Klein–Becker USA, LLC v. Englert
Decision Date | 27 March 2013 |
Docket Number | No. 12–4076.,12–4076. |
Citation | 711 F.3d 1153 |
Parties | KLEIN–BECKER USA, LLC, a Utah limited liability company; Klein–Becker IP Holdings, LLC, a Nevada limited liability company, Plaintiffs–Appellees, v. Patrick ENGLERT, d/b/a Mr Finest Supplements, Mrfinestsupplements.com, Mrfinest.com, Strivect insales@ aol. com, Skin–Cream–Sales, Strivectin–Sales, Defendant–Appellant. |
Court | U.S. Court of Appeals — Tenth Circuit |
OPINION TEXT STARTS HERE
Andrew H. Koor, Suddarth & Koor, L.L.C., O'Fallon, MO, for Appellant.
Jason M. Kerr (David R. Parkinson, with him on the brief), Price, Parkinson and Kerr, PLLC, Salt Lake City, UT, for Appellees.
Before LUCERO, HARTZ, and MATHESON, Circuit Judges.
Klein–Becker USA and Klein–Becker IP Holdings (collectively “Klein–Becker”) sued Patrick Englert and Mr. Finest, Inc., for trademark infringement, copyright infringement, false advertising, and unfair competition under the Lanham Act; false advertising under the Utah Truth in Advertising Act; unfair competition under the Utah Unfair Practices Act; fraud; civil conspiracy; and intentional interference with existing and prospective business relations. Mr. Englert was sanctioned several times for failing to comply with court orders and discovery schedules.1 The third and final sanction resulted in the entry of default judgment for Klein–Beckeron all remaining claims. A bench trial determined damages.
Mr. Englert appeals the district court's entry of default judgment against him, determination of his personal liability and the amount of damages owed, grant of a permanent injunction, denial of a jury trial, and refusal to allow Mr. Englert to call a certain witness. Exercising jurisdiction under 28 U.S.C. § 1291, we affirm.
Klein–Becker owned and controlled all aspects of the trademarks StriVectin–SD and StriVectin (U.S. Trademark Registration Numbers 2,760,414 and 3,165,013) at all times relevant to this appeal.2 The StriVectin line of skin care products could only be sold through authorized sellers that Klein–Becker approved and trained.
Mr. Englert has never been an authorized seller of StriVectin. Nonetheless, in April 2006, Klein–Becker discovered that Mr. Englert was advertising and selling products marketed as StriVectin on eBay without authorization. Klein–Becker filed an Electronic Notice of Claimed Infringement with eBay on the belief that Mr. Englert either stole or counterfeited those items, and requested that eBay remove the alleged unlawful listings. In response, eBay removed a portion of Mr. Englert's listings. Mr. Englert challenged the removal, claiming that the items did not involve infringing materials and that Klein–Becker was required to file a complaint in federal court.
Some of the StriVectin products that Mr. Englert sold online were acquired in March 2005 as part of a scheme whereby Mr. Englert posed as a General Nutrition Center (“GNC”) store to purchase StriVectin products. GNC stores received special pricing from Klein–Becker, below regular wholesale rates. Mr. Englert purchased $82,050 of Klein–Becker's products directly from Klein–Becker by fraudulently altering the “Bill To” and “Ship To” addresses on GNC invoices to pose as a GNC store and purchase StriVectin at the special GNC rate (“the GNC scheme”). He sold those products online through eBay and other commercial web platforms, including his commercial websites, mrfinestsupplements.com and mrfinest.com.
On January 3, 2007, StriVectin products worth $320,000 were stolen from a Salt Lake City warehouse. Klein–Becker tracked these products by lot numbers, and the district court granted Klein–Becker's Ex Parte Emergency Motion for a Temporary Restraining Order and Seizure Order to resecure the products and stop their unlawful sales. While carrying out that order on March 1, 2007, Klein–Becker found $36,000 in stolen products at Mr. Englert's residence, where he conducts business as Mr. Finest, Inc., and as other alter egos through which he sold StriVectin products. Evidence at Mr. Englert's residence indicated that he had already sold additional units of stolen StriVectin online. Klein–Becker was able to repurchase 16 units of the stolen StriVectin from Mr. Englert's online platforms.
Klein–Becker sued Mr. Englert on May 9, 2006, for alleged trademark infringement, copyright infringement, false advertising, and unfair competition under the Lanham Act; false advertising under the Utah Truth in Advertising Act; unfair competition under the Utah Unfair Practices Act; fraud; civil conspiracy; and intentional interference with existing and prospective business relations.
