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Vineyard Vines, LLC v. Macbeth Collection, LLC

United States District Court, D. Connecticut

December 5, 2018

VINEYARD VINES, LLC
v.
MACBETH COLLECTION, L.L.C., et al.

          RULING RE: MOTION FOR ADDITIONAL RELIEF [Doc. #113]

          HON. SARAH A. L. MERRIAM UNITED STATES MAGISTRATE JUDGE

         Plaintiff Vineyard Vines, LLC (“plaintiff”) has filed a motion seeking additional relief. Plaintiff asserts that defendants MacBeth Collection, L.L.C., MacBeth Collection By Margaret Josephs, LLC, MacBeth Designs LLC, and Margaret Josephs (collectively, “defendants”), violated the Permanent Injunction and Final Judgment on Consent (Doc. #70) entered in this case. See Doc. #113. For the reasons set forth herein, the Court GRANTS, in part, and DENIES, in part, plaintiff's Motion for Additional Relief [Doc. #113].

         I. BACKGROUND

         On July 30, 2014, plaintiff commenced this action against defendants alleging that defendants were creating and distributing products that infringed plaintiff's intellectual property rights. See Docs. #1; #11. The parties eventually reached an agreement to resolve the action, the full terms and conditions of which were set forth in a settlement agreement dated June 15, 2015. See Doc. #95. Pursuant to the settlement agreement, the parties executed and filed with the Court a proposed permanent injunction and final judgment on consent. See Doc. #67.

         On June 17, 2015, the Court entered a Permanent Injunction and Final Judgment on Consent (“Final Judgment”). See Doc. #70. The Final Judgment required defendants to pay plaintiff $300, 000 (“Judgment Amount”), as damages stemming from defendants' infringement of plaintiff's intellectual property rights. See Doc. #70 at 4. The Judgment Amount was to be paid in five installments according to a schedule set forth in the Final Judgment (“Payment Schedule”). See Id. at 5. Specifically, defendants were required to pay $75, 000 by August 15, 2015, $75, 000 by November 15, 2015, $50, 000 by February 15, 2016, $50, 000 by May 15, 2016, and $50, 000 by August 15, 2016. See id.

         The Final Judgment imposed a permanent injunction (the “Permanent Injunction”). See Id. at 2-4. The Final Judgment also provided

that in the event Defendants violate this Injunction, breach the Settlement Agreement, or fail to timely pay an installment payment, [plaintiff] shall be entitled to: (a) liquidated damages in the amount of Five Hundred Thousand Dollars ($500, 000); and (b) recovery of its actual expenses, including reasonable attorneys' fees, associated with the enforcement of the Settlement Agreement and this Injunction[.]

Id. at 6.

         Defendants paid the first installment of $75, 000, as required by the Final Judgment, on August 15, 2015. See Docs. #113-3 at 2; #120-1 at 6. However, defendants failed to pay the second installment due on November 15, 2015. See Id. On November 15, 2015, defendants filed a motion to seal, indicating that they expected to file a Motion to Modify Consent Judgment, and asking the Court to seal any such motion. See Doc. #72. The motion to seal asserted that the motion and exhibits were “being filed contemporaneously” with the motion to seal, but they were not in fact filed. Id. at 1. The Court conducted a telephonic conference with the parties regarding the motion, and then entered an order directing “the parties to meet and confer in good faith to resolve their disputes before filing any motions to enforce or modify the settlement agreement.” Doc. #74.

         The parties never filed a motion to modify the settlement agreement, but they apparently agreed to modify the Payment Schedule on their own. See Docs. #113-3 at 2; #120-1 at 6. Plaintiff “informally agreed” to modify the payment schedule in exchange for an additional payment of $20, 000 from defendants (the “Additional Debt”). Doc. #113-3 at 2. Defendants paid an additional $115, 000 pursuant to the voluntarily modified payment terms.[1] See Id. On November 1, 2016, defendant MacBeth Designs LLC filed a petition for Chapter 11 relief under the United States Bankruptcy Code. See Doc. #120-1 at 7. Defendants missed the next payment due under the modified schedule on November 15, 2016. See Docs. #113-3 at 2; #120-1 at 6-8. $110, 000 of the Judgment Amount and the $20, 000 in “Additional Debt” remained unpaid. See id.

         On December 30, 2016, plaintiff filed a motion seeking an order enforcing the Final Judgment, based on defendants' alleged failure to abide by the payment schedule in the Final Judgment. See Doc. #77. On February 3, 2017, defendants filed a response to plaintiff's motion, asserting that it was impossible for defendants to comply with the payment schedule. See Doc. #85 at 2. Plaintiff filed a reply on February 14, 2017. See Doc. #87.

