Snow Joe, LLC v. Linemart Inc.

Opinion

Case 2:20-cv-00587-RSWL-RAO Document 60 Filed 07/18/22 Page 1 of 21 Page ID #:574 'O' 1 2 3 4 5 6 7 CV20-00587-RSWL-RAOx ORDER re: Plaintiff’s Plaintiff, Motion for Contempt and v. Enforcement of Settlement [55] LINEMART INC., et al., Defendants. Plaintiff Snow Joe, LLC (“Plaintiff”) brought the instant Action against Defendants Linemart, Inc.; Linemart NJ, Inc.; Shenzhen Sailvan Network Technology Ltd.; and Shenzhen Sailvan Ecommerce Co., Ltd. (collectively, “Defendants”) alleging: (1) direct and contributory false advertising under 15 U.S.C. § 1125(a)(1)(B); and (2) violations of California Business and Professions Codes §§ 17200 and 17500. Currently before the Court is Plaintiff’s Motion for Contempt and Enforcement of Settlement [55] (“Motion”). Having reviewed all papers submitted pertaining to this 1 Case 2:20-cv-00587-RSWL-RAO Document 60 Filed 07/18/22 Page 2 of 21 Page ID #:575

1 Motion, the Court NOW FINDS AND RULES AS FOLLOWS: the

2 Court GRANTS IN PART and DENIES IN PART Plaintiff’s

3 Motion. 5 A. Factual Background 6 1. Plaintiff’s Underlying Complaint 7 Plaintiff sells pressure washers online, including 8 through Amazon.com (“Amazon”). Compl. ¶¶ 14-16, 21, ECF 9 No. 1. Defendants sell electric pressure washers that directly compete with Plaintiff’s. Id. ¶ 22. Plaintiff’s Complaint alleged that Defendants falsely advertised their pressure washers’ Pounds Per Square Inch (“PSI”) pressure ratings and adherence to European Conformity (“CE”) safety standards. Id. ¶¶ 26-28. 2. Parties’ Settlement and Injunction Order On November 7, 2021, Plaintiff and Defendants entered into a Settlement Agreement (the “Original Agreement”), relating specifically to HOMDOX-branded (“Homdox”) pressure washers. See generally Notice of Settlement of Entire Action, ECF No. 47. The Original Agreement required Defendants, inter alia, to: (1) immediately submit their pressure washers for third- party testing and label them according to the results; (2) identify all their pressure washers, including the model numbers, Amazon Standard Identification Numbers (“ASINs”), and Standard Product Numbers (“SPUs”); and (3) retain a third-party service to monitor and remove inaccurate listings. Mot. for Contempt Ex. 1 (“Original 2 Case 2:20-cv-00587-RSWL-RAO Document 60 Filed 07/18/22 Page 3 of 21 Page ID #:576

1 Agreement”), ECF No. 55-3. Pursuant to the Original

2 Agreement, the Court entered a Permanent Injunction

3 Order (“Original Injunction”) on November 17, 2021, 4 enjoining Defendants from falsely advertising their 5 pressure washers.1 See generally Permanent Inj., ECF 6 No. 49. 7 On December 20, 2021, Plaintiff notified Defendants 8 of their breach of each provision of the Original 9 Agreement. Pl.’s Mem. of P. & A. (“Mot.”) 3:11-16, ECF No. 55. The parties then entered into an Amended Settlement Agreement (“Amended Agreement”) on February 17, 2022.2 Id. at 3:18-22. Accordingly, on February 18, 2022, the Court entered an Amended Permanent Injunction Order (“Amended Injunction”). See generally Am. Permanent Inj., ECF No. 54. On February 28, 2022, Plaintiff sent Defendants another notice of breach of the Amended Agreement.3

