Mercedes-Benz Grp. AG v. A-Z Wheels LLC
| Decision Date | 23 June 2022 |
| Docket Number | 16-CV-875 JLS (MDD) |
| Court | U.S. District Court — Southern District of California |
| Parties | MERECES-BENZ GROUP AG, a German corporation, Plaintiff, v. A-Z WHEELS LLC d/b/a USARim.COM; EUROTECH WHEELS, a California company; GALAXY WHEELS & TIRES, LLC, a California company; INFOB AHN INTERNATIONAL, INC. d/b/a INFOBAHN; EUROTECH; EUROTECH LUXURY WHEELS; EUROTECH WHEELS; USARim; RYAN MOALEMI, an individual; RASOOL MOALEMI a/k/a RUSS MOALEMI, an individual; JOSHUA MOALEMI, an individual; and Does 1-10 inclusive, Defendants. |
ORDER (1) VACATING HEARING ON CONTEMPT SANCTIONS MOTION; (2) GRANTING IN PART MOTION FOR CONTEMPT SANCTIONS (3) AWARDING COMPENSATORY AND COERCIVE SANCTIONS; AND (4) SETTING BRIEFING SCHEDULE FOR MOTION FOR ATTORNEYS' FEES (ECF NO. 164)
Presently before the Court is Plaintiff Mercedes-Benz Group AG's[1] Motion for Contempt Sanctions (“Mot.,” ECF No. 164). Also before the Court are Defendants' Opposition to (“Opp'n,” ECF No. 165) and Plaintiff's Reply in Support of (“Reply,” ECF No. 166) the Motion. The Court finds this matter appropriately decided on the papers without oral argument and accordingly VACATES the hearing scheduled for June 30, 2022. See S.D. Cal. CivLR 7.1(d)(1); see also Conn. Gen. Life Ins. Co. v. New Images of Beverly Hills, 56 Fed.Appx. 826, 827 (9th Cir. 2003) ( argument that district court should have held evidentiary hearing before holding appellant in contempt and sanctioning appellant as “[a]ppellant was afforded notice and an opportunity to be heard; nothing more was required”) (citing United States v. Ayres, 166 F.3d 991, 995 (9th Cir. 1995)). Having considered the Parties' arguments and the law, the Court GRANTS IN PART Plaintiff's Motion and AWARDS compensatory sanctions in the amount of $100,000 plus attorneys' fees and a coercive forward-looking sanction of $1,000 per mark for future violations.
In 2016, Plaintiff, a producer of luxury automotive vehicles and parts, initiated the instant action against Defendants sellers of counterfeit automotive wheels, for federal trademark infringement and counterfeiting, federal unfair competition and false designation of origin, trademark dilution, infringement of U.S. design patents, and related violations of California state law. See generally ECF No. 1 (“Compl.”). In January 2018, Plaintiff moved for partial summary judgment against Defendants on its trademark infringement and counterfeiting claim and its design patent infringement claim. See generally ECF No. 58. Following briefing and oral argument on the motion, see ECF No. 90, on August 13, 2018, the Court granted Plaintiff's motion for partial summary judgment in its entirety, see generally ECF No. 91. Plaintiff subsequently filed a motion for partial summary judgment for statutory damages, injunctive relief, and attorneys' fees. See generally ECF No. 120. On November 2, 2020, the Court denied without prejudice the motion as to statutory damages and attorneys' fees but granted permanent injunctive relief enjoining Defendants from, inter alia, continuing to sell products that infringe the word mark “MERCEDES-BENZ” or three “Three-Point Star” marks registered to Plaintiff. See generally ECF No. 127.
On October 4, 2021, Plaintiff filed a motion for contempt. See ECF No. 145. On November 30, 2021, the Court held a half-day hearing on the contempt motion, at which both sides presented evidence and witness testimony. See ECF No. 155. On January 31, 2022, the Court granted Plaintiff's contempt motion. See ECF No. 158 (the “Contempt Order”). The Contempt Order thoroughly summarized the evidence of Defendants' contempt, and the Court incorporates by reference the summary set forth therein. See Id. at 3-6. In brief, the Court found that the evidence clearly and convincingly showed Defendants had violated the permanent injunction and that Defendants failed to make any argument concerning their inability to comply. Id. at 6-8. The Court then determined that a finding of contempt would serve a coercive purpose given Defendants' failure to evidence their alleged cessation of infringing business activity. Id. at 9-10. In so doing, the Court reasoned that Defendant Rasool Moalemi's self-serving testimony at the contempt hearing and Defendants' attorney argument were “clearly insufficient to demonstrate compliance with the permanent injunction and a cessation of infringing business activities.” Id. at 9 (internal quotation marks and citation omitted). The Court further found that an order of contempt would serve a compensatory purpose, rejecting Defendants' argument that the twelve infringing center caps sold to Plaintiff's investigator “sold for less than $100” and noting that Plaintiff potentially was entitled to both disgorgement of profits and its attorneys' fees. Id. at 10. Accordingly, the Contempt Order required Defendants to fully comply with the permanent injunction within fourteen days, and, within sixty days, to produce to Plaintiff certain information relevant to a determination of Defendants' profits on sales in violation of the permanent injunction and an accounting of the destruction or disposal of infringing products in Defendants' possession. Id. at 11.
