Schwartz v. Rent-A-Wreck of America, Inc.

Filing 580

MEMORANDUM OPINION. Signed by Judge Peter J. Messitte on 6/29/2017. (aos, Deputy Clerk)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND

DAVID SCHWARTZ,

et al.,

*

*
*

Plaintiffs and Counter-Defendants

*
*
*
*
*
*

v.
RENT-A-WRECK
Defendants

OF AMERICA, et al.,
and Counter-Claimants

Civil No. I'JM 07-1679

MEMORANDUM
Rent-a- Wreck is a nationwide

franchise

OPINION

business

that specializes

in the short and mid-

tenn rental of used automobiles.
For nearly

10 years, David Schwartz,
collectively

Inc. (hereinafter,
Wreck")

operation

concerns

contemptuous,
proccdural

and

"Schwartz")

and Bundy American,

over Schwartz's
skirmish

the originator

certain

LLC (hereinafter,

Rent-A- Wreck
collectively

of a RAW A franchise
actions

on

of the concept,

part

I

which

for present purposes

appeals to the Fourth Circuit, the rights and obligations

Inc. ('"Rent-A-

"RAW A"), have been doing battle

and as to which the Court must now consider

history of the case is long.

of America.

in West Los Angeles,

RA WA's

and Rent A Wreck,

the

California.

Court

appropriate

it is suf1icient

has

Their latest
found

sanctions.

to be

While the

to say that, after two

of the parties have been fully established.

Schwartz filed suit against RA WA in June 2007. In the last iteration of the Complaint, Schwartz sued
for declaratory judgment, specitlc performance, and breach of contract. In response, RA WA filed various
counterclaims, one of which asserted that the Schwartz franchise violated California competition law and
constituted an unlawful restraint on trade. The parties' claims proceeded to trial in April 2010. The jury
found that Schwartz had a contract with RA WA with respect to Schwartz's operation of a used car rental
business in West Los Angeles and that the contract afforded Schwartz the exclusive right to operate a
RA WA franchise in West Los Angeles. RA WA subsequently moved under Federal Rule ofCi"il
Procedure 50 to set aside portions of the jury's verdict, arguing, among other things, that California
competition law rendered the exclusivity provision void ab initio. The Court denied RA WA's Rule 50
Motion and entered a Final Order of Declaratory Judgment on September 23,2010. ECF No. 344. On
appeal. on March 9, 2012, the United States Court of Appeals for the Fourth Circuit issued an opinion
1

After the second appeal became
filed a Bill of Costs, seeking
issued

an Order

$13,405.11.
which

Costs

$32,665.21

from RAWA.

in favor of Schwartz

On April

to this Court, Schwartz

1,2016,

and against

that it reduce

RAW A's Motion

the Clerk's
to Review

Schwartz's

the Clerk of Court

RAW A in the amount

ECF No. 525. RAW A then filed a Motion to Review Clerk's

RAW A asked that the Court reject

alternative,
denied

Taxing

final and the case was remanded

Bill of Costs

award of costs by $4,442.83.

of

Order Taxing Costs, in
in its entirety

or. in the

ECF No. 526. The Court

and on July 12, 2016, aftinned

the Clerk's

Costs. ECF Nos. 535-36. RAW A did not appeal the Order, but did not promptly

Order Taxing
pay the ordered

costs.
On May 3, 2016, Schwartz

filed a Motion

ECF No. 528, which the parties briefed.
Hearing at which it found RA WAin
several

weeks.

prospective
Wreck

RAW A deliberately

customers

business

correspondence

On September

in West

and status reports,

Court's

Order and for Contempt.

