Summary
noting that the plaintiffs' "conclusory statement that '[a]ny judgment entered against the [d]efendants will cause [them] to suffer irreparable harm and damage'" did not establish irreparable harm"
Summary of this case from Home It, Inc. v. WenOpinion
DOCKET NO. 00-CV-0055E(Sc).
February 2, 2001
Joseph J. Welter, Esq., c/o Kavinoky Cook, Buffalo, NY., Attorneys For The Plaintiff.
Neil Weinberg, Esq., Williamsville, NY., Attorneys For The Defendant.
MEMORANDUM AND ORDER
Plaintiffs filed suit against defendants January 13, 2000 alleging that defendants were using plaintiffs' trademarks, trade names, promotional literature and technical data in violation of the Lanham Act, 15 U.S.C. § 1051-1127. The parties entered into a Settlement Agreement August 23, 2000 whereby defendants admitted to "willfully engaging in the conduct alleged in the complaint" and agreed to the entry of a permanent injunction in exchange for plaintiffs dropping the lawsuit. Welter Aff. Ex. D (Settlement Agreement at 1). The Settlement Agreement provided that if
"either TPH or Lewin violate the Permanent Injunction or any of the terms of this Agreement, the Parties agree that a judgment may be entered against TPH and Lewin in the amount of $35,000, which amount represents attorneys' fees incurred by AEM and Thermal Foams as of the date of this Agreement and an estimate of the profits TPH and Lewin have made as a result of their improper conduct as of the date of this Agreement. Any such judgment may be entered upon ten (10) days notice to TPH and Lewin." Id. at ¶ 2.
Therma Panel Homes Corporation.
The Permanent Injunction entered by this Court September 11, 2000 prohibited defendants from inter alia:
(a) using for any purpose any promotional literature, advertising materials, technical data, specifications or any other documents, in redacted form or otherwise, produced for or owned by AFM ***,
(b) using for any purpose any promotional literature, advertising materials, technical data, specifications or any other documents, in redacted form or otherwise, relating to any products manufactured, offered for sale, sold or distributed by AEM, *** [and]
(h) using for any purpose any trademarks, service marks, service marks or trade names of AEM including, but not limited to "AFM", "R-Control", *** [and] "Perform Guard" ***. Welter Aff. Ex. E (Permanent Injunction ¶ 5).
On December 13, 2000 plaintiffs sent notice to defendants that they would be entering judgment pursuant to the Settlement Agreement, although they did not state how defendants had violated it. Welter Aff. Ex. F (Welter Letter of December 13, 2000). On December 21, 2000 defendants' attorney Neil Weinberg, Esq. contacted this Court seeking a temporary restraining order barring plaintiffs from entering the judgment on the ground that defendants had not violated either the Settlement Agreement or the Permanent Injunction. The undersigned called the attorney for plaintiffs, Joseph J. Welter Esq. and set up a hearing for December 27, 2000. Presently before this Court is the defendants application for a temporary restraining order.
In their application for a temporary restraining order, defendants attached an affidavit by Lewin, sworn to December 20, 2000, wherein he states that "Defendants have fully complied with all terms and conditions of the Settlement Agreement and verily believe that no violations whatsoever occurred." Lewin Aff. ¶ 4. Lewin further states that
"Upon receipt of said notice, I immediately commenced a thorough investigation involving my employees, representatives and agents of the company in addition to all forms of advertising and the company's web page to determine of any violation of the Settlement Agreement took place. Deponent's investigation has led to no violations or wrongdoings on the part of the Defendants and Deponent strenuously objects to a judgment being entered." Id. ¶¶ 10-11.
