Opinion
6:23-CV-00066-ADA-JCM
04-11-2023
H-E-B, L.P., Plaintiff, v. NINGBO KUER PLASTIC TECHNOLOGY CO., LTD., et al, Defendants.
TO: THE HONORABLE ALAN D ALBRIGHT, UNITED STATES DISTRICT JUDGE.
REPORT AND RECOMMENDATION OF THE UNITED STATES MAGISTRATE JUDGE
JEFFREY C. MANSKE, UNITED STATES MAGISTRATE JUDGE.
This Report and Recommendation is submitted to the Court pursuant to 28 U.S.C. § 636(b)(1)(C), FED. R. CIV. P. 72(B), AND RULES 1(F) AND 4(B) OF APPENDIX C OF THE LOCAL RULES OF THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF TEXAS, LOCAL RULES FOR THE ASSIGNMENT OF DUTIES TO UNITED STATES MAGISTRATE JUDGES. BEFORE THE UNITED STATES MAGISTRATE JUDGE IS PLAINTIFF'S MOTION FOR PRELIMINARY INJUNCTION (ECF NO. 7). AS DISCUSSED BELOW, FOR THE REASONS DESCRIBED BELOW, THE COURT RECOMMENDS that Plaintiff's Motion be GRANTED.
I. BACKGROUND
Plaintiff, H-E-B, L.P., sued Defendants Ningbo Kuer Plastic Technology Co., Ltd., Ningbo Kuer Kayak Co., Ltd., Ningbo Kuer Outdoor Products Co., Ltd., and Ningbo Huanhai Marine Supplies Co. for breach of contract. Pl.'s Compl. (ECF No. 10) at 1. Plaintiff alleges that it is the owner of several patents relating to a line of coolers carried by H-E-B stores. Id. at ¶ 30.
Plaintiff sued Defendants for patent and trade dress infringement in 2020. Id. at | 33. During litigation, Plaintiff and Defendants entered into a settlement agreement. Id. at ¶¶ 41-49.
The settlement agreement prohibits Defendants from directly or indirectly developing, designing, manufacturing, supplying, or otherwise commercializing any cooler product that practices a claim of H-E-B's patents. Id. at ¶¶ 51-52. The settlement agreement contains two exceptions. Id. at | 53. The first allowed Defendants to sell certain products outside of the State of Texas. Id. at ¶¶ 55-56. Importantly, Defendants were not permitted to sell infringing coolers in the State of Texas. Id. at ¶¶ 43-44. The second exception allowed Defendants to sell up to 6,000 units in Defendants' existing inventory during the sell-off period. Id. at ¶¶ 59-64.
Plaintiff alleges that shortly after entering the settlement agreement, Plaintiff discovered that companies selling infringing coolers procured them from Defendants. Id. at ¶ 118. Plaintiff alleges on information and belief that Defendants sold the coolers after the sell-off period, that Defendants sold more than 6,000 units, and that Defendants violated the settlement agreement's geographical restrictions. Id. at ¶¶ 119-20. The settlement agreement also required a Kuer officer to provide a sworn statement certifying that all remaining units were destroyed and disclosing the total number of units sold during the sell-off period and who bought the units. Pl.'s Compl., Ex. 1 at § 6.1.3.
The settlement agreement also included remedies provisions. Under the agreement, if Defendants sold or distributed any infringing coolers, they would owe Plaintiff $20 per unit in liquidated damages. Id. at § 6.4.1. The parties also agreed that injunctive relief would be an appropriate remedy for sales or marking products in breach of the agreement. Id. at § 6.4.2. Further, Defendants agreed that they would not oppose or challenge a request for preliminary injunctive relief within Texas relating to a breach of Sections 6.1, 6.1.4, or 6.3, except on the grounds that Plaintiff cannot establish a likelihood of success on the merits that Defendants breached those sections. Id. After suing, Plaintiff filed the present Motion for Preliminary Injunction.
