

JERRY E. SMITH, Circuit Judge:

These consolidated appeals involve a trademark infringement dispute and a counterclaim for alleged wrongful seizure. Judith and Frank Juhasz and their proprietorship, Diamond & Gem Trading United States of America Company (collectively "Diamond & Gem"), appeal (1) the denial of their motion to amend and clarify the effect of a permanent injunction entered against them in the trademark dispute; (2) a partial summary judgment in favor of Martin's Herend Imports, Inc. ("Martin's"), and Herendi Porcelangyar ("Herendi") that Martin's lacked bad faith in obtaining a seizure order for Diamond & Gem's goods; (3) a jury instruction that Diamond & Gem had the burden of proof on its wrongful seizure counterclaim; and (4) an order, given on remand after a prior appeal, limiting Diamond & Gem to the witnesses, issues, and discovery it had offered at the first trial. We affirm in part, reverse in part, and remand.

I.

This matter began with a dispute over the import and sale of high-end porcelain products manufactured by Herendi, a Hungarian company that owns a federally registered trademark that consists of the hand-painted "Herend" name and design. Martin's is a U.S. corporation that owns the exclusive right to import Herendi's products into the United States. Frank and Judith Juhasz owned and operated Diamond & Gem, a Houston proprietorship that sold, among other things, porcelain pieces bearing the Herend trademark. Diamond & Gem acquired the pieces from American and foreign sources, including Herendi's stores in Hungary, and sold them in the United States. Among the Herend pieces Diamond & Gem sold were pieces that Martin's did not offer for sale in the United States.

II.

Martin's sued Diamond & Gem, alleging, inter alia, trademark infringement, and obtained an ex parte temporary restraining order against Diamond & Gem and a seizure order based, in part, on affidavit evidence that Diamond & Gem had sold counterfeit Herend porcelain goods. Counsel for Martin's, along with U.S. marshals, seized porcelain pieces and records from Diamond & Gem's business premises.

Diamond & Gem counterclaimed, alleging that the seizure was wrongful. Following the presentation of Martin's's evidence, the court granted summary judgment for Martin's on the wrongful seizure counterclaim. The jury then returned a verdict in favor of Martin's for $685,000 on the trademark infringement claim, and the court entered final judgment and a permanent injunction against Diamond & Gem and later entered a contempt order against Diamond & Gem for violating the terms of the injunction.

After entry of final judgment, Diamond & Gem filed for bankruptcy protection under chapter 7. The bankruptcy case is still pending, but Lowell Cage, Trustee for Diamond & Gem and intervenor-defendant, has also appealed the adverse judgment on the wrongful seizure counterclaim. Diamond & Gem appealed, and we affirmed the judgment and damage award but found the injunction too broad and remanded with instructions to amend it. We also reversed the summary judgment on the wrongful seizure counterclaim. See Martin's Herend Imports, Inc. v. Diamond & Gem Trading USA, Co., 112 F.3d 1296, 1307-08 (5th Cir. 1997) ("Martin's I").

On remand, the district court asked the parties which issues they felt still needed to be resolved. Diamond & Gem identified for retrial the wrongful seizure counterclaim and the language of the "over broad" injunction. Despite failing to request additional discovery at that time, Diamond & Gem subsequently made numerous attempts to introduce new evidence, which the court denied.

Diamond & Gem moved for leave to file a First Amended Counterclaim to seek declaratory relief with respect to the scope of the injunction. The court denied the motion, then entered the Amended Permanent Injunction; Diamond & Gem appealed that and filed an unsuccessful petition for writ of mandamus.

Martin's filed a motion for partial summary, judgment alleging that it had not acted in bad faith as a matter of law at the ex parte hearing to obtain the seizure of Diamond & Gem's merchandise. The court granted the summary judgment motion on the issue of bad faith and held that Diamond & Gem was not entitled to summary judgment establishing the scope of the injunction based on its denied First Amended Counterclaim and that Diamond & Gem could not introduce any new evidence.

