California Expanded Metal Products Company et al v. James A Klein et al

Filing 111

PRELIMINARY INJUNCTION by Judge Dean D. Pregerson: 1. Defendants and their Agents are enjoined and prohibited from taking or engaging in any action or conduct that would cause, or is likely, or intended by Defendants, tocause, Clark to be removed fr om any listing of Underwriters Laboratory (UL) or any other third party certifying entity (collectively, "UL listings") for anyintumescent-tape bearing products or any fire stopping products; and 2 In the event Defendants or their Agents ha ve taken any action or engaged in any conduct that would cause, or is likely, or intended by Defendants, to cause, Clark to be removed from any UL listings, Defendants are directed andordered to immediately take all actions necessary to reinstate or maintain Clarks listing as approved on all UL listings for any intumescent-tape bearing products or any fire stopping products; and 3. Defendants shall, by May 25, 2017, provide, or otherwise make available to ClarkDietrich, any and all UL files for licensed products, including testing and data files; and 4. ClarkDietrich shall use such files and data for the sole purpose of obtaining its own UL certifications; and 5. ClarkDietrich shall post a bond of $100,000 in connection with this order.with this Order. (lc)

Download PDF
1 2 O 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 CENTRAL DISTRICT OF CALIFORNIA 10 11 CALIFORNIA EXPANDED METAL PRODUCTS COMPANY, ET AL., 12 Plaintiff, 13 v. 14 JAMES A. KLEIN, ET AL., 15 Defendants. 16 ___________________________ ) ) ) ) ) ) ) ) ) ) ) ) Case No. CV 16-05968 DDP (MRWx) ORDER RE: PRELIMINARY INJUNCTION 17 18 This matter comes before the court on the court’s Order to 19 Show Cause Re: Preliminary Injunction. 20 submissions of the parties and heard oral argument, the court 21 enters a preliminary injunction against Defendants and adopts the 22 following Order. 23 I. 24 Having considered the Background The history of this case is well known to the parties and 25 described in detail in this Court’s prior Orders. In brief, 26 Defendant James Klein (“Klein”) assigned various building material- 27 related patents to a company he helped form, Defendant Blazeframe 28 Industries, Ltd. (“Blazeframe”). Klein, Blazeframe, and Plaintiffs 1 California Expanded Metal Products Company (“CEMCO”) and 2 ClarkWestern Dietrich Building Systems LLC (“Clark”) litigated 3 several questions regarding the ownership, licensing, and alleged 4 infringement of the patents in a prior case before this court. 5 No. CV 12-10791-DDP(MRWx) (“the prior case”). 6 The parties settled all claims in the prior case. See The 7 transcript of a settlement conference constitutes the Settlement 8 Agreement.1 9 which would then license the patents to Clark and to Blazeframe. Blazeframe agreed to transfer the patents to CEMCO, 10 Among the material provisions of the Settlement Agreement were 11 terms related to ownership and maintenance of safety 12 certifications, or listings, issued by nonparty Underwriters 13 Laboratories (“UL”). 14 utilize products that are not UL-approved. 15 conference, Clark’s counsel asked whether “CEMCO will be 16 maintaining all the UL files . . . .” 17 responded, “No.” 18 different way. 19 will be maintained – and – by someone, so – such that Clark 20 Dietrich will have the benefit of them as it currently does.” 21 Blazerframe’s counsel replied, “I think that’s correct.” 22 counsel clarified that she was “actually talking about the[] UL 23 approvals that are related to the products.” 24 then stated, “Yes, that’s correct. Many architects and contractors will not At the settlement Blazeframe’s counsel Clark’s counsel then said, “Let me ask it a There will be a provision that all the UL files Clark’s Blazeframe’s counsel Those are not being transferred 25 26 1 27 28 The settlement agree on a settlement parties agreed to the terms of a settlement at the conference and further agreed that if they failed to memorialization of those terms, the transcript of the conference would constitute the Settlement Agreement. 2 1 and neither is the trademark, but yes, that’s all going to be 2 maintained.” 3 In the instant case, Plaintiffs allege that Defendants 4 breached the Settlement Agreement and infringed upon the patents. 