The Court subsequently ordered the Parties to file a joint status report regarding Defendants' compliance with the Contempt Order. See ECF No. 159 (“Joint Br.”). Defendants represent in the Joint Brief that they are in full compliance with the Court's permanent injunction. See id. at 2. Plaintiff contests this statement, contending that “Defendants had not complied with the Permanent Injunction Order at time of the hearing on the Motion for Contempt of that Order, and have not provided any evidence to substantiate their current claim of otherwise having complied.” Id. at 3. Concerning the documents Defendants were ordered to produce to Plaintiff to assess Plaintiff's damages, Defendants indicate that Id. at 3; 5; 6 (citations omitted). Plaintiff contends that Defendants have provided no documents accounting for their profits or the sourcing of Defendants' infringing parts and that the Declaration of Russ Moalemi attached to the Joint Brief is wholly inadequate. Id. at 3-5, 5-6, 6-7. Concerning the destruction of the infringing products and an accounting thereof, Defendants' position is that, “[a]s discussed and documented with the Court at the November 30, 2021 hearing, Defendants have destroyed all inventory in the process of closing down all of their business operations.” Id. at 7 (citation omitted). Plaintiff counters that the infringing wheel caps and wheel sets shipped to its investigator are still in Plaintiff's possession, so clearly not all infringing products have been destroyed; at any rate, “a mere statement confirming disposal made by either Defendants or counsel in the present circumstances would be insufficient to satisfy the accounting requirement set forth by the Court.” Id. at 7-8. Thereafter, the Court set a briefing schedule and a hearing date for the instant Motion.
The district court has wide latitude and a broad range of civil contempt sanctions at its disposal, such as “fine[s], imprisonment, receivership, and a broader category of creative, non-traditional sanctions.” United States v. States of Tenn., 925 F.Supp. (W.D. Tenn. 1995); see also Hook v. Arizona, 907 F.Supp. 1326, 1339 (D. Az. 1995). Sanctions may be imposed to coerce defendants into compliance with the court's order, to compensate the party pursuing the contempt action for losses sustained as a result of the contemptuous behavior, or both. United States v. United Mine Workers, 330 U.S. 258, 303-04 (1947); United States v. Bright, 596 F.3d 683, 696-97 (9th Cir. 2010).
Regarding coercive sanctions, “[g]enerally, the minimum sanction necessary to obtain compliance is to be imposed.” Whittaker Corp. v. Execuair Corp., 953 F.2d 510, 517 (9th Cir. 1992) (citing Spallone v. United States, 493 U.S. 265, 280 (1990)). Compensatory sanctions, meanwhile, “are limited to ‘actual losses sustained as a result of the contumacy.'” Gen. Signal Corp. v. Donallco, Inc., 787 F.2d 1376, 1380 (9th Cir. 1986) (quoting Shuffler v. Heritage Bank, 720 F.2d 1141, 1148 (9th Cir. 1983)) (emphasis in original); see also United Mine Workers, 330 U.S. at 304 (). In a trademark case such as this one, “[t]he district court may use the Lanham Act as a guide for imposing contempt sanctions.” Toyo Tire & Rubber Co. v. Hong Kong Tri-Ace Tire Co., 281 F.Supp.3d 967, 988 (C.D. Cal. 2017) (citing Howard Johnson Co. v. Khimani, 892 F.2d 1512, 1519 (11th Cir. 1990)). Further, “[c]ompensatory awards may, under certain circumstances, include an award to the aggrieved party of the attorneys' fees and costs in bringing the contempt proceeding.” Id. at 992 (citations and footnote omitted). “[A]ttorneys' fees in a civil contempt proceeding are limited to those reasonably and necessarily incurred in the attempt to enforce compliance.” Id. at 993 (citations omitted).
Plaintiff seeks maximum statutory damages under the Lanham Act of $2,000,000 per mark, or $6,000,000 total, given that Defendants' infringement was blatantly willful. Mot. at 6-10 (citing, inter alia, 15 U.S.C. § 1117(c)(2)).
Alternatively Plaintiff asks the Court to award maximum statutory damages under 15 U.S.C. § 1117(c)(1) of $200,000 per mark, or $600,000 total. Id. at...
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