         The Court held an in-person status conference regarding plaintiff's motion for an order enforcing the Final Judgment on February 16, 2017. See Doc. #91. During the conference, the Court noted that an award of some attorneys' fees would be appropriate upon resolution of the dispute and “reminded defendant Margaret Josephs that she remains personally liable for the outstanding judgment, notwithstanding any bankruptcy proceedings for corporate defendants.” Id. at 2. The Court also ordered Ms. Josephs to “make a diligent and concerted effort to stop third party vendors from importing, exporting, shipping, delivering, holding for sale, offering for sale, selling, distributing, returning, transferring and/or otherwise moving or disposing of in any manner any infringing products.” Id. The Court held a follow-up telephonic status conference on March 22, 2017. See Doc. #106. The Court then issued an order instructing plaintiff to file a formal motion if it “seeks additional relief from the Court[.]” Doc. #105 at 2.

         On June 30, 2017, plaintiff filed the motion for additional relief currently before the Court. See Doc. #113. In light of plaintiff's filing of the motion for additional relief, the Court denied as moot plaintiff's motion seeking an order enforcing the Final Judgment (Doc. #77). See Doc. #114.[2]Plaintiff asserts that it is entitled to additional relief based on defendants' alleged violation of both the Payment Schedule and the Permanent Injunction in the Final Judgment. See Docs. #113; #113-2. Plaintiff asks the Court to enter a judgment against defendants MacBeth Collection, L.L.C., MacBeth Collection By Margaret Josephs, LLC, and Margaret Josephs, jointly and severally, [3] awarding plaintiff the unpaid $110, 000 of the Judgment Amount, $20, 000 in Additional Debt, $500, 000 in liquidated damages, $8, 600, 000 in statutory damages, and $201, 657.21 in expenses and attorneys' fees it asserts were incurred enforcing the Final Judgment. See Doc. #113 at 1. Plaintiff also moves the Court for:

an Order directing Defendants to immediately cease and desist from any and all further violations of the Permanent Injunction and Final Judgment on Consent (DKT. 70), to immediately recall, remove and ready for destruction any and all of Defendants' illegal and illicit Infringing Products from the marketplace, in transit or in inventory, as well as any and all related marketing and advertising materials or references present in any media, electronic media or otherwise.

Id. at 2. Finally, plaintiff moves the Court for “an Order imposing coercive sanctions on Defendants[, ]” see Doc. #113 at 2, and asks the Court to hold defendants in civil contempt, see Doc. #113-2 at 7.

         Defendants filed a response on August 9, 2017, arguing that plaintiff's claims pertaining to alleged violations of the Permanent Injunction are barred by the doctrine of laches; that defendants have complied with the Permanent Injunction; and that the liquidated damages provision included in the Final Judgment is punitive and, as a result, unenforceable. See Doc. #120. Plaintiff filed a reply on September 6, 2017. See Doc. #123. Defendants filed a supplemental response on September 28, 2017, see Doc. #129, and plaintiff filed a sur-reply on October 19, 2017, see Doc. #132.

         II. DISCUSSION

         A. Defendants' Laches Defense

         The Court turns first to defendants' affirmative defense of laches. Defendants argue that “the entirety of the plaintiff's trademark and related claims are barred by the doctrine of laches.” Doc. #120 at 13. Defendants assert that plaintiff knew or should have known about any alleged violation of the Permanent Injunction long before filing the motion at issue here, but that plaintiff did not complain of an alleged violation at any point in 2016. See Id. at 14. Defendants claim they were prejudiced by plaintiff's delay, because they would have taken steps to “have the third-party cease and desist.” Id. at 15. Plaintiff contends that defendants are barred from asserting laches because they intended to infringe plaintiff's intellectual property rights. See Doc. #123 at 6. Plaintiff further argues that even if the defendants can assert laches, the defense fails. See Id. at 6-7. Plaintiff claims it did not delay in taking action, because it consistently put defendants on notice that infringing products were in the marketplace, and because the majority of the products at issue are new to the marketplace. See Id. Plaintiff further contends that defendants did not suffer prejudice, because defendants “neither report suffering economic prejudice or provide evidence of a change in economic position during the purported period of delay.” Id. at 7.

         Actions to enforce consent judgments can be subject to a defense of laches. See Brennan v. Nassau Cty., 352 F.3d 60, 63 (2d Cir. 2003). Laches

is an equitable defense that bars a plaintiff's equitable claim where he is guilty of unreasonable and inexcusable delay that has resulted in prejudice to the defendant. A party asserting the defense of laches must establish that: (1) the plaintiff knew of the defendant's misconduct; (2) the plaintiff inexcusably delayed in taking action; and (3) the defendant was prejudiced by the delay.

Ikelionwu v. United States, 150 F.3d 233, 237 (2d Cir. 1998) (quotation marks and citations omitted).