5 On February 3, 2017, Plaintiffs filed an Ex Parte Application for 6 a Temporary Restraining Order, asserting that Blazeframe had 7 threatened to drop Clark from the UL listings for the licensed 8 products. 9 further action to de-list Clark, and represented that they would do (Dkt. 53.) At hearing, Defendants agreed to take no 10 everything in their power to ensure that Clark either remained 11 listed on the UL certifications or, in the event UL had already de- 12 listed Clark, to reinstate Clark’s UL listings. 13 that representation, the court vacated Plaintiffs’ application for 14 a TRO. 15 On the basis of (Dkt. 63.) Shortly after the February 7 hearing, UL revealed new testing 16 standards, and indicated that the licensed products at issue here 17 will need to demonstrate compliance with the new standards by 18 August 2017. 19 testing plans to UL no later than May 31, 2017. 20 that the parties were aware of impending changes to UL’s testing 21 requirements prior to the October 2015 settlement conference that 22 resulted in the Settlement Agreement. 23 UL further required that listing entities submit new Plaintiffs assert On May 5, 2017, Plaintiffs filed another Application for A 24 Temporary Restraining Order. (Dkt. 100.) 25 that, despite the representations made at the February 7 TRO 26 hearing, Defendants were once again threatening to “dump” Clark 27 from the UL listings. Indeed, Defendants’ counsel represented to 28 Plaintiffs that that “Blazeframe has no duties to ClarkDietrich 3 Plaintiffs contended 1 whatsover.” (Declaration of Anne G. Schoen in Support of TRO, Ex. 2 5.) 3 2017, this Court entered a Temporary Restraining Order enjoining 4 Defendants from taking, or failing to take, any action that would 5 result in Clark’s removal from any UL listing and requiring 6 Defendants to mitigate the effects of any such actions that had 7 already been taken. 8 cause why a preliminary injunction along similar lines should not 9 be entered. Defendants did not oppose Plaintiffs’ application. On May 9, The court also ordered Defendants to show Defendants submitted a written opposition to the entry 10 of a preliminary injunction and all parties appeared before the 11 court on May 22, 2017. 12 II. 13 Legal Standard A private party seeking a preliminary injunction must show 14 that: (i) it is likely to succeed on the merits; (ii) it will 15 suffer irreparable harm in the absence of preliminary relief; (iii) 16 the balancing of the hardships and equities between the parties 17 that would result from the issuance or denial of the injunction 18 tips in its favor; and (iv) an injunction will be in the public 19 interest. 20 (2008). 21 shows a combination of probable success on the merits and the 22 possibility of irreparable harm; or (ii) raises serious questions 23 on such matters and shows that the balance of hardships tips in 24 favor of an injunction. 25 Inc., 819 F.2d 935, 937 (9th Cir. 1987). “These two formulations 26 represent two points on a sliding scale in which the required 27 degree of irreparable harm increases as the probability of success 28 decreases.” Winter v. Natural Res. Defense Counsel, 555 U.S. 7, 20 Preliminary relief may be warranted where a party: (i) Id. See Arcamuzi v. Continental Air Lines, Under both formulations, the party must 4 1 demonstrate a “fair chance of success on the merits” and a 2 “significant threat of irreparable injury” absent the issuance of 3 the requested injunctive relief.2 4 III. Discussion Id. 5 A. Likelihood of Success on the Merits 6 Plaintiffs have demonstrated that they are likely to succeed 7 on the merits of their UL listing-related claims. The Settlement 8 Agreement clearly states that the UL listings will be “maintained” 9 in such manner “that Clark[] will have the benefit of them . . . .” 10 Blazeframe was very clear that it would retain those listings, and 11 would not transfer them to CEMCO along with the patents. 12 notwithstanding Blazeframe’s counsel’s representation that 13 “Blazeframe has no duties to ClarkDietrich whatsover,” it appears 14 beyond dispute that Blazeframe agreed to “maintain” the listings 15 for Clark’s use. Thus, 16 Defendants’ opposition does not dispute that Defendants 17 threatened and intend to drop Clark from the current UL listing, 18 and have no intention of including Clark in any re-testing, re- 19 certification, or updated listing to UL’s revised standards. 