Otr Wheel Engineering v. West Worldwide Services

• Court: Court of Appeals for the Ninth Circuit
• Decided: July 24, 2018
• Docket: 16-35897
• Status: Unpublished

Opinion

FILED NOT FOR PUBLICATION JUL 24 2018 UNITED STATES COURT OF APPEALS MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS

FOR THE NINTH CIRCUIT

OTR WHEEL ENGINEERING, INC.; Nos. 16-35897 BLACKSTONE/OTR, LLC; F.B.T. 16-35936 ENTERPRISES, INC., D.C. No. 2:14-cv-00085-LRS Plaintiffs-Appellees- Cross Appellants, MEMORANDUM* v.

WEST WORLDWIDE SERVICES, INC.; SAMUEL J. WEST, individually, and his marital community; SSL CHINA, LLC; QINGDAO STW TIRE CO. LTD.; SSL HOLDINGS, INC.,

Defendants-Appellants- Cross-Appellees.

Appeal from the United States District Court for the Eastern District of Washington Lonny R. Suko, District Judge, Presiding

Argued and Submitted March 7, 2018 Seattle, Washington

Before: RAWLINSON, CLIFTON, and CHRISTEN, Circuit Judges.

* This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3. A jury found West liable to OTR for violating the Lanham Act prohibition

against false designation of origin (specifically by reverse passing off OTR tires as

being West’s product); tortiously interfering with a contract between OTR’s

partner, Solideal, and the manufacturer of OTR tires for Solideal, Superhawk;

tortiously interfering with a business relationship between OTR and its customer

Genie and also with a business relationship among OTR, Solideal, and Superhawk;

and violating the Washington Consumer Protection Act.1 West appeals the

judgment entered against it, and OTR cross-appeals the denial of a new trial as to

some of its Lanham Act claims.

The facts of this case have been related in detail in a concurrently filed

opinion that discusses some of the issues raised on appeal. See OTR Wheel

Engineering, et al v. West Worldwide Services, et al, 16-35897 (9th Cir. 2018).

That opinion deals with the Lanham Act issues raised by this appeal. In this

1 This case involves multiple plaintiffs and multiple defendants. Plaintiffs are OTR Wheel Engineering, Inc.; Blackstone/OTR, LLC; and F.B.T. Enterprises, Inc.. Defendants are West Worldwide Services, Inc.; Samuel J. West, individually, and his marital community; SSL China, LLC; Qingdao STW Tire Co. Ltd.; and SSL Holdings, Inc. In briefing, the parties refer to each side generally as “OTR” for the Plaintiffs/Appellees/Cross-Appellants and “West” for the Defendants/Appellants/Cross-Appellees. Where Plaintiffs prevailed, the judgment was for all Plaintiffs against all Defendants. Likewise, where Defendants prevailed, the judgment was for all Defendants against all Plaintiffs. There is no need to draw any distinctions among plaintiffs or among defendants. We therefore follow the parties in referring to each side simply as OTR and West. 2 memorandum disposition, we affirm the jury’s verdicts on tortious interference and

the Washington Consumer Protection Act. We also affirm three challenged

evidentiary rulings. We vacate the preliminary injunction and remand to the district

court to consider West’s claim against the injunction bond. We also reverse the

district court’s order granting OTR prejudgment interest.

1. Tortious Interference

West seeks to challenge the jury’s verdict against him on some of the

tortious interference claims. But West cannot challenge the sufficiency of the

evidence for the tortious interference claims because he did not raise those

arguments in a Rule 50(a) motion before the district court. Freund v. Nycomed

Amersham, 347 F.3d 752, 761 (9th Cir. 2003).

West did object to the tortious interference jury instructions, arguing that the

instructions should require the jury to find that OTR was an intended beneficiary of

the contract between Solideal and Superhawk. The challenge to those instructions

is properly before us. United States v. $11,500.00 in United States Currency, 869

F.3d 1062, 1067 (9th Cir. 2017). A district court’s formulation of civil jury

instructions is reviewed for an abuse of discretion, and will not be reversed if

harmless. Hung Lam v. City of San Jose, 869 F.3d 1077, 1085 (9th Cir. 2017). But

3 review is de novo whenever the challenge is based on a question of law. Spencer v.

Peters, 857 F.3d 789, 797 (9th Cir. 2017).

Instruction 35 asked the jury to determine whether West interfered with a

business relationship between Superhawk, Solideal, and OTR. As written, the

instruction matches the elements of tortious interference with a business

relationship. See Hoffer v. State, 755 P.2d 781, 791 (Wash. 1988). Thus, the

instruction is not erroneous.

Instruction 32 asked the jury to determine whether West tortiously interfered

with a contract between Solideal and Superhawk. But the instruction did not state

that OTR must have been the party whose contractual relationship had been

interfered with. Thus, the instruction may have been erroneous. See Calbom v.