         Here, plaintiff believed that defendants were in violation of the Permanent Injunction before seeking court intervention. Plaintiff did not, however, inexcusably delay taking action. Plaintiff, through its counsel, sent three emails to defendants informing them of alleged violations. On November 20, 2015, Attorney Todd Sharinn, counsel for plaintiff, emailed Attorney Tim Frawley, counsel for defendants, demanding that defendants “cease[] and desist[] from their continued material breach of the ... Order” and attaching screen shots of allegedly infringing products being sold on third-party websites. Doc. #113-10 at 1-7. On December 4, 2015, Attorney Sharinn again emailed Attorney Frawley, stating that “several of the entities that originally offered for sale and sold the subject counterfeit goods are again selling the same” and that plaintiff “discovered new entities who are also selling these illegal goods.” Doc. #113-9 at 26. On November 10, 2016, Attorney Sharinn emailed Attorney David Edelberg, [4] attaching “examples of infringing goods still offered by the MacBeth entities.” Id. at 32-35. These communications were sufficient to put defendants on notice of plaintiff's objections to the allegedly infringing activity. See VOX Amplification Ltd. v. Meussdorffer, 50 F.Supp.3d 355, 364-65 (E.D.N.Y. 2014) (finding allegedly infringing party's receipt of cease and desist letters defeated its defense of laches) (collecting cases). Plaintiff's counsel also raised concerns regarding potential violations of the Permanent Injunction during a status conference with the Court and counsel for defendants on November 19, 2015. See Doc. #76 at 11. Plaintiff first filed a formal motion seeking to enforce the Permanent Injunction on December 30, 2016. See Doc. #77.

         Thus, only seven weeks elapsed between the last email contact regarding violations of the Permanent Injunction asserted by plaintiff, and the filing of the formal motion to enforce. Although there was a delay of approximately 11 months between the December 4, 2015, email and the November 10, 2016, email, defendants offer no argument as to why that particular delay was unreasonable. “[L]aches is an equitable, hence flexible, doctrine, and no length of time is considered per se unreasonable.” Whitfield v. Anheuser-Busch, Inc., 820 F.2d 243, 245 (8th Cir. 1987). Here, plaintiff and defendants engaged in substantial discussions regarding potential infringing conduct in late 2015, and defendants undertook to address plaintiff's concerns. It was not unreasonable for plaintiff to allow some months to pass, to permit the measures taken by plaintiff to have an effect. Indeed, defendants submit an affidavit indicating that as a result of their actions in 2015, at one point, “there was no indication that any” infringing products remained available in the marketplace. Doc. #120-1 at 5.

         Furthermore, defendants make only a conclusory assertion that the delay in filing a formal motion has prejudiced them. “To prevail on the affirmative defense of laches, a defendant must prove that it has been prejudiced by the plaintiff's unreasonable delay in bringing the action.” Mashantucket Pequot Tribe v. Redican, 403 F.Supp.2d 184, 198 (D. Conn. 2005). Here, defendants have not shown that they actually changed their position in any way as a result of any purported delay. To the contrary, they contend that they were actively attempting to prevent third parties from distributing infringing products throughout the relevant time period. See Docs. #120-1 at 4 (“On December 21, 2015 MacBeth again contacted Albert Shammah of SSS Design to cease and desist with any marketing concerning the whale.”); #120 at 16 (“MacBeth continually contacted any and all vendors that were using the whale image when it became so aware.”).

         Accordingly, defendants have failed to meet their burden of establishing a defense of laches, and plaintiff's claims are not barred by that doctrine. The Court will thus proceed to consider the merits of plaintiff's motion.

         B. Failure to Pay Judgment/Settlement Amount

          Plaintiff asks the Court to award it $110, 000, which it asserts is the outstanding portion of the Judgment Amount owed by defendants. Defendants do not dispute that they have failed to pay the full $300, 000 Judgment Amount, and the parties agree that $110, 000 of the Judgment Amount remains unpaid. See Docs. #129 at 6; #120 at 7; #113-3 at 2. Accordingly, plaintiff's request for an award of $110, 000, representing the unpaid portion of the Judgment Amount is GRANTED.

         C. “Additional Debt”

         Plaintiff asks the Court to award it $20, 000 in “Additional Debt” it asserts is owed by defendants. See Doc. #113 at 1. The parties do not dispute that plaintiff agreed to modify the Payment Schedule in exchange for an additional payment by defendants, and that $20, 000 of Additional Debt remains unpaid. See Docs. #113-3 at 2; #120-1 at 6. However, neither party offers any discussion of whether it is appropriate for the Court to enforce this alleged informal agreement to modify the Final Judgment.

         On November 19, 2015, the Court issued an Order indicating that any motion to modify the terms of the Final Judgment should be filed on the public docket, see Doc. #74, but the parties never filed such a motion. Thus, any informal agreement between the parties to modify the terms of the judgment is beyond the scope of the jurisdiction retained by this Court to enforce the Final Judgment.

