Schwartz v. Rent-A-Wreck of America

261 F. Supp. 3d 607
CourtDistrict Court, D. Maryland
DecidedJune 29, 2017
DocketCivil No. PJM 07-1679
StatusPublished
Cited by11 cases

This text of 261 F. Supp. 3d 607 (Schwartz v. Rent-A-Wreck of America) is published on Counsel Stack Legal Research, covering District Court, D. Maryland primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Schwartz v. Rent-A-Wreck of America, 261 F. Supp. 3d 607 (D. Md. 2017).

Opinion

MEMORANDUM OPINION

PETER J. MESSITTE, UNITED ' STATES DISTRICT JUDGE

Rent-a-Wreek is a nationwide franchise business that specializes in the short and mid-term rental of used automobiles.

For nearly 10 years, David Schwartz, the originator of the concept, and Rent A Wreck, Inc. (hereinafter, collectively “Schwartz”) and Rent-A-Wreck of America, Inc. (“Rent-A-Wreck”) and Bundy American, LLC (hereinafter, collectively “RAWA”), have been doing battle over Schwartz’s operation of a RAWA franchise in West Los Angeles, California. Their latest skirmish concerns certain actions on RAWA’s part which the Court has found to be contemptuous, and as to which the Court must now consider appropriate sanctions. While the procedural history of the case is long,1 for present purposes it is sufficient to say that, after two appeals to the Fourth Circuit, the .rights and obligations of the parties have been fully established.

After the second appeal became final and the case was remanded to this Court, Schwartz filed a Bill of Costs, seeking $32,665.21 from RAWA. On April 1, 2016, the Clerk of Court issued an Order Taxing Costs in favor of Schwartz and against [612]*612RAWA in the amount of $13,405.11. ECF No. 525. RAWA then filed a Motion to Review Clerk’s Order Taxing Costs, in which RAWA asked that the Court reject Schwartz’s Bill of Costs in its entirety or, in the alternative, that it reduce the Clerk’s award of costs by $4,442.83. ECF No. 526. The Court denied RAWA’s Motion to Review and on July 12, 2016, affirmed the Clerk’s Order Taxing Costs. ECF Nos. 535-36. RAWA did not appeal the Order, but did not promptly pay the ordered costs.

On May 3, 2016, Schwartz filed a Motion to Enforce Court’s Order and for Contempt. ECF No. 528, which the parties briefed. On September 30, 2016, the Court held a Show Cause Hearing at which it found RAWA in contempt of the Court’s Order of March 4, 2011, in that for several weeks, RAWA deliberately directed or permitted its call center operators to advise prospective customers that RAWA had no franchise in what was Schwartz’s exclusive Rent-A-Wreck business territory in West Los Angeles.2 Subsequently, the parties filed extensive correspondence and status reports, leading up to a second hearing on February 27, 2017. See ECF Nos. 529-567.

For the reasons stated on the record at the September 30, 2016 and February 27, 2017 hearings, and as further set forth in this Memorandum, Schwartz’s Motion to Enforce Court’s Order and for Contempt, ECF No. 528, will be GRANTED IN PART and DENIED IN PART.3

I.

It is well-established that federal courts possess an inherent power to punish for contempt. Chambers v. NASCO, Inc., 501 U.S. 32, 44, 111 S.Ct. 2123, 115 L.Ed.2d 27 (1991). To establish civil contempt, the moving party must establish each of the following elements by clear and convincing evidence: (1) the existence of a valid decree of which the alleged contem-nor had actual or constructive knowledge; (2) that the decree was in the movant’s “favor”; (3) that the alleged contemnor by its conduct violated the terms of the decree, and had knowledge (at least constructive knowledge) of such violations; and (4) that movant suffered harm as a result. Ashcraft v. Conoco, Inc., 218 F.3d 288, 301 (4th Cir. 2000). “Willfulness is not [613]*613an element of civil contempt.” Redner’s Markets, Inc. v. Joppatowne G.P. Ltd. P’ship, 608 Fed.Appx. 130, 131 (4th Cir. 2016). Although the movant has the initial burden of showing these elements by clear and convincing evidence, if he meets that burden, the burden of production shifts to respondent to raise a defense on an appropriate ground. United States v. Darwin Const. Co., 679 F.Supp. 531, 534 (D. Md. 1988). See also In re Minh Vu Hoang, 2014 WL 1320322, at *4 (Bankr. D. Md. Mar. 28, 2014); S.E.C. v. SBM Inv. Certificates, Inc., 2012 WL 706999, at *10 (D. Md. Mar. 2, 2012).

Schwartz has, by clear and convincing evidence, satisfied all four elements on the part of RAWA.

By written order dated March 4, 2011, the Court ordered that “[RAWA’s] Call Center shall in no way attempt to dissuade prospective customers from connecting with [Schwartz’s] business or in any way attempt to divert business from [Schwartz’s] exclusive business territory to other franchises.” ECF No. 382. Schwartz contends that RAWA violated the terms of the Court’s March 4, 2011 Order.

The March 4, 2011 Order was unquestionably a valid decree. It was not reversed or vacated by the Fourth Circuit in its Opinion and Order of March 9, 2012. See ECF No. 395.4 Furthermore, RAWA does not dispute that it had actual knowledge of the existence of the March 4, 2011 Order or that the March 4, 2011 Order was in Schwartz’s favor.

According to Schwartz, RAWA violated the March 4, 2011 Order when it intentionally diverted prospective customers away from his business. He alleges and has testified based on his own phone calls to RAWA’s customer service center that for more than one month, i.e. primarily in April of 2016, employees at the customer service call and email centers systematically informed potential customers inquiring by phone that despite Schwartz’s West Los Angeles franchise, no franchise existed there or that Schwartz had ceased operating. Moreover, some customers were directed to a different RAWA franchise in another California city while others were referred to a used car rental company known as Priceless, a non-RAWA but RAWA-related entity. Schwartz, himself as the caller, has established eight instances in April 2016 when RAWA’s call center and email response team falsely represented either that RAWA had no franchise in West Los Angeles or that Schwartz’s franchise no longer existed. Based on this conduct, Schwartz submits that RAWA violated the Court’s March 4,2011 Order.

Although RAWA concedes that their call center staff may have wrongly represented that Schwartz’s franchise was closed or did not exist, it has argued that a contempt finding is not warranted because these statements were caused by an inadvertent programming error within a March 31, 2016 software update to their online reservation system prepared by a third party. According to RAWA, the programming error removed several franchises, including Schwartz’s franchise, from a list used by the call center staff. RAWA alleges that the error did not otherwise affect their public website, which consumers could continue to use to locate and contact Schwartz’s franchise. Accordingly, says RAWA, it did not intend to divert business from Schwartz’s franchise. Furthermore, RAWA maintains that it did not know about the programming error or its effects until Schwartz served the instant Motion and that it promptly corrected the error at that time. Therefore, according to RAWA, Schwartz cannot prove, at least not by [614]*614clear and convincing evidence, that its conduct violated the terms of the decree or. that it had notice of these violations, ■

The Court is unconvinced by RAWA’s arguments.

There is no question that RAWA’s conduct in or about April 2016 violated the terms of the March 4, 2011 Order.

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Bluebook (online)
261 F. Supp. 3d 607, Counsel Stack Legal Research, https://law.counselstack.com/opinion/schwartz-v-rent-a-wreck-of-america-mdd-2017.