H–D Mich., LLC v. Hellenic Duty Free Shops S.A.

• Decision Date: 05 September 2012
• Docket Number: 11–3838,Nos. 11–3618,12–1280.,s. 11–3618
• Citation: 694 F.3d 827
• Parties: H–D MICHIGAN, LLC et al., Plaintiffs–Appellees, v. HELLENIC DUTY FREE SHOPS S.A., Defendant–Appellant.
• Court: U.S. Court of Appeals — Seventh Circuit

694 F.3d 827

H–D MICHIGAN, LLC et al., Plaintiffs–Appellees,

v.HELLENIC DUTY FREE SHOPS S.A., Defendant–Appellant.

Nos. 11–3618, 11–3838, 12–1280.

United States Court of Appeals, Seventh Circuit.

Argued May 24, 2012.

Decided Sept. 5, 2012.

Melissa H. Burkland, Attorney, Michael Best & Friedrich LLP, Madison, WI, David M. Kelly (argued), Attorney, Finnegan, Henderson, Farabow, Garrett & Dunner, Washington, DC, for Plaintiffs–Appellees.

James W. Dabney (argued), Attorney, Fried, Frank, Harris, Shriver & Jacobson, New York, NY, for Defendant–Appellant.

Before CUDAHY, KANNE, and HAMILTON, Circuit Judges.

HAMILTON, Circuit Judge.

These consolidated appeals arise from an international trademark licensing dispute between plaintiff Harley–Davidson Motor Company and its former Greek licensee, defendant Hellenic Duty Free Shops S.A. (“DFS”). DFS challenges a series of injunctions issued by the United States District Court for the Eastern District of Wisconsin. Appeal No. 11–3618 challenges the district court's orders of November 7 and 17, 2011 denying DFS's motions to dissolve a temporary restraining order entered on September 6, 2011. No. 11–3838 challenges a preliminary injunction entered on December 20, 2011. No. 12–1280 challenges a further preliminary injunction issued February 7, 2012 addressing DFS's efforts to litigate this same dispute in the courts of Greece.

Harley–Davidson made strong showings that DFS was deliberately breaching a binding trademark licensing agreement. Since Harley–Davidson learned of the breaches and terminated the parties' licensing agreement, DFS has tried numerous legal twists and contortions to try to avoid the legal consequences of its actions. DFS's primary argument is that the term in the licensing agreement giving consent to personal jurisdiction in the courts of Wisconsin is not binding on it, and DFS raises numerous other challenges to the injunctions. The district court correctly found that it had jurisdiction over DFS and properly rejected its other arguments and tactics. We affirm.

I. Factual and Procedural BackgroundA. The Licensing Agreement and the Breach

Harley–Davidson manufactures motorcycles and owns famous trademarks that are popular on clothing and other merchandise all over the world. For more than ten years, Harley–Davidson had a licensing agreement with a Greek company, Elmec Sport S.A., which was a subsidiary of defendant DFS. On January 1, 2010, Harley–Davidson and Elmec reaffirmed this relationship in a trademark license agreement (the “Agreement”). Under the Agreement, Harley–Davidson permitted Elmec to use the “Harley–Davidson” and “Bar and Shield Logo” trademarks, among others, for Harley–Davidson-approved premium apparel products through Harley–Davidson-approved European distribution channels. The Agreement required Elmec to undergo a three-stage approval process prior to its release of any Harley–Davidson-branded products into the stream of commerce. Elmec had to submit to Harley–Davidson for review and written approval first all proposed concepts and artwork, then pre-production samples, and finally production samples.

Elmec sent Harley–Davidson a notice dated January 20, 2011 of “Merger of our Company with our parent company.” The notice informed Harley–Davidson that Elmec and DFS would “from now on, trade as a single entity” and that DFS “acts as full successor of Elmec.” In Elmec's words, “all the contracts that Elmec has entered into remain valid,” and “this merger does not alter the ownership structure and/or the management of our company, and it shall not affect the business relationships between our two companies.”

The Agreement gave Harley–Davidson the right to terminate it if Elmec went through a merger. Harley–Davidson did not exercise that right. Instead, as it had promised, DFS just stepped into Elmec's shoes in its relationship with Harley–Davidson. It submitted pre-production samples to Harley–Davidson for approval, exhibited Harley–Davidson-branded products, took orders, and met with Harley–Davidson to discuss future branded products at an annual Harley–Davidson dealer meeting. The same Harley–Davidson and DFS personnel continued to work together, and Harley–Davidson received DFS communications from e-mail addresses ending “@elmec. gr.”

