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

District Court, S.D. California·Decided June 23, 2022·No. 3:16-cv-00875·Unknown

Opinion

MERECES-BENZ GROUP AG, Case No.: 16-CV-875 JLS (MDD) a German corporation, ORDER (1) VACATING HEARING Plaintiff, ON CONTEMPT SANCTIONS v. MOTION; (2) GRANTING IN PART MOTION FOR CONTEMPT A-Z WHEELS LLC d/b/a USARim.COM; SANCTIONS; (3) AWARDING EUROTECH WHEELS, a California COMPENSATORY AND COERCIVE company; GALAXY WHEELS & TIRES, SANCTIONS; AND (4) SETTING LLC, a California company; INFOBAHN BRIEFING SCHEDULE FOR INTERNATIONAL, INC. d/b/a MOTION FOR ATTORNEYS’ FEES INFOBAHN; EUROTECH; EUROTECH LUXURY WHEELS; EUROTECH WHEELS; USARim; RYAN MOALEMI, (ECF No. 164) an individual; RASOOL MOALEMI a/k/a RUSS MOALEMI, an individual; JOSHUA MOALEMI, an individual; and Does 1-10 inclusive, Defendants. Presently before the Court is Plaintiff Mercedes-Benz Group AG’s1 Motion for Contempt Sanctions (“Mot.,” ECF No. 164). Also before the Court are Defendants’ 1 On April 28, 2022, the Court granted Plaintiff’s unopposed motion to amend the case caption given that Opposition to (“Opp’n,” ECF No. 165) and Plaintiff’s Reply in Support of (“Reply,” ECF No. 166) the Motion. The Court finds this matter appropriately decided on the papers without oral argument and accordingly VACATES the hearing scheduled for June 30, 2022. See S.D. Cal. CivLR 7.1(d)(1); see also Conn. Gen. Life Ins. Co. v. New Images of Beverly Hills, 56 F. App’x 826, 827 (9th Cir. 2003) (rejecting argument that district court should have held evidentiary hearing before holding appellant in contempt and sanctioning appellant as “[a]ppellant was afforded notice and an opportunity to be heard; nothing more was required”) (citing United States v. Ayres, 166 F.3d 991, 995 (9th Cir. 1995)). Having considered the Parties’ arguments and the law, the Court GRANTS IN PART Plaintiff’s Motion and AWARDS compensatory sanctions in the amount of $100,000 plus attorneys’ fees and a coercive forward-looking sanction of $1,000 per mark for future violations. In 2016, Plaintiff, a producer of luxury automotive vehicles and parts, initiated the instant action against Defendants, sellers of counterfeit automotive wheels, for federal trademark infringement and counterfeiting, federal unfair competition and false designation of origin, trademark dilution, infringement of U.S. design patents, and related violations of California state law. See generally ECF No. 1 (“Compl.”). In January 2018, Plaintiff moved for partial summary judgment against Defendants on its trademark infringement and counterfeiting claim and its design patent infringement claim. See generally ECF No. 58. Following briefing and oral argument on the motion, see ECF No. 90, on August 13, 2018, the Court granted Plaintiff’s motion for partial summary judgment in its entirety, see generally ECF No. 91. Plaintiff subsequently filed a motion for partial summary judgment for statutory damages, injunctive relief, and attorneys’ fees. See generally ECF No. 120. On November 2, 2020, the Court denied without prejudice the motion as to statutory damages and attorneys’ fees but granted permanent injunctive relief enjoining Defendants from, inter alia, continuing to sell products that infringe the word mark “MERCEDES-BENZ” or three “Three-Point Star” marks registered to Plaintiff. See generally ECF No. 127. On October 4, 2021, Plaintiff filed a motion for contempt. See ECF No. 145. On November 30, 2021, the Court held a half-day hearing on the contempt motion, at which both sides presented evidence and witness testimony. See ECF No. 155. On January 31, 2022, the Court granted Plaintiff’s contempt motion. See ECF No. 158 (the “Contempt Order”). The Contempt Order thoroughly summarized the evidence of Defendants’ contempt, and the Court incorporates by reference the summary set forth therein. See id. at 3–6. In brief, the Court found that the evidence clearly and convincingly showed Defendants had violated the permanent injunction and that Defendants failed to make any argument concerning their inability to comply. Id. at 6–8. The Court then determined that a finding