Mercedes-Benz Group AG v. A-Z Wheels LLC

• Court: District Court, S.D. California
• Decided: January 31, 2022
• Docket: 3:16-cv-00875
• Status: Unknown

Opinion

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 DAIMLER AG, Case No.: 16-CV-875 JLS (MDD)

12 Plaintiff, ORDER GRANTING MOTION FOR 13 v. CONTEMPT

14 A-Z WHEELS LLC, et al., (ECF No. 146) 15 Defendants. 16 17 Presently before the Court is Plaintiff Daimler AG’s Motion for Contempt (ECF No. 18 146). Plaintiff seeks a Court order holding Defendants1 in contempt for their violation of 19 the Court’s November 2, 2020 Order granting, inter alia, permanent injunctive relief to 20 Plaintiff and prohibiting Defendants from continuing to sell infringing products. (ECF No. 21 146-1 at 2.) Defendants oppose Plaintiff’s motion on the grounds that no defendant 22 violated the permanent injunction, the products were obtained genuinely, and an order of 23 contempt would not serve a compensatory or coercive purpose. (ECF No. 152 at 3.) On 24

25 26 1 Remaining Defendants in this action include: A-Z Wheels LLC d/b/a USARIM; UsaRim.com; Eurotech Wheels; Galaxy Wheels & Tires LLC; Infobahn International, Inc. 27 d/b/a Infobahn; Eurotech; Eurotech Luxury Wheels; Eurotech Wheels; UsaRim 28 (collectively, the “Entity Defendants”); and Rasool Moalemi a/k/a Russ Moalemi. 1 November 30, 2021, the Court held a half-day hearing on Plaintiff’s motion, and both sides 2 presented evidence and witness testimony. (ECF No. 155.) Based on the evidence 3 presented at the hearing, the Parties’ moving papers, and the applicable law, the Court 4 GRANTS Plaintiff’s motion. 5 LEGAL STANDARD 6 “A district court has the power to adjudge in civil contempt any person who willfully 7 disobeys a specific and definite order of the court.” Gifford v. Heckler, 741 F.2d 263, 265 8 (9th Cir. 1984). “The contempt ‘need not be willful,’ and there is no good faith exception 9 to the requirement of obedience to a court order.” In re Dual-Deck Video Cassette 10 Recorder Antitrust Litig., 10 F.3d 693, 695 (9th Cir. 1993) (quoting In re Crystal Palace 11 Gambling Hall, Inc., 817 F.2d 1361, 1365 (9th Cir. 1987)); accord Stone v. City & Cty. of 12 San Francisco, 968 F.2d 850, 856 n.9 (9th Cir. 1992) (“Intent is irrelevant to a finding of 13 civil contempt, and therefore, good faith is not a defense.”). 14 To establish a prima facie case for civil contempt, the moving party must show, “by 15 clear and convincing evidence,” that the non-moving party disobeyed “a specific and 16 definite court order,” and that such disobedience was “beyond substantial compliance” and 17 “not based on a good faith and reasonable interpretation of the court’s order.” In re Dual- 18 Deck Video Cassette Recorder Antitrust Litig., 10 F.3d at 695. If the moving party makes 19 a prima facie case of contempt, the burden shifts to the non-moving party, the alleged 20 contemnor, to demonstrate an inability to comply. Stone, 968 F.2d at 856 n.9. The non- 21 moving party must demonstrate that it was unable to comply, despite taking all reasonable 22 steps to do so. Id. (citing Sekaquaptewa v. MacDonald, 544 F.2d 396, 406 (9th Cir. 1976)). 23 “A court may wield its civil contempt powers for two separate and independent 24 purposes: (1) ‘to coerce the defendant into compliance with the court’s order’; and (2) ‘to 25 compensate the complainant for losses sustained.’” Shell Offshore Inc. v. Greenpeace, 26 Inc., 815 F.3d 623, 629 (9th Cir. 2016) (quoting United States v. United Mine Workers of 27 Am., 330 U.S. 258, 303–04 (1947)). 28 /// 1 EVIDENCE OF CONTEMPT 2 On November 2, 2020, the Court entered the following permanent injunction in this 3 action: 4 1. Defendant Rasool Moalemi and the Entity Defendants, and their officers, owners, partners, directors, 5 employees, agents, assigns, representatives, servants, 6 subsidiaries, affiliates, distributors, dealers, and any and all persons in active concert or participation with them, are hereby 7 permanently restrained and enjoined from engaging in or 8 performing, directly or indirectly, any and all of the following acts: 9

a. Infringing any of the DAIMLER Marks, 10 including U.S. Reg. No. 657,386, U.S. Reg. No. 11 3,614,891, and U.S. Reg. No. 4,423,458;

