Colonial Williamsburg Foundation v. Kittinger Co.

• Decision Date: 24 October 1994
• Docket Number: No. 92-1925,92-1925
• Citation: 38 F.3d 133
• Parties: The COLONIAL WILLIAMSBURG FOUNDATION, a Virginia non-stock corporation, Plaintiff-Appellee, v. The KITTINGER COMPANY, a North Carolina corporation; Michael P. Carlow; Nicholas J. Defino, Defendants-Appellants, and Ladd Furniture, Inc.; Maytag Corporation, Defendants.
• Court: U.S. Court of Appeals — Fourth Circuit

Page 133

38 F.3d 133

The COLONIAL WILLIAMSBURG FOUNDATION, a Virginia non-stock corporation, Plaintiff-Appellee, v. The KITTINGER COMPANY, a North Carolina corporation Michael P. Carlow; Nicholas J. Defino Defendants-Appellants and Ladd Furniture, Inc.; Maytag Corporation, Defendants.

No. 92-1925.

United States Court of Appeals Fourth Circuit.

Argued June 8, 1993.

Decided Oct. 24, 1994.

ARGUED: Robert F. Wagner, Dickie, McCamey & Chilcote, P.C., Pittsburgh, PA, for appellants. George H. Gromel, Jr., Hunton & Williams, Richmond, VA, for appellee. ON BRIEF: Steven B. Larchuk, Dickie, McCamey & Chilcote, P.C., Pittsburgh, PA, Alexander H. Slaughter, McGuire, Woods, Battle & Boothe, Richmond, VA, for appellants. Douglas W. Kenyon, Hunton & Williams, Raleigh, NC, for appellee.

Before RUSSELL, WIDENER, and HALL, Circuit Judges.

Affirmed by published opinion. Judge WIDENER wrote the opinion, in which Judge DONALD RUSSELL and Judge K.K. HALL concurred.

OPINION

WIDENER, Circuit Judge:

Michael P. Carlow, Chairman of the Board of Kittinger Company, appeals the decision of the district court holding him in civil contempt. Kittinger, Carlow, and Nicholas J. Defino, President of Kittinger, appeal the district court's decision enjoining Kittinger from manufacturing its HK furniture line and the district court's award of attorneys' fees, costs, and expenses. ¹ Finding no error, we affirm.

For more than fifty years the Colonial Williamsburg Foundation and Kittinger did business together. See Colonial Williamsburg Foundation v. Kittinger Co., 792 F.Supp. 1397, 1400 (E.D.Va.1992). ² Pursuant to a licensing agreement, Kittinger manufactured and sold antique furniture reproductions and adaptations that Kittinger designed in collaboration with Colonial Williamsburg from original pieces in Colonial Williamsburg's collection. See Kittinger, 792 F.Supp. at 1399-1400. On February 26, 1990, Colonial Williamsburg terminated the licensing agreement because it feared that frequent ownership changes and financial hard times would necessitate Kittinger's closing. See 792 F.Supp. at 1400.

In June 1990 Carlow acquired control of Kittinger and tried to negotiate a continuation of the licensing agreement, but Colonial Williamsburg had already entered into a licensing agreement with another company. See 792 F.Supp. at 1400. Consequently, in late 1990, Kittinger filed a declaratory judgment action in the United States District Court for the Western District of New York, seeking to have both certain provisions of the licensing agreement and certain trademarks of Colonial Williamsburg declared unenforceable. See 792 F.Supp. at 1400. On January 25, 1991, Colonial Williamsburg filed the instant case in the United States District Court for the Eastern District of Virginia, alleging breach of contract, federal trademark infringement, false designation of origin, and related Virginia statutory and common law violations. See 792 F.Supp. at 1400. On February 19, 1991, Colonial Williamsburg and Kittinger entered into a settlement agreement that provided for the dismissal of Kittinger's declaratory judgment action in the Western District of New York and the entry of a consent judgment in Colonial Williamsburg's suit in this case in the Eastern District of Virginia. ³ See 792 F.Supp. at 1400. Pursuant to the settlement agreement, the district court for the Eastern District of Virginia entered the consent judgment on February 25, 1991. See 792 F.Supp. at 1400.

On April 30, 1991, Defino, then Kittinger's Vice-President of Operations, filed an affidavit with the district court stating that Kittinger had complied with the consent judgment. See 792 F.Supp. at 1400, 1402. On February 5, 1992, Colonial Williamsburg filed a motion requesting both an order to show cause why Kittinger, Carlow, and Defino should not be held in contempt for violating the consent judgment and an order requesting certain discovery proceedings. See 792 F.Supp. at 1402. After the district court entered both orders, various events occurred resulting in, among other things, the seizure and impounding of certain materials retained by Kittinger, a motion for sanctions against defendants for violating the discovery order, and a continuation and consolidation of the hearings for show cause and sanctions. See 792 F.Supp. at 1402-03.