1 The Original Injunction also expressly retained jurisdiction over the matter to enforce the terms of the Original Agreement. Permanent Inj. 2:25-3:2. 2 The Amended Agreement expanded the scope of the Original Agreement to include Defendants’ MRLIANCE-, SYNCLL-, and TEANDE- branded pressure washers, and it also added a provision allowing for recovery of attorneys’ fees for the enforcement of the agreement. Decl. of Christopher Q. Pham in Supp. of Mot. (“Pham Decl.”) Ex. 2 ¶ 5, ECF No. 55-4. It further provided that any terms in the Original Agreement not modified by the Amended Agreement remain in full force. Id. 3 Also on February 28, 2022, Defendants provided Plaintiff with a declaration identifying the model numbers, ASINs, and SPUs for all of Defendants’ pressure washers, as well as Defendants’ Amazon account names, as required by the Settlement Agreements. Mot. 4:13-23. The same day, Defendants submitted five Homdox pressure washers for testing; the testing results were not completed until March 31, 2022. Id. at 5:5-11. 3 Case 2:20-cv-00587-RSWL-RAO Document 60 Filed 07/18/22 Page 4 of 21 Page ID #:577

1 Mot. Ex. 6, ECF No. 55-9. On March 10, 2022, Plaintiff

2 captured evidence of three Amazon listings for pressure

3 washers under Defendants’ accounts advertising false PSI 4 claims. Mot. 8:7-11. The parties then engaged in meet- 5 and-confer sessions on March 11, March 21, and April 13, 6 2022. Id. at 4:6-9. Later, on April 19, 2022, 7 Plaintiff purchased a pressure washer from one of 8 Defendants’ confirmed Amazon listings that also 9 contained false PSI claims. Id. at 9:21-10:28. The parties then held a fourth meet-and-confer session on April 27, 2022. Id. at 4:6-9. B. Procedural Background Plaintiff filed the instant Motion [55] on April 28, 2022. Defendants filed their Opposition [56] on May 9, 2022, and Plaintiff replied [58] on May 16, 2022. A. Legal Standard “[C]ourts have inherent power to enforce compliance with their lawful orders through civil contempt.” Spallone v. United States, 493 U.S. 265, 276 (1990); Shillitani v. United States, 384 U.S. 364, 370 (1966). Civil contempt consists of a party’s disobedience to a specific and definite court order by failure to take all reasonable steps within the party’s power to comply. In re Dual-Deck Video Cassette Recorder Antitrust Litig., 10 F.3d 693, 695 (9th Cir. 1993). “The moving party has the burden of showing by clear and convincing evidence that the contemnors violated a specific and definite 4 Case 2:20-cv-00587-RSWL-RAO Document 60 Filed 07/18/22 Page 5 of 21 Page ID #:578

1 order of the court. The burden then shifts to the

2 contemnors to demonstrate why they were unable to

3 comply.” Stone v. City & County of San Francisco, 968 4 F.2d 850, 856 n.9 (9th Cir. 1992) (citations omitted). 5 A person should not be held in contempt if his 6 action “appears to be based on a good faith and 7 reasonable interpretation of the [court's order].” 8 Vertex Distrib., Inc. v. Falcon Foam Plastics, Inc., 689 9 F.2d 885, 889 (9th Cir. 1982). Nevertheless, “there is no good faith exception to the requirement of obedience to a court order.” In re Dual-Deck, 10 F.3d at 695. “[C]ivil contempt may be established even though the failure to comply with the court order was unintentional.” Perry v. O’Donnell, 759 F.2d 702, 705 (9th Cir. 1985). A showing of willfulness is not a necessary element for civil contempt because while the purpose of criminal contempt is punishment, the purpose of civil contempt is remedial. Id. B. Analysis 1. Evidentiary Objections Plaintiff objects to the Declaration of XiaoShuang Zheng in Opposition to the Motion for Contempt and Enforcement of Settlement (“Zheng Declaration”), along with its accompanying exhibits. See generally Evid. Objs. to Zheng Decl. and Exs. 1-33, ECF No. 57. In particular, Plaintiff argues that the declaration should be excluded in its entirety because Zheng was not identified as a potential witness in Defendant’s initial 5 Case 2:20-cv-00587-RSWL-RAO Document 60 Filed 07/18/22 Page 6 of 21 Page ID #:579

