Reno Air Racing Ass'n., Inc. v. McCord

• Decision Date: 07 July 2006
• Docket Number: No. 04-16001.,04-16001.
• Citation: 452 F.3d 1126
• Parties: RENO AIR RACING ASSOCIATION, INC., Plaintiff-Appellee, v. Jerry McCORD, Defendant-Appellant.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1126

452 F.3d 1126

RENO AIR RACING ASSOCIATION, INC., Plaintiff-Appellee, v. Jerry McCORD, Defendant-Appellant.

No. 04-16001.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted February 14, 2006.

Filed July 7, 2006.

Jeanne Collachia, Winnetka, CA, for the defendant-appellant.

Matthew D. Francis, Watson Rounds, Reno, NV, for the plaintiff-appellee.

Appeal from the United States District Court for the District of Nevada; Howard D. McKibben, District Judge, Presiding. D.C. No. CV-02-00474-HDM.

Before ALARCÓN and McKEOWN, Circuit Judges, and H. RUSSEL HOLLAND,^* District Judge.

McKEOWN, Circuit Judge.

Jerry McCord appeals the district court's decision and final judgment following a bench trial. The district court entered an award of damages and a permanent injunction against McCord due to his infringement of two trademarks belonging to Reno Air Racing Association, Inc. ("Reno Air"), in violation of the Lanham Act of 1946, 15 U.S.C. §§ 1051 et seq. ("Lanham Act"). In addition, the district court found McCord in civil contempt and imposed sanctions based on his violation of an ex parte temporary restraining order ("TRO") issued the same day the complaint was filed.

This appeal highlights the sometimes routine fashion in which TROs are issued to unsuspecting parties, who, lacking fair notice of the prohibited conduct, may unwittingly invite a contempt citation. We conclude that the TRO was improvidently issued because it failed to comport with the notice and specificity provisions of Federal Rule of Civil Procedure 65 ("Rule 65"). Consequently, we vacate and reverse the district court's contempt finding and imposition of sanctions. We affirm the district court's findings and judgment with respect to trademark infringement.

BACKGROUND

Since 1964, Reno Air has operated the National Championship Air Races, an annual air show at the Reno/Stead Airport in Nevada. The show features airplanes that race around pylons¹ for cash prizes and stunt aircraft that perform acrobatic maneuvers. Each year, approximately 80,000 to 90,000 people attend the event, which generates millions of dollars of revenue. Reno Air extensively advertises and promotes the event through a variety of print and electronic media, referring to it both as "Reno Air Races" and "National Championship Air Races."

Since commencement of the races in 1964, Reno Air has used a logo featuring a checkered pylon with two airplanes circling it ("pylon logo") to identify the event and merchandise promoting the event. Reno Air is the registered owner of two federal trademarks,² numbers 1,322,146 and 1,371,797, for the "pylon logo;" the marks are identical, although one is a trademark and the other a service mark. The marks have been registered with the United States Patent and Trademark Office since 1985 and have acquired incontestable status.³ The trademark registrations are in four classes that include entertainment services, printed materials, cloth patches, caps and t-shirts. Through special licensing agreements, Reno Air permits vendors situated inside the gates of the show to sell merchandise bearing the trademarks.

McCord owns Western Sales Distributing Company, a sole proprietorship. Between 1999 and 2002, McCord sold merchandise, including t-shirts, caps and mugs, depicting the term "Reno Air Races" and artwork containing images of at least one airplane and a pylon, from booths located just outside of the gates of the air races. In 1999, McCord sold approximately $4,433 worth of such merchandise; in 2000, he sold $10,152; in 2001, $3,174; and in 2002, $9,152.

Sometime in 2000, McCord received a letter and telephone call from Reno Air's attorney, who objected to McCord's sale of merchandise at the air races. The following year, a representative from Reno Air advised McCord that his sale of such merchandise violated Reno Air's rights. The district court noted that Reno Air was unable to produce a copy of the letter sent to McCord in 2000 and that the testimony was also vague on exactly how clearly Reno Air expressed its objections to McCord's sale of the merchandise prior to this litigation.

On September 13, 2002, Reno Air filed a complaint in the District of Nevada, alleging McCord's infringement of the federally registered "pylon logo" mark in violation of 15 U.S.C. § 1114(1)(a) and infringement of the unregistered "Reno Air Races" mark in violation of 15 U.S.C. § 1125(a). That same day, Reno Air also filed an ex parte application for a TRO pursuant to Rule 65(b) and a motion for a preliminary injunction. Reno Air's TRO application stated that notice to McCord was unnecessary because "of the immediate and irreparable harm that will occur if the restraining order is not immediately issued ... and because of the significant risk that [McCord] may leave the Reno/Stead Airport area and destroy or conceal [his] infringing merchandise once[he] receive[s] notice of the lawsuit."