II. LEGAL STANDARD
A preliminary injunction is “an extraordinary remedy that may only be awarded upon a clear showing that the plaintiff is entitled to such relief.” Winter v. Nat. Res. Def. Council, Inc., 555 U.S. 7, 22 (2008). To obtain a preliminary injunction, plaintiffs must establish: (1) a substantial likelihood of success on the merits; (2) substantial threat of irreparable injury if the injunction is not issued; (3) the threatened injury outweighs harm to the defendant; and (4) the injunction will not disserve the public interest. Enrique Bernat F., S.A. v. Guadalajara, Inc., 210 F.3d 439, 442 (5th Cir. 2000). “A preliminary injunction is ... not to be granted routinely, but only when the movant, by a clear showing, carries the burden of persuasion.” White v. Carlucci, 862 F.2d 1209, 1211 (5th Cir. 1989) (quotation omitted). “The decision to grant a preliminary injunction is to be treated as the exception rather than the rule.” Miss. Power & Light Co. v. United Gas Pipe Line Co., 760 F.2d 618, 621 (5th Cir.1985). “The court may issue a preliminary injunction only on notice to the adverse party.” Fed.R.Civ.P. 65(a)(1). This “necessarily requires that the party opposing the preliminary injunction has the opportunity to be heard and to present evidence.” Opulent Life Church v. City of Holly Springs, 697 F.3d 279, 298 (5th Cir. 2012) (quotation omitted).
III. DISCUSSION
A. Plaintiff has established a substantial likelihood of success on the merits.
Plaintiff argues that it will have no trouble prevailing on the merits of this case. Pl.'s Mot. at 13. In the Fifth Circuit, a movant need not prove it is entitled to summary judgment to show a likelihood of success on the merits. Miner Ltd. v. Anguiano, 383 F.Supp.3d 682, 695 (W.D. Tex. 2019). Instead, the movant must present a prima facie case of its claims. Id. Here, Plaintiff brings claims of breach of the settlement agreement. To prove its claim, Plaintiff must prove that (1) a valid contract exists; (2) Plaintiff performed; (3) Defendants breached by failing to perform or tender performance as contractually required; and (4) Plaintiff sustained damages due to the breach. Pathfinder Oil & Gas, Inc. v. Great W. Drilling, Ltd., 574 S.W.3d 882, 890 (Tex. 2019).
Plaintiff has established a substantial likelihood of success on the merits. The settlement agreement is unquestionably a contract. See Liberto v. D.F. Stauffer Biscuit Co., 441 F.3d 318, 323 (5th Cir. 2006) (holding that “settlement agreements are enforceable in the same manner as any other written contract.”) (citation omitted). Plaintiff performed by dismissing Defendants from the underlying patent and trade dress infringement claims. Pl.'s Mot. at 6.
Plaintiff has also established that Defendants breached the settlement agreement. Plaintiff presented evidence that Defendants sold and imported 18,000 prohibited coolers months after the sell-off period ended. Pl.'s Mot., Exs. 11, 14. Plaintiff also provided evidence that Defendants failed to certify their compliance with the sell-off period in breach of the settlement agreement and that Defendants have refused to provide the required annual audit numbers. Pl.'s Mot., Exs. 4, 19. These acts are sufficient to establish a prima facie case that Defendants breached the settlement agreement.
