Whittaker Corp. v. Execuair Corp.

• Decision Date: 03 January 1992
• Docket Number: No. 90-55176,90-55176
• Citation: 953 F.2d 510
• Parties: , 21 U.S.P.Q.2d 1424 WHITTAKER CORPORATION; Whittaker Controls, Inc., Plaintiffs-Appellees, v. EXECUAIR CORPORATION, et al.; Execuair Sales Corporation; David Manhan, Defendants-Appellants.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 510

953 F.2d 510

21 Fed.R.Serv.3d 1081, 21 U.S.P.Q.2d 1424

WHITTAKER CORPORATION; Whittaker Controls, Inc., Plaintiffs-Appellees, v. EXECUAIR CORPORATION, et al.; Execuair Sales Corporation David Manhan, Defendants-Appellants.

No. 90-55176.

United States Court of Appeals Ninth Circuit.

Argued and Submitted Oct. 10, 1991.

Decided Jan. 3, 1992.

Marian Haycock Tully, West Covina, Cal., for defendants-appellants.

Maureen McGuirl, Gibson, Dunn & Crutcher, Los Angeles, Cal., for plaintiffs-appellees.

Appeal from the United States District Court for the Central District of California.

Before BROWNING, ALARCON and NELSON, Circuit Judges.

ALARCON, Circuit Judge:

Execuair Corporation, Execuair Sales Corporation, Laurence S. Manhan, and David Manhan (Execuair) appeal from an order entered on December 15, 1989 (December 1989 Order) by the district court in favor of Whittaker Corporation and Whittaker Controls (Whittaker). In its December 1989 Order, the district court found Execuair in contempt of the order entered on June 9, 1987 (June 1987 Order) and adopted the remedies requested by Whittaker. Execuair does not challenge the order finding it in contempt. Execuair seeks reversal on the following grounds:

One. The amount of the conditional fine imposed by the district court as a coercive sanction was excessive.

Two. The district court lacked the power to require the posting of a one million dollar bond as a security for the payment of the monetary losses suffered by Whittaker as a result of Execuair's contempt of the June 1987 Order.

Three. The provisions of the December 1989 Order barring Execuair from engaging in the aircraft surplus parts business is punitive and thus an improper civil contempt sanction.

Four. The court lacked the authority to order the destruction of Execuair's entire inventory of surplus aircraft parts as a sanction for civil contempt because there was no opportunity accorded to Execuair to purge itself of its contempt, and it was invalid as a criminal sanction because the court applied the wrong burden of proof.

Five. The December 1989 Order is void because it imposed sanctions on persons who are not parties to this action.

We affirm that portion of the order imposing a conditional fine to compel compliance with the December 1989 Order and the requirement that a one million dollar bond be imposed. We modify the order banning Execuair from the aircraft parts business to permit Execuair to demonstrate compliance and affirm it as so modified. We modify the order requiring the destruction of Execuair's inventory to apply only to infringing parts and as so modified, affirm it. We decline to consider Execuair's claim that the order is inapplicable to non-parties because we conclude that Execuair has no standing to raise this issue.

PERTINENT FACTS

Execuair is a surplus and replacement aircraft parts dealer. Some of the parts in its inventory are rebuilt versions of Whittaker parts. It also sells genuine Whittaker parts. In addition, Execuair manufactures and sells parts approved by the FAA or the armed forces.

In 1977, Whittaker filed an action for unfair competition in which it alleged that Execuair had counterfeited and palmed off parts as genuine Whittaker aircraft replacement parts. In 1985, the action was brought to trial and resulted in a judgment for Whittaker. The court issued a permanent injunction on November 18, 1986. Execuair and its employees were enjoined from using the Whittaker name unless Execuair adhered to certain restrictions.

In 1985, Whittaker initiated a second lawsuit in which it was alleged that Execuair had sold counterfeit parts to the United States Air Force at Tinker Air Force Base. As a result of settlement negotiations to settle disputes arising out of the first action and the second lawsuit, the parties stipulated that a new injunction would be entered that contained restrictions not included in the original November 18, 1986 judgment.

