Abbott Laboratories v. Unlimited Beverages Inc

• Decision Date: 14 July 2000
• Docket Number: 99-4363,Nos. 99-4223,s. 99-4223
• Citation: 218 F.3d 1238
• Parties: (11th Cir. 2000) ABBOTT LABORATORIES, Plaintiff-Appellee, v. UNLIMITED BEVERAGES, INC., Defendant-Appellant
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 1238

218 F.3d 1238 (11th Cir. 2000)

ABBOTT LABORATORIES, Plaintiff-Appellee, v. UNLIMITED BEVERAGES, INC., Defendant-Appellant.

Nos. 99-4223 , 99-4363

IN THE UNITED STATES COURT OF APPEALS FOR THE ELEVENTH CIRCUIT

July 14, 2000

Appeals from the United States District Court for the Southern District of Florida D. C. Docket No. 93-08576-CV-JLK

Before EDMONDSON, BARKETT and RONEY, Circuit Judges.

BARKETT, Circuit Judge:

Unlimited Beverages, Inc. and its successor Unico Holdings, Inc. ("UBI") appeal from a final judgment in favor of Abbott Laboratories ("Abbott") imposing sanctions against UBI after finding that it was in contempt for violating a final consent judgment entered in 1994.

BACKGROUND

In 1992, UBI began to develop and sell an oral electrolyte maintenance solution called Naturalyte. At the time Abbott had its own electrolyte solution, known as Pedialyte, on the market.¹ Abbott sued UBI under 15 U.S.C. 1125, alleging that the sale of UBI's electrolyte solution in a square bottle with a label that mimicked Abbot's product constituted trade dress infringement and sought injunctive relief. After the court granted a preliminary injunction, the parties entered into a settlement agreement and, based thereupon, the district court entered a consent judgment enjoining the sale, advertisement or promotion of Naturalyte in bottles or with labels confusingly similar to those used by Abbott for Pedialyte. Although UBI continues to sell Naturalyte as a retail product, its packaging is now significantly different from that of Pedialyte. However, in addition to its own retail sales, in 1998 UBI began supplying to Meijer, Inc. ("Meijer"), a mass-merchandising retailer, electrolyte solution in the identical bottles which had been the subject of the infringement action.² When Abbott discovered the sales to Meijer, it filed a motion for an order to show cause why UBI, as supplier to Meijer, should not be held in contempt for violating the earlier consent judgment.

At the hearing on that motion, in addition to receiving evidence from both parties, the magistrate judge considered UBI's stipulation to the following:

(1) UBI provided the private-label retailers and Meijer with electrolyte solution packaged in "the same exact bottle" that UBI agreed not to use for the sale of Naturalyte, and

(2) the electrolyte solution that UBI manufactures for the private-label retailers has the same chemical composition as Naturalyte.

The magistrate recommended that UBI be held in contempt and the district court affirmed. The magistrate recommended sanctions totaling $179,649.30, comprising $109,499.30 in gross profits and $72,150.00 in attorneys' fees. That recommendation was adopted by the district court. UBI now challenges both the finding of contempt and the calculation of sanctions.

We review the district court's interpretation of the final consent judgment de novo. Paradise v. Prescott, 767 F.2d 1514, 1525 (11th Cir. 1985). We review the district court's finding of contempt and the imposition of sanctions for abuse of discretion. Afro-American Patrolmen's League v. City of Atlanta, 817 F.2d 719, 723 (11th Cir. 1987).

DISCUSSION

1. Did UBI Violate the Consent Judgment?

The determination of whether a defendant violated a permanent injunction begins with a close examination of the judgment. King v. Allied Vision, Ltd., 65 F.3d 1051, 1058 (2nd Cir. 1995). As we stated in American Red Cross v. Palm Beach Blood Bank, Inc., 143 F.3d 1407 (11th Cir. 1998):

[A] court must craft its orders so that those who seek to obey may know precisely what the court intends to forbid. . . . Thus, Rule 65(d) of the Federal Rules of Civil Procedure provides that "[e]very order granting an injunction ... shall be specific in terms; [and] shall describe in reasonable detail ... the act or acts sought to be restrained...." Fed. R. Civ. P. 65(d). Under this rule, "an ordinary person reading the court's order should be able to ascertain from the document itself exactly what conduct is proscribed."

Id. at 1411 (quoting Hughey v. DMS Dev. Corp., 78 F.3d 1523, 1531 (11th Cir. 1996)). A district court may not expand the decree or impose obligations that are not unambiguously mandated by the decree itself. See United States v. Armour & Co., 402 U.S. 673, 681-82 (1971). However, the consent judgment is to be read in the light of the circumstances surrounding its formation "and any other documents expressly incorporated in the decree." United States v. ITT Continental Banking Co., 420 U.S. 223, 238 (1975).

In this case the preliminary injunction was incorporated by reference into the consent judgment, and the settlement agreement provided the contours upon which the permanent injunction was based. Thus, the district court correctly considered the totality of these documents to determine whether an ordinary person would be able to ascertain exactly what conduct the consent judgment proscribes.

On appeal UBI essentially argues that the consent judgment is exclusively limited to the sale of an electrolyte solution with the name "Naturalyte" and does not prohibit UBI from manufacturing or supplying private-label retailers with electrolyte solution in square bottles that those retailers sell under their own private labels in their own stores. UBI claims that, because the order did not specifically address whether it could manufacture or supply private-label retailers with electrolyte solution in a square bottle sold under the retailers' private labels, it is not in violation, and the district court erred in expanding the language of the consent judgment.

In the alternative, UBI argues that, since it did not violate the actual language of the consent judgment, it was entitled to fair warning before being sanctioned for violating the consent judgment. UBI urges that, for the purposes of contempt proceedings, any ambiguities in the consent judgment should be resolved in its favor. Hughes v. United States, 342 U.S. 353, 357-58 (1952); Ford v. Kammerer, 450 F.2d 279, 280 (3rd Cir. 1971) (stating that an injunction must be obeyed only to the extent it reasonably specifies the conduct prohibited). UBI contends that, since the plain language of the consent judgment prohibits UBI from marketing Naturalyte electrolyte solution in square bottles and not Meijer electrolyte solution in square bottles, the consent judgment is not sufficiently clear and unambiguous to justify a finding of contempt.

We find no merit to these arguments. To focus exclusively on the word "Naturalyte" ignores everything else in the relevant documents and myopically distorts the common sense meaning of the documents in the context of the injunction proceedings. UBI does not dispute that the various electrolyte solutions that it is supplying to private-label retailers has the identical chemical composition as its own Naturalyte. It also does not dispute that the bottles in which it is packaging these products are identical to those that were the subject of the 1994 consent judgment. Finally, it cannot claim that it was unaware of the contents or...