B. Plaintiff has established a substantial threat of irreparable injury if an injunction is not issued.
Plaintiff argues that there is a substantial threat of irreparable injury to Plaintiff if an injunction is not issued. Pl.'s Mot. at 14. Irreparable harm requires a showing that: (1) harm to the plaintiff is imminent; (2) the injury would be irreparable; and (3) that plaintiffs have no other adequate legal remedy. Chacon v. Granata, 515 F.2d 922, 925 (5th Cir. 1975). The settlement agreement clearly states that Defendants “shall not oppose or otherwise challenge a request for preliminary injunctive relief within the state of Texas relating to an alleged breach of Sections 6.1, 6.1.4, or 6.3 for any reason, except on the grounds that [Plaintiff] cannot establish a likelihood of success on the merits that [Defendants have] breached Sections 6.1, 6.1.4, or 6.3.” Pl.'s Compl., Ex. 1 at § 6.4.2. Plaintiff further argues that Defendants' breach has caused lost sales, attorneys' fees, other injuries that can be cured with money damages, and harms that have no quantifiable price. Pl.'s Mot. at 15. Included in the nonquantifiable damages are damages to Plaintiff's industry reputation and goodwill with its customers. Id. These nonquantifiable damages alone are sufficient to carry Plaintiff's burden on this factor. See Coach, Inc. v. Brightside Boutique, No. 1:11-CA-20 LY, 2021 WL 32941, at *6 (W.D. Tex. Jan. 6, 2012), R. & R. adopted, No. A-11-CA-020-LY, 2021 WL 13149026 (W.D. Tex. Mar. 16, 2012) (holding that a likelihood of confusion constitutes irreparable harm). Thus, Plaintiff has established a substantial threat of irreparable injury if an injunction is not issued.
C. Plaintiff has established that the threatened injury outweighs harm to Defendant.
Plaintiff argues that the balance of the hardships favors issuing the injunction. Pl.'s Mot. at 17. Plaintiff more specifically asserts that issuing the injunction will subject Defendants to the market conditions they agreed to in the settlement agreement, but that denying the injunction would severely harm Plaintiff by diminishing its market share, reputation, and goodwill. Id. The Court agrees that the threatened injury outweighs harm to Defendants because Plaintiffs are merely requesting enforcement of the settlement agreement Defendants entered.
D. Plaintiff has established that an injunction will not disserve the public interest.
As to the fourth factor, Plaintiff argues that issuing the injunction will serve the public interest rather than disserve it. Id. at 18. The public interest is served by enforcing contracts and by prohibiting infringement that could create confusion. See N. Am. Deer Registry, Inc. v. DNA Sols., Inc., No. 4:17-CV-00062, 2017 WL 2402579, at *10 (E.D. Tex. June 2, 2017) (holding that the public is served by enforcing contracts); see also Qin v. P'shps & Unincorporated Ass'ns on Schedule A, No. 6:21-CV-1243-ADA, 2022 WL 80274, at *4 (W.D. Tex. Jan. 7, 2022) (holding that the public interest is disserved by permitting continued infringement that creates confusion). Thus, the Court concludes that the public interest would be served by issuing this preliminary injunction. Because each of the four factors favors enjoining Defendants' conduct, the Court should issue a preliminary injunction.
IV. CONCLUSION
For the reasons outlined above, the undersigned RECOMMENDS that Plaintiff's Motion (ECF No. 7) be GRANTED and that the Court should enter Plaintiff's Proposed Order located at ECF No. 11.
V. OBJECTIONS
The parties may wish to file objections to this Report and Recommendation. Parties filing objections must specifically identify those findings or recommendations to which they object. The District Court need not consider frivolous, conclusive, or general objections. See Battle v. U.S. Parole Comm'n, 834 F.2d 419, 421 (5th Cir. 1987).
A party's failure to file written objections to the proposed findings and recommendations contained in this Report within fourteen (14) days after the party is served with a copy of the Report shall bar that party from de novo review by the District Court of the proposed findings and recommendations in the Report. See 28 U.S.C. § 636(b)(1)(C); Thomas v Arn, 474 U.S. 140, 150-53 (1985); Douglass v. United Servs. Auto. Ass'n, 79 F.3d 1415 (5th Cir. 1996) (en banc). Except upon grounds of plain error, failing to object shall further bar the party from appellate review of unobjected-to proposed factual findings and legal conclusions accepted by the District Court. See 28 U.S.C. § 636(b)(1)(C); Thomas, 474 U.S. at 150-53; Douglass, 79 F.3d at 1415.