Stanley Black & Decker, Inc. et al v. D&L Elite Investments, LLC et al

Filing 78

ORDER GRANTING Contempt Sanctions re 58 Ex Parte Application for and Order to Show Cause Re: Comtempt Sanctions filed by The Black & Decker Corporation, Stanley Black & Decker, Inc., 50 Order to Show Cause, Set Hearings. Signed by Judge Samuel Conti on 7/19/2013. (sclc1, COURT STAFF) (Filed on 7/19/2013)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE NORTHERN DISTRICT OF CALIFORNIA

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For the Northern District of California

United States District Court

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STANLEY BLACK & DECKER, INC., and
THE BLACK & DECKER CORPORATION,
Plaintiffs,

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v.

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D&L ELITE INVESTMENTS, LLC, d/b/a
G BAY INTERNATIONAL; BILLY DENG;
WISHEN LUO; and JOHN DOES 1-10,
inclusive,

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Defendants.

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) Case Nos. 12-4516 SC
)
)
) ORDER GRANTING APPLICATION
) FOR CONTEMPT SANCTIONS
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I.

INTRODUCTION
The above-captioned plaintiffs ("Black & Decker") bring this

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action for trademark infringement against Defendants D&L Elite

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Investments ("D&L"), Billy Deng ("Deng"), and Wishen Luo ("Luo")

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(collectively, "Defendants") in connection with Defendants' alleged

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sale of counterfeit DeWalt batteries.

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September 5, 2012, the Court entered a temporary restraining order

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enjoining Defendants from selling or otherwise distributing the

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alleged counterfeit batteries.

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subsequently stipulated to a preliminary injunction with the same

ECF No. 1 ("Compl.").

ECF No. 26 ("TRO").

On

Defendants

applied for contempt sanctions on the ground that Defendants

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violated the TRO and preliminary injunction.

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On May 8, 2013, the Court ordered Defendants to show cause why

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contempt sanctions should not issue.

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filed a response to the Order to Show Cause, and Black & Decker has

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filed a reply in support of its Application.

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("Response"), 73 ("Reply").

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determination without oral argument per Civil Local Rule 7-1(b).

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United States District Court

terms and conditions.

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For the Northern District of California

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ECF No. 29.

Black & Decker has since

For the reasons set forth below, Black & Decker's Application for

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contempt sanctions is GRANTED.

ECF No. 59 ("App.").

ECF No. 50.

Defendants have

ECF Nos. 72

This matter is now appropriate for

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II.

BACKGROUND
Plaintiff Black & Decker manufacturers and sells tools and

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accessories, including DeWalt battery packs.

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Decker owns the trademark registrations for the DeWalt mark, as

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well as trade dress registrations for DeWalt's signature yellow and

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black color scheme, both of which are used in connection with

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DeWalt battery packs.

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from the California Secretary of State, Defendant D&L is a

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California corporation with a principal place of business at

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Huntwood Avenue in Hayward, California.

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Ex. 81.

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general partner at D&L and Defendant Deng is its agent.

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& Decker asserts that D&L sells counterfeit DeWalt batteries under

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various aliases, including G Bay International ("G Bay").

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Id. ¶ 14.

Compl. ¶ 17.

Black &

According to certified documents

ECF No. 59 ("Keats Decl.")

These records also indicate that Defendant Luo is a
Id.

Black

In or around 2012, Black & Decker's counsel hired private
investigators to collect evidence of Defendants' alleged trademark

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infringement.

Juan Rubio ("Rubio"), one of the private

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investigators, submitted a declaration in support of Black &

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Decker's TRO application.

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that he visited a warehouse at D&L's Huntwood Avenue address on

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July 12, 2012, and found a sign for G Bay.

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G Bay and reached a man named "Billy," who said that he could meet

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Rubio at the Hayward warehouse later that day.1

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met Billy at the warehouse, he observed a number of batteries

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bearing the DeWalt trademark and trade dress and ultimately

ECF No. 8 ("Rubio Decl.").