1 disclosures. Id. Parties are required to provide in

2 their initial disclosures the names of individuals

3 likely to have discoverable information related to the 4 case. Fed. R. Civ. P. 26(a). Failure to do so 5 prohibits the party from using that witness to supply 6 evidence on a motion, except where the failure was 7 substantially justified or harmless. Fed. R. Civ. P. 8 37(c)(1). In determining whether to exclude evidence 9 under Rule 37, courts consider factors such as the surprise to the party against whom the evidence would be offered, the ability of that party to cure the surprise, and the importance of the evidence. Dey, L.P. v. Ivax Pharm., Inc., 233 F.R.D. 567, 571 (C.D. Cal. 2005). Given that the purpose of the Zheng Declaration was limited to providing evidence to rebut a finding of contempt in response to Plaintiff’s Motion, the Court finds that Defendants’ failure to identify Zheng in its initial disclosures was harmless. See S.F. Baykeeper v. West Bay Sanitary Dist., 791 F. Supp. 2d 719 (N.D. Cal. 2011) (concluding that although plaintiff failed to provide declarants’ names in initial disclosures, “[d]efendant cannot say it is surprised that [p]laintiff would submit declarations from its members” establishing standing to bring suit). Plaintiff’s objection on this basis is therefore OVERRULED. Plaintiff also objects to the Zheng Declaration and the accompanying exhibits for lack of personal knowledge and on hearsay grounds. The Court similarly OVERRULES 6 Case 2:20-cv-00587-RSWL-RAO Document 60 Filed 07/18/22 Page 7 of 21 Page ID #:580

1 these objections. Zheng has certified under oath that

2 the emails were sent by employees of Defendants in an

3 effort to comply with the injunction and settlement 4 agreement, and that he has personal knowledge of all 5 facts stated in the Zheng Declaration. See Zheng Decl. 6 ¶¶ 1, 3, 6. Moreover, while the emails attached as 7 exhibits contain out-of-court statements, they are not 8 being offered for the truth of the matters stated within 9 the emails. Rather, they are being offered to show Defendants’ attempts to comply with the injunction and why those attempts have been unsuccessful. See Bates v. Medtronic, Inc., No. EDCV 14-02643-VAP (KKx), 2016 WL 446923, at *8 (C.D. Cal. 2016) (“If an out-of-court statement is not introduced for the truth of the matter asserted, but to establish the effect on the listener or a basis in fact for the listener’s subsequent actions, the statement is not hearsay.”). Plaintiff’s remaining objections are also OVERRULED. The Court has considered Plaintiff’s arguments and relies only on facts it considers to be reliable and admissible. See F.T.C. v. Data Med. Cap., Inc., No. SA CV 99-1266 AHS (EEx), 2010 WL 1049977, at *28 (C.D. Cal. Jan. 15, 2010). 2. Local Rule 7-3 Local Rule 7-3 requires that “counsel contemplating the filing of any motion shall first contact opposing counsel to discuss thoroughly, preferably in person, the substance of the contemplated motion and any potential 7 Case 2:20-cv-00587-RSWL-RAO Document 60 Filed 07/18/22 Page 8 of 21 Page ID #:581

1 resolution.” C.D. Cal. L.R. 7-3. The purpose of Local

2 Rule 7-3 is to give all parties a full understanding of

3 the relevant disputes and to allow nonmovants time to 4 evaluate proposed motions and oppose it or reach 5 agreement. Fitzgerald v. City of Los Angeles, 485 F. 6 Supp. 2d 1137, 1140 (C.D. Cal. 2007). Courts have 7 “considerable latitude” in enforcing Local Rule 7-3. 8 Christian v. Mattel, Inc., 286 F.3d 1118, 1129 (9th Cir. 9 2002). A party’s “failure to comply with the Local Rules does not automatically require the denial of a party's motion . . . particularly where the non-moving party has suffered no apparent prejudice.” CarMax Auto Superstores Cal. LLC v. Hernandez, 94 F. Supp. 3d 1078, 1088 (C.D. Cal. 2015). Here, the parties engaged in four meet-and-confer sessions before Plaintiff filed the instant Motion. Mot. 4:6-8. In its Motion, Plaintiff plainly stated that these four meetings had occurred pursuant to Local Rule 7-3. Id. at 2:18-19. Defendants argue that these meetings were insufficient because Plaintiff did not mention Defendant’s alleged mislabeling of products during the meetings, including its mislabeling of the product that Plaintiff purchased as evidence in support of the Motion. Opp’n 5:4-7, ECF No. 56. Despite Defendants’ contentions to the contrary, Plaintiff’s counsel satisfied the requirements of Local Rule 7-3. Plaintiff made numerous attempts to inform Defendants of their violations during the meet-and- 8 Case 2:20-cv-00587-RSWL-RAO Document 60 Filed 07/18/22 Page 9 of 21 Page ID #:582