30, 2016, the Court held a Show Cause

contempt

of the Court's

Order of March 4, 2011, in that for

directed

or permitted

its call center

that RAW A had no franchise

territory

to Enforce

Los Angeles.2
leading

in what was Schwartz's
Subsequently,

up to a second

hearing

operators
exclusive

the parties
on February

filed

to advise
Rent-Aextensive

27, 2017. See

ECF Nos. 529 - 567.
affinning in part, vacating in part, reversing in part, and remanding the case for further proceedings. ECF
No. 395. Of immediate relevance, the Fourth Circuit instructed the Court to submit to ajul)' the question
of whether the exclusive territoI)' provision of Schwartz's contract foreclosed competition in a substantial
share of the market for rental cars, and therefore whether Schwartz's franchise was void under California
law. as asserted by RA WA. After the second jul)' trial, the jul)' found that Schwartz's exclusive territorY
agreement did 1101 foreclose competition in a substantial share of the market for rental cars and
.
accordingly, the Court entered a Final Order of Judgment on Remand in favor of Schwartz on RA WA' s
counterclaim. On March 10, 2015, the Fourth Circuit issued an opinion affinning the Judgment. ECF No.
517. That court's mandate issued on April 2, 20 I5. ECF NO.5 I9.
2 At the September 30, 2016 hearing, after the Court inquired as to the maner, counsel for RA WA handed
Schwartz's counsel a check for $13,405.11 to cover the court-ordered costs. The fact that RAWA waited
until the filing of Schwartz' Motion and the day of the hearing to make the tender was yet another
indication of RA WA's apparent strategy, proclaimed at the outset by RA WA's principal operative, Jack
Fitzgerald, to make Schwartz sweat at virtually eveI)' stage of the proceedings.
2

For the reasons
hearings.
Order

stated on the record at the September

and as further set forth in this Memorandum,

and for Contempt,

ECF No. 528, will be

30, 2016 and February

Schwartz's

GRANTED

Motion

27, 2017

to Enforce

Court's

IN PART and DENIED IN

I.
It is well-established

To establish

civil contempt,

and convincing

contemnor
"favor";

federal

courts

possess

Chambers v. NASCa, Inc., 501 U.S. 32,44,

contempt.

clear

that

the moving

evidence:

had actual

(I)

or constructive

(3) that the alleged contemnor

knowledge

(at least constructive

III

an inherent

knowledge;

knowledge)

each of the following

of a valid

decree

(2) that the decree

by its conduct

to punish

S.Ct. 2123, lIS L.Ed.2d

party must establish

the existence

power

violated

of which

27 (1991).
elements

App'x

of civil contempt."

was in the movant's

the terms of the decree, and had

of such violations;

and (4) that movant

suffered

by clear and convincing

shins to respondent

is not

Redner's Markels, Inc. v. .Ioppalowne G.P. Ltd. P'ship, 608 F.

130, 131 (4th Cir. 2015).

clements

by

the alleged

harm as a result. Ashcraft v. ConoCO, Inc., 218 F.3d 288, 301 (4th Cir. 2000). "Willfulness
an element

for

Although
evidence,

the movant

has the initial burden of showing

if he meets that burden,

to raise a defense on an appropriate

ground.

the burden

these

of production

Uniled Stales v. Darwin Consl.

3 The Court's finding of contempt is confined to RA WA and not its counsel. That said. as has been
expressed several times in the course of this case, the Court has concerns that the hand of RA WA's
counsel-whether
lead counselor
in-house counsel----<!oes seem to have been involved in earlier
potentially contemptuous activity, specifically vis a vis RA WA 's online publication of different false
infonnation pertaining to Schwartz's West Los Angeles franchise. Thus, the Court received testimony at
the September 30, 2016 hearing indicating that RA WA 's outside counsel, Daniel Janssen, Esquire, had
directed RA WA to change the address and hours listed for Schwartz's franchise on its website to an
outdated address and hours, even though RA WA had previously published the correct infonnation.
Janssen did not dispute that fact at that hearing. Later, however, in both the brieling for and at the
February 27, 2017 hearing, RAWA contended that it was RAWA's in-house counsel, Greg Steinbarth,
Esquire, who gave the change directive, and that he did so over the objection of Janssen. To be clear. that
episode is not the basis of the present contempt finding; but it does illustrate the continuouslv cavalier
attitude that RA WA has exhibited toward Schwartz.
•

3

CO., 679 F. Supp. 531, 534 (D. Md. 1988). See also In re Minh

VII

Hoang, 2014 WL 1320322, at

*4 (Bankr. D. Md. Mar. 28, 2014); s.E.C v. SBM Inv. Cerl!ficales. Inc., 2012 WL 706999, at
*10 (D. Md. Mar. 2, 2012).
Schwartz has, by clear and convincing evidence, satisfied all four elements on the part of
RAWA.
By written order dated March 4, 2011, the Court ordercd that "[RAWA's]