20 Instead, Defendants argue that Plaintiffs are unlikely to succeed 21 on the merits because (1) Clark is manufacturing defective products 22 and (2) Clark has the resources to conduct its own product testing 23 and obtain its own UL listings at its own expense. 24 are not persuasive. These arguments 25 26 27 28 2 Even under the “serious interests” sliding scale test, a plaintiff must satisfy the four Winter factors and demonstrate “that there is a likelihood of irreparable injury and that the injunction is in the public interest.” Alliance for the Wild Rockies v. Cottrell, 632 F.3d 1127, 1135 (9th Cir. 2011). 5 1 First, Defendants raised the same manufacturing defect 2 arguments in response to Plaintiffs’ February 3 application for a 3 TRO. 4 either party in connection with the current application, Defendants 5 essentially argue that Clark’s packaging methods do not 6 sufficiently protect the licensed products during transport. 7 discussed at the prior hearing, Plaintiffs dispute not only 8 Defendants’ characterization of Clark’s products and packaging, but 9 also Defendants’ methods of evidence gathering and the authenticity Although not briefed or supported in comparable detail by As 10 of the samples examined by Defendants. 11 this evidentiary dispute, however, as there has been no significant 12 change in the evidence or arguments since the time of the first 13 hearing, at which Defendants agreed to leave Clark’s UL 14 designations undisturbed. 15 characterization does not appear to comport with the UL’s own 16 determination that Clark’s products are sufficiently identical to 17 Blazeframe’s to merit UL certification.3 18 The court need not resolve Furthermore, Defendants’ As for Defendants’ suggestion that Clark can easily bear the 19 expense of independent testing, and therefore obtain its own UL 20 certification without Defendants’ assistance, that contention is 21 irrelevant. 22 its own testing has no bearing on the question whether Defendants 23 agreed to maintain UL listings for Clark’s benefit. 24 Agreement appears to leave little doubt that Blazeframe did so Whether Clark has the financial wherewithal to conduct The Settlement 25 26 27 28 3 Even if Defendants’ factual contentions are ultimately borne out, it is not clear to the court that defects in Clark’s packaging would excuse Defendants from the obligations they agreed to undertake in the Settlement Agreement. 6 1 agree. Plaintiffs have adequately shown, at this stage, that 2 Defendants’ renewed threats to drop Clark from the current UL 3 listings and stated intent not to assist Clark in any way with 4 respect to the revised testing requirements violate the Settlement 5 Agreement. 6 B. Irreparable Harm 7 “Price erosion, loss of goodwill, damage to reputation, and 8 loss of business opportunities are all valid grounds for finding 9 irreparable harm.” Advanced Transit Dynamics, Inc. v. Ridge Corp., 10 No. CV 15-1877 BRO (MANx), 2015 WL 12516692 at *24 (C.D. Cal. Aug. 11 24, 2015) (quoting Celsis in Vitro, Inc. v. CellzDirect, Inc., 664 12 F.3d 922, 930 (Fed. Cir. 2012) (internal quotation marks omitted). 13 There appears to be no dispute that, should Clark lose UL-certified 14 status for Clark’s licensed products, Clark will suffer severe 15 damage to its reputation. 16 plans generally specify that only UL-certified components be used. 17 Clark therefore faces the prospect of a drastically reduced, if not 18 completely foreclosed, market, as well as the specter of wide-scale 19 product returns and disputes over completed orders. 20 were Clark to lose the benefit of the UL listings, the pernicious 21 reputational effects of being known as a seller of “unsafe” 22 products would likely extend beyond the licensed products here to 23 Clark’s entire, varied line of building products. 24 There is no dispute that architectural Furthermore, Defendants nevertheless maintain that Clark would not be 25 irreparably harmed in the absence of an injunction because Clark is 26 free to conduct independent testing of its version of the licensed 27 products and obtain its own UL listings at a cost of approximately 28 $98,000. (Opposition at 20-21.) As an initial matter, that 7 1 approach would, at best, only insulate Clark from irreparable harm 2 at some point in the future. 