1 confer sessions. Reply in Supp. of Mot. (“Reply”) 4:2-

2 8, ECF No. 58; see also Mot. 3:11-17, 4:2-6. Moreover,

3 Defendants were clearly on notice of the present Motion 4 and were able to timely file an Opposition. Thus, any 5 prejudice to Defendant from a potential defect in the 6 meetings is minimal. See Fitzgerald, F. Supp. 2d at 7 1140 (finding that nonmovants suffered no prejudice 8 because they had adequate time to respond to the 9 motion). 3. Defendants Is in Contempt of Court Orders To establish that Defendants should be held in civil contempt here, Plaintiff first must demonstrate by clear and convincing evidence that Defendants violated a court order “beyond substantial compliance, and that the violation was not based on a good faith and reasonable interpretation of the [order].” Wolfard Glassblowing Co. v. Vanbragt, 118 F.3d 1320, 1322 (9th Cir. 1997). If Plaintiff meets this burden, the burden then shifts to Defendants to show that they “took every reasonable step to comply.” Stone, 968 F.2d at 856 n.9. For the reasons set forth below, the Court holds Defendants in civil contempt and GRANTS in part and DENIES in part Plaintiff’s Motion. a. Defendants Violated the Amended Injunction and Settlement Agreements Where a party is enjoined from falsely representing a products’ adherence to certain testing standards, the party’s disregard for the testing standards can support 9 Case 2:20-cv-00587-RSWL-RAO Document 60 Filed 07/18/22 Page 10 of 21 Page ID #:583

1 a finding of contempt. See Gen. Signal Corp. v.

2 Donallco, Inc., 787 F.2d 1376, 1379 (9th Cir. 1986).

3 Even where a defendant’s violative labeling occurs by 4 mistake, courts have found contempt where a reasonable 5 inspection should have revealed the misrepresentation. 6 Id. 7 Here, Plaintiff has demonstrated by clear and 8 convincing evidence that Defendants have repeatedly 9 violated the Amended Injunction. The Amended Injunction prohibited Defendants from misrepresenting their pressure washers’ PSI capabilities and CE compliance, and Plaintiff provided evidence of Defendants’ Amazon listings containing false PSI claims. See Decl. of Lee Ann Sowers in Supp. of Mot. (“Sowers Decl.”) Exs. 7-9, ECF Nos. 55-11, 55-12, 55-13. The pressure washer Plaintiff purchased from Defendants also included contradicting PSI claims between the product label, instruction manual, and advertisement for the product. See Sowers Decl. Exs. 10-12, ECF Nos. 55-14, 55-15, 55- 16. Moreover, all three of these PSI claims were inaccurate based on the third-party test results.4 Id. Additionally, Plaintiff has shown that Defendants are in violation of paragraphs 3.a., 3.c., and 3.e. of the Settlement Agreements, which further supports a

4 Defendants attack Plaintiff’s evidentiary purchase by claiming the pressure washer may not have been sold by Defendants. Id. at 6:7-8. However, Defendants themselves confirmed that the account, ASIN, and model number associated with the purchased product belonged to Defendants. Pham Decl. Ex. 3, ECF No. 55-5. 10 Case 2:20-cv-00587-RSWL-RAO Document 60 Filed 07/18/22 Page 11 of 21 Page ID #:584