Call Center

shall in no way attempt to dissuade prospective customers from connecting with [Schwartz's]
business or in any way attempt to divert business from [Schwartz's] exclusive business territory
to other franchises." ECF No. 382. Schwartz contends that RA WA violated thc tcrms of the
Court's March 4, 2011 Order.
The March 4. 2011 Order was unquestionably

a valid decree. It was not reversed or

vacated by the Fourth Circuit in its Opinion and Order of March 9, 2012. See ECF No. 395.4
Furthermore, RAW A does not dispute that it had actual knowledge of the existencc of the March
4,20 II Order or that the March 4, 20 II Order was in Schwartz's favor.
According to Schwartz, RA WA violated the March 4, 2011 Order when it intentionally
diverted prospective customers away from his business. He alleges and has testified based on his
own phone calls to RA WA's customer service center that for more than one month, i.e. primarily
in April of 2016, employees at the customer service call and email centers systematically
informed potential customers inquiring by phone that despite Schwartz's

West Los Angeles

franchise, no franchise existed there or that Schwartz had ceased operating. Moreover, some
customers were directed to a different RAW A franchise in another California city while others
were referred to a used car rental company known as Priceless, a non-RA WA but RAW A-related

4 The March 4, 20 II Order was not a declaratory judgment as asserted by RAWA. Rather, it explicitly
and coercively directed RAWA to refrain from certain actions.

4

entity. Schwartz. himself as the caller. has established eight instances in April 2016 when
RA WA's call center and email response team falsely represented either that RA WA had no
franchise in West Los Angeles or that Schwartz's

franchise no longer existed. Based on this

conduct, Schwartz submits that RA WA violated the Court's March 4. 2011 Order.
Although RAW A concedes that their call center staff may have wrongly represented that
Schwartz's

franchise was closed or did not exist. it has argued that a contempt finding is not

warranted because these statements were caused by an inadvertent programming error within a
March 31, 2016 sofiware update to their online reservation system prepared by a third party.
According to RA WA, the programming error removed several franchises. including Schwartz's
franchise, from a list used by the call center staff. RAW A alleges that the error did not otherwise
affect their public website, which consumers could continue to use to locate and contact
Schwartz's

franchise. Accordingly,

Schwartz's

franchise.

Furthermore,

says RAW A, it did not intend to divert business from
RA WA maintains

that it did not know

about

the

programming error or its effects until Schwartz served the instant Motion and that it promptly
corrected the error at that time. Therefore, according to RAW A, Schwartz cannot prove, at least
not by clear and convincing evidence, that its conduct violated the terms of the decree or that it
had notice of these violations.
The Court is unconvinced by RAW A's arguments.
There is no question that RAW A's conduct in or about April 2016 violated the tenns of
the March 4, 2011 Order. When prospective customers contacted RA WA about possibly renting
a car in the West Los Angeles area, they were told that there was no RAW A franchise located in
West Los Angeles, which, as the Court has had occasion to note, is the second largest city in the
United States. Consequently. RAW A diverted or attempted to divert business from Schwartz's

5

franchise, in clear violation of the order that they "in no way attempt to ... divert business from
[Schwartz's] exclusive business territory to other franchises." Even if the violation occurred due
to an inadvertent error-a

proposition which the Court flatly rejects-it

is irrelevant. "The

absence of willfulness does not relieve from civil contempt," and "it matters not with what intent
the defendant did the prohibited act." In re Walters, 868 F.2d 665, 668 (1989). See also In re:

Galleria Enters. 9{Maryland. Ltd. 102 B.R. 472, 476 (Bankr. D. Md. 1989).
With regard to whether RAW A had actual or constructive knowledge of its violation of
the March 24, 20 II Order, the Court looks not only to the facts surrounding the immediately
involved violations but considers as well the history and context of the litigation between the
parties. RAWA cites Gce N. Am.. Inc. v. MCS Servs., Inc.. 2011 WL 6130542 (D. Md. Dec. 7,
2011) to argue that negligent, non-willful aets cannot support a contempt finding. Id. at *5.
However, in Gce N. Am., the employer had e-mailed its employees to advise them about the
existence of the court orders and had held conference calls with its employees to explain the
court orders to them and to warn them about the need to strictly comply with the orders. See id.
at * I. Here, not only has RAW A not shown that it took comparable steps; it is simply incredible
that RAW A's call center employees could have believed that either RAW A had no franchise in
West Los Angeles-the

second largest city in the United States-or

that one might have shut

down virtually overnight without any warning or prior announcement by their superiors. This
extreme improbability is highlighted by the fact that RAW A, for nearly nine years, had been
engaged in extraordinarily

intense litigation with Schwartz regarding the RA WA franchise in

West Los Angeles.
The history between the parties adds context. The Court recalls yet again its finding that
111

2012 RAW A deliberately

changed the address and hours it was listing for Schwartz's

6

franchise

on its website

RA W A had previously

to an outdated

franchise's

and to patently

the correct information.6

published

2013, RAW A unilaterally

address

demanded

that Schwartz

fleet size from 150 vehicles

between

2015 and 2017. Following

President

explaining

its "Customer

fitzgerald

together

direct

that he was going

everything

Schwartz

had.