         The Second Circuit has addressed the proper manner in which a trial court may interpret and enforce a judgment entered on consent:

In interpreting a consent decree, we have recognized that courts must abide by the express terms of a consent decree and may not impose supplementary obligations on the parties even to fulfill the purposes of the decree more effectively. A court may not replace the terms of a consent decree with its own, no matter how much of an improvement it would make in effectuating the decree's goals. Consistent with this narrow construction, we have held that a district court may not impose obligations on a party that are not unambiguously mandated by the decree itself.

Barcia, 367 F.3d at 106 (internal citations and quotation marks omitted). The Court cannot, here, add to the Final Judgment a requirement that defendants pay an additional $20, 000 not contemplated by that Judgment.

         Furthermore, the Settlement Agreement entered into by the parties includes an explicit merger clause, stating that the Agreement “may not be altered, amended or modified, except in a writing signed by all Parties.” Doc. #95 at 18. No. such writing has been produced. And, again, even if the parties voluntarily agreed to alter the Settlement Agreement, they did not seek any modification to the Judgment. Accordingly, plaintiff's request that the Court award it $20, 000 in Additional Debt is DENIED.

         D. Violation of the Permanent Injunction

          Plaintiff contends that defendants have violated the Permanent Injunction. While plaintiff's argument as to exactly how defendants have violated the Permanent Injunction is less than clear, the Court identifies two theories under which such violation could be found, based on the record before the Court.

         First, plaintiff points to numerous instances in which products bearing marks that would violate the Permanent Injunction have been found for sale in the marketplace, after the entry of judgment in this matter. Plaintiff has offered no evidence that defendants themselves have licensed or sold infringing products after the entry of the Permanent Injunction. The Court therefore construes this argument as relying on one or more of the following provisions of the Permanent Injunction:

a. The provision barring defendants and “confederates and any other persons or entities acting in concert or participation with them” from offering for sale any infringing products. Doc. #70 at 2.
b. The provision barring defendants from “enabling others to sell or pass off” infringing items as genuine products. Id. at 3.
c. The provision barring defendants from “assisting, aiding, or abetting any other person or business entity” in violating any term of the Permanent Injunction. Id. at 4.

         The Court will refer to conduct prohibited by these provisions of the Permanent Injunction as “Enabling Violations” for purposes of this ruling.

         Second, plaintiff affirmatively asserts that defendants violated the Permanent Injunction by telling a licensee, Access Bags, which was in possession of infringing product, that Access Bags could sell the infringing products, after the Permanent Injunction entered, barring any such sale. Such an action by defendants would violate any of the above provisions.

         The Court will evaluate plaintiff's claim under each of these alternate theories. As a threshold matter, however, the Court must determine the standard of proof applicable to this claim. Neither party articulates the standard of proof that must be met by plaintiff in establishing that the Permanent Injunction has been violated for purposes of awarding liquidated damages.[5]

         A consent judgment, such as the one entered in this case, has “a dual character, a ‘hybrid nature' that reflects attributes of both a contract and a judicial decree.” Kozlowski v. Coughlin, 871 F.2d 241, 245 (2d Cir. 1989) (quoting Local Number 93, Int'l Assoc. of Firefighters v. Cleveland, 478 U.S. 501, 519 (1986)). Although the Permanent Injunction at issue here has been ordered by the Court, it was agreed upon by the parties. As such, it “is a contract between the parties, and should be interpreted accordingly.” Tourangeau v. Uniroyal, Inc., 101 F.3d 300, 307 (2d Cir. 1996); see also United States v. ITT Cont'l Baking Co., 420 U.S. 223, 238 (“[A] consent decree or order is to be construed for enforcement purposes basically as a contract[.]”); Whitmire v. Corbel & Co., 977 F.Supp. 290, 293 (S.D.N.Y. 1997) (“Consent judgments are agreements between parties to litigation and, therefore, should be construed as contracts.”).

         Under Connecticut law, a party asserting a breach of contract has the burden of proving that breach by a preponderance of the evidence.[6]See, e.g., Franco v. Yale Univ.,238 F.Supp.2d 449, 453 (D. Conn. 2002), aff'd, 80 Fed.Appx. 707 (2d Cir. 2003); see also Madigan v. Hous. Auth. of Town of E. Hartford, 113 A.3d 1018, 1029 n.2 (Conn.App. 2015) (affirming jury instruction stating that “the burden of proof is on the plaintiff to prove by a preponderance of the evidence that the defendant breached his contract of employment”); Chieffalo v. Norden Sys., Inc.,714 A.2d 1261, 1264 (Conn.App. 1998). Cf. E.E.O.C. v. New York Times Co., No. 92CV6548(RPP), 1998 WL 474201, at ...


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