of contempt would serve a coercive purpose given Defendants’ failure to evidence their alleged cessation of infringing business activity. Id. at 9–10. In so doing, the Court reasoned that Defendant Rasool Moalemi’s self-serving testimony at the contempt hearing and Defendants’ attorney argument were “clearly insufficient to demonstrate compliance with the permanent injunction and a cessation of infringing business activities.” Id. at 9 (internal quotation marks and citation omitted). The Court further found that an order of contempt would serve a compensatory purpose, rejecting Defendants’ argument that the twelve infringing center caps sold to Plaintiff’s investigator “sold for less than $100” and noting that Plaintiff potentially was entitled to both disgorgement of profits and its attorneys’ fees. Id. at 10. Accordingly, the Contempt Order required Defendants to fully comply with the permanent injunction within fourteen days, and, within sixty days, to produce to Plaintiff certain information relevant to a determination of Defendants’ profits on sales in violation of the permanent injunction and an accounting of the destruction or disposal of infringing products in Defendants’ possession. Id. at 11. The Court subsequently ordered the Parties to file a joint status report regarding Defendants’ compliance with the Contempt Order. See ECF No. 159 (“Joint Br.”). Defendants represent in the Joint Brief that they are in full compliance with the Court’s permanent injunction. See id. at 2. Plaintiff contests this statement, contending that “Defendants had not complied with the Permanent Injunction Order at time of the hearing on the Motion for Contempt of that Order, and have not provided any evidence to substantiate their current claim of otherwise having complied.” Id. at 3. Concerning the documents Defendants were ordered to produce to Plaintiff to assess Plaintiff’s damages, Defendants indicate that “[a]ll responsive documentation was presented (mostly by Plaintiff) and discussed with the Court at the November 30, 2021 hearing. Defendants have no more documentation than what was presented and discussed, and their profits were less than $500.” Id. at 3; 5; 6 (citations omitted). Plaintiff contends that Defendants have provided no documents accounting for their profits or the sourcing of Defendants’ infringing parts and that the Declaration of Russ Moalemi attached to the Joint Brief is wholly inadequate. Id. at 3–5, 5–6, 6–7. Concerning the destruction of the infringing products and an accounting thereof, Defendants’ position is that, “[a]s discussed and documented with the Court at the November 30, 2021 hearing, Defendants have destroyed all inventory in the process of closing down all of their business operations.” Id. at 7 (citation omitted). Plaintiff counters that the infringing wheel caps and wheel sets shipped to its investigator are still in Plaintiff’s possession, so clearly not all infringing products have been destroyed; at any rate, “a mere statement confirming disposal made by either Defendants or counsel in the present circumstances would be insufficient to satisfy the accounting requirement set forth by the Court.” Id. at 7–8. Thereafter, the Court set a briefing schedule and a hearing date for the instant Motion. The district court has wide latitude and a broad range of civil contempt sanctions at its disposal, such as “fine[s], imprisonment, receivership, and a broader category of creative, non-traditional sanctions.” United States v. States of Tenn., 925 F. Supp. (W.D. Tenn. 1995); see also Hook v. Arizona, 907 F. Supp. 1326, 1339 (D. Az. 1995). Sanctions may be imposed to coerce defendants into compliance with the court’s order, to compensate the party pursuing the contempt action for losses sustained as a result of the contemptuous behavior, or both. United States v. United Mine Workers,

Mercedes-Benz Group AG v. A-Z Wheels LLC, (S.D. Cal. 2022).

Mercedes-Benz Group AG v. A-Z Wheels LLC (Mercedes-Benz Group AG v. A-Z Wheels LLC) — published by Counsel Stack Legal Research, free access to 12M+ legal documents.

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