1 finding of contempt.5 Paragraph 3.a. of the Original

2 Agreement required Defendants to immediately submit all

3 their Homdox power washers for third-party testing. See 4 Original Agreement ¶ 3.a. The Amended Agreement 5 expanded this provision to include Defendants’ MRLIANCE, 6 SUYNCLL, and TEANDE pressure washer brands. See Amended 7 Agreement ¶ 3. However, Defendants have not submitted 8 any MRLIANCE-, SUYNCLL-, or TEANDE-branded models for 9 testing. Reply 7:14-18, ECF No. 58. Defendants only submitted five models of Homdox pressure washers for testing and did so eleven days late. Pham Decl. Exs. 3- 4, ECF Nos. 55-5, 55-6. Defendants also breached paragraph 3.c. of the Original Agreement, which requires Defendants to base all PSI claims on the testing results found in paragraph 3.a. See Pham Decl. Ex. 1. Because Defendants did not submit the majority of their electric pressure washers for testing, there is no basis upon which Defendants could make any accurate PSI claims in their product labeling. Even considering the five Homdox models that Defendants did submit for testing, at least one model 5 The Settlement Agreements spell out clear procedures to ensure Defendants’ compliance with the Amended Injunction. Further, the Court expressly retained jurisdiction to enforce the terms of the Settlement Agreements. Am. Permanent Inj. 2:25-28; Flanagan v. Arnaiz, 143 F.3d 540, 544 (9th Cir. 1998). Thus, violations of the Settlement Agreements may constitute independent grounds for contempt. See Plummer v. Chem. Bank, 668 F.2d 654, 659 (2d Cir. 1982) (holding that provisions of a settlement operate as an injunction); see also Buckhannon Board & Care Home v. W. Va. Dep’t of Health and Human Res., 532 U.S. 598, 604 (2001) (noting that a settlement functions as a court order). 11 Case 2:20-cv-00587-RSWL-RAO Document 60 Filed 07/18/22 Page 12 of 21 Page ID #:585

1 contained false PSI claims. Mot. 7:16-28.

2 Moreover, Paragraph 3.e. of the Original Agreement

3 obligates Defendants to retain a third-party monitoring 4 service to monitor the online listings of Defendants’ 5 electric pressure washers. Pham Decl. Ex. 1 ¶ 3.e. 6 Defendants agreed to authorize the third-party 7 monitoring service to remove listings containing false 8 or unverified PSI ratings.6 However, in the seven 9 months since the parties entered the Original Agreement, Defendants have not provided any proof that they retained a third-party monitor. Had they done so, Defendants likely could have discovered and removed the false, unverified, or inconsistent PSI claims of which Defendants claim they were unaware. Since a third-party monitor could have discovered Defendants’ false advertisements, Defendants’ failure to modify or remove their Amazon listings is contemptuous. See Gen. Signal Corp., 787 F.2d at 1379. ///

6 Defendants blame their failure to retain a third-party monitor on the fact that they discussed an alternative solution to this requirement with Plaintiff’s counsel. Opp’n 7:23-28. However, the Settlement Agreements include an integration clause and state that any amendment or modification to the Settlement Agreements must be written and signed to be binding. Ex. 1 ¶ 10, ECF No. 55-3; Ex. 2 ¶ 11, ECF No. 55-4. Regardless of any discussion between the parties, no signed writing exists to modify the third-party monitor requirement. The parties must therefore be held to the terms of the written and signed Amended Agreement. See Cal. Civ. Code § 1698(c) (“Unless the contract otherwise expressly provides, a contract in writing may be modified by an oral agreement supported by new consideration.”) (emphasis added). 12 Case 2:20-cv-00587-RSWL-RAO Document 60 Filed 07/18/22 Page 13 of 21 Page ID #:586

