Polo Fashions, Inc. v. Stock Buyers Intern., Inc.

• Decision Date: 26 April 1985
• Docket Number: No. 84-3332,84-3332
• Citation: 760 F.2d 698
• Parties: , 226 U.S.P.Q. 117 POLO FASHIONS, INC., et al., Plaintiffs-Appellees, v. STOCK BUYERS INTERNATIONAL, INC.; Columbus Business Systems, Inc.; Eugene Sergio and Morton Ladowitz, Defendants-Appellants, Frank Edmunds, et al., Third Party Defendants.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 698

760 F.2d 698

53 USLW 2552, 226 U.S.P.Q. 117

POLO FASHIONS, INC., et al., Plaintiffs-Appellees, v. STOCK BUYERS INTERNATIONAL, INC.; Columbus Business Systems, Inc.; Eugene Sergio and Morton Ladowitz Defendants-Appellants Frank Edmunds, et al., Third Party Defendants.

No. 84-3332.

United States Court of Appeals Sixth Circuit.

Argued Feb. 21, 1985.

Decided April 26, 1985.

Mary Jane McFadden, Dublin, Ohio, Carl Genberg, argued, Genberg and Aucoin, Columbus, Ohio, for defendants-appellants.

Maryann B. Gall, Columbus, Ohio, Robert S. Groban, Jr., argued, Friedman and Shaftan, P.C., Milton Springout, Amster, Rothstein & Engelberg, New York City, for plaintiffs-appellees.

Before LIVELY, Chief Judge, ENGEL, Circuit Judge, and PECK, Senior Circuit Judge.

LIVELY, Chief Judge.

The defendants appeal from jury convictions of criminal contempt and the punishments imposed by the district court.

I.

Polo Fashions, Inc. (Polo) filed suit in the district court on January 21, 1982, alleging that Stock Buyers International, Inc. (Stock Buyers), Columbus Business Systems, Inc. (CBS), and Eugene B. Sergio were engaged in activities that infringed Polo's registered trademarks. In its complaint Polo sought injunctive relief, an accounting, costs and attorney fees. On February 3, 1982 the district court entered an agreed preliminary injunction order.

On August 9, 1983 Polo moved the district court to issue civil and criminal contempt citations against the three defendants and Morton Ladowitz, an officer, director and shareholder of Stock Buyers. Polo also requested that its attorneys be appointed to prosecute the criminal contempt charges. On August 24, 1983 the district court entered an order in which it determined that there was probable cause to believe that the defendants and Ladowitz willfully violated the terms of the agreed injunction, and that "the appointment of Polo's counsel to prosecute the criminal contempt will facilitate an expeditious resolution of these charges since Polo's counsel is fully familiar with this matter." The order, entered pursuant to Rule 42(b), Fed.R.Crim.P., appointed two New York City law firms together with Polo's counsel of record, a Columbus, Ohio attorney, to prosecute the criminal contempt charges. All appointees were attorneys for Polo.

The district court then signed and entered a statement of charges which had been prepared by Polo's counsel. The statement of charges was amended prior to hearing without objection. The defendants and Ladowitz pled not guilty to the charges and a trial date was set. (Hereafter Ladowitz is referred to as a defendant along with the three original defendants). The defendants made a motion to vacate the order appointing special counsel on the ground that appointed counsel were "too privately interested" to properly prosecute the case. The district court denied this motion, along with others filed by the defendants, but it granted the defendants' motion for trial by jury.

Trial of the contempt charges commenced on February 21, 1984 before the district judge and a jury. Two attorneys for Polo, one from Columbus and one from New York, appeared for the prosecution. No one from the office of the United States Attorney appeared in the proceedings. The jury found all four defendants guilty and the district court passed sentence on April 25, 1984. The individual defendants, Sergio and Ladowitz, were each sentenced to imprisonment for six months and fined $100,000, to be paid to Polo. The corporate defendants were jointly fined $100,000. All defendants have appealed, and we reverse for a new trial.

II.

The defendants have presented ten separate claims of reversible error. However, one assignment is dispositive. Therefore, we will not discuss those issues which are not likely to arise at a retrial or the many claims of error that are based on trial rulings which were made in the exercise of the trial judge's discretion and under different circumstances than will probably exist at a retrial. There are two claims of error other than the dispositive one which must be considered, however, as they would require dismissal rather than retrial if the court were to agree with the defendants.

A.

