Thomas & Betts Corporation v. Leger, No. A04-260 (MN 11/24/2004), A04-260.

CourtSupreme Court of Minnesota (US)
PartiesThomas & Betts Corporation, Respondent, v. Ronald Leger, d/b/a Independent Distributing, Appellant, Janet Leger, et al., Defendants.
Docket NumberNo. A04-260.,A04-260.
Decision Date24 November 2004

Appeal from the District Court, Mower County, File No. CX-01-1441.

Donald Chance Mark, Jr., Erik F. Hansen, Fafinski Mark & Johnson, P.A., (for respondent)

Ralph V. Mitchell, Lapp, Libra, Thomson, Stoebner & Pusch, Chtd., (for appellant)

Considered and decided by Willis, Presiding Judge; Minge, Judge; and Forsberg, Judge.*



Respondent Thomas & Betts Corporation (T&B), a manufacturer of waste-oil furnaces, brought an action against appellant Ronald Leger, one of its distributors, alleging tortious interference with prospective and existing contracts, defamation, deceptive trade practices, breach of contract, unjust enrichment, unfair competition, consumer fraud, and fraud and misrepresentation. T&B later amended its complaint to add Janet Leger, Ronald Leger's wife, and Independent Waste Oil Furnaces, Inc. (IWOF), the Legers' newly created distributing company, as defendants. T&B also added claims for trademark dilution and infringement, fraudulent conveyance, and punitive damages. The claims against the Legers and their company arose primarily out of Ronald Leger's sales and service of T&B furnaces following his termination as a distributor.

After two years of litigation, two orders compelling discovery, and three contempt orders for failure to comply with an ex parte temporary restraining order, the district court entered a default judgment against the Legers and IWOF in the amount of $578,230.48. The court later vacated the judgment against Janet Leger and the company for lack of personal jurisdiction. Ronald Leger now appeals from the default judgment and from the denial of his motion to vacate the judgment, arguing that (1) as a discovery sanction, the default judgment is neither fair nor related to the particular claims at issue in the orders compelling discovery; (2) the evidence is insufficient to establish a prima facie case of liability or damages on any of T&B's claims; (3) the judgment should be vacated as void under Minn. R. Civ. P. 60.02(d) because he was denied his due-process right to cross-examine T&B's witnesses and to provide input into the proposed findings of fact and conclusions of law; (4) the judgment should be vacated under Minn. R. Civ. P. 60.02(f) for "[a]ny other reason justifying relief" from the judgment; and (5) the district court's grant of permanent injunctive relief is illegal because the court did not make adequate findings or set forth its reasons for granting injunctive relief. By notice of review, T&B argues that the district court abused its discretion by (1) vacating the default judgment against Janet Leger and IWOF and (2) refusing to award T&B damages on its trademark-infringement and trademark-dilution claims.


Thomas & Betts is a Memphis-based corporation that manufactures waste-oil furnaces under the REZNOR trademark. T&B sells its furnaces through a network of authorized distributors who, in addition to selling, are required to make warranty repairs, for which they are later compensated by T&B.

Ronald Leger (Leger), the sole proprietor of Independent Distributing, became a T&B distributor in 1997. Leger signed a Distributor Contract Stocking Plan, under which he agreed to (1) sell Reznor waste-oil furnaces as his "exclusive line" of furnaces, (2) "[a]ctively promote" the sale of Reznor furnaces, (3) service furnaces as required by customers, and (4) refrain from using the T&B name or any of its trademarks without prior written approval. Leger also signed a service agreement, under which he agreed to restrict his sales to Minnesota (except the northwest portion) and Wisconsin. Specifically, Leger agreed "not to actively promote or market Reznor waste oil heaters in . . . North Dakota, South Dakota, or Iowa."

In March 2000, Leger ordered 90 new Reznor furnaces worth approximately $240,000. Leger stopped making payments on the furnaces, however, after T&B refused to honor an approximately $ 47,000 claim that Leger had submitted for warranty repairs. Leger contended that problems with the furnaces, including faulty heat exchangers and parts, accounted for the high service costs. But T&B concluded that the vast majority of the claim was unjustified, and refused to honor it. T&B then terminated Leger as a distributor and brought an action against him in Tennessee for the balance due on the furnaces.