Knudtzon, 396 P.2d 148, 151 (Wash. 1964). Even if the instruction was

erroneous, however, any error was harmless. The jury was instructed to calculate

damages if it found tortious interference with a contract or a business relationship.

The jury was directed to consider OTR’s lost profits due to West’s interference and

the increased operation costs OTR incurred as a result of West’s actions. The

interference at issue here is the same, regardless of whether the offending conduct

was interference in a contract or a relationship. The damages should be the same.

4 Thus, even if no tortious interference with a contract could properly have been

found, the damages would remain unchanged.

2. Washington Consumer Protection Act

West argues that no reasonable jury could find that he violated the

Washington Consumer Protection Act (WCPA). A jury’s verdict must be upheld if

supported by “substantial evidence.” Unicolors, Inc. v. Urban Outfitters, Inc., 853

F.3d 980, 984 (9th Cir. 2017). Substantial evidence is evidence adequate to support

the jury’s conclusion, even if it is possible to draw a contrary conclusion from the

same evidence. Id.

West argues that the WCPA claim was derivative of the trade dress and trade

secret claims, on which OTR did not prevail. OTR did prevail on its reverse

passing off claim, though, which was a violation of the Lanham Act, and which

could support the jury verdict in favor of OTR on the WCPA claim.

West also argues that OTR failed to establish the public interest element of a

WCPA claim. West waived that argument, however, by failing to include it in his

Rule 50(a) motion.

3. Evidentiary Rulings

West challenges three of the district court’s evidentiary rulings. Evidentiary

rulings are reviewed for an abuse of discretion. Spencer, 857 F.3d at 797. To

5 reverse on the basis of an erroneous evidentiary ruling, the court must conclude

both that the district court abused its discretion in its decision and also that the

error was prejudicial. Wagner v. Cty. of Maricopa, 747 F.3d 1048, 1052 (9th Cir.

2013).

West sought to admit a report comparing a Genie tire with one of West’s

tires. The district court excluded the report and related testimony on the grounds

that the report was an expert opinion and the report’s author was not available to

testify. We agree with the district court that the report was an expert opinion. Thus,

it was appropriate to exclude the report and to exclude the lay witness from

testifying as to the report’s contents. Fed. R. Evid. 701(c), 702.

West sought to admit a statement made by OTR’s patent attorney during his

deposition. The district court excluded the statement on the grounds that it was a

legal opinion. West cannot establish prejudice as to the exclusion because the

statement pertained to information that had previously been provided to the PTO

by Patrick Smith.

Finally, West sought to exclude the admission of various written agreements

between Superhawk and Solideal. West is unable to establish prejudice as to these

agreements. The documents established the relationship between Superhawk and

Solideal. The jury was told about that relationship by the witness who described

6 the documents. He described the relationship before the documents were admitted

into evidence, and West did not object to his testimony. The jury also learned about

that relationship from the emails between Superhawk and West discussing whether

to secretly use the Solideal mold.

4. Preliminary Injunction

West seeks to appeal the district court’s decision to maintain the preliminary

injunction pending appeal. We review the district court’s order maintaining the

preliminary injunction for abuse of discretion. Tracer Research Corp. v. Nat’l

Envtl. Servs. Co., 42 F.3d 1292, 1294 (9th Cir. 1994).

OTR argues that we do not have jurisdiction to review the injunction

because preliminary injunctions are interlocutory, and according to OTR, this is

not an interlocutory appeal. But a party may file an interlocutory appeal from an

order refusing to dissolve an injunction. 28 U.S.C. § 1292(a)(1). In his notice of

appeal, West clearly signaled his intent to appeal the preliminary injunction by

titling the appeal, “Preliminary Injunction Appeal” and by specifying that he was

appealing the court’s order on his motion to suspend or lift the preliminary

injunction. Accordingly, we have jurisdiction to review the order on the

preliminary injunction. See Fed. R. App. P. 3(c)(4) (An “appeal must not be

7 dismissed for informality of form or title of the notice of appeal.”); cf. Rabin v.

Cohen, 570 F.2d 864, 866 (9th Cir. 1978).2

The decision by the district court to leave the preliminary injunction in effect

pending appeal was explicitly intended to maintain it “pending the Ninth Circuit’s

determination whether to uphold the jury’s verdict finding OTR’s registered trade

dress invalid.” As we have upheld that verdict, there appears to be no reason for

that preliminary injunction to remain in effect.

OTR argues that even if its trade secret and infringement claims failed, its

successful claims justify the retention of the preliminary injunction. We disagree.

