Levi Strauss & Co. v. Sunrise Intern. Trading Inc.

• Decision Date: 05 May 1995
• Docket Number: No. 93-4844,93-4844
• Citation: 51 F.3d 982
• Parties: LEVI STRAUSS & CO., Plaintiff-Appellee, v. SUNRISE INTERNATIONAL TRADING INC., Defendant, Duty Free Worldwide Shops, Inc., a/k/a Duty Free Shops, International Product Locators, Defendants-Appellants, Georgio Ceciarelli, Defendant, Robert Sussman, Defendant-Appellant, Unique Brush Company, Ron Carillo, Eduardo Garza, Eduardo Garza y Cia, Defendants, Pavignani Ceciarelli, Inc., Vicelli International Corp., International Atlantic Corp., Defendants-Appellants.
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 982

51 F.3d 982

34 U.S.P.Q.2d 1712

LEVI STRAUSS & CO., Plaintiff-Appellee, v. SUNRISE INTERNATIONAL TRADING INC., Defendant Duty Free Worldwide Shops, Inc., a/k/a Duty Free Shops International Product Locators, Defendants-Appellants Georgio Ceciarelli, Defendant Robert Sussman, Defendant-Appellant, Unique Brush Company, Ron Carillo, Eduardo Garza, Eduardo Garza y Cia, Defendants, Pavignani Ceciarelli, Inc., Vicelli International Corp., International Atlantic Corp., Defendants-Appellants.

No. 93-4844.

United States Court of Appeals, Eleventh Circuit.

May 5, 1995.

Frederick Albert Cary, Ft. Lauderdale, FL, for all appellants.

Stephan P. Lange, Fort Lauderdale, FL, for Garza y Cia.

Peter H. Goldsmith, Timothy R. Cahn, Joshua R. Floum, San Francisco, CA, for Levi Strauss.

Appeal from the United States District Court for the Southern District of Florida.

Before KRAVITCH and CARNES, Circuit Judges, and HILL, Senior Circuit Judge.

KRAVITCH, Circuit Judge:

This is an appeal from the district court's entry of a preliminary injunction and asset freeze in a suit brought under the Lanham Act. We AFFIRM.

I.

Levi Strauss & Co. ("LS & CO"), a Delaware corporation with its principal place of business in San Francisco, California, manufactures blue jeans which are sold in the United States and abroad. LS & CO holds valid United States trademarks for "Levi's 501's," a style of button-fly jeans.

Appellants are individuals and corporations transacting business in Florida. Appellants are not authorized to trade in LS & CO products or to use LS & CO trademarks.

On July 1, 1993, LS & CO filed a complaint against appellants in the Southern District of Florida, claiming that appellants had offered for sale tens of thousands of pairs of counterfeit Levi's 501 jeans. Specifically, LS & CO contended that appellants were part of an "illicit enterprise involving the manufacture of large quantities of counterfeit Levi's in the People's Republic of China and elsewhere." It alleged that appellants had bought and sold counterfeit Levi's and arranged for their shipment to mostly European buyers. LS & CO stated federal claims of trademark infringement, false designation of origin, false description, and racketeering, and state claims of statutory trademark dilution, injury to business reputation, and unfair competition. It sought a temporary restraining order, an entry inspection of appellants' business premises, preliminary and permanent injunctions, and damages.

The district court issued the temporary restraining order and granted LS & CO's request for an inspection of appellants' business premises in Florida. The inspection revealed voluminous documents demonstrating that appellants had engaged in allegedly illegal transactions. The inspection also revealed two pairs of counterfeit Levi's 501 jeans. The documents and jeans were seized.

The district court held a brief evidentiary hearing regarding the preliminary injunction, at which LS & CO's corporate security director, Thomas Nagle, testified. The district court also reviewed the evidence seized from appellants' business premises and sworn statements offered by LS & CO. Although appellants argued against the preliminary injunction, they presented no opposing evidence.

The district court adopted LS & CO's proposed findings of fact and conclusions of law. It found that appellants had engaged in an illicit enterprise involving numerous transactions to manufacture and sell counterfeit LS & CO products; had created fraudulent documents certifying their counterfeited products to be "Levi's" jeans made in the United States; and had copied and used the "Levi's" mark, trade name, and trade dress without permission. The district court also found that there was evidence indicating that appellants' business premises in Florida were used extensively to facilitate and perpetrate the ongoing fraud.

In accordance with its findings, the district court issued a preliminary injunction preventing appellants from (1) participating in transactions involving any genuine or counterfeit LS & CO product; (2) representing that any product with which they dealt was connected to LS & CO; (3) representing that they were connected in any way with LS & CO; and (4) further diluting or infringing on any "Levi's" trademarks or otherwise damaging LS & CO's reputation. The injunction further required appellants to surrender any inventory or material with "Levi's" marks and to file a report reflecting compliance with the injunction. Finally, the injunction imposed an asset freeze on appellants, limiting appellants' spending to enumerated business expenses and a $2000 per month living allowance.