3 their threat to drop Clark from even the current UL listings. 4 Defendants to carry out that threat, no future independent 5 certification would undo the harm that Clark would suffer from 6 having lacked UL certification in the interim. Defendants have, however, renewed Were 7 Furthermore, and even looking solely to Clark’s ability to 8 meet the revised UL standards come August, Defendant’s narrow focus 9 on the financial cost of independent testing significantly 10 understates the challenges facing Clark. Defendants acknowledge 11 that they have exclusive control over data files related to 12 Blazeframe’s testing of the licensed products to the current 13 standard. 14 certification only as a “multiple listee” under Blazeframe’s 15 certification. 16 configurations, methodology, or other testing circumstances that 17 enabled Blazeframe to satisfy the UL’s current requirements. 18 Without Blazeframe’s assistance, Clark might theoretically be able 19 to start from scratch and design an adequate testing plan, obtain 20 its own data, and satisfy the current UL standard. 21 could it proceed to re-evaluate its products and procedures in 22 light of the revised standard. 23 party hoping to obtain certification under the new standard must 24 submit a testing plan to UL by May 31, 2017. 25 unlikely that Clark will be able to formulate and implement a 26 testing regimen that would yield data and results roughly 27 equivalent to that already in Klein’s possession and then use that 28 data to construct an even more stringent testing plan prior to UL’s Clark played no role in that testing, and enjoys UL Thus, Clark has no information about the product Only then it It is undisputed, however, that any 8 It is extremely 1 May 31 and August deadlines. Clark would then face the same 2 prospect of de-listing, with all of its concomitant, irreparable 3 harms.4 4 C. 5 Defendants reiterate that Clark has greater financial Balance of Hardships and Public Interest 6 resources than Blazeframe to argue that the balance of hardships 7 favors the latter. 8 point out, Blazeframe itself must conduct additional testing to 9 satisfy UL’s revised standards. These arguments ring hollow. As Plaintiffs It would cost Blazeframe no 10 additional time, energy, or money to continue to designate Clark as 11 a “multiple listee” of the Blazeframe listing. 12 with an eye toward obviating future disputes of this nature, Clark 13 proposed that it and Blazeframe collaborate to design and carry out 14 new tests in light of the revised UL standards, with Clark bearing 15 half of the cost of such testing and each party receiving a copy of 16 the resulting data. 17 Nevertheless, and Blazeframe rejected this proposal.5 Now, for the first time, Blazeframe asserts that it intends to 18 completely abandon the licensed products at issue here, and 19 suggests that it will not seek to maintain or update UL listings 20 21 22 23 24 25 26 27 28 4 Furthermore, as discussed by this Court in a prior Order (Dkt. 106), Blazeframe may be judgment-proof, limiting the deterrent effect of money damages. See, e.g., Aviara Parkway Farms, Inc. v. Agropecuaria La Finca, S.P.R. de R.L., No. 08 CV 2301 JM (CAB), 2009 WL 249790 at *3 (S.D. Cal. Feb. 2, 2009); Wang Laboratories Inc. v. Chip Merchant Inc., No. 93-893-K (POR), 1993 WL 42820 at *7 (S.D. Cal. Sept. 3, 1993). Indeed, Defendants’ course of conduct in this litigation appears to be somewhat untethered from increased risk of additional, significant monetary liability. 5 As is evident from the discussion herein, and by the very number of motions filed in this case, Plaintiffs and Defendants are largely incapable of effective cooperation. The court is thus reluctant to order any relief requiring the parties to collaborate in good faith. 9 1 for the licensed products even for Blazeframe’s own benefit. 2 being the case, Clark asks that this court order Defendants to 3 provide Clark with existing, UL testing-related data files, in 4 order to afford Clark a realistic opportunity to develop and 5 conduct its own tests and obtain its own UL listing within UL’s 6 looming deadlines. 