That does not appear to have been the intent of the district court. The comments by

the court cited by OTR pertained to the possibility of West claiming against the

bond for the restrictions imposed under the injunction prior to trial, not to

maintaining the preliminary injunction pending appeal. Moreover, OTR’s

successful claims would not ordinarily support the entry of injunctive relief, and

the jury verdict here did not appear to support OTR’s argument for maintaining the

preliminary injunction. OTR prevailed on claims for reverse passing off, tortious

2 This would be West’s second interlocutory appeal relating to the preliminary injunction, but there is no rule against multiple interlocutory appeals. See Behrens v. Pelletier, 516 U.S. 299, 309 (1996). Given that the underlying merits have been decided, there are different legally relevant factors at issue in this second interlocutory appeal. 8 interference, and violating the WCPA. Those claims assert singular harms and are

therefore suitable to be remedied with damages, not an injunction. Indeed, by

awarding only part of the damages calculated by the OTR expert, the jury indicated

that further damages are not being suffered.

OTR has not cited any expert testimony indicating that West could not have

developed and marketed his own product by now. West can presumably approach a

customer without passing off an OTR tire, tortiously interfering in any of OTR’s

contracts or business relationships, or committing an unfair or deceptive act under

the WCPA. Absent the existence of a trade dress or some other intellectual

property, West should not be enjoined from competing.

At this point, it appears appropriate to vacate the preliminary injunction. If

there is a basis for further injunctive relief, it can be considered by the district court

on remand, as the permanent injunction question is not before us. The district court

may also consider West’s claims on the injunction bond.

5. Prejudgment Interest

Applying Washington law, the district court awarded OTR prejudgment

interest at a rate of 12 percent. Whether interest is permitted as a matter of law is

reviewed de novo. Polar Bear Prods., Inc. v. Timex Corp., 384 F.3d 700, 716 (9th

Cir. 2004). The court’s selection of an appropriate rate of interest, however, is

9 reviewed for an abuse of discretion. Dishman v. UNUM Life Ins. Co., 269 F.3d

974, 988 (9th Cir. 2001).

It was proper to apply Washington law in determining the availability and

rate of prejudgment interest. See Oak Harbor Freight Lines, Inc. v. Sears Roebuck,

& Co., 513 F.3d 949, 961 (9th Cir. 2008).

Under Washington law, prejudgment interest is awardable for liquidated

claims. Hansen v. Rothaus, 730 P.2d 662, 664 (Wash. 1986). A claim is liquidated

in Washington when “the evidence furnishes data which, if believed, makes it

possible to compute the amount with exactness, without reliance on opinion or

discretion.” Id. at 665. “The rationale for this rule is that it would be unfair to hold

a defendant accountable for interest on an amount that is unquantifiable and

unforeseeable prior to a jury verdict. A defendant cannot stop the running of

interest by paying the plaintiff if that defendant does not know the amount due.”

Rekhter v. State, Dep’t of Soc. & Health Servs., 323 P.3d 1036, 1047 (Wash.

2014).

OTR’s damages expert had actual data on the number of tire assemblies

West sold between June 2013 and May 2014. He also had data on the price and

cost per unit. He used these data to calculate lost profits, adding some extra

10 shipping costs OTR incurred to meet Genie’s demand to quickly ramp up

production.

The data on the number of sales was based on an assumption, however.

OTR’s expert assumed that if West had not used OTR’s development tire, then

OTR would have accounted for all of the sales to Genie between June 2013 and

May 2014. To support this assumption, the expert stated that he saw a declaration

by a Genie executive indicating that Genie preferred to maintain a single supplier.

But that is not enough to establish that OTR would not have faced competition for

Genie’s business. If West had not used OTR’s development tire, he could have

acquired his own development from a different supplier at a later point in time.

Indeed, he presumably filled the orders from Genie using his own tires. He, or

somebody else, would presumably have been able to begin supplying Genie at

some point during the damages period.

Given that the sales volume data was based in part on an assumption, “the

exact amount [of the damages] cannot be definitively fixed from the facts proved.”

Hansen, 730 P.2d at 665. Accordingly, the claim is unliquidated. Id. Indeed, the

jury applied discretion in choosing to reduce the award from the amount calculated

by the expert witness. That further illustrates that the calculation of damages was

unliquidated because it reflected the jury’s judgment in partial but not complete

11 reliance on the expert’s opinion. See Douglas Nw., Inc. v. Bill O’Brien & Sons

Const., Inc., 828 P.2d 565, 582 (Wash. Ct. App. 1992); see also St. Hilaire v. Food

Servs. of Am., Inc., 917 P.2d 1114, 1119 (Wash. Ct. App. 1996).

We reverse the district court’s order granting OTR prejudgment interest and

remand for entry of a corrected judgment.

Each party to bear its own costs.

AFFIRMED in part, VACATED in part, REVERSED in part;

REMANDED.

12 FILED OTR Wheel Engineering, Inc. v. West Worldwide Services Inc. JUL 24 2018 Case Nos. 16-35897, 16-35936 and 16-35982 Rawlinson, Circuit Judge, concurring: MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS

I concur in the result.