1 Defendants have repeatedly failed to satisfy their

2 obligations under both the Amended Injunction and the

3 Settlement Agreements. Therefore, the Court finds that 4 Defendants have violated court orders beyond substantial 5 compliance. 6 b. Defendants Did Not Take Reasonable Steps to 7 Comply 8 To defend against Plaintiff’s prima facie showing 9 of contempt, Defendants must demonstrate that they took “all reasonable steps” to substantially comply with the order but compliance was nevertheless impossible. Gen. Signal Corp., 787 F.2d at 1379 (quoting Vertex Distrib. V. Falcon Foam Plastics, Inc., 689 F.2d 891–92). “If a violating party has taken all reasonable steps to comply with the court order, technical or inadvertent violations of the order will not support a finding of civil contempt.” Id. (internal quotation marks and citations omitted). Defendants have not put forth sufficient evidence of its attempts to substantially comply with the Amended Injunction or the Settlement Agreements. Defendants’ emails to Amazon do not demonstrate substantial compliance because the email exchanges took place after Defendants had already been in violation of the Original Agreement for months, and most emails were sent after the filing of this Motion. See Zheng Decl. Exs. 1-33, ECF Nos. 56-2, 56-3, 56-4, 56-5, 56-6. Other than these untimely emails, Defendants provide no evidence of 13 Case 2:20-cv-00587-RSWL-RAO Document 60 Filed 07/18/22 Page 14 of 21 Page ID #:587

1 affirmative steps taken to comply with the Amended

2 Injunction or Settlement Agreements. Cf. Harbor Breeze

3 Corp. v. Newport Landing Sportfishing, Inc., No. 4 SACV1701613CJCDFMX, 2020 WL 816135, at *1 (C.D. Cal. 5 Jan. 23, 2020) (declining to hold defendants in contempt 6 where defendants took affirmative steps to comply, and 7 defendants’ only violation was a technical error). 8 Nor have Defendants shown that compliance with the 9 Amended Injunction was impossible. Amazon never took more than one day to respond to Defendants’ inquiries, despite Defendants’ claim that in some instances Amazon would “state for days or weeks” that requested changes were in process. Opp’n at 7:2-4; Zheng Decl. Exs. 1-33. Defendants also allude to Amazon’s “web crawling” algorithm, which allegedly causes listings “to revert back to the old unchanged content.” Opp’n 6:4-7. However, no evidence indicates that this so-called “web crawling” algorithm actually affected Defendants’ listings, nor that Defendants were unable to simply remove the listings altogether. Further, the changes Defendants requested from Amazon still included PSI claims that were all either unsubstantiated or higher than the tested 1300 PSI rating. By requesting modifications that still included false PSI claims, Defendants have not only failed to show a reasonable effort to comply with the Amended Injunction but have also actively continued to violate it. Defendants additionally claim to have experienced 14 Case 2:20-cv-00587-RSWL-RAO Document 60 Filed 07/18/22 Page 15 of 21 Page ID #:588

1 challenges with employees due to COVID-19 lockdowns, but

2 Defendants do not indicate that these lockdowns made

3 compliance impossible. Opp’n 6:12-24. For instance, 4 Defendants do not argue that the lockdowns prevented 5 their employees from accessing the internet, nor that 6 the lockdowns prevented Defendants from manufacturing 7 and selling their pressure washers in a manner that 8 complies with the Amended Injunction. Id. Thus, while 9 Defendants may have experienced challenges due to COVID- 19, these challenges do not excuse their non-compliance. See F.T.C. v. Affordable Media, 179 F.3d 228, 1241 (9th Cir. 1999) (“[T]he party asserting the impossibility defense must show categorically and in detail why he is unable to comply.”). While Defendants contend that they “have been as diligent as possible in attempting to comply,” Opp’n at 6:12-14, conclusory statements about diligence alone do not excuse their violations. Plaintiff has demonstrated clear violations of the both the Amended Injunction and the Settlement Agreements, and Defendants have failed to meet their burden to show that they took all reasonable steps to comply. This Court therefore holds Defendants in contempt and ORDERS Defendants to comply with the terms of the Amended Injunction and the Settlement Agreements, namely paragraphs 3.a., 3.c., and 3.e. 4. Coercive and Compensatory Sanctions Plaintiff’s Motion seeks sanctions against Defendants to coerce their obedience and to compensate 15 Case 2:20-cv-00587-RSWL-RAO Document 60 Filed 07/18/22 Page 16 of 21 Page ID #:589