7 be inequitable to require it to turn over proprietary data to 8 Clark. 9 That Blazeframe, in response, contends that it would As discussed above, it appears highly likely that Blazeframe 10 bears the obligation to “maintain” UL listings for Clark’s benefit, 11 notwithstanding Defendants’ stated position to the contrary. 12 Defendant nevertheless argues that it would be unduly burdensome to 13 (1) require Blazeframe to continue to list Clark as a multiple 14 listee, at no additional cost to Blazeframe above its own testing 15 costs, (2) require Blazeframe to bear even fifty percent of the 16 cost of additional testing, or (3) share existing data already in 17 Blazeframe’s control. 18 to take any affirmative action to themselves “maintain” the UL 19 listings, but also contend that they should not be required to help 20 Clark obtain its own listings. 21 In other words, Defendants not only refuse Defendants cannot have it both ways. As discussed above, 22 Clark’s “vast” financial resources do not insulate it from the 23 significant hardships it faces as a result of Defendants’ 24 decisions. 25 them to bear any testing costs whatsoever. 26 Blazeframe nothing, however, to share existing UL testing data with 27 Clark. Defendants have rejected any proposal that requires It would cost Any hardship to Defendants, therefore, is negligible or, at 28 10 1 worst, remediable by money at a later date.6 2 hardships weighs heavily in Plaintiffs’ favor. 3 The balance of Nor is the court persuaded by Defendants’ one-sentence 4 argument that “the public interest sharply favors BlazeFrame 5 because the risks associated with selling a life safety product 6 that has never been fire tested is simply too great.” 7 21.) 8 Blazeframe’s products and Clark’s products are materially 9 divergent. (Opp. at This argument is predicated on the conclusion that As discussed above, the evidence on record does not 10 support any such conclusion at this stage, and this Court takes no 11 position on the efficacy of any party’s products. 12 however, UL itself appears to make no distinction between 13 Blazeframe-manufactured products, which have been tested, and 14 Clark-manufactured versions. UL remains free to grant or withhold 15 its approval as it sees fit. The possibility that UL would deny 16 its approval to Clark products, however, in no way justifies 17 Defendants’ efforts to impede Clark from maintaining or seeking it. 18 IV. 19 As noted above, Conclusion For the reasons stated above, the court hereby orders that: 20 21 1. Defendants and their Agents are enjoined and prohibited 22 from taking or engaging in any action or conduct that 23 would cause, or is likely, or intended by Defendants, to 24 cause, Clark to be removed from any listing of 25 Underwriters Laboratory (UL) or any other third party 26 certifying entity (collectively, "UL listings") for any 27 6 28 Although Defendants refuse to turn over existing UL testing data to Clark, Defendants are willing to sell Clark that data. 11 1 intumescent-tape bearing products or any fire stopping 2 products; and 3 4 2 In the event Defendants or their Agents have taken any 5 action or engaged in any conduct that would cause, or is 6 likely, or intended by Defendants, to cause, Clark to be 7 removed from any UL listings, Defendants are directed and 8 ordered to immediately take all actions necessary to 9 reinstate or maintain Clark’s listing as approved on all 10 UL listings for any intumescent-tape bearing products or 11 any fire stopping products; and 12 13 3. Defendants shall, by May 25, 2017, provide, or otherwise 14 make available to ClarkDietrich, any and all UL files for 15 licensed products, including testing and data files; and 16 17 4. 18 ClarkDietrich shall use such files and data for the sole purpose of obtaining its own UL certifications; and 19 20 21 22 5. ClarkDietrich shall post a bond of $100,000 in connection with this Order. Failure to comply with this Order may result in sanctions, 23 including the striking of the Answer and any Counterclaims, 24 monetary sanctions, and imprisonment. 25 26 IT IS SO ORDERED. 27 Dated: May 23, 2017 DEAN D. PREGERSON United States District Judge 28 12

Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.

Why Is My Information Online?