Schwartz's

franchise

111

informed

RAWA

of his franchise.

the Court and RA WA about a
from the RA W A website

submitted

programming

an affidavit

from its Vice

error, email inquiries

from

by RAW A' s CEO

Jack

Form" stopped working in late 2016.

with the earlier

to Schwartz

or face termination

his franchise received

that due to yet another third-party

Support/Feedback

Taken

that hearing,

even though

in a very short time frame either increase his

to 1.726 vehicles

drop in the number of email inquiries

hours,5

The Court also recalls that in January

Finally. at the February 27, 2017 court hearing, Schwartz
precipitous

incorrect

the Court

or about

verbal

to make

concludes

April

2016

that

threats
things

made
difficult

RAW A's

was clearly

and

for Schwartz

diversion

and take

of business

convincingly

deliberate

from
and

RA WA offers flimsy rationales for its decision to publish information that it knew was outdated and
incorrect. including that Schwartz had failed to submit the necessary forms to obtain clearance to move
his franchise to a new location. When the Court inquired at the February 27, 2017 hearing as to whether
RA WA had sent specific notice to Schwartz infonning him of his obligation to submit said forms.
RA WA's in-housc counsel Stein barth alluded to a July 24, 2012 letter sent by RA WA's President James
Cash to Schwartz. This letter, which notably RA WA had not attempted to enter as an exhibit at any of the
hearings. was read into the record following the Court's inquiry. The Court found RA WA's reluctance to
enter the letter into the record curious given that it apparently buttressed the argument that RA WA had
previously given notice to Schwartz to submit the necessary forms. But from the letter itself it was
obvious why RA WA did not offcr the letter initially. The letter also advised Schwartz that he could not. at
that point, cure the "breach:' and that RA WA was prepared to take steps to tenninate his franchise. The
Court observed that no referencc was made to this letter at the second jury trial, which occurred five
months aftcr the letter was sent, when it was indisputable that Schwartz was operating at the new address.
6 Although the Court's finding of contempt is limited to the call center misstatements in or about April
2016. the Court can only conclude that RA WA's publication of the wrong address and hours for
Schwartz's franchise also caused harm to Schwartz. This fortifies the Court's conclusion that RA WA has
consistently not acted in good faith and underscores that the diversion of business through the call centcr
misstatemcnts that is now before the Court was donc intentionally.
5

7

intentional,

not merely accidental

March 4, 20 II Order.
Finally,
violation.

or negligent.

Although

lost business

and damage to business

contemptuous

infra, are not only real, but unquestionably
In sum, the Court finds Schwartz
for the imposition

harm as a result of RAW A's

reputation

may be dimcult

Const. Co., 679 F. Supp.
complied

actions to the attention

has satisfied
against

for its violation

at 534.

RA WA

with the Order

to quantify,

fees associated

of the Court, as discussed

tangible.

of civil contempt

RA W A to set forth a valid defense

persuaded

suffered

to believe that they did not result. In any event, the attorneys'

with having to bring RA WA's

substantially

violated the

7

there can be little doubt that Schwartz

it defies experience

elements

The Court finds RA W A intentionally

his prima facie burden of showing

all four

RAW A. With that, the burden

shifts to

of the March 4, 2011 Order. See Darwin

seemingly

and second,

asserts

that it acted

two
111

defenses:

first,

that

it

good faith. The Court

IS

by neither.

To benefit from the substantial
took all reasonable

compliance

steps to ensure compliance.

