Original Brooklyn Water Bagel Co. v. Bersin Bagel Grp., LLC

• Decision Date: 25 March 2016
• Docket Number: No. 15–11748.,15–11748.
• Citation: 817 F.3d 719
• Parties: The ORIGINAL BROOKLYN WATER BAGEL CO., INC., a Florida corporation, Defendant–Appellant, v. BERSIN BAGEL GROUP, LLC, Interested Party–Appellee.
• Court: U.S. Court of Appeals — Eleventh Circuit

817 F.3d 719

The ORIGINAL BROOKLYN WATER BAGEL CO., INC., a Florida corporation, Defendant–Appellant,

v.BERSIN BAGEL GROUP, LLC, Interested Party–Appellee.

No. 15–11748.

United States Court of Appeals, Eleventh Circuit.

March 25, 2016.

Eric Lee, Lee & Amtzis, PL, Boca Raton, FL, Ira Marcus, Law Office of Ira Marcus, Fort Lauderdale, FL, for Defendant–Appellant.

Samantha Tesser Haimo, Jan Douglas Atlas, Kopelowitz Ostrow Ferguson Weiselberg Keechl, Fort Lauderdale, FL, for Interested Party–Appellee.

Before MARCUS, JORDAN, and BLACK, Circuit Judges.

MARCUS, Circuit Judge:

At issue today is whether the district court erred by refusing to issue an order to show cause why Bersin Bagel Group ("Bersin") should not be cited for contempt for prosecuting a series of state law claims in a Florida court after having been enjoined from doing so by the federal court. This is the second trip this case has taken to our Court. The first time we considered the matter, we concluded that the Court lacked jurisdiction to entertain the appeal and, therefore, we declined to rule on its merits. This time, now clothed with jurisdiction, we conclude that the district court did not abuse its discretion by declining to enjoin Bersin from prosecuting its case against Original Brooklyn Water Bagel ("OBWB") in state court. Nor did the district court err in declining to hold Bersin in contempt. The limits Congress has imposed on federal courts through the Anti–Injunction Act deprived the district court of the power to enjoin Bersin from prosecuting its state court suit. Moreover, even if the district court had the power to issue such an injunction, it would have been improper on the merits to bind Bersin to a settlement release it had no part in negotiating and from which it obtained no benefit. Thus, we affirm the judgment of the district court.

I.

Appellant OBWB is a Florida corporation and the parent company of Brooklyn Water Bagel Franchise Co. ("BWB"), which franchises a quick-service restaurant concept featuring the sale of bagels, coffee, bottled water, and related products. Steven M. Fassberg is OBWB's and BWB's CEO and former president.¹ Appellee Bersin is a Florida limited liability company that entered into a franchise agreement with BWB in August 2010 to open a restaurant in Miami–Dade County. Bersin alleges in its state court suit, among other things, that it suffered damages from the deal because of many serious misrepresentations made by Fassberg and his companies. However, OBWB argues that Bersin's claims were released as part of a settlement in a federal qui tam action involving allegedly false patent marking by OBWB.

The qui tam action was commenced by Mamma Mia's Trattoria, Inc. ("Mamma Mia's"), on behalf of itself and the United States in the United States District Court for the Southern District of Florida. The suit alleged violations of 35 U.S.C. § 292, which at that time provided, inter alia:

(a) ... Whoever marks upon, or affixes to, or uses in advertising in connection with any unpatented article, the word "patent" or any word or number importing that the same is patented, for the purpose of deceiving the public ... [s]hall be fined not more than $500 for every such offense.

(b) Any person may sue for the penalty, in which event one-half shall go to the person suing and the other to the use of the United States.

35 U.S.C. § 292 (2006).² Specifically, the suit asserted that OBWB falsely claimed to possess patents to a water treatment process that would create water identical to that used and sold in Brooklyn, New York. But, Mamma Mia's said, OBWB neither owned nor held such patents.

Mamma Mia's, with the consent of the United States Department of Justice, entered into a Settlement Agreement with OBWB. In it, OBWB agreed to make a total payment of $10,000, half of which was to be paid to Mamma Mia's and half to the United States in accordance with 35 U.S.C. § 292(b). The district court entered a Final Consent Judgment, finding that Mamma Mia's had standing to pursue and dispose of the claims on behalf of the United States and the general public pursuant to 35 U.S.C. § 292. In dismissing the action, the district court also

ORDER[ED] and ADJUDGE[D] that any future litigation alleging violations of 35 U.S.C. § 292 or any other statute or law related to false marking or false advertising, with regard to any past or existing product, advertising regarding patented process, water treatment system, technology, water, ice cubes, or "Cubsta machine", covered by this Stipulation of Dismissal, that has been marked, manufactured, sold, distributed, advertised or promoted by OBWB prior to entry of this Final Judgment, is barred.