b. Manufacturing, reproducing, copying, 12 importing, using, selling, offering to sell, advertising, 13 promoting, displaying, licensing, transferring, distributing, receiving, shipping, or delivering any 14 infringing products bearing marks that are identical to, 15 substantially indistinguishable from, or confusingly similar to any of the DAIMLER Marks; 16

c. Engaging in any conduct that tends to falsely 17 represent, or is likely to confuse, mislead, or deceive 18 purchasers and/or members of the public to believe, that the products sold by Defendants, are connected with, 19 sponsored, approved, or licensed by Daimler, or are in 20 some way affiliated with Daimler; and

d. From assisting, aiding, or abetting any other 21 person or business entity in engaging in or performing, or 22 inducing any other person or business entity to engage or perform, any of the activities referred to above. 23

2. Within thirty (30) days of the date of the electronic 24 docketing of this Order, Defendants shall remove all infringing 25 uses of any of the DAIMLER Marks, and any products bearing marks that are identical to, substantially indistinguishable from, 26 or confusingly similar to any of the DAIMLER Marks, from any 27 websites that they use. 28 /// 1 (ECF No. 127 at 18–19.) Plaintiff now moves for an order holding Defendants in contempt 2 for violating this permanent injunction by continuing to sell products that infringe the 3 Daimler Marks covered in the injunction. (ECF No. 146.) Plaintiff presents undisputed 4 evidence of Defendants’ violation by way of investigative reports, pictures of infringing 5 product, e-mail chains, invoices, shipping confirmations, and chain of custody 6 documentation. The evidence, which is attached to the declaration of Sven-Eric Widmayer, 7 legal counsel for Legal Global Litigation – Brand Protection at Daimler AG, supports the 8 following events: 9 On August 3, 2021, Plaintiff’s investigator, John K. Henderson, purchased three sets 10 of “Mercedes Benz Replica” wheels—two sets from seller Defendant USARim on eBay 11 and one set from Defendant USARim’s website, usarim.com. (ECF No. 146-3 at 1.) Both 12 eBay’s and USARim’s websites advertised for purchase “Mercedes Benz Replica” or 13 “Replica Mercedes Benz” wheels that included “generic” center caps or “center caps.” (Id. 14 at 6–8, 11–12, 16–17.) Mr. Henderson paid $1,982.40 including shipping and tax for the 15 two sets of wheels from eBay and $983.60 including shipping and tax for the set from 16 USARim. (Id. at 2–3.) The same day, Mr. Henderson received an e-mail from Frank Blue 17 at usarimsales@gmail.com indicating that he received both eBay orders and the order 18 placed through usarim.com and inquiring the make and model of the vehicle the wheels 19 would be installed on. (Id. at 4; 28.) Mr. Henderson responded to the inquiry and asked, 20 “Can you include MB caps?” (Id. at 28.) Mr. Blue responded to the question two minutes 21 later stating, “Yes, I can.” (Id.) 22 Mr. Henderson and Mr. Blue subsequently engaged in an e-mail exchange regarding 23 the purchase of lug bolts (id.), and on August 7, another investigator of Plaintiff’s, Ronald 24 C. Humphries, received the two sets of wheels from the eBay order (id. at 4). On August 25 8, Mr. Henderson e-mailed Mr. Blue regarding the status of the order placed from 26 USARim’s website, as it had not yet been received. (Id. at 4; 29.) Mr. Blue replied to the 27 e-mail and provided UPS tracking numbers for the order on August 9, and Mr. Humphries 28 received the third set of wheels on August 17. (Id. at 4, 29.) 1 During this e-mail exchange, Mr. Henderson inquired again whether Mr. Blue would 2 be able to send him “MB caps.” (Id. at 30.) The following e-mail exchange occurred 3 between August 10 and 25: 4 Mr. Henderson (on 8/10/2021): Also the wheels we got so far did 5 not have the MB caps, can you send them with the last shipment. 6 We have some time as cars are still in rehab.

7 Mr. Blue (on 8/10/2021): Yes, I will. 8 Mr. Henderson (on 8/18/2021): Frank we got the last set of 9 wheels, the extensions were in there but we never got the MB 10 caps, can you send them?

11 Mr. Henderson (on 8/19/2021): If there is an extra charge for the 12 caps just let me know and send a [sic] invoice.

13 Mr. Henderson (on 8/25/2021): Hi Frank – I’m just checking on 14 the MB Caps, they were not in the boxes on the last order and we are close to getting these cars ready to ship. Can you send the 15 caps? Same address as the order please. Let me know because 16 I’m having problems finding them elsewhere. thanks, jt2

17 Mr. Blue (on 8/25/2021): Hi John, Already been shipped out here 18 is the UPS tracking: . . .

19 Mr. Henderson (on 8/25/2021): Thanks Frank appreciate it. Will 20 hit you up again next round of cars we get in a few months.