On February 9, 2007, Klein–Becker moved for sanctions against Mr. Englert for delaying and obstructing court orders to expedite discovery before the preliminary injunction hearing. A magistrate judge found that Mr. Englert's discovery responses were “inadequate” and “almost contemptuous.” Klein–Becker USA, LLC v. Englert, No. 2:06–CV–378 TS, 2011 WL 147893 at *7 (D.Utah Jan. 18, 2011).
On March 21, 2007, Klein–Becker renewed its motion for sanctions after discovering that Mr. Englert had withheld additional information from discovery. On June 20, 2007, the magistrate judge found that Mr. Englert “deliberately withheld information and intentionally caused delay.” Id. at *9. He issued sanctions, requiring Mr. Englert to pay Klein–Becker's expenses related to the motion to compel and the renewed motion for sanctions. He warned Mr. Englert that sanctions would escalate if the violations continued.
Mr. Englert was represented by counsel until April 23, 2007, when the district court granted Mr. Englert's counsel's motion to withdraw. He proceeded pro se throughout the rest of the district court proceedings.
On August 2, 2007, Klein–Becker filed a motion for partial summary judgment, which the district court granted in part on the trademark infringement claim. On January 23, 2008, after Klein–Becker filed a third set of motions for sanctions, the district court ordered Mr. Englert to pay Klein–Becker $75,411.45 for expenses, including attorney fees, related to filing and prosecuting motions for sanctions during discovery.
On March 27, 2008, the district court found that Mr. Englert had failed to comply with the magistrate judge's order that he either appear in person or retain counsel and that he provide a complete privilege log no later than June 30, 2007. He granted Klein–Becker's motion for sanctions and, on March 27, 2008, entered a default judgment against Mr. Englert on all remaining claims pursuant to Fed.R.Civ.P. 37(b)(2)(A)(vi).
On January 18, 2011, after a bench trial on damages, the district court entered judgment in favor of Klein–Becker for $773,384.31, including $673,988.17 for Lanham Act damages, $78,056.14 for fraud damages, $11,340 for stolen property, and $10,000 for copyright damages. The court also awarded Klein–Becker all attorney fees and costs. Finally, the district court determined that Klein–Becker was entitled to a permanent injunction, but declined Klein–Becker's request to make the preliminary injunction permanent because circumstances had changed. Instead, the court ordered Klein–Becker to submit a proposed permanent injunction within 10 days. Upon inspection of the record, this court was unable to locate the permanent injunction. We ordered both parties to supplement the record with the permanent injunction, but neither party could do so. The appeal was then abated and the case was returned to the district court, where it addressed the issue. The district court issued a permanent injunction on March 5, 2013, and the abatement was lifted on March 8, 2013.
Mr. Englert appeals the district court's (1) entry of default judgment against him on all existing claims as sanctions for his discovery abuses, (2) award of damages to Klein–Becker, (3) determination that Klein–Becker is entitled to a permanent injunction, (4) denial of his demand for a jury trial, and (5) denial of his request to call an unlisted witness.
Based on Mr. Englert's discovery abuses, the district court decided that Klein–Becker was entitled to judgment on all claims against Mr. Englert/Mr. Finest, Inc. Under Rule 37(b)(2)(A)(vi) of the Federal Rules of Civil Procedure, a district court may issue sanctions, including “default judgment against the disobedient party” when a party disobeys a discovery order. Id.
Default judgment is generally considered a harsh sanction that should be used only when a party's noncompliance is due to “willfulness, bad faith, or any fault of the [disobedient party]” and not when a party is unable to comply with a discovery order. Nat'l Hockey League v. Metro. Hockey Club, Inc., 427 U.S. 639, 640, 96 S.Ct. 2778, 49 L.Ed.2d 747 (1976) (quoting Societe Internationale v. Rogers, 357 U.S. 197, 212, 78 S.Ct. 1087, 2 L.Ed.2d 1255 (1958)); see also In re Standard Metals Corp., 817 F.2d 625, 628–29 (10th Cir.1987) ( ” .
Mr. Englert argues that the court's imposition of default judgment was unnecessarily harsh because he was a pro se litigant, attempted to comply with the discovery orders, and was not on notice that the district court might sanction him with a default judgment.
We review discovery sanctions for abuse of discretion. See United States v. Brown, 592 F.3d 1088, 1090 (10th Cir.2009). Sanctions must be “just” and related to the claim “at issue in the order to provide discovery.” Ehrenhaus v. Reynolds, 965 F.2d 916, 920 (10th Cir.1992). To determine if a sanction such as dismissal or default judgment is appropriate, courts should consider “(1) the degree of actual prejudice to the defendant; (2) the amount of interference with the judicial process; ... (3) the culpability...
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