Waco Intern., Inc. v. Khk Scaffolding Houston Inc.
| Decision Date | 17 January 2002 |
| Docket Number | No. 00-20741.,00-20741. |
| Court | U.S. Court of Appeals — Fifth Circuit |
| Parties | WACO INTERNATIONAL, INC., Plaintiff-Appellant-Cross-Appellee, v. KHK SCAFFOLDING HOUSTON INC.; et al., Defendants, KHK Scaffolding Houston Inc.; Jim Yung Kim, Defendants-Appellees-Cross-Appellants, KHK Scaffolding & Formwork Ltd.; GMN Scaffolding Corp., Defendants-Appellees. |
Rita M. Irani, Larry L. Huelbig (argued), Haynes & Boone, Houston, TX, for Waco Intern. Inc.
Charles Scott Kinzel, Chester Joseph Makowski (argued), Royston, Rayzor, Vickery & Williams, Houston, TX, for KHK Scaffolding Houston, Inc., KHK Scaffolding & Formwork Ltd., GMN Scaffolding Corp. and Kim.
Appeals from the United States District Court for the Southern District of Texas.
Before DUHÉ and BENAVIDES, Circuit Judges, and RESTANI, Judge.*
The primary issues before the court are (1) whether the district court applied the proper standard for a Lanham Act wrongful seizure claim; (2) whether the district court abused its discretion in allowing expert testimony regarding the standard of care for an ex parte seizure order; (3) whether the district court abused its discretion in denying a permanent injunction; and (4) whether a cross-appellant is entitled to additional attorney fees. We affirm the district in all respects.
Plaintiff-Appellant Waco International, Inc. ("Waco") is a California corporation that manufactures scaffolding and shoring products. Waco owns the federally registered trademarks "WACO" and "HI-LOAD." Waco's scaffolding and shoring products are marked with a decal bearing the Waco mark. Waco typically offers lines of scaffolding in red and blue, but has sold scaffolding in other colors at customer request.
KHK Scaffolding Houston, Inc., et al. ("KHK") is a Texas corporation that sells scaffolding manufactured by its parent company in Dubai, United Arab Emirates, KHK Scaffolding & Formwork, Ltd. ("KHK Dubai"). KHK sells scaffolding that is compatible with products manufactured and sold by Waco and other companies. In its sales brochure, KHK indicates the compatibility of its scaffolding by abbreviated designations (e.g. "Scaffold WR Frames" indicates compatibility with Waco Red frames). The scaffolds themselves do not bear the Waco mark or a KHK mark. The scaffolds are stamped "made in the U.A.E." In addition, the scaffolds bear a safety label that reads as follows: "Safety Instructions and Design Assistance available from KHK Houston, Inc.," followed by a telephone number.
In early 1998, KHK mailed brochures and solicitation letters to prospective customers. Some of those materials stated that KHK was offering "Waco" products. On April 2, 1998, Waco sent a cease and desist letter to KHK. On April 20, 1998, Waco's investigator purchased scaffold frames from KHK. The investigator was given an original "sales report" that identified the frames as "WACO" frames. On April 20, 1998, KHK sent a letter to Waco's counsel stating that one of KHK's salespersons mistakenly quoted "Waco Red" and "Waco Blue" to six potential customers in the midst of his sales presentation, and that KHK would take measures to prevent such representations.
On April 30, 1998, Waco sued KHK for trademark infringement and for unfair competition under the Lanham Act, 15 U.S.C. § 1051, et seq., as well as for related causes of action under Texas state law. On the same date, Waco sought and obtained an ex parte seizure order under 15 U.S.C. § 1116(d)(1)(A). The seizure order permitted Waco to enter KHK's place of business and seize KHK's red and blue scaffolding and certain business records.
A post-seizure hearing was held on May 15, 1998, and a preliminary injunction hearing was held on June 8-10, 1998. The magistrate judge found that injunctive relief was not appropriate with respect to KHK's use of Waco Red and/or Waco Blue in describing the style or compatibility of its KHK products.1 She found, however, that "invoices purporting to sell `Waco Red' or `Waco Blue' scaffolding ... demonstrate a likelihood of confusion, warranting injunctive relief." Proposed Findings of Fact and Conclusions of Law (June 19, 1998). The magistrate judge recommended an injunction "enjoining KHK from quoting, describing, or purporting to sell, its products as `Waco' products, `Waco Red,' or `Waco Blue.'" Id. The magistrate judge also recommended that the seizure order be dissolved pursuant to section 1116(d)(10)(A), reasoning that the products seized did not carry a "counterfeit mark." On July 20, 1998, the district court adopted the magistrate judge's recommendation in full.