In April 2011, however, Harley–Davidson discovered that DFS had sold unauthorized products bearing the Harley–Davidson trademark to an unapproved German retailer, Penny Markt. Harley–Davidson learned of DFS's action because other European dealers of its licensed products complained, believing that the distribution of sub-par products to unauthorized retailers would harm the Harley–Davidson brand and their own businesses. Harley–Davidson had not approved in writing any pre-production samples or production samples of the Penny Markt goods. In fact, DFS had not submitted any for approval, and Harley–Davidson had previously rejected a product concept and artwork for DFS's “Essentials Collection,” which included several proposed products that were similar to Penny Markt goods. Nor had Harley–Davidson approved Penny Markt as a retailer under the Agreement. On April 14, 2011, Harley–Davidson sent an e-mail to DFS saying that Harley–Davidson believed DFS was in “serious breach of your contract” because of the Penny Markt sales, and that Harley–Davidson was “suspending approval of any products in concept, pre-production, or production phases.” DFS responded in kind, stating that it had “no option but to put on hold, as of today [April 15, 2011], all our dealings with you under the Agreement of January 1st 2010.” On April 22, 2011, Harley–Davidson faxed DFS a letter describing DFS's breaches of the Agreement and advising DFS that it was exercising its right to terminate the Agreement immediately.

Over the following months, Harley–Davidson attempted to recover unpaid royalties from DFS and to secure from DFS certain information required under the Agreement. DFS refused these attempts. Even though Harley–Davidson had suspended all DFS product approvals and DFS had put “on hold” its own dealings with Harley–Davidson, on July 22, 2011, DFS submitted production samples for the then-upcoming “Autumn/Winter 2011–2012” goods collection for Harley–Davidson's approval. Harley–Davidson did not review the samples, reminding DFS that its April 22, 2011 termination prohibited DFS from “designing, manufacturing, promoting, selling or distributing” any unauthorized products bearing Harley–Davidson trademarks. On July 28, 2011, DFS's counsel advised Harley–Davidson that it had “wrongfully repudiated the License Agreement” and that DFS planned to “act unilaterally in accordance with its own views of the parties' rights and obligations.” That exchange lit the fuse of this litigation.

B. Temporary Restraining Order

Invoking the diversity jurisdiction of the federal courts under 28 U.S.C. § 1332(a)(2), Harley–Davidson filed this lawsuit in the Eastern District of Wisconsin for breach of contract against DFS on August 5, 2011, and on August 12, 2011 moved for a temporary restraining order. DFS received copies of all papers filed with the district court through its U.S. counsel, but refused to accept formal service of process through counsel. On the day of the TRO hearing, the district court contacted DFS's U.S. attorney who had been speaking for DFS in negotiations with Harley–Davidson and who has represented DFS in these appeals. The attorney told the court that DFS did not wish to participate in the TRO hearing on Friday, September 2, 2011. On the next business day, Tuesday, September 6, 2011, the district court granted the TRO against DFS, setting the bond at $10,000.

One week later, on September 13, 2011, Harley–Davidson moved for an extension of the TRO beyond the initial 14–day time period provided by Federal Rule of Civil Procedure 65(b)(2) until DFS could be served with process under the Hague Convention and until a preliminary injunction hearing could be held. Harley–Davidson had initiated the process of effecting service on DFS in August and had been informed that service would likely take three to four months. The court granted Harley–Davidson's motion on September 19, extending the TRO “until plaintiffs have effected service on defendant pursuant to the Hague Convention.” H–D Michigan, LLC v. Hellenic Duty Free Shops, S.A., 2011 WL 4368418, at *2 (E.D.Wis. Sept. 19, 2011). In fact, service had taken only about a month. DFS had been served in Greece on September 13, 2011, less than a week after the district court issued the TRO. DFS did not appear in the district court until October 4, 2011, when it filed its answer.

On October 17, 2011, the district court held a telephonic status conference. The minutes of that conference reflect that the court offered to hold a hearing immediately on the continuation of the TRO or the issuance of a preliminary injunction. DFS requested 45 to 60 days to conduct discovery and to prepare for a hearing. The court granted DFS's request, scheduling the preliminary injunction hearing for December 15, 2011. It also asked DFS to submit any objections to the TRO and to submit evidence on the appropriate size of the bond within 10 days. In the meantime, though, the court ordered that the TRO would remain in effect over DFS's objection. Per the court's order, DFS moved to modify or vacate the temporary restraining order on October 27, 2011, arguing in part that the bond then in place was inadequate and that the district court did not have personal jurisdiction over DFS. Its motion to vacate was denied, but the court raised the amount of Harley–Davidson's injunction bond to $1 million. It was raised again on November 17, 2011, to $1.8 million.

C. Preliminary Injunction

On December 20, 2011, after a hearing five days earlier, the district court granted a preliminary injunction against DFS. The preliminary injunction remains in effect and prohibits DFS and “its employees, agents, partners,...