21 Mr. Blue (on 8/25/2021): Sounds good, thanks! 22 23 (ECF No. 146-4 at 11–12.) 24 On August 27, Mr. Humphries received twelve center caps resembling Mercedes 25 Benz center caps from Mr. Blue and subsequently mailed the center caps to Mr. Widmayer. 26

27 28 2 Mr. Henderson used the alias “John Thomas” during the investigation. 1 (Id. at 2.) In his declaration, Mr. Widmayer declares that, after examining the center caps 2 received from Mr. Blue, he can confirm that they “are not sales or resales of genuine 3 Daimler parts.” (ECF No. 146-2 ¶ 5.) Mr. Widmayer further declares that he knows the 4 parts are not genuine because genuine parts are not, “among other things, . . . sold with 5 adhesive backings, in contrast to those received” from Mr. Blue. (Id. ¶ 6.) 6 DISCUSSION 7 To establish a prima facie case that Defendants violated the permanent injunction, 8 Plaintiff must show by clear and convincing evidence that Defendants disobeyed “a 9 specific and definite court order,” and that such disobedience was both “beyond substantial 10 compliance” and “not based on a good faith and reasonable interpretation of the permanent 11 injunction.” In re Dual-Deck Video Cassette Recorder Antitrust Litig., 10 F.3d at 695. The 12 Court finds that Plaintiff has met this burden. 13 First, Plaintiff has shown by clear and convincing evidence that Defendants sold 14 infringing product in violation of the permanent injunction. It is undisputed that Mr. Blue 15 was an employee of Defendants Rasool Moalemi and USARims when he sold the 16 counterfeit center caps to Plaintiff’s investigator, and the permanent injunction specifically 17 covers this action. The injunction clearly states that “Defendant Moalemi and the Entity 18 Defendants, and their . . . employees . . . and any and all persons in active concert or 19 participation with them” are enjoined from “selling, offering to sell, advertising, 20 promoting, . . . transferring, distributing, receiving, shipping, or delivering any infringing 21 products bearing marks that are identical to, or substantially indistinguishable from, or 22 confusingly similar to any of the DAIMLER Marks.” (ECF No. 127 at 18 (emphasis 23 added).) The injunction further prohibits any employee of Defendant Moalemi of the 24 Entity Defendants “[f]rom assisting, aiding, or abetting any other person or business entity 25 in engaging in or performing, or inducing any other person or business entity to engage or 26 perform, any of” these activities. (Id.) 27 In their opposition, Defendants posit that “no Defendant” violated the injunction 28 because Mr. Blue was an employee of non-defendant ABC Wheels when he sold the 1 infringing center caps to Plaintiff’s investigator. (ECF No. 152 at 1, 3.) But as argued by 2 Plaintiff in reply, the undisputed evidence shows that Mr. Henderson purchased the wheels 3 and center caps from Defendant USARim via the usarim.com website and seller 4 “USARim” on eBay.4 (ECF No. 153 at 3.) Even were the Court to entertain Defendants’ 5 unsubstantiated argument that the wheels and center caps were purchased from ABC 6 Wheels, this argument is unavailing. Defendants do not dispute that ABC Wheels is a 7 business owned by Defendant Moalemi, and Mr. Blue—even if an employee of ABC 8 Wheels—is an employee of Defendant Moalemi. Whether Mr. Blue worked for USARim 9 or ABC Wheels at the time is inconsequential given the scope of the injunction. 10 Second, Plaintiff has shown that Defendants have violated the permanent injunction 11 in a manner beyond substantial compliance, for the sale of twelve infringing center caps, 12 which bear the Daimler Marks referenced in the injunction, is exactly the type of activity 13 the Court attempted to prevent in issuing the injunction. Further, no reasonable 14 interpretation of the injunction would permit Defendants to continue to sell infringing 15 product. Notably, Defendants make no argument that they have substantially complied 16 with the injunction or that the sale of the infringing center caps was based on a good faith 17 and reasonable interpretation of the injunction. Instead, Defendants maintain that ABC 18 Wheels obtained the center caps “as genuine parts.” (ECF No. 152 at 3.) Despite making 19 20 21 3 Contrary to Defendants’ representations, Mr. Blue testified during his deposition that 22 he works for Defendant USARim, that he associates USARim with Defendant Moalemi, and that when he greets customers on the phone he says, “USARim,” not “ABC Wheels.” 23 (ECF No. 146-7 at 2:16–3:11.) Mr. Blue further testified that he uses the USARim e-mail 24 address when answering customer e-mails, and ABC Wheels does not have an e-mail account that he “know[s] of.” (Id. at 3:12–21.) 25