The defendants argue that the injunction was too vague to be the basis of a contempt action. We disagree. The preliminary injunction was sufficiently clear and specific to provide the basis for criminal contempt proceedings. It was an agreed order and none of the original defendants ever objected to its terms, claimed they were unclear or sought a clarification prior to institution of contempt proceedings. The defendants acted at their own risk by failing to seek the court's interpretation of the injunction if they had any good faith doubt as to its meaning or by failing to have it set aside or amended if they thought it was defective. Once the injunction was entered the defendants were bound to obey it. Where, as here, the issuing court has jurisdiction, the validity of the injunction is not an issue in a criminal contempt prosecution. Walker v. City of Birmingham, 388 U.S. 307, 315-20, 87 S.Ct. 1824, 1829-32, 18 L.Ed.2d 1210 (1967); United States v. United Mine Workers, 330 U.S. 258, 293-94, 67 S.Ct. 677, 695-96, 91 L.Ed. 884 (1947).

B.

The defendants contend that the evidence of willful violation by CBS was insufficient to support the guilty verdict and that Ladowitz was not shown to have actual knowledge of the preliminary injunction. We find the evidence of involvement by CBS in activities prohibited by the injunction fully sufficient to support the verdict. As to Ladowitz, he was an officer, director and shareholder of Stock Buyers, a party to the consent injunction. Thus, by the terms of Rule 65(d), Fed.R.Civ.P., he was bound by the order whether or not he had actual notice. Further, in her opening statement at the contempt trial one of the attorneys for the defendants stated that "these gentlemen," referring to Sergio and Ladowitz, went to their attorney and asked that he explain to them how to comply with the injunction. Therefore, the evidence of Ladowitz's knowledge of the injunction provisions was sufficient.

III.

The determinative factor relates to the appointment of opposing counsel in the civil case as sole prosecutors of the criminal contempt action. The defendants maintain that in the absence of any supervision or control by the United States Attorney's office, the prosecution of a criminal contempt action by counsel for a party in the underlying civil litigation constitutes a denial of due process. Polo responds that the practice has been approved repeatedly and that it promotes efficiency by placing the prosecution of a case in the hands of persons most familiar with the facts.

A.

The strongest support for Polo's position lies in dictum of Judge Learned Hand in McCann v. New York Stock Exchange, 80 F.2d 211 (2d Cir.1935), cert. denied sub nom. McCann v. Leibell, 299 U.S. 603, 57 S.Ct. 233, 81 L.Ed. 444 (1936). After discussing the confusion which often arose over whether contempt proceedings were civil or criminal, Judge Hand wrote:

Surely it should be possible to find some simple and certain test by which the character of the prosecution can be determined. We think that it is. Criminal prosecutions, that is, those which result in a punishment, vindictive as opposed to remedial, are prosecuted either by the United States or, by the court to assert its authority. The first are easily ascertainable; they will be openly prosecuted by the district attorney; it would not seem to be of consequence how they are entitled when that is true. In the second the court may proceed sua sponte without the assistance of any attorney, as in the case of disorder in the courtroom; there can be little doubt about the kind of proceeding when that is done. But the judge may prefer to use the attorney of a party, who will indeed ordinarily be his only means of information when the contempt is not in his presence. There is no reason why he should not do so, and every reason why he should; but obviously the situation may in that event be equivocal, for the respondent will often find it hard to tell whether the prosecution is not a remedial move in the suit, undertaken on behalf of the client. This can be made plain if the judge enters an order in limine, directing the attorney to prosecute the respondent criminally on behalf of the court, and if the papers supporting the process contain a copy of this order or allege its contents correctly.

Id. at 214-15. It is generally agreed that Rule 42(b), Fed.R.Crim.P., was adopted in response to the problem identified in McCann. See Musidor v. Great American Screen, 658 F.2d 60, 64 (2d Cir.1981), cert. denied, 455 U.S. 944, 102 S.Ct. 1440, 71 L.Ed.2d 656 (1982) ("the Advisory Committee on Rules relied upon the McCann case in establishing Federal Rule of Criminal Procedure 42."). Rule 42(b) provides:

Rule 42. Criminal Contempt

(b) Disposition Upon Notice and Hearing. A criminal contempt except as provided in subdivision (a) of this rule shall be prosecuted on notice. The notice shall state the time and place of hearing, allowing a reasonable time for the preparation of the defense, and shall state the essential facts constituting the criminal contempt charged and describe it as such. The notice shall be given orally by the judge in open court in the presence of the defendant or, on application of the United States attorney or of an attorney appointed by the court for that purpose, by an order to show cause or an order of arrest. The defendant is entitled to a trial by jury in any case in which an act of Congress so provides. He is entitled to admission to bail as provided in these rules. If the contempt charged involves disrespect to or criticism of a judge, that judge is disqualified from presiding at the trial or hearing except with the defendant's consent. Upon a verdict or finding of guilt the court shall enter an order...