AMF Inc. v. Jewett, 82-1416

• Decision Date: 26 August 1983
• Docket Number: No. 82-1416,82-1416
• Citation: 711 F.2d 1096
• Parties: AMF INCORPORATED, Plaintiff, Appellant, v. Raymond L. JEWETT, et al., Defendants, Appellees.
• Court: U.S. Court of Appeals — First Circuit

Page 1096

711 F.2d 1096

219 U.S.P.Q. 486

AMF INCORPORATED, Plaintiff, Appellant, v. Raymond L. JEWETT, et al., Defendants, Appellees.

No. 82-1416.

United States Court of Appeals First Circuit.

Argued Nov. 2, 1982.

Decided July 8, 1983.

As Modified on Denial of Rehearing and

Rehearing En Banc Aug. 26, 1983.

Gregor F. Gregorich, New York City, with whom Thayer Fremont-Smith, William R. Golden, Jr., David C. Stimson, Rogers Hoge & Hills, New York City, and Choate, Hall & Stewart, Boston, Mass., were on brief, for plaintiff, appellant.

Robert D. Paul, Boston, Mass., with whom Martha Coakley, and Goodwin, Procter & Hoar, Boston, Mass., were on brief, for defendants, appellees.

Before CAMPBELL and BREYER, Circuit Judges, and HEMPHILL, ^* Senior District Judge.

LEVIN H. CAMPBELL, Chief Judge.

AMF appeals from the denial of its motion to hold the defendants Raymond Jewett and Walthem Chemical Pump Corporation (Walchem) in civil contempt of a consent decree. The decree permanently enjoins Jewett and Walchem from using AMF's trademarks, trade names, and parts and model numbers in connection with the sale of chemical metering pumps and related components. Alleging that defendants had violated the decree, AMF moved, pursuant to a provision in the decree retaining jurisdiction, for an order holding Jewett and Walchem in civil contempt and awarding damages. Following lengthy discovery and an eight-day trial, the United States District Court for the District of Massachusetts issued a memorandum and order denying AMF's motion.

I.

AMF and Jewett have been involved in business dealings since 1973. In May of that year, AMF purchased from Jewett and an associate the assets of the Precision Control Products Corporation, a company that produced and sold Precision chemical metering pumps. Through this purchase, AMF obtained the rights to the trade names "Precision Control Products," and "Precision," to the trademarks "Sentrol," "Diaton," and "PCP," and to the copyrights, model numbers, manufacturing methods, and labels used in the production and sale of metering pumps. Jewett, who had been president of the company prior to its acquisition, accepted employment with AMF and agreed not to compete in the chemical pump business for a stated period thereafter.

Eleven months after purchasing Precision Control Products, AMF transferred the company from Waltham, Massachusetts to Meriden, Connecticut, as a part of the AMF Cuno Division. Jewett resigned from his position with AMF and formed a new corporation at the company's old location in Waltham. As its name--Precision Chemical Pump Service Corporation--implied, Jewett's new venture was an authorized service center for AMF Precision pumps. In March 1975 Jewett assumed a distributor function as well as a service function, and changed his company's name to Precision Chemical Pump Corporation.

In the fall of 1976, after his non-competition agreement with AMF expired, Jewett acquired an interest in Liquid Metronics, a newly formed company that was beginning to compete with AMF. When Jewett informed AMF of his interest in Liquid Metronics, AMF terminated Jewett's authorized dealer and service center contracts and demanded that Jewett cease doing business under the name Precision. Jewett refused and AMF brought suit in May 1977, alleging that Jewett's unauthorized use of the name Precision violated the Lanham Act, 15 U.S.C. §§ 1051-1127, and related state laws proscribing unfair methods of competition.

The parties' settlement negotiations culminated in the consent decree at issue here. The decree, which is set forth in the appendix hereto, was approved by the court on September 15, 1977.

In June 1980, three years after entry of the decree, AMF brought this motion for an order holding Jewett and Walchem in civil contempt. The contempt proceeding was heard by a judge other than the one who had handled AMF's initial suit and had approved the consent decree. In denying the motion, the district court concluded that AMF had failed to establish clearly and convincingly that defendants had violated the decree. The court also held that the terms of the consent decree were ambiguous, that defendants had used their best efforts to comply, and that AMF failed to show that certain technical violations of the decree were likely to cause confusion among customers as to the origin of certain Walchem products.

II.

The parties vigorously dispute the nature of the standard by which this court should review the district court's interpretation of the consent decree. We decline an extended exegesis, but some discussion seems necessary.