26 4 Additionally, Defendant Moalemi admitted at his deposition that he is the seller behind the USARim’s eBay account (ECF No. 153-1 at 4:20–5:2) and that he controls the 27 usarimsales@gmail.com account (id. at 2:22–3:1), which was used in the sale of the 28 infringing center caps to Plaintiff’s investigator. 1 such a claim, Defendants provide no evidence of their own to rebut the Plaintiff’s evidence 2 that center caps sold by Mr. Blue to Plaintiff’s investigator were in fact counterfeit. The 3 Court finds it of no coincide that Defendants abandoned this theory at the hearing. 4 But the theory Defendants did present at the hearing is equally, if not more, dubious. 5 At the hearing, Mr. Blue’s testified that he obtained the counterfeit center caps from a 6 “third-party website” as a favor to the customer, Mr. Henderson, although it is not his 7 typical practice to do favors for customers. Defendants, however, provided no evidence of 8 the digital paper trail Mr. Blue’s Good-Samaritan deed surely would have created. And 9 even if the Court were to believe Mr. Blue’s non-credible and self-serving testimony that 10 he purchased the center caps from a third-party, had them delivered first to USARim 11 instead of Mr. Henderson, and then shipped them to Mr. Henderson, the permanent 12 injunction enjoins Defendants’ employees from “shipping” and “delivering any infringing 13 products” and from “assisting, aiding, or abetting any other person or business entity in 14 engaging in” the activities covered by the injunction, including the sale of infringing 15 product. 16 Having found that Plaintiff has shown by clear and convincing evidence that 17 Defendants violated the permanent injunction, and Defendants have made no argument as 18 to their inability to comply, the Court turns to whether finding Defendants in contempt 19 would serve a coercive or compensatory purpose. The Court finds that it may wield its 20 civil contempt powers for both purposes here. See Gen. Signal Corp. v. Donallco, Inc., 21 787 F.2d 1376, 1380 (9th Cir. 1986) (“Sanctions for civil contempt may be imposed to 22 coerce obedience to a court order, or to compensate the party pursing the contempt action 23

24 5 As stated above, Mr. Widmayer’s declaration provides, among other differences, 25 that genuine Mercedes-Benz center caps do not have adhesive backings, but the center caps 26 sold by Mr. Blue did. (ECF No. 146-2 ¶ 6.) Mr. Widmayer testified to further differences between the genuine and counterfeit center caps at the hearing. He explained, for example, 27 that genuine Mercedes-Benz center caps have unique 10-digit part numbers on them, but 28 the center caps sold by Mr. Blue did not have part numbers. 1 for injuries resulting from the contemptuous behavior, or both.” (citing United Mine 2 Workers of Am., 330 U.S. at 303–04)). 3 Defendants argue in their opposition that there is no coercive justification for an 4 order of contempt because Defendant Moalemi, the Entity Defendants, and ABC Wheels 5 “are completely shut down for many reasons, including lack of continued viability.” (ECF 6 No. 152 at 3.) Defendants further contend that “[a]ll websites and sales operations have 7 been shuttered, all inventory has been liquidated, and there is no more business being 8 conducted or planned in the future.” (Id.) Defendants, however, have failed to provide 9 any evidence that these representations are true other than Defendant Moalemi’s self- 10 serving testimony at the hearing,6 and the Court agrees with Plaintiff that “statements made 11 through attorney argument[,] are clearly insufficient to demonstrate compliance” with the 12 permanent injunction and a cessation of infringing business activities. (ECF No. 153 at 8.) 13 Therefore, without any reassurance that Defendants will not or cannot continue to violate 14 /// 15