750, 755 (4th Cir. 1989). Importantly,

defense,

the violating

party must show that it

See United States v. Darwin Const. Co., 873 F.2d

inadvertent

omissions

are excused only if such reasonable

steps were in fact taken. fd. See also Darwin Const. Co., 679 F. Supp. at 536 ("If a violating
party has taken
violations

'all reasonable

steps' to comply

of the order will not support

with the court order, technical

a finding of civil contempt:'

(quoting

or inadvertent

General Signal

Corp. v. Donal/co, fnc .. 787 F.2d 1376, 1379 (9th Cir.1986))).
The Court is further convinced that the misstatements perpetuated by RAW A's eall center employees
were part of an intentional seheme devised by RAW A based on the fact that those employees' statements
to customers appear to have come from a pre-written, uniform script. Thus, three different employees
responded to potential customers with the words, "Unfortunately, Rent-A- Wreek does not have a location
in Los Angeles, California anymore .. ," or some slight variation thereof. It is highly unlikely that these
employees spontaneously generated responses virtually identical to those of their eolleagues. Clearly
someone in RA WA 's organization prepared a script for these call center employees to lise.

7

8

RA WA asserts that it substantially complied with the March 4, 2011 Order with respect
to the call center misstatements in or about April 2016 and that it only violated that Order due to
an inadvertent error. Beyond restating the standard for the substantial compliance defense,
RA WA otfers very little support for this assertion. Even if the programming error was due to an
inadvertent mistake committed by a third party-and

the Court does not believe it was-the

efforts made by RAW A to ensure that it was not diverting business from Schwartz's franchise
were, to say the least, substandard.

There is no indication that RA WA alerted, much less

instructed, its employees as to the significance of the West Los Angeles franchise. In fact, what
seems clear is that the company took absolutely no steps whatsoever to ensure that its employees
even knew about the instant litigation, the March 4, 2011 Order, or the importance of treating the
West Los Angeles franchise fairly. The substantial compliance defense offers RAW A no shelter.
Whether the defense of good faith is available to civil contempt is open to debate. Courts
within the Fourth Circuit have disagreed whether good faith is a stand-alone defense to civil
contempt.8 Here, however, the Court need not consider whether good faith can serve as a defense

The Fourth Circuit, in COll.wl. Coal Co. v. United Mineworkers of Am .. Local 1702. 683 F.2d 827, (4th
Cir.1982), held, "[a] good faith attempt by local union officials to comply with a court's back to work
order can be a defense to a civil contempt order, even if those attempts were ineffective." Id. at 832.
However, in s.E.c. v. SBM Inv. Certificates. Inc .. 2012 WL 706999 (D. Md. Mar. 2, 2012), the court
stated:

8

At one time, the Fourth Circuit considered an alleged contemnor's good faith to be a
stand-alone defense to civil contempt. See Consol. Coal Co. v. United Mineworkers of
Am .. Local 1702. 683 F.2d 827, 832 (4th Cir.1982). But because "[t]he absence of
wilfulness does not relieve from civil contempt," AfcComb v. Jacksonville Paper Co., 336
U.S. 187, 191, 69 S.C!. 497, 93 L.Ed. 599 (1949), the Fourth Circuit subsequently
rejected this defense, holding that "good faith alone does not immunize a party from a
civil contempt sanction," McLean I'. Cent. States. Se. & Sw. Areas Pension Fund. 762
F.2d 1204, 1210 (4th Cir.1985) (citing McComb. 336 U.S. at 19\).
/d. at *IOn. 21. This conclusion was recently accepted in Victor Stanley. Inc. v. Creative Pipe, Inc., 2016
WL 1597119 (D. Md. Apr. 20, 2016).Id. at *3

9

to civil contempt because the Court finds, for all the reasons previously stated, that at no time did
RA WA demonstrate a good faith attempt to comply with the Court's March 4, 2011 Order. Its
failures to advise or instruct its employees about the importance of the West Los Angeles
franchise or to advise them as to the outcome of the protracted and intense legal proceedings or
of the need to treat Schwartz fairly completely undercut any profession of good faith. Once
again, the history of the litigation looms large. Statements by RA WA's CEO Fitzgerald about his
intention to see "how high" he could make Schwartz "jump" and how he was going to take
everything Schwartz owned, RAW A's decision to change the correct address and hours for
Schwartz's franchise listed on RA WA's website to an address and hours it knew were incorrect
(having done so on the advice of counsel), RA WA's repeated refusal to change the address and
hours back when Schwartz requested RA WA do so, and RA WA's delay in paying court-ordered
costs clearly convince the Court that RA WA did not act in good faith when its call center
employees diverted business from Schwartz's franchise in or about April 2016.
III
"The appropriate remedy for civil contempt is within the court's broad discretion:'
Gel1.