KHK filed a counterclaim for compensatory and punitive damages for wrongful seizure under 15 U.S.C. § 1116(d)(11).2 Both parties subsequently filed motions for partial summary judgment. On August 16, 1999, the magistrate judge recommended that Waco's motion be denied. The magistrate judge also recommended that the court grant KHK's motion in part, reasoning that the seizure was wrongful as a matter of law because the KHK frames were "legitimate non-infringing merchandise."3 The judge recommended denial of summary judgment on KHK's claim for damages, noting that "evidence shows that the measure of damages allegedly sustained by KHK from the wrongful seizure is disputed." On September 16, 1999, the district court adopted the magistrate judge's memorandum and recommendation in full.4
On December 3, 1999, the parties jointly submitted a proposed Pre-Trial Order, listing a contested issue as follows: "Whether the Court's [summary judgment] ruling that seizure of KHK-Houston's goods was a `wrongful seizure' ... as a matter of law ... should be vacated in light of the new authority issued by the Fifth Circuit." In the Joint Proposed Jury Questions submitted as an attachment to the proposed Pre-Trial Order, both Waco and KHK proposed a jury question concerning wrongful seizure liability.
Voir dire was conducted on June 14, 2000, during which the judge informed the potential jurors of the procedural history of the case, including the fact that at summary judgment the ex parte seizure was found to be wrongful as a matter of law. A jury trial was then held on Waco's Lanham Act and state law claims and KHK's counterclaim for wrongful seizure damages.
The jury made the following findings, inter alia: (1) KHK had infringed Waco's trademarks, but that KHK's use constituted "fair use;" (2) KHK did not use a counterfeit mark in connection with the sale, offering for sale, or distribution of goods or services; (3) KHK did not engage in unfair competition or passing off; (4) Waco had seized goods that were predominantly non-infringing and had acted in bad faith in seeking the seizure order. The jury also awarded KHK $730,687 in attorney fees, $185,196 in costs, and $250,000 in punitive damages. The jury found, however, that KHK suffered $0 in lost profits and $0 in lost goodwill from the seizure. Final judgment was entered on June 30, 2000. In a minute entry order on June 30, 2000, the district court denied Waco's posttrial motion for permanent injunctive relief.
Waco seeks reversal of the district court's judgment awarding money damages to KHK and a remand for entry of a permanent injunction against KHK. KHK cross-appeals for attorney's fees pursuant to 15 U.S.C. § 1117(a) and prejudgment interest pursuant to 15 U.S.C. § 1116(d)(11).
Review of factual findings underlying a jury verdict is deferential: "Unless the evidence is of such quality and weight that reasonable and impartial jurors could not arrive at such a verdict, the findings of the jury must be upheld." Ham Marine, Inc. v. Dresser Indus., Inc., 72 F.3d 454, 459 (5th Cir.1995). Questions of law are reviewed de novo. Munn v. Algee, 924 F.2d 568, 575 (5th Cir.1991). The district court's instructions to the jury are reviewed for abuse of discretion. See EEOC v. Manville Sales Corp., 27 F.3d 1089, 1096 (5th Cir.1994).5
Review of a district court's admission or exclusion of evidence is for abuse of discretion. General Electric Co. v. Joiner, 522 U.S. 136, 136, 118 S.Ct. 512, 139 L.Ed.2d 508 (1997). The denial of injunctive relief is reviewed under an abuse of discretion standard, while the legal conclusions underlying the denial are subject to de novo review. Pebble Beach Co. v. Tour 18 I Ltd., 155 F.3d 526, 537, 550 (5th Cir.1998). Review of a denial of prejudgment interest is for abuse of discretion. Ensley v. Cody Resources, Inc., 171 F.3d 315, 322 (5th Cir.1999). We review an award of attorney's fees pursuant to section 1117(a) for abuse of discretion. Moore Business Forms v. Ryu, 960 F.2d 486, 491 (5th Cir.1992).6
Waco claims that the district court erred in instructing the jury as to its summary judgment ruling that the ex parte seizure was wrongful as a matter of law. Waco also claims error in the application of the standard for wrongful seizure liability. Waco's arguments lack merit.
Waco claims that the judge erred in giving an "opening instruction" to the "jury panel" at the "beginning of trial" that the court had found at summary judgment that the ex parte seizure was wrongful as a matter of law.7 Waco asserts that the judge never retracted the "opening instruction" but, at the end of trial, charged the jury with determining whether Waco was liable for wrongful seizure. Waco concedes the correctness of the court's instruction at the close of evidence that Waco would be liable for seizure if it sought the seizure order in bad faith or if the majority of the seized goods were noninfringing. Waco contends, however, that conflicting instructions confused the jury such that its finding of bad faith was predicated on the judge's comments that the seizure had already been deemed wrongful.
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