The district court issued a modified injunction on June 9, 1987 that incorporated the provisions set forth in the stipulation. The June 1987 Order reads as follows:

(a) The Execuair companies and/or the Manhans shall cease using and identifying such parts with their current part numbering system which consists of a Whittaker Part Number preceded by the letter or prefix "E";

(b) The Execuair companies and/or the Manhans shall immediately adopt a new and distinct part numbering system to identify each part made by or for them;

(c) The new part numbering system that Execuair companies and/or the Manhans shall adopt (1) shall not use any Part Number currently used or used in the past by Whittaker (2) shall not use the same number of digits or combination of letters and digits as any identification system used now or in the past by Whittaker, (e.g., any three, four, five, six or seven digit part number, whether or not preceded by the letter or prefix "E"); (3) shall not utilize for a particular part any portion of the part number Whittaker has assigned to that part (e.g., the Execuair companies and/or the Manhans shall not use 152, 677, 1526771, or any combination or subset of the number 152677-1 to designate their, the Execuair or the EPN version of a 152677-1 actuator); (4) shall use more seven (7) digits; (5) shall not impinge in any way on Whittaker's past, present or future part numbers; (6) shall not violate Paragraph 15(d) of, or the other terms that concern Whittaker trademarks or part numbers contained in, the Second Amended Final and Permanent Injunction entered in Whittaker v. Execuair, Civ. No. 77-3261-CBM; and (7) shall not infringe upon, be a colorable imitation of or confusingly similar to any Whittaker trademark or part number used now, in the past or in the future; provided that, as to part numbers adopted by Whittaker in the future, this Order applies to part numbers that Whittaker shall have adopted prior to any adoption and use of such part numbers by the Execuair companies and/or the Manhans;

(e) [sic] The Execuair companies and/or the Manhans shall immediately adopt the new part numbering system for each part which they make, manufacture, have or cause to be made or manufactured; provided, however, that for parts on which Execuair has previously obtained Parts Manufacturer Approval ("PMA") (a list of said parts is attached hereto as Exhibit A), the Execuair companies and/or the Manhans need not adopt the new part numbering system until the FAA approves the use of the new part numbers on the aforementioned existing PMA parts; this Proviso, however, is conditioned on the Execuair companies and/or the Manhans applying to the FAA for revised PMA under the new part numbering system within forty-five (45) days of May 12, 1987 and on their complying in good faith and as expeditiously as possible with any FAA requests necessary to convert the part numbers;

(f) The Execuair companies and/or the Manhans shall not use any Whittaker part number, adopted now, or in the past or the future, except in lists, or other publications or documents, that cross-reference Whittaker part numbers with Execuair or EPN part numbers; provided, however, that such publications or documents shall clearly state that the Execuair or EPN part numbers do not designate parts made by or for Whittaker;

(g) The Execuair companies and/or the Manhans agree to notify customers upon inquiry that the "E" prefix and any part numbering system they will adopt in the future pursuant to this Agreement, designates a part that has been made by or for Execuair or EPN, not by or for Whittaker; such notification shall be made in writing if the customer's inquiry is made in writing and may be made orally if the customers' inquiry is made orally;

(h) If the Execuair companies and/or the Manhans make or send any announcement concerning the part numbering system they will adopt in the future pursuant to this agreement, such announcement shall state that the new part numbers designate parts made by or for Execuair or EPN, not by or for Whittaker;

(i) David Manhan shall not form, establish, set up or operate any new company to acquire and sell or otherwise dispose of Execuair's surplus inventory as defined in Paragraph 5 of the Second Amended Final and Permanent Injunction entered in Whittaker v. Execuair, Civ. No. 77-3261-CBM; and

(j) The terms of the Second Amended Final and Permanent Injunction ("the Injunction") remain in effect and are not altered by this Order except that (a) insofar as Paragraph 25 of the Injunction is inconsistent with this Order, this Order controls, and (b) insofar as provided in the agreements between Whittaker and the Execuair Companies and/or the Manhans, upon the occurrence of certain events, the Injunction may apply to EPN Corporation, Jonathan A. Manhan, Eleanor Manhan, and Bonnie Manhan, directly and individually.

On August 14, 1987, Whittaker sought a temporary restraining order (TRO) and petitioned for an order to show cause (OSC) why defendants should not be held in contempt. The court granted the TRO and the OSC on August 17, 1987. An evidentiary hearing on the issue raised by these motions commenced on November 21, 1988. On December 15, 1989, the court entered an order finding the defendants in contempt and imposed the relief at issue here.

In its December 1989 Order, the court found Execuair in contempt based on the following violations of the June 1987 Order:

"a) Selling and/or offering to sell, in the ILS listings and in the British Airways letter, PMA parts bearing or identified by the old "E" part numbers after June 26, 1987;

b) Advertising and soliciting orders for non-PMA parts, made by or for Execuair or the other Execuair Companies, that were identified with the old "E" part numbers through a computer service known as Inventory Locator Service, Inc. ("ILS") after May 13, 1987;

c) Representing, in the British Airways letter and the ILS listings, that surplus parts sold or offered for sale by...