16 6 At the hearing, Defendants attempted to admit into evidence two exhibits that 17 purportedly show that Defendants are unable to carry out any further business activities. 18 Plaintiff objected to the admission of these exhibits on the ground that they were not identified prior to the hearing, as required by the Court’s October 25, 2021 Order. (See 19 ECF No. 151 (“The parties are cautioned that any witnesses or exhibits not listed in the 20 parties’ joint list of witnesses and exhibits shall not be admitted and considered at the hearing.”).) Because Defendants did not timely produce these exhibits, Plaintiff’s 21 objection is hereby SUSTAINED. Nevertheless, even if the Court considered these 22 exhibits, neither exhibit proves that Defendants are out of business or otherwise unable to continue violating the permanent injunction. Exhibit A appears to be a receipt from 23 Ecology Recycling Services, LLC to USARim for the recycling of unspecified aluminum 24 wheels and cardboard. The receipt does not include any detailed inventory of what exactly was recycled. Exhibit B is a “Judgment for Possession Pursuant to Stipulation of Parties” 25 filed in San Diego Superior Court and executed by “Defendants ABC WHEELS INC. a.k.a. 26 ABC WHEELS a.k.a. USA RIM (“ABC WHEELS”) and RASOOL MOALEMI. This filing shows only that judgment was entered against Defendant Moalemi and ABC Wheels 27 for the possession of real property; it does not show, for example, that Defendants are 28 unable to carry out their business online. 1 the permanent injunction, the Court finds that an order of contempt will serve a coercive 2 purpose. 3 Defendants additionally argue that an order of contempt would serve no 4 compensatory purpose because “the alleged contempt involved 12 parts sold for less than 5 $100.” (ECF No. 152 at 3.) This argument, however, misses the mark for reasons Plaintiff 6 identifies in reply, and namely, Plaintiff’s request for disgorgement of profits as a 7 compensatory contempt sanction. See Jerry’s Famous Deli, Inc. v. Papanicolaou, 383 F.3d 8 998, 1004 (9th Cir. 1985) (“[D]isgorgement of profits is a traditional trademark remedy 9 and the district court’s use of profits as a measure for the contempt sanction is hardly a 10 novel proposition.”). Compensatory sanctions may also take the form of Plaintiff’s 11 attorneys’ fees in obtaining the contempt finding. Donovan v. Burlington N., Inc., 781 F.2d 12 680, 684 (9th Cir. 1986) (“[T]he cost of bringing the violation to the attention of the court 13 is part of the damages suffered by the prevailing party and those costs would reduce any 14 benefits gained by the prevailing party from the court’s violated order.” (quoting Perry v. 15 O’Donnell, 759 F.2d 702, 704 (9th Cir. 1985))). Accordingly, the Court does not share 16 Defendants’ view that an order of contempt would serve no compensatory purpose.7 17 CONCLUSION 18 Based on the evidence before the Court, both attached to Plaintiff’s motion and 19 presented at the hearing, it is undisputed that Defendant Moalemi and the Entity 20 Defendants have failed to comply with the permanent injunction issued by the Court on 21

22 7 Additionally, as pointed out by Plaintiff in reply (ECF No. 153 at 9–10), Defendants’ 23 contention that any contempt sanction over $5,000 requires a jury trial is incorrect. 24 Because Plaintiff seeks a finding of civil contempt—not criminal contempt—a jury trial is not required. Int’l Union, United Mine Workers of Am. v. Bagwell, 512 U.S. 821, 827 25 (1994) (“In contrast [to criminal contempt sanctions], civil contempt sanctions, or those 26 penalties designed to compel further compliance with a court order, are considered to be coercive and avoidable through obedience, and thus may be imposed in an ordinary civil 27 proceeding upon notice and an opportunity to be heard. Neither a jury trial nor proof 28 beyond a reasonable doubt is required.” (footnotes omitted)). 1 || November 2, 2020. Accordingly, Plaintiff’s Motion for Contempt (ECF No. 146) is hereby 2 GRANTED, and the Court ORDERS as follows: 3 1. Defendants shall within fourteen (14) days from the date of this Order fully 4 comply with the permanent injunction issued by the Court on November 2, 5 2020 (ECF No. 127 at 18-19). 6 2. Defendants shall within sixty (60) days from the date of this Order: 7 a. Produce to Plaintiff an accounting of all profits received from the 8 marketing and sale of products in violation of the permanent 9 injunction; 10 b. Produce to Plaintiff source information and _ transaction 11 documents for the subject products; 12 C. Produce to Plaintiff information regarding all financial accounts 13 used in connection with the purchase or sale of the subject 14 products; and 15 d. Destroy or otherwise dispose of the subject products in their 16 possession and produce to Plaintiff an accounting for such 17 destruction or disposal. 18 3. A telephonic Status Conference regarding Defendants’ compliance with this 19 Order and the issuance of a briefing schedule regarding the determination of 20 contempt sanctions shall be held on April 1, 2022, at 3:30 PM before Judge 21 Sammartino. The parties shall contact the Court’s Courtroom Deputy by e- 22 mail at alex_ramos @casd.uscourts.gov for teleconference access information. 23 IT IS SO ORDERED. 24 Dated: January 31, 2022 . tt f te 25 on. Janis L. Sammartino 6 United States District Judge 27 28