After hearing, the district court held Kittinger, Carlow, and Defino in civil contempt for violating both the consent judgment and the discovery order. See 792 F.Supp. at 1406. The district court then held each jointly and severally liable pursuant to the following sanctions: a disgorging of profits equal to one-third of the revenues generated from the sale of offending pieces; accrued interest from April 15, 1991 on unpaid royalties that were admittedly due and owing; reasonable attorneys' fees and costs to be determined by the parties or by petition to the court; the surrender of all offending products, regardless of their stage in production, and various paraphernalia, including papers, used in manufacturing, within forty-five days of the entry of the Final Order. See 792 F.Supp. at 1406, 1409-10. The district court also enjoined Kittinger from marketing or selling products derived from the offending pieces, plans, or drawings, required Kittinger to allow Colonial Williamsburg certain inspection rights four times per year for the next four years, and stated that the consent judgment would remain in effect to the extent its terms did not conflict with the Final Order. See 792 F.Supp. at 1410.

After the parties were unable to agree on reasonable attorneys' fees and costs, Colonial Williamsburg filed a motion requesting attorneys' fees of $308,511.75 and costs and expenses of $47,030.19. Defendants filed numerous specific objections to the fees, costs, and expenses and filed general objections claiming that they were unreasonable, improperly documented, and duplicitous and unnecessary. The defendants also filed a motion to amend or alter the judgment in several respects, and the district court stayed the execution of the Final Order until resolution of defendants' motion.

By Memorandum and Order entered July 1, 1992, the district court ordered that Kittinger be given control of the seized and impounded items and that it dispose of them in accordance with the Final Order, that Kittinger, at the request of Colonial Williamsburg, either surrender or destroy all drawings, files, and work-in-progress pieces, and that Kittinger retain certain seized and impounded items not affected by the consent judgment. The district court also prohibited Colonial Williamsburg from selling any finished goods that were not destroyed and ordered it to keep confidential all information obtained from Kittinger. By Memorandum and Order entered July 6, 1992, the district court awarded Colonial Williamsburg modified attorneys' fees, costs, and expenses in the amount of $361,627.01. ⁴ Defendants now appeal.

Carlow claims that the district court, based on its own findings of fact, abused its discretion in holding him in civil contempt for violations of the consent judgment. He claims that the district court made no specific findings of misconduct with regard to him and premised its finding of contempt on the fact that he, as President of Kittinger, had not done enough to guarantee compliance with the consent judgment. Because Carlow had delegated day-to-day management authority to Defino, he claims that he cannot be strictly or vicariously liable for the direct violations of Defino.

Because it is uncontested that Carlow knew of the consent judgment and discovery order; that the consent judgment and discovery order were in favor of Colonial Williamsburg; and that the violations caused Colonial Williamsburg harm, the only issue with regard to Carlow is whether the facts show that by his conduct he "violated the terms of the decree, and had knowledge (at least constructive knowledge) of such violations...." See Omega World Travel, Inc. v. Omega Travel, Inc., 710 F.Supp. 169, 170 (E.D. Va.1989) (stating four factors necessary for finding of contempt), aff'd by unpublished op., 905 F.2d 1530 (4th Cir.1990). Based on Carlow's deposition testimony that he did not read the consent judgment and Defino's deposition testimony that Carlow never discussed the consent judgment with him, the district court found that "no responsible person in the hierarchy of Kittinger made any effort to see that the terms and requirements of the Consent Judgment were disseminated to the employees of Kittinger in a manner that would alert them to their legal obligations thereunder." Kittinger, 792 F.Supp. at 1403. The district court further found that Carlow signed a letter sent to Kittinger's customers directly referencing Kittinger's past relationship with Colonial Williamsburg and that his actions were "deliberate, willful, and in bad faith." 792 F.Supp. at 1404-05. Based on these findings the district court stated:

The imposition of joint and several liability on Carlow is justified under the facts of this case.... Further, the case law establishes that an individual who is responsible for ensuring that a corporation complies with a court order cannot escape liability merely by removing himself from the day to day operations of the corporation and washing his hands of responsibility. In the instant case, the evidence is clear that Carlow took none of the affirmative steps necessary to ensure Kittinger's compliance with the Consent Judgment. Carlow's total dereliction of responsibility cannot be countenanced by this Court.

792 F.Supp. at 1406-07 (citations omitted).

In contesting the finding of contempt, Carlow attempts to distinguish the case law relied upon by the district court, namely Wilson v. United States, 221 U.S. 361, 376, 31 S.Ct. 538, 542-43, 55 L.Ed. 771 (1911), Connolly v. J.T. Ventures, 851 F.2d 930, 934-35 (7th Cir.1988), and NLRB v. Maine Caterers, Inc., 732 F.2d 689, 691 (1st...