Rubio states

Id. ¶ 9.

Id. ¶ 10.

Id.

Rubio called

When Rubio

In later

United States District Court

For the Northern District of California

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purchased one of these batteries.

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communications with the Black & Decker investigators, Billy

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indicated that G Bay had approximately 200 DeWalt batteries on hand

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and that the company could special-order additional batteries.

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No. 13 ("Yerena Decl.") ¶ 12.

ECF

Bhanu Gorti ("Gorti"), Black & Decker's Vice President of

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Engineering Global Electronics and Electrical Systems, declares

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that the battery purchased by Rubio is a counterfeit.

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("Gorti Decl.").

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inferior to genuine DeWalt batteries in a number of respects and

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that the counterfeit battery presents significant safety hazards,

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including an explosion risk.

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customers have purchased similar counterfeit batteries on the

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websites eBay and Amazon.

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concludes that these counterfeit batteries were made by the same

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manufacturer that made the counterfeit battery purchased by Rubio.

ECF No. 11

Gorti explains that the counterfeit battery is

Black & Decker employees and

Id.

See ECF No. 10 ("Foss Decl.").

Gorti

After reviewing this and other evidence submitted by Black &

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Black & Decker appears to suggest that "Billy" is actually Billy
Deng, an agent of D&L and one of the individual defendants in this
action.
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Decker, the Court entered a TRO on September 5, 2012.

Among other

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things, the TRO enjoined Defendants from "marketing, advertising,

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distributing, offering to sell, or selling any product, packaging

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or any other item of any kind that is or ever was named or labeled

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with the word 'DeWalt' or any colorable imitation thereof."

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3.

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which would have provided for the seizure of counterfeit batteries

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and other evidence by federal marshals.

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stipulated to a preliminary injunction with the same basic terms as

TRO at

The Court denied Black & Decker's request for a seizure order,

The parties later

United States District Court

For the Northern District of California

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the TRO, and the Court granted the stipulation on September 20,

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2012.

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On April 17, 2013, Black & Decker filed an ex parte

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Application for a seizure order on the ground that Defendants had

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continued to market and sell counterfeit batteries in violation of

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the TRO and preliminary injunction.

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an order to show cause why contempt sanctions should not issue, and

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a temporary restraining order freezing Defendants' financial

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accounts and assets.

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sanctions, as well as the attorney fees it incurred in bringing the

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Application.

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Black & Decker also requested

Black & Decker specifically sought $43,758 in

In support of the Application, Black & Decker submitted, inter

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alia, evidence produced by Paul Asbury ("Asbury"), the owner of

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Discount Tool Mall.

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evidence shows that Luo offered to sell and did in fact sell Asbury

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a number of DeWalt branded batteries throughout September, October,

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November, and December 2012.

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shows that Asbury was invoiced $43,758 for these batteries.

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declaration from one of Black & Decker's senior project engineers

ECF No. 60 ("Asbury Decl.") ¶ 1.

Id. Exs. 2-3.

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This

The evidence also
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states that the batteries sold to Asbury were counterfeit and were

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made by the same manufacturer who made the counterfeit batteries

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purchased in connection with Black & Decker's TRO.

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("Osborne Decl.").

ECF No. 62

In its Application, Black & Decker also complained about what

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it characterized as Defendants' "less-than-forthcoming" discovery

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responses.

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Defendants agreed to allow Black & Decker to inspect Deng's

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computer hard drive.

App. at 4.

According to Black & Decker's attorneys,

Keats Decl. ¶ 5.

Defendants repeatedly

United States District Court

For the Northern District of California

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delayed turning over the computer, and eventually Defendants

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represented that they did not have any computers which were used in

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connection with the alleged counterfeit batteries.

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and-confer conference, D&L's attorney purportedly stated that Deng

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arranged for his computer to be "recycled."

In one meet-

Id. ¶ 12.

On April 24, 2013, the Court granted Black & Decker's

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Application.