1 Plaintiff for damages resulting from Defendants’

2 behavior. Mot. 2:4-10. As for compensatory sanctions,

3 Plaintiff asks this Court to order Defendants to pay to 4 Plaintiff all profits received by Defendants from the 5 sale of their pressure washers in violation of the 6 Amended Injunction. Id. at 17:11-13. 7 “A court may wield its civil contempt powers for 8 two separate and independent purposes: (1) ‘to coerce 9 the defendant into compliance with the court’s order’; and (2) ‘to compensate the complainant for losses sustained.’” Shell Offshore Inc. v. Greenpeace, Inc., 815 F.3d 623, 629 (9th Cir. 2016) (quoting United States v. United Mine Workers of Am., 330 U.S. 258, 303-04 (1947)). When imposing coercive sanctions, courts must “consider the character and magnitude of the harm threatened by continued contumacy, and the probable effectiveness of any suggested sanction in bringing about the result desired.” United Mine Workers, 330 U.S. at 304. Coercive fines are payable to the court, rather than the movant. Id. Coercive sanctions often take the form of a conditional daily fine. Shell Offshore, 815 F.3d at 629; see, e.g., Whittaker Corp. v. Execuair Corp., 953 F.2d 510, 617 (9th Cir. 1992) (noting that coercive sanctions “are by their very nature ‘conditional’ because they only operate if and when the contumacy continues”). While courts may exercise discretion in fashioning an amount of fines, 16 Case 2:20-cv-00587-RSWL-RAO Document 60 Filed 07/18/22 Page 17 of 21 Page ID #:590

1 see United Mine Workers, 330 U.S. at 305, the

2 conditional fine should afford the contemnor an

3 opportunity to purge the fine by complying with the 4 court order. Shell Offshore, 815 F.3d at 629. In 5 determining the amount of the fine, courts should also 6 “consider the amount of [the contemnor’s] financial 7 resources and the consequent seriousness of the burden” 8 to the contemnor. United Mine Workers, 330 U.S. at 304. 9 Here, Defendants’ continued contumacy poses an ongoing threat to Plaintiff as a direct competitor. Seven months have passed since the Original Agreement and Permanent Injunction were entered, and four months have passed since the Amended Agreement and Amended Injunction were entered. Defendants’ contumacy has continued through this entire period. See Mot. 1:3-10. While Plaintiff has not suggested an amount of coercive sanctions to impose, a conditional daily fine in the amount of $250 per day is appropriate here for three reasons. First, a conditional daily fine would likely induce Defendants’ compliance with the Amended Injunction and the Settlement Agreements, given their failure to comply in the absence of a coercive sanction. Second, a conditional daily fine would provide Defendants an opportunity to purge the fine by ceasing their contemptuous conduct. See Shell Offshore, 815 F.3d at 629. Third, the amount of $250 per day is warranted given the lack of information about Defendants’ financial resources and given the 17 Case 2:20-cv-00587-RSWL-RAO Document 60 Filed 07/18/22 Page 18 of 21 Page ID #:591

1 substantial magnitude of Defendants’ continued

2 contumacy. Arabian Gas & Oil Dev. Co. v. Wisdom Marines

3 Lines, S.A., No. 16-CV-03801-DMR, 2017 WL 4390184, at *7 4 (N.D. Cal. Oct. 3, 2017) (noting that a $250 per diem 5 fine was “well within the range of coercive per diem 6 fines issued by courts in this district for civil 7 contempt”); United States v. Gillies, No. CV-11-3623 CW 8 MEJ, 2013 WL 968244, at *2 (N.D. Cal. Feb. 22, 2013), 9 report and recommendation adopted, No. C 11-03623 CW, 2013 WL 968231 (N.D. Cal. Mar. 12, 2013) (imposing a coercive daily fine of $250 against an individual). Thus, this Court GRANTS Plaintiff’s request for coercive sanctions and ORDERS Defendants to pay a daily fine of $250, starting from the date of this Order, for each day they remain in violation of the Amended Injunction and the Settlement Agreements. Unlike coercive sanctions, compensatory awards are limited to “actual losses sustained as a result of the contumacy.” Shuffler v. Heritage Bank, 720 F.2d 1141, 1148 (9th Cir. 1983). Compensatory awards are payable to the party moving for contempt. United Mine Workers, 330 U.S. at 304. Here, Plaintiff has failed to provide the Court with evidence as to sales it actually lost as a direct result of Defendants’ contumacy. See United Mine Workers, 330 U.S. at 304 (compensatory fine must “be based upon evidence of complainant’s actual loss”); see also Gen. Signal Corp., 787 F.2d at 1380 (denying a compensatory fine where movant provided no evidence of 18 Case 2:20-cv-00587-RSWL-RAO Document 60 Filed 07/18/22 Page 19 of 21 Page ID #:592