After T&B terminated Leger, Leger continued to hold himself out as an authorized distributor. He also misrepresented the status of other distributors, telling customers that they were not authorized. At the same time, Leger began to sell Reznor furnaces as "scratch-and-dent" furnaces, at prices below the suggested retail price. As a result, several customers to whom Leger had offered Reznor furnaces at substantially reduced prices accused authorized distributors of overcharging. Leger also made statements about the superiority of a competing brand, and told customers that Reznor furnaces were "junk" and were "too light" to operate properly and that T&B did not honor warranties or pay distributors for warranty repairs. Finally, Leger made unauthorized modifications to his remaining Reznor stock, causing the furnaces to underperform. Specifically, Leger unnecessarily equipped furnaces designed for low altitudes with pumping mechanisms designed for high altitudes. He also substituted various furnace components with components from other manufacturers and actively concealed his modifications by placing his own stickers over warning labels and identifying marks, thereby voiding the factory warranty.

In the fall of 2001, T&B learned that a Wisconsin customer's shop had burned down and that the fire had originated near a Reznor RA 140 furnace that Leger had sold to the business. The furnace had been equipped with a pump designed for an RA 235 model, and both the warning label and the sticker identifying the pump's manufacturer had been covered with an Independent Distributing sticker.

Out of concern for the safety of its customers, T&B brought an ex parte motion for a temporary restraining order (TRO), seeking to enjoin Leger from selling any Reznor products and to require him to produce a list of customers to whom Leger had sold Reznor furnaces. In October 2001, the district court issued a TRO, enjoining Leger from selling, advertising, or modifying Reznor products and from using the Reznor name. The TRO also required Leger to return his remaining stock and to produce the requested list of customers.

T&B then filed and served a complaint against Leger, alleging tortious interference with prospective and existing contracts, defamation, deceptive trade practices, breach of contract, unjust enrichment, unfair competition, consumer fraud, and fraud and misrepresentation.

In November 2001, the court granted the first of three contempt motions to enforce compliance with the TRO. T&B's motion was supported by affidavits and exhibits showing that Leger had continued to advertise Reznor products for sale, both in newspapers and on his company's website; had offered an Iowa company a Reznor RA 350 furnace at a price below the suggested retail price; and had sold a reconditioned RA 235 model to Larry Wood Construction. The court granted the motion and issued an order finding Leger in contempt for continuing to sell Reznor furnaces and for failing to provide T&B the customer list it had requested and the court had ordered Leger to produce. The court also ordered Leger to pay T&B's attorney fees.

In March 2002, T&B brought a second motion for contempt. The district court granted the motion, finding that Leger had serviced Reznor furnaces at Kemna Motors on three separate occasions, in violation of the TRO. The court fined Leger and sentenced him to 90 days in jail, but it stayed the sentence to allow Leger to purge himself of the contempt. In May 2002, the court issued its first order compelling Leger to respond to T&B's discovery requests.

T&B brought its third and last motion for contempt in May 2002, based on information provided by James Daily, a former employee of Leger. Daily advised T&B that after Leger's employees learned about the TRO from a third party, Leger directed them to disregard it and told them only to stop using Reznor parts numbers on documentation. Daily also stated that Leger's technicians had serviced Reznor furnaces in Sauk Centre on at least three occasions, had installed a Shenanodoah fire cone on a Reznor RA 500 furnace on one occasion, and had retrofitted two Reznor furnaces that were later sold under the name EZ WASTE OIL HEATERS. Additionally, Daily indicated that Leger had not only failed to return all Reznor parts to T&B but also had ordered $10,000 worth of Reznor parts from a Canadian distributor and had instructed his employees to burn the labels on the shipping crates.

In April 2002, the court denied T&B's motion for a temporary injunction, based on findings that (1) the likelihood of irreparable harm was minimal and (2) the issuance of an injunction would not further serve the public because Leger had returned his Reznor stock and the public had been warned of the modifications.

In August 2002, the court issued an order finding Leger in contempt for continuing to service Reznor furnaces and for failing to advise his employees of the TRO. The court imposed a $750 fine, ordered Leger to pay T&B $3,000 for attorney fees, and sentenced Leger to 90 days in jail. But the court stayed the sentence, once again, to allow Leger an opportunity to purge himself of the contempt.

In November 2002, Leger filed an answer and counterclaim, alleging breach of contract,...

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