II.

Appellants maintain that the district court did not have subject matter jurisdiction because the counterfeit jeans were not manufactured or intended for final sale in the United States. We review a district court's decision regarding subject matter jurisdiction de novo. Motorcity of Jacksonville, Ltd. v. Southeast Bank, 39 F.3d 292, 295 (11th Cir.1994).

The Lanham Act applies to all "commerce within the control of Congress." 15 U.S.C. Sec. 1127. The Supreme Court applied the Lanham Act to extraterritorial activities in Steele v. Bulova Watch Co., 344 U.S. 280, 73 S.Ct. 252, 97 L.Ed. 319 (1952). In Bulova, a United States citizen purportedly manufactured and sold counterfeit watches in Mexico, allegedly infringing the United States trademark of a United States corporation. Bulova held that the "broad jurisdictional grant" of the Lanham Act extended to Steele's extraterritorial activities because "[h]is operations and their effects were not confined within the territorial limits of a foreign nation." Id. 344 U.S. at 286, 73 S.Ct. at 256. The Bulova court noted that both parties were American, that U.S. components were used in the watches, that the Mexican watches were sometimes repaired at U.S. jewelers, and that the Mexican watches could adversely affect Bulova's trade reputation in the United States and abroad. It also observed that an exercise of jurisdiction did not impose on the sovereignty of any other nation. Id.

Our court recently applied the Lanham Act to extraterritorial activities in Babbit Electronics, Inc. v. Dynascan Corp., 38 F.3d 1161 (11th Cir.1994). In Babbit, we held that the Lanham Act applied to sales of cordless telephones outside the United States because the telephones were shipped through a United States free trade zone. Id. at 1179. In so holding, we noted that the following facts also supported jurisdiction: the primary corporate defendant was a United States corporation, negotiations had occurred in the United States, and sales had been orchestrated from a Florida office.

The instant case is similar to Bulova and Babbit. The plaintiff is a United States corporation. Some or all of the corporate defendants are United States corporations. All of the individual defendants are United States residents. Counterfeit jeans were discovered at appellants' business premises in Florida, and the evidence suggests that some of the counterfeit jeans were shipped through the United States on their way to Europe. The alleged transactions involved fraudulent documents stating that the jeans were made in the United States. Moreover, many of the alleged illegal activities, including locating and negotiating with prospective buyers and arranging for shipment, occurred in the United States. In light of these facts, we conclude that the district court had subject matter jurisdiction over LS & CO's claims. ¹

III.

Appellants argue that there was insufficient evidence to support the preliminary injunction. We review the grant of a preliminary injunction for abuse of discretion, giving no deference to the district court's legal determinations. Church v. City of Huntsville, 30 F.3d 1332, 1341-42 (11th Cir.1994).

To support a preliminary injunction, a district court need not find that the evidence positively guarantees a final verdict in plaintiff's favor. Instead, it must determine whether the evidence establishes: "(1) a substantial likelihood of success on the merits; (2) a substantial threat of irreparable injury if the injunction were not granted; (3) that the threatened injury to the plaintiffs outweighs the harm an injunction may cause the defendant; and (4) that granting the injunction would not disserve the public interest." Church, 30 F.3d at 1342. At the preliminary injunction stage, a district court may rely on affidavits and hearsay materials which would not be admissible evidence for a permanent injunction, if the evidence is "appropriate given the character and objectives of the injunctive proceeding." Asseo v. Pan American Grain Company, 805 F.2d 23, 26 (1st Cir.1986).

Appellants' main contention is that the record contains insufficient evidence to show that they were involved in the manufacturing and sale of counterfeit Levi's. We disagree. Our review of the record has revealed sufficient evidence to establish a substantial likelihood of proving that each appellant engaged in the alleged activity. The record contains the testimony of Thomas B. Nagle, LS & CO's corporate security director; sworn statements regarding the alleged counterfeit jeans transactions; and sworn statements regarding the inspections of appellants' Florida business premises. The record includes numerous documents linking Duty Free Shops and Robert Sussman to counterfeit jean sales. It contains a copy of a fax from Sussman on International Product Locators letterhead describing specifications for 20,000 pairs of jeans to be sent from China. The record also has invoices for International Atlantic and Vicelli International for large purchases of jeans using the same address as Duty Free, as well as suspicious letters on Pavignani Ceciarelli and Vicelli International letterhead which appear to relate to counterfeit jean sales.

Appellants' claim that the record contains insufficient evidence to prove that LS & CO...