The Court issued an order to show cause regarding

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contempt sanctions, as well as a seizure order and a temporary

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restraining order freezing Defendants' financial accounts.

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Defendants were permitted to move for the modification or

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dissolution of the asset restraining order upon two days' written

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notice to the Court and opposing counsel.

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take any action to modify the asset restraining order, aside from a

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stipulation to unfreeze a single safe deposit box.

Defendants have yet to

ECF No. 54.

Pursuant to the Court's April 24 Order, U.S. Marshalls

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conducted a seizure at one of Defendants' warehouses on May 3,

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2013.

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result of the seizure suggests that Defendants continued to sell

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counterfeit DeWalt batteries to other customers after the entry of

ECF No. 75 ("McArthur Decl.") ¶ 2.

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Evidence collected as a

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the TRO and preliminary injunction.

See MacArthur Decl. Exs. 1-12.

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III. LEGAL STANDARD
Federal courts "have inherent power to enforce compliance with

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their lawful orders through civil contempt."

Spallone v. United

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States, 493 U.S. 265, 276 (1990) (quotations omitted).

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moving for sanctions "has the burden of showing by clear and

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convincing evidence that the contemnors violated a specific and

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definite order of the court."

The party

Stone v. City & Cnty. of San

United States District Court

For the Northern District of California

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Francisco, 968 F.2d 850, 856 n.9 (9th Cir. 1992).

"The burden then

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shifts to the contemnors to demonstrate why they were unable to

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comply. . . .

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comply."

They must show they took every reasonable step to

Id. (internal citations omitted).

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IV.

DISCUSSION

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A.

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The Court finds that civil contempt sanctions against

Monetary Sanctions

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Defendants are appropriate.

The TRO and preliminary injunction

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unequivocally prohibited Defendants from selling or marketing

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counterfeit DeWalt batteries.

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submitted by Black & Decker clearly show that Defendant violated

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those orders by selling counterfeit batteries to Asbury.

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Defendants do not deny that they sold DeWalt brand batteries to

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Asbury or that those batteries were counterfeit.

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Defendants' response to the Order to Show Cause admits that

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Defendants sold certain products to Asbury and that they ultimately

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were forced to refund Asbury at least some of the money for his

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purchase.

The declarations and other evidence

Response at 2.

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In fact,

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Defendants argue that sanctions are not warranted here because

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they refunded $38,676 to Asbury between February 2013 and March

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2013, and, as a result, there are no profits to disgorge.

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This argument lacks merit.

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refunded Asbury's money, their decision to sell the batteries in

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the first instance constituted a blatant violation of the Court's

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order.

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Asbury took place on November 23, 2012, about two months after the

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Court entered the preliminary injunction.

Id.

First, regardless of whether Defendants

According to Defendants' response brief, the first sale to

Id.

By this time,

United States District Court

For the Northern District of California

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Defendants were aware that such actions were prohibited.

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Defendants did not voluntarily refund the money in an attempt to

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comply with the Court's orders.

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that Asbury filed a complaint with PayPal demanding a "chargeback,"

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and that Defendants disputed the claim.

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("Harrison Decl.") Ex. 1.

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Defendants and forced them to refund Asbury's money.

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Third, the evidence indicates that, after the entry of the TRO,

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Defendants earned more than $38,676 from the sale of counterfeit

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batteries.

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counterfeit batteries, and the evidence seized by the U.S.

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Marshalls on May 4 suggests that Defendants sold or intended to

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sell counterfeit batteries to a number of other customers in

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violation of the Court's orders.

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Second,

Defendants' own evidence shows

See ECF No. 72-1

PayPal ultimately ruled against
See id.

Defendants charged Asbury at least $43,758 for the

Next, Defendants argue that they lack the financial ability to

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pay $43,758 in monetary sanctions and that they "are in dire

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financial straits as their assets were frozen pursuant to this

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Court's order of April 24, 2013."

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also lacks merit.

Response at 3.

This argument

The Court is aware of no authority that would

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justify limiting the award of sanctions based on a contemnor's

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ability to pay.

