Western Water Management, Inc. v. Brown
| Decision Date | 15 December 1994 |
| Docket Number | No. 93-1936,93-1936 |
| Citation | 40 F.3d 105 |
| Parties | , 33 U.S.P.Q.2d 2014 WESTERN WATER MANAGEMENT, INC., Plaintiff-Appellee, v. Charles P. BROWN, et al., Defendants-Appellants. |
| Court | U.S. Court of Appeals — Fifth Circuit |
Mark J. Zimmermann, Turner, Dealey & Zimmermann, Dallas, TX, for appellants.
Brent Brown, Mark Schwartz, Bracewell & Patterson, Dallas, TX, for appellee.
Appeal from the United States District Court for the Northern District of Texas.
Before POLITZ, Chief Judge, GOLDBERG and DUHE, Circuit Judges.
After having been enjoined from manufacturing certain products, Defendants were found to be in contempt of that injunction. After another finding of contempt and a modification of the injunction, Defendants ask this Court to vacate the modified injunction and both contempt orders or to vacate and remand for a more specific injunctive order. For the following reasons, we affirm the contempt orders, vacate the modification to the injunction, reinstate the Amended Injunction, and remand.
Western Water Management originally sued Chem Craft Corporation and its officers, Charles Brown, Richard Hornack, and J.B. Rivers, alleging a conspiracy to steal Western's formulas for manufacturing water treatment products. Western proved that Defendants used formulas misappropriated from Western to make and sell waste treatment products under the Chem Craft name. The court issued a permanent injunction requiring Defendants to surrender all copies of Western's formulas (introduced at trial as "Exhibit 58") and prohibiting Defendants from using or modifying Western's formulas to manufacture any products. As amended and affirmed by this Court, the injunction (the "Amended Injunction") provides as follows:
IT IS, THEREFORE ORDERED that Defendants ... be and the same hereby are ordered to return to Western Water Management any and all copies of (1) Plaintiff's Trial Exhibit 58, the listing of Western Water Management, Inc.'s chemical product formulations, (2) Western Water formula No. 9715, and (3) any and all copies made therefrom....
... [Defendants] are directed forthwith to desist and refrain from disclosing the contents of Plaintiff's Trial Exhibit 58, the Western Water Management chemical product formulations, or Western Water formula No. 9715 to any individuals or entities ...;
... [Defendants] are restrained and enjoined from utilizing the formulations contained on Plaintiff's trial Exhibit 58, or Western Water formula No. 9715, or their modifications of those formulations, in Defendants' trade or business. This Order shall not preclude Defendants from utilizing formulations based upon or derived from other sources, or from selling single ingredient products or dilutions of single ingredient products, unless those dilutions are derived from Trial Exhibit 58.
Defendants formed a new entity known as Clearwater Industries, which began selling products formulated in violation of the Amended Injunction. Plaintiff moved for enforcement of the Amended Injunction and for contempt. A magistrate judge found that Clearwater was incorporated in an effort to hide Defendants' continuing contemptuous formulation and sales of water-treatment products, found Defendants in contempt, and recommended an order for production of business documents showing Defendants' sales revenues to determine the propriety of further monetary sanctions. The court adopted the magistrate judge's recommendation in May 1992. Defendants moved for relief from and now appeal the May 1992 finding of contempt.
In August 1992 Western filed a second motion for contempt alleging Defendants' continued use of proprietary formulas and failure to produce documents. In September 1993 the court granted Western's second motion for contempt, denied Defendants' motion for relief from the first contempt order, and sua sponte modified the Amended Injunction (the "Modification"). The Modification deleted that portion of the injunction which stated,
This Order shall not preclude Defendants from utilizing formulations based upon or derived from other sources, or from selling single ingredient products or dilutions of single ingredient products, unless those dilutions are derived from Trial Exhibit 58.
11 R. 2737. From this September 1993 order and the May 1992 contempt order, Defendants appeal. 1
Defendants first complain that the findings of contempt are erroneous because the Amended Injunction is unenforceable. The collateral attack on an injunction during contempt proceedings is prohibited if earlier review of the injunction was available. See United States v. Ryan, 402 U.S. 530, 532 n. 4, 91 S.Ct. 1580, 1582 n. 4, 29 L.Ed.2d 85 (1971); see also NLRB v. Union Nacional de Trabajadores, 611 F.2d 926, 928 n. 1 (1st Cir.1979).
In their previous appeal, Defendants argued that the Amended Injunction improperly imposed "an overbroad blanket prohibition" against their use of Western's product formulas. Defendants claim that despite their previous attack on the Amended Injunction via appeal, they may now in these contempt proceedings collaterally attack the Amended Injunction as vague or overbroad. 2 We disagree. We see no reason to reopen consideration of the issue. 3
In the first contempt order the court found that Defendants failed to return all copies of Western's formulas and made formulas copied from Western in violation of the injunction. Defendants moved for relief from this contempt order under Rule 60(b)(5) on the basis of equitable reformation. Rule 60(b)(5) authorizes relief from a final judgment or order when "it is no longer equitable that the judgment should have prospective application." In reviewing a request for relief under Rule 60(b)(5), United States v. Swift & Co., 286 U.S. 106, 119, 52 S.Ct. 460, 464, 76 L.Ed. 999 (1932). Defendants have not met their burden of establishing this equitable ground for relief. See id. ("The inquiry ... is whether the changes are so important that dangers, once substantial, have become attenuated to a shadow."); see also 11 Charles A. Wright & Arthur R. Miller, Federal Practice and Procedure Sec. 2863 (1973) ().
Defendants contend that the second contempt order is based on clearly erroneous findings or evidentiary errors. The court found, contrary to Defendants' evidence at the second contempt hearing, that certain formulas originated with Plaintiff rather than other competitors in the industry. Defendants first complain of the district judge's remark that Defendants did not argue before the magistrate judge that formulas were derived from other sources. The court considered the failure to present the argument earlier only in making its credibility determination, not in refusing to admit evidence. See Sept. 1993 contempt order, 11 R. 2727. Using a belated assertion in making credibility determinations is not an improper evidentiary ruling.
Defendants also assert error in the court's consideration of rebuttal evidence of other sources, namely, Plaintiff's belatedly submitted affidavits. After an evidentiary hearing, the court gave the parties the opportunity to make "further written submission" to the court, and Western's affidavits from the competitors (attesting that Defendants' use of their formulas was not permitted) followed.
These affidavits were cumulative to impeach the credibility of Defendants' evidence suggesting new sources of formulas. Considering that the affidavits were both cumulative and uncontroverted, the court's consideration of the affidavits was not an abuse of discretion. See Hoffman ex rel NLRB v. Beer Drivers & Salesmen's Local Union No. 888, 536 F.2d 1268, 1277 (9th Cir.1976) ().
Defendants also contend that the court clearly erred in finding Defendants' noncompliance with the order to surrender documents and in finding that they wrongfully used formula numbers CC 1105 and CC 6190. These issues were decided as a matter of fact by the court, and Defendants have not demonstrated that such findings are clearly erroneous.
Defendants also complain of the district court's sua sponte modification of the Amended Injunction, tightening...
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