A year after entry of the Final Consent Judgment, Bersin sued Fassberg and BWB in the Circuit Court of the Eleventh Judicial Circuit in and for Miami–Dade County, alleging that Bersin had been induced into investing more than $350,000 in a BWB franchise through fraud and misrepresentations, some of which concerned OBWB's advertising of patented technology. The complaint broadly claimed that Fassberg made a series of promises and representations that he ultimately did not fulfill. Bersin asserted three state law causes of action: (1) fraud in the inducement; (2) negligent misrepresentation and omission; and (3) violation of the Florida Deceptive and Unfair Trade Practices Act (FDUTPA), Fla. Stat. §§ 501.201 –.213. Of the three, only the last made direct mention of the patent issue, although the issue could be read as a component in the other counts.

In order to defeat Bersin's claims, OBWB moved the federal district court in the qui tam action to bar Bersin from prosecuting those claims in state court. The district court agreed and entered an Enforcement Order granting OBWB's motion. It concluded that Bersin was "asserting barred claims" in the state court action because "the main underlying basis for all of these claims [is] false marking and advertising, which [was] released and barred by the Settlement Agreement and Final Consent Judgment." As a result, Bersin was enjoined from pursuing each of its state claims.³

In Round One, we determined that the Court had no jurisdiction to entertain the appeal and, therefore, dismissed the case. Original Brooklyn Water Bagel Co., 768 F.3d at 1324. Specifically, we concluded that "enforcement of a permanent injunction is not final unless it holds a party in contempt of court or imposes a sanction for violating the injunction"—neither of which was present. Id. at 1325–26 (emphasis omitted). Since we found ourselves without jurisdiction to entertain the appeal, we "pass[ed] no judgment on whether the district court acted within its broad equitable authority in issuing so sweeping an injunction[ ] [and said] nothing about the enforceability or indeed about the advisability of the injunction entered by the district court." Id. at 1330.

On remand, the district court reconsidered its earlier decision. After conducting a hearing on the matter, the trial court vacated the injunction and lifted the order enjoining Bersin from pursuing its state court claims. OBWB nevertheless moved the district court for an order to show cause why Bersin should not be held in contempt for failing to comply with the now-vacated injunction. Not surprisingly, the district court denied the motion, observing that it had vacated the federal injunction that had formed the basis for barring Bersin from prosecuting its state law claims in state court.

II.

OBWB now appeals from the district court's denial of its motion for an order to show cause. We have jurisdiction over such denials and review them for an abuse of discretion. Thomas v. Blue Cross & Blue Shield Ass'n, 594 F.3d 814, 818, 821 (11th Cir.2010). Moreover, the grant or denial of injunctive relief is likewise reviewed only for an abuse of discretion. Klay v. United Healthgroup, Inc., 376 F.3d 1092, 1096 (11th Cir.2004). "A district court abuses its discretion if it applies an incorrect legal standard, follows improper procedures in making the determination, or makes findings of fact that are clearly erroneous." Martin v. Automobili Lamborghini Exclusive, Inc., 307 F.3d 1332, 1336 (11th Cir.2002) (internal quotation marks omitted). "A district court may also abuse its discretion by applying the law in an unreasonable or incorrect manner." Klay, 376 F.3d at 1096.

A.

The district court did not abuse its discretion. Having properly vacated its injunction barring Bersin from pursuing its state law claims, there was no basis to cite Bersin for contempt. Indeed, far from applying an incorrect legal standard or applying the law in an unreasonable manner, the district court correctly declined to exercise equitable authority it did not have.

OBWB claims, however, that the district court had the power to enjoin Bersin from pursuing its state court claims under the All Writs Act. We disagree. The All Writs Act allows the federal courts to "issue all writs necessary or appropriate in aid of their respective jurisdictions and agreeable to the usages and principles of law." 28 U.S.C. § 1651(a). This enables the federal courts to "safeguard not only ongoing proceedings, but potential future proceedings, as well as already-issued orders and judgments." Klay, 376 F.3d at 1099 (footnotes omitted). Thus, for example, a federal court may issue an order necessary to interpret and enforce a settlement agreement over which the court has retained jurisdiction or enjoin separate litigation of issues resolved by a class action. In re Managed Care, 756 F.3d 1222, 1233 (11th Cir.2014) ; Henson v. Ciba–Geigy Corp., 261 F.3d 1065, 1068 (11th Cir.2001). The authority granted by the All Writs Act, however, is cabined by the Anti–Injunction Act. Burr & Forman v. Blair, 470 F.3d 1019, 1027 (11th Cir.2006). The Anti–Injunction Act explicitly bars a federal court from enjoining "proceedings in a State court except as expressly authorized by Act of Congress, or where necessary in aid of its...