In opposing the defendants' application for a temporary restraining order and in support of their intention to enter judgment, plaintiffs state that they discovered November 9, 2000 that defendants were violating the Settlement Agreement and the Permanent Injunction by using plaintiffs' photographs and illustrations and their registered trademarks "R-Control" and "Perform Guard" on their websites www.thermapanel.com andwww.thermapanelhomes.com. As evidence thereof, plaintiffs submitted copies of their promotional material along with printouts from defendants' website www.thermapanel.com from December 21, 2000. Welter Aff. Exs. H-L. A comparison between these items shows that defendants were using plaintiffs' promotional material, photographs from their promotional material and plaintiffs' registered trademarks "R-Control" and "Perform Guard" on their website www.thermapanel.com December 21, 2000. Plaintiffs have further requested that sanctions be imposed against both defendants and their attorney, Weinberg, pursuant to Rule 11 of the Federal Rules of Civil Procedure based upon not only their violation of the Settlement Agreement and the Permanent Injunction but also on Lewin's submission of a fraudulent affidavit and Weinberg's failure to conduct an adequate investigation before moving for a temporary restraining order.
In support of their motion for a temporary restraining order, defendants submitted a printout from their webpagewww.thermapanel.com/about/ structural/main.htm taken December 26, 2000 which is totally different than that submitted by plaintiffs. Weinberg December 27, 2000 Aff. Ex. A. The defendants also submitted printouts from their webpages www.thermapanel.com/about!structural/default3htm andwww.thermapanel.comlabout/structural/default5.htm which — unlike the corresponding printouts from December 21, 2000 submitted by plaintiffs — Welter Aff. Exs. I-J — are blank. Weinberg December 27, 2000 Aff. Exs. B-C. Defendants explain the difference in the printouts submitted by the parties by stating that:
"Although Deponent admits to be far from an expert in computers, I believe the following is the basis for Plaintiffs' belief that a violation occurred:
At approximately 10:00 PM. on December 26, 2000, I was able to reach Defendant's web site programmer. It is believed that Mr. Welter provided the Court with the old, and unchanged web site pages. Apparently when litigation commenced earlier this year, Mr. Welter reviewed Defendants' web site and the same was automatically "stored" in his computer. When again accessing the web site on December 21, 2000, the "stored" material automatically appeared thereby believing [sic] that violations still occurred. Had Mr. Welter pressed "Refresh" on his computer, the new web site would have appeared, none of which violate the Settlement Agreement. Deponent believes that that is the only logical explanation for the differences in Plaintiffs' Exhibits H, I and J and Defendants' Exhibits A, B and C (note the same web page address was used in all exhibits)." Weinberg December 27, 2000 Aff. ¶ 9.
Based upon the difference in the web pages, which defendants claim were caused by plaintiffs' attorney failing to press "Refresh" when viewing the web site thereby pulling up the old pre-settlement version, defendants have requested that sanctions be imposed against plaintiffs and their counsel for "gross negligence, harassment and malicious prosecution of Defendants." Weinberg December 27, 2000 Aff. ¶ 10.
There is however, another explanation for the difference between the webpages submitted by plaintiffs from December 21, 2000 and defendants on December 26, 2000 — i.e., they were changed in the interim. In fact it does appear that defendants changed their website after December 21, 2000. Defendants' main website — www.thermapanel.com — states that it was last modified August 23, 2000 at 2:16:25 AM Local time. Clicking on the link for "About Our Home Kits" brings one towww.thermapanel.com/about/about.htm, which was last modified August 23, 2000 at 1:56:31 AM Local Time. From that page, clicking on the link "Structural Insulated Panel" brings one towww.thermapanel.com/about/structural/main.htm which states that it was last modified December 26, 2000 at 3:10:10 AM Local Time.
In his December 27, 2000 affidavit, Weinberg stated that he was able to reach defendant's web site programmer at 10:00 PM December 26, 2000. He does not state what he was told by the web site programmer; however it seems unlikely that the defendant's web site programmer would have forgotten his or her making modifications to the defendant's web site earlier that same day. Further, while Weinberg states that he was "advised on or about December 20, 2000 from Welter to look at Defendant's web site for violations of the Settlement Agreement," he does not state that he did so but only that he "made an independent investigation which included conversations with Mr. Lewin and determined that the web site did not violate the Settlement Agreement. Weinberg December 27, 2000 Aff. ¶ 8.