1 losses caused by non-movant’s contumacy). Lacking

2 evidence of losses attributable to Defendants’

3 contumacy, this Courts DENIES Plaintiff’s request for 4 compensatory sanctions. 5 5. Attorneys’ Fees 6 In addition to sanctions, Plaintiff seeks 7 attorneys’ fees and costs in the amount of $12,192.25 8 incurred in connection with bringing the instant Motion 9 and enforcing the Settlement Agreements. Mot. 17:14-16, 18:1-3. The Amended Agreement provides in Paragraph 5 that, in the event that either party breaches the Settlement Agreements, the accused party “shall pay all reasonable attorneys’ fees, costs and expenses incurred by the prevailing Party in any civil action relating to the enforcement of the Original Agreement, the Amended Agreement, [and] the Amended Permanent Injunction.” Ex. 2 ¶ 5. Courts have considerable discretion to award attorneys’ fees. Fitzgerald v. City of Los Angeles, No. CV 03–01876 DDP (RZx), 2009 WL 960825, at *3 (C.D. Cal. April 7, 2009). Courts have awarded attorneys’ fees based on the terms of a settlement agreement where an unambiguous provision in the settlement agreement provided payment of attorneys’ fees and costs, especially where it was likely that an agreement or injunction “w[ould] need monitoring.” Id. at *6. Additionally, because “[a]ttorneys’ fees frequently must be expended to bring a violation of an order to the 19 Case 2:20-cv-00587-RSWL-RAO Document 60 Filed 07/18/22 Page 20 of 21 Page ID #:593

1 court’s attention,” courts in civil contempt proceedings

2 may exercise discretion to decide whether an award of

3 attorneys’ fees is “appropriate as a remedial measure.” 4 Perry, 759 F.2d at 705. 5 Here, Plaintiff is entitled to attorneys’ fees 6 under the express terms of the Settlement Agreements. 7 However, Plaintiff has not submitted financial records, 8 such as billing statements, to establish the amount of 9 reasonable attorneys’ fees and costs beyond its bald assertion that it incurred costs of $12,192.25 in bringing this Motion. See Global Ampersand, LLC v. Crown Eng'g & Constr., 261 F.R.D. 495, 502 (E.D. Cal. 2009) (citing Van Gerwen v. Guarantee Mut. Life Co., 214 F.3d 1041, 1045 (9th Cir. 2000)) (holding that a party seeking an award of attorney’s fees “must submit evidence to support the number of hours worked and the rates claimed”). Thus, the Court GRANTS Plaintiff’s request for attorneys’ fees and ORDERS Plaintiff to provide supplemental briefing to establish the amount of reasonable attorneys’ fees and costs. Based on the foregoing, the Court GRANTS in part and DENIES in part Plaintiff’s Motion for Contempt and Enforcement of Settlement. Specifically, the Court ORDERS Defendants to comply with the Amended Injunction and the Settlement Agreements and cease their use of false or unverified PSI claims. The Court also GRANTS Plaintiff’s request for coercive sanctions and ORDERS 20 Case 2:20-cv-00587-RSWL-RAO Document 60 Filed 07/18/22 Page 21 of 21 Page ID #:594

1 Defendants to pay a daily fine of $250, starting from

2 the date of this Order, for each day they remain in

3 violation of the Amended Injunction and the Settlement 4 Agreements. The Court DENIES Plaintiff’s request for 5 compensatory sanctions. The Court additionally GRANTS 6 Plaintiff’s request for attorneys’ fees and ORDERS 7 Plaintiff to submit supplemental briefing to establish 8 the amount of reasonable attorneys’ fees and costs 9 within fourteen (14) days of this Order. DATED: July 18, 2022 ______/_s/_ R_o_n_a_ld_ _S_.W__. L_e_w_______ HONORABLE RONALD S.W. LEW Senior U.S. District Judge 21