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Court's restraining order, then that order can be modified.

In any event, if the only impediment is the

Finally, Defendants argue that Black & Decker's Complaint and

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Application include allegations of sales activity by entities and

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individuals who are not associated with Defendants, including G.

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Bay.

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including the declarations of Black & Decker's private

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investigators and the evidence seized by the U.S. Marshalls on May

Id. at 2.

Defendants' contention is belied by the evidence,

United States District Court

For the Northern District of California

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4.

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this topic is a cryptic declaration from their attorney stating

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that, at a mediation session, Defendants explained that they were

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not associated with G Bay and the other entities named in Black &

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Decker's Application.

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need not reach the issue to find that Defendants violated the TRO

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and preliminary injunction.

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Decker shows that Defendant Luo, not G Bay, sold the counterfeit

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batteries to Asbury.

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Thus far, the only evidence that Defendants have put forth on

Harrison Decl. ¶ 4.

In any event, the Court

The evidence submitted by Black &

Defendants' blatant violations of the Court's orders justify

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the award of monetary sanctions.

The Court finds that $43,758 is

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an equitable sanction since that amount is equivalent to the

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revenue that Defendants would have realized from the sales to

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Asbury.

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B.

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In their reply brief, Black & Decker seeks spoliation

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sanctions in connection with Defendants' destruction of Deng's

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computer.

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computer in its Application, this is the first time Black & Decker

Spoliation Sanctions

Reply at 4-6.

While Black & Decker discussed Deng's

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has raised the issue of spoliation sanctions.

Black & Decker urges

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the Court to issue an order instructing the jury that it must draw

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all inferences against Defendants due to their willful suppression

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of evidence.

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have not had an opportunity to respond to Black and Decker's

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request because it was raised for the first time on reply.

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Accordingly, Black & Decker's request for spoliation sanctions is

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DENIED without prejudice.

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motion for spoliation sanctions in accordance with the local rules.

The request is procedurally improper.

Defendants

Black & Decker may file a separate

United States District Court

For the Northern District of California

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C.

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While Black & Decker did not request spoliation sanctions in

Attorney Fees

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its Application, it did request attorney fees.

See App. at 24.

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Defendants have yet to respond to this request and the Court finds

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it proper.

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the costs and expenses incurred in connection with a successful

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motion for contempt.

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Tech., Inc., 539 F.3d 1039, 1042-43 (9th Cir. 2008); Bad Ass Coffee

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Co. of Hawaii, Inc. v. Bad Ass Coffee Ltd. P'ship, 95 F. Supp. 2d

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1252, 1257 (D. Utah 2000).

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Decker's request for reasonable attorney fees incurred in

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connection with the filing of its Application.

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shall file declarations and other evidence documenting its attorney

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fees within fourteen days of the signature date of this Order.

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These documents should set forth the lodestar amount and describe

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the hours expended, the work performed, and the attorneys'

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qualifications and hourly rates.

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Black & Decker's requested attorney fees within twenty-eight days

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of the signature date of this Order.

Attorney fees are recoverable to compensate a party for

See Koninklijke Philips Elecs. N.V. v. KXD

Accordingly, the Court GRANTS Black &

Black & Decker

Defendants may file objections to

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V.

CONCLUSION
For the foregoing reasons, the Court GRANTS Plaintiffs Stanley

Application for civil contempt sanctions and awards sanctions

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against Defendants D&L Elite Investments, Billy Deng, and Wishen

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Luo in the amount of $43,758.

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spoliation sanctions is DENIED without prejudice.

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Black & Decker's request for attorney fees incurred in connection

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with this application, but defers setting the attorney fee amount

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United States District Court

Black & Decker, Inc. and the Black & Decker Corporation's

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For the Northern District of California

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pending the additional briefing requested in Section IV.C supra.

Black & Decker's request for
The Court GRANTS

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IT IS SO ORDERED.

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Dated:

July 19, 2013
UNITED STATES DISTRICT JUDGE

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