Defendants state that "Paragraph 3 of the Settlement Agreement provides that "a preponderance of the evidence that a violation has occurred' must first be shown before Defendants are deemed to be in violation of the Order." Weinberg December 20, 2000 Aff. ¶ 2. This is incorrect. Paragraph 2 of the Settlement Agreement addresses the entry of judgment. It is only in paragraph 3 which deals with contempt of court that states that a violation of the Permanent Injunction will subject them to contempt of court of proven by a preponderance of the evidence. Plaintiffs have submitted printouts from the defendants' website which show that defendants were in violation of the injunction. These printouts show that on December 21, 2000 the defendants' websitewww.thermapanel.com had material prohibited under both the Settlement Agreement and the Permanent Injunction entered by this Court; accordingly and even though not explicitly required by the Settlement Agreement, plaintiffs have demonstrated by the preponderance of the evidence their entitlement to enter judgment pursuant thereto.
A temporary restraining order is designed for the "purpose of preserving the status quo and preventing irreparable harm and for just so long as is necessary to hold a hearing." Warner Bros. Inc. v. Dae Rim Trading, Inc., 877 F.2d 1120, 1124 (2d Cir. 1989). A hearing was held on this matter December 27, 2000 during which the undersigned informally instructed plaintiffs to hold off on filing judgment until further notice of this court; therefore this Court will treat the application for a temporary restraining order as one for a preliminary injunction. A party seeking a preliminary injunction must demonstrate that it will suffer irreparable injury in the absence of such relief and either (1) a likelihood of success on the merits or (2) sufficiently serious going to the merits to make them a fair ground for litigation and a balance of hardships tipping decidedly in the favor of the movant. Jolly v. Coughlin, 76 F.3d 468, 473 (2d Cir. 1996). Irreparable injury "means injury for which a monetary award cannot be adequate compensation and that where money damages is adequate compensation a preliminary injunction will not issue." Jackson Dairy, Inc. v. H.P Hood Sons, Inc., 596 F.2d 70, 72 (2d Cir. 1979). Defendants do not satisfy these criteria. The only damage defendants will seek in the absence of a preliminary injunction is the entry of a $35,000 monetary judgment. Such does not come close to qualifying as irreparable injury because it can be simply remedied by an award of monetary damages. Defendants have not even attempted to show that they will suffer irreparable injury, absent the conclusory statement that "[a]ny judgment entered against the Defendants will cause Defendants to suffer irreparable harm and damage." Lewin Aff. ¶ 12. Also, it cannot be said that defendants have a substantial likelihood of success on the merits inasmuch as plaintiffs have submitted evidence to this Court — viz., printouts from the defendants' website www.thermapanel.com — showing that defendants did in fact breach both the Settlement Agreement and the Permanent Injunction. Defendants' only response to this is the submissions of different printouts from the web site five days later coupled with a statement from Weinberg — who is "far from an expert in computers" — that plaintiffs' attorney failed to press "Refresh" when viewing the web site thereby bringing up the old version. However, of as Weinberg claims, Welter failed to press "Refresh" thereby causing the old pre-settlement version of defendant's website to be displayed in his web browser, then plaintiffs must also have done the same thing when they first viewed that site November 9, 2000 because they also saw the same material on that site as Welter did when he submitted printouts from December 21, 2000. Finally, there are not sufficiently serious questions going to the merits to make them a fair ground for litigation and, even of there were, the balance of hardships does not tip decidedly in the favor of the movant who has admitted to willfully infringing the plaintiffs' trademarks and may indeed be in contempt of this Court's order.
"By presenting to the court *** a pleading, written motion, or other paper, an attorney *** is certifying that to the best of the person s knowledge, information, and belief, formed after an inquiry reasonable under the circumstances, — (1) it is not being presented for any improper purpose, such as to harass or to cause unnecessary delay or needlessly increase in the cost of litigation; *** [and] (3) the allegations and other factual contentions have evidentiary support or, of specifically so identified, are likely to have evidentiary support after a reasonable opportunity for further investigation or discovery FRCvP 11(b).