The wrongful seizure case went to the jury, which found in favor of Martin's. The court entered final judgment incorporating the verdict, and Diamond & Gem appealed. We consolidated Diamond & Gem's two appeals.

III.

Diamond & Gem appeals the denial of the motion for leave to amend to request a declaratory judgment that "all Herend porcelain found in the United States is presumed to have been adopted by Herend." Diamond & Gem also contends that the district court erred in its modification of the permanent injunction to comply with Martin's I.

A.

As an initial matter, we must consider whether we have jurisdiction to hear an immediate appeal of the injunction. Under 1292(a)(1), the modification of an injunction is "independently appealable." See Western Water Man v. Brown, 40 F.3d 105, 108 n.1 (5th Cir. 1995). And if we have jurisdiction over the modification of the injunction, we also may review the denial of Diamond & Gem's motion to amend and clarify the effect of the injunction. See id.¹

For us to have jurisdiction over this interlocutory appeal, the district court's order must "modify" the earlier order, not merely "interpret" it. See In re Ingram Towing Co., 59 F.3d 513, 516 (5th Cir. 1995). The line between modification and interpretation is a functional one, and the dispositive issue is whether "the ruling appealed from can fairly be said to have changed the underlying decree in a jurisdictionally significant way." See Sierra Club v. Marsh, 907 F.2d 210, 212 (1st Cir. 1990).

This is unlike the circumstance in Ingram Towing, in which we lacked jurisdiction because the district court had only "explained" the coverage of the earlier injunction. See Ingram Towing, 59 F.3d at 516. Here, the district court altered the language of the injunction to "relax its prohibitions" against Diamond & Gem. See Sierra Club, 907 F.2d at 212. Specifically, the court attempted to follow this court's mandate to limit the injunction's reach to prohibit Diamond & Gem from selling only those goods that Martin's has ever approved for importation and sale in this country. Thus, the injunction is sufficiently altered to satisfy 1292(a)(1).

Martin's objects to our jurisdiction under 1292(a)(1) by seeking to draw a distinction between permanent and preliminary injunctions, arguing that only the latter are subject to interlocutory appeal. But neither 1292(a)(1) nor Fifth Circuit precedent draws any distinction between preliminary and permanent injunctions in this regard.

In Association of Co-Operative Members, Inc. v. Farmland Indus., Inc., 684 F.2d 1134 (5th Cir. 1982), we held that jurisdiction was proper and noted that 1292(a)(1), "on its face," provided jurisdiction over the issuance of a permanent injunction. See id. at 1137-38. Thus, we properly have jurisdiction under 1292(a)(1).

B.

Before the district court ruled on Diamond & Gem's motion to amend and clarify the injunction, Diamond & Gem filed a second motion for partial summary judgment, seeking to have the court find, as a matter of law, that all Herend porcelain manufactured by the Herendi factory had been approved by Martin's or Herendi, or both, for importation into and sale in the United States. In support of this motion, Diamond & Gem sought to introduce declarations by Frank Juhasz and Edwin Pound, a sales representative who had worked with Martin's for about thirteen years.

According to Diamond & Gem, Pound's testimony "suggests that all of the porcelain manufactured by the [Herendi] factory over time has been approved for importation and sale in the United States" and also supports Diamond & Gem's theory, during the first trial, that anything Diamond & Gem, a retailer in a secondary market, purchased in the United States "should be presumed" to have come from Martin's. The district court denied the motion to amend.

We review denials of leave to amend for abuse of discretion. See Dussouy v. Gulf Coast Inv. Corp., 660 F.2d 594, 597 (5th Cir. 1981). In the context of motions to amend pleadings, "discretion" may be misleading, because Fed. R. Civ. P. 15(a) "evinces a bias in favor of granting leave to amend." Id. Indeed, "unless there is a substantial reason," such as undue delay, bad faith, dilatory motive, or undue prejudice to the opposing party, "the discretion of the district court is not broad enough to permit denial." Id. at 598 (citing Lone Star Motor Import...