We start with the principle that the complainant must prove contempt by clear and convincing evidence. See Burke v. Guiney, 700 F.2d 767, 769 (1st Cir.1983); Vertex Distributing, Inc. v. Falcon Foam Plastics, Inc., 689 F.2d 885, 889 (9th Cir.1982); 11 C. Wright & A. Miller, Federal Practice and Procedure: Civil § 2960 at 591. Another even more familiar principle is that the district court's findings of fact are not to be set aside unless clearly erroneous. See Fed.R.Civ.P. 52(a); Kittitas Reclamation District v. Sunnyside Valley Irrigation District, 626 F.2d 95, 98 (9th Cir.1980), cert. denied, 449 U.S. 1079, 101 S.Ct. 861, 66 L.Ed.2d 802 (1981). Together these principles suggest that a district court's refusal to find contempt should not be overturned lightly.

It does not follow, however, that the district court's actions are unreviewable. Here there was little dispute as to defendants' actual conduct. The controversy at the trial centered largely on the interpretation of defendants' activities in light of the meaning and purpose of the decree. We have referred to this process of interpretation as analogous to the interpretation of contracts. See Massachusetts Association for Retarded Citizens, Inc. v. King, 668 F.2d 602, 607 (1st Cir.1981) (citing United States v. ITT Continental Baking Co., 420 U.S. 223, 238, 95 S.Ct. 926, 935, 43 L.Ed.2d 148 (1975)). Courts of appeal have considerable freedom to review the district court's determination of such matters, which are often characterized, whether or not correctly, as "questions of law." Vertex Distributing 689 F.2d at 892; Eaton v. Courtaulds of North America, Inc., 578 F.2d 87, 90 (5th Cir.1978). Cf. 3 Corbin on Contracts § 554 (1960) (issues of contract meaning are actually all questions of fact although some are for the court alone rather than for the jury).

Courts, to be sure, have also spoken of reviewing the district court in contempt matters only for an abuse of discretion. See Washington-Baltimore Newspaper Guild v. The Washington Post Co., 626 F.2d 1029, 1031 (D.C.Cir.1980); V.T.A., Inc. v. Airco, Inc., 597 F.2d 220, 226-27 (10th Cir.1979). Even under that standard, however, the lower court's construction of the meaning of language in a consent decree is subject to closer scrutiny than is likely appropriate as to ordinary factual questions. See, e.g., United States v. ITT Continental Baking Co., 420 U.S. 223, 95 S.Ct. 926, 43 L.Ed.2d 148 (1975) (reversing lower court's interpretation of the term "acquiring").

The reason for differing articulations of the standard of review undoubtedly lies in the wide variety of circumstances in which contempt proceedings may arise. A civil contempt proceeding involving a commercial consent decree involves different considerations from one involving, say, a defaulting spouse under a support order. In dictum that has come to be regarded as the leading statement of the complaining party's right to a remedial order upon a showing of a violation of an injunction and resultant injury, Judge Magruder distinguished between coercive contempt proceedings and remedial proceedings of the sort involved here, stating that

[i]f the complainant makes a showing that respondent has disobeyed a decree in complainant's favor and that damages have resulted to complainant thereby, complainant is entitled as of right to an order imposing a compensatory fine. The court has no discretion to withhold the appropriate remedial order. In this respect, the situation is unlike that of criminal contempt where the court may withhold punishment for the past act of disobedience. An order imposing a compensatory fine in a civil contempt proceeding is thus somewhat analogous to a tort judgment for damages caused by wrongful conduct.

Parker v. United States, 153 F.2d 66, 70 (1st Cir.1946) (citations omitted). See also G & C Merriam Co. v. Webster Dictionary Co., 639 F.2d 29, 41 (1st Cir.1980); Vuitton et Fils, S.A. v. Carousel Handbags, 592 F.2d 126, 130 (2d Cir.1979); Rendleman, Compensatory Contempt: Plaintiff's Remedy When a Defendant Violates an Injunction, 1980 U.Ill.L.F. 971, 979.

This court has observed that in interpreting consent decrees entered into by private parties, courts adhere more closely to contract principles than when interpreting broader, programmatic decrees entered into in public law litigation, where a more flexible approach may be required. See Massachusetts Association for Retarded Citizens, Inc. v. King, 668 F.2d at 607-08. Private commercial disputants typically understand the business realities of their agreements and broader questions of public policy are not implicated. A civil finding of contempt in the private context essentially triggers a payment of money damages as in garden variety tort or contract litigation. There is no risk of the kinds of societal disruptions that may be threatened in the public law context where judicial discretion may well be crucial to securing complex legal goals. Those who give up the advantages of a lawsuit in return for obligations contained in a negotiated decree, rely upon and have a right to expect a fairly literal interpretation of the bargain that was struck and approved by the court.

This is not to say that a court should construe an ambiguous decree against the party burdened with compliance. The Federal Rules of Civil Procedure...