"A motion for sanctions under this rule shall be made separately from other motions or requests *** and shall not be filed with or presented to the court unless, within 21 days after service of the motion *** the challenged paper, claim, defense, contention, allegation, or denial is not withdrawn and appropriately corrected." Rule 11(c)(1)(A) of the Federal Rules of Civil Procedure ("FRCvP"). Neither of the parties has complied with either of these requirements; however, because the requests for sanctions were brought in connection with an application for a temporary restraining order and because the court can initiate such sanctions on its own initiative — FRCvP 11(c)(1)(B) —, this Court will consider the requests for sanctions.
This Court first addresses defendants' request that sanctions be imposed against plaintiffs' attorney. What defendants state amounts to "gross negligence, harassment and malicious prosecution" is Welter's alleged failure to press "Refresh" on his web browser when viewing the defendants' web site. Weinberg December 27, 2000 Aft. ¶ 10. Defendants however have presented no evidence that the old pre-settlement web pages would be displayed of Welter did not press "Refresh" when viewing the defendants' web site. Accordingly, defendants' request that plaintiffs' attorney be sanctioned will be denied.
Plaintiffs have requested that defendant Lewin be sanctioned for submitting a false affidavit and that defendants' attorney be sanctioned for failure to conduct an adequate investigation before moving for a temporary restraining order. Lewin stated in his December 20, 2000 affidavit that, upon receiving notice that the plaintiffs intended to enter judgment pursuant to the Settlement Agreement, he "immediately commenced a thorough investigation involving the company's web page" and that his "investigation has led to no violations or wrongdoings on the part of the Defendants ***." Lewin Aff. ¶ 10-11. However, according to the printouts of defendants' web page www.thermapanel.com from December 21, 2000 — the day after Lewin swore to his affidavit — submitted to this Court by plaintiffs, the defendants' web site was replete with "violations and wrongdoings." Accordingly, it appears to this Court that this affidavit was submitted — along with the application for a temporary restraining order — with the intention of delaying plaintiffs from entering judgment until the defendants could modify their website by removing the infringing material. This is supported not only by the fact that the defendants' website appears to have been drastically changed between December 21, 2000 and December 26, 2000 as evidenced by the difference between the printouts submitted by plaintiffs and defendants, but also by the fact that defendants' web pagewww.thermapanel.com/ about/structurallmain.htm was last modified December 26, 2000 at 3:10:10 AM Local Time. In light of Weinberg's knowledge that defendants had willfully infringed the plaintiffs' trademarks — Settlement Agreement at 1, Permanent Injunction ¶ 4 — and that he had been advised by plaintiffs' attorney December 20, 2000 to look at defendants' website — Weinberg December 27, 2000 Aff. 68 —, the undersigned finds that Weinberg had a duty to investigate plaintiffs' allegations for himself by personally viewing defendants' website before moving for a temporary restraining order. Weinberg skirts this issue in his December 27, 2000 affidavit. While it does not appear he examined the defendants' website before moving for a temporary restraining order, such is not sufficiently clear. Accordingly, before imposing sanctions on defendants and their attorney, this Court will conduct an evidentiary hearing to allow them to present evidence to show that their application for a temporary restraining order was not made for the purpose of delaying plaintiffs' entry of judgment while they changed their website. In addition and because it appears likely that defendants were in violation of this Court's Permanent Injunction, at such time this Court will also determine whether to hold defendants in contempt of court.
Accordingly it is hereby ORDERED that defendants' request for a temporary restraining order/preliminary injunction barring plaintiffs from entering judgment pursuant to the Settlement Agreement is denied, that the Clerk of this Court is directed to enter judgment for plaintiffs in the amount of $35,000, that defendants' request that plaintiffs and their attorney be sanctioned is denied, that defendants counsel is ordered to show cause, why he 5hould not be sanctioned and that defendants are ordered to show cause at a term of this Court to be held at 3:00 p.m. on February 16, 2001, why they 5hould not be sanctioned and held in contempt for violating this Court's Permanent Injunction.