The district court granted the application after a telephonic hearing, and issued an ex parte TRO that prohibited McCord from engaging in the following activities:

(1) making, manufacturing, using, distributing, shipping, licensing, selling, developing, displaying, delivering, advertising and/or otherwise marketing or disposing of any goods, packaging or any other items which bear the trademarks set forth in Exhibit F to Mr. Houghton's declaration, or any confusingly similar variations thereof;

(2) disposing of, destroying, moving, relocating or transferring any and all goods and other items ... bearing the trademarks set forth in Exhibit F to Mr. Houghton's declaration, or any confusingly similar variations thereof;

(3) disposing of, destroying, moving, relocating or transferring any means for making products having the trademarks set forth in Exhibit F to Mr. Houghton's declaration, or any confusingly similar variations thereof ...;

(4) disposing of, destroying, moving, relocating or transferring any documents pertaining to the creation, development... of items bearing the trademarks set forth in Exhibit F to Mr. Houghton's declaration, or any marks confusingly similar thereto.

"Exhibit F," to which the TRO referred extensively, contained a picture of a t-shirt design sold by McCord that depicted a stylized image of two airplanes and a checkered pylon, with the words "Reno Air Races" underneath.

Reno Air served McCord with the TRO late in the afternoon on September 13, 2002, the Friday of the air races weekend. McCord was outside the gates of the show when he was served and was packing up for the day. He did not read the TRO until later that evening and over the weekend had difficulty locating an attorney with whom he could consult about the meaning of the injunction. Even after the weekend, finding an attorney in the Reno area who did had not have a conflict of interest as a result of a prior relationship with Reno Air was not easy. McCord finally located an attorney in Carson City, Nevada.

As of Saturday, September 14, 2002, McCord stopped selling t-shirts containing the exact design pictured in Exhibit F. McCord continued to sell merchandise containing the term "Reno Air Races" and depicting a pylon and airplanes until the end of the air show on Sunday, September 15, 2002.

In April 2003, more than six months after the show closed, Reno Air filed a motion for contempt and claimed that McCord violated the TRO. The district court denied this application without prejudice to its renewal at trial. A two-day bench trial was held in February 2004. The district court entered a final judgment in April 2004.

The district court found that McCord infringed "Reno Air Races" and the "pylon logo," which were protectable marks under the Lanham Act. The district court awarded Reno Air $6,727 in damages arising from the sale of infringing merchandise and permanently enjoined McCord from "making, manufacturing, [or] distributing... any goods, packaging or any other items which bear the Marks, or any confusingly similar variations thereof."⁴ The district court also found McCord in civil contempt for continuing to sell infringing merchandise after being served with the TRO on September 13, 2002. The district court imposed contempt sanctions in an amount equal to Reno Air's reasonable attorneys' fees and costs in connection with the TRO and contempt motion.

ANALYSIS

I. CONTEMPT

"We review for abuse of discretion the district court's civil contempt order, including the decision to impose sanctions." Hook v. Arizona Dep't of Corrections, 107 F.3d 1397, 1403 (9th Cir.1997). "[W]e will not reverse unless we have a definite and firm conviction that the district court committed a clear error of judgment after weighing the relevant factors." In re Dual-Deck Video Cassette Recorder Antitrust Litig., 10 F.3d 693, 695 (9th Cir. 1993).

"Civil contempt in this context consists of a party's disobedience to a specific and definite court order by failure to take all reasonable steps within the party's power to comply." Id.⁵ The contempt "`need not be willful,'" id. (quoting In re Crystal Palace Gambling Hall, Inc., 817 F.2d 1361, 1365 (9th Cir.1987)); however, a person should not be held in contempt if his action "appears to be based on a good faith and reasonable interpretation of the court's order." Id. (internal quotations and citations omitted).

A. EX PARTE PROCEEDING

We consider first whether the TRO was properly granted ex parte without notice. Rule 65(b) provides, in relevant part:

A[TRO] may be granted without written or oral notice to the adverse party ... only if (1) it clearly appears ... that immediate and irreparable injury, loss, or damage will result to the applicant before the adverse party or that party's attorney can be heard in opposition, and (2) the applicant's attorney certifies to the court in writing the efforts, if any, which have been made to give the notice and the reasons supporting the claim that notice should not be required. Every [TRO]...