In re

Motors Corp., 61 F.3d 256, 259 (4th Cir. 1995). The court "may impose sanctions

for civil contempt to coerce obedience to a court order or to compensate the complainant

for

losses sustained as a result of the contumacy." Id. at 258. Accordingly, in addition to ordering
injunctive relief, a court can order "the contemnor to reimburse the complainant

for losses

Conversely, numerous courts, including the Fourth Circuit itself, have cited directly to Uniled
,Hineworkers of America without mention of McLean, holding that "a good faith attempt to comply as
well as substantial compliance or the inability to comply, can be defenses to a civil contempt order." See.
e.g., Dunkin' DOlluls. Illc. v. Three Rivers El/lm'l And Travel, 42 F. App'x 573, 575 (4th Cir. 2002);
Superior Performers. Inc. v. Meaike, 2014 WL 3734758, at *3 (M.D.N.C. July 29,2014); Chesapeake
Bank 1'. Berger, 2014 WL 5500872, at *3 (E.D. Va. Oct. 30, 2014), appeal dismissed, 629 F. App'x 501
(4th Cir. 2015).

10

sustained and for reasonable attorney's fees." See also Enovative Techs .. LLC v. Leor, 86 F.
Supp. 3d 445, 447 (D. Md. 2015). A compensatory sanction, however, cannot "exceed the actual
loss to the complainant caused by the actions of respondent, lest the contempt tine become
punitive in nature, which is not appropriate in a civil contempt proceeding."

Id. While the

moving party "bears the burden of proving both the fact and the amount of its losses," the
amount of damages awarded in a contempt finding must only meet the preponderance of the
evidence standard. In re Gen. Motors Corp., 110 F.3d 1003, 1016-1018 (4th Cir. 1997).
In addition to injunctive relief, Schwartz seeks monetary relief in the form of attorneys'
fees and compensation for lost profits. He seeks $500,000 to recoup his losses from the diversion
of business from his territory. He also asks to recover all attorneys' fees he has incurred dating
back to the start of the litigation with RAW A in 2007. Alternatively,
attorneys'

Schwartz seeks all

fees related to the current Motion for Contempt, the relevant hearings, and other

related filings.
A. Injunctive Relief
Injunctive relief in this case is not only merited, but necessary and appropriate. In light of
RA WA's consistent efforts to undermine Schwartz's

business, coercive sanctions will ensure

that RAW A in no way continues to divert business from Schwartz's franchise. Accordingly, the
Court wi 11order that:
1. RAW A shall publish the correct address, phone number, dates, and hours of operation
for Schwartz's

franchise on the Rent-A-Wreck website.9 If any of this information

requires amendment at any time in the future, Schwartz should contact RAW A, and
RA WA shall update the information on the website without delay.

The Court understands that both parties are currently satisfied with the information currently displayed
on Rent-A-Wreek's website.

Q

II

2. RAW A shall employ a pre-recorded dialogue for all incoming calls to its call center.
The pre-recorded dialogue must substantially be as follows:
"Thank You for calling the Rent-A- Wreck Customer Care Center. This
call may be monitored and recorded for quality assurance and training
purposes. For information regarding cities served by our location in the
Greater Los Angeles, California area, please press I. For information
about all other locations, please press 2."
Upon pressing I the caller will hear the following message: "Please press
I for the Greater Los Angles, California area telephone number. Please
press 2 for the Greater Los Angles, California area street address. Please
press 3 for the Greater Los Angles, California area business hours. Please
press 4 for the Greater Los Angles, California area email address."
Upon pressing 1, the caller will hear the following message on a
continuous loop until the caller presses 1 or hangs up: "The phone number
is 310-826-7555, 310-826-7555. Please press 1 to return to the previous
menu."
Upon pressing 2, the caller will hear the following message on a
continuous loop until the caller presses 1 or hangs up: ''The address is
2270 South Centinela Avenue, Los Angeles, California 90064. Please
press I to return to previous menu,"
Upon pressing 3, the caller will hear the following message on a
continuous loop until the caller presses 1 or hangs up: "The business hours
are: Monday thm Friday 9:00 AM to 6:00 PM Pacific Time, Saturday 9:00
AM to 4:00 PM Pacific Time, Sunday 10:00 AM to I :00 PM Pacific
Time. Please press I to return to previous menu."
Upon pressing 4, the caller will hear the following message on a
continuous loop until the caller presses 1 or hangs up: "The email address
is [e-mail].
[e-mail]. Please press I
to return to previous menu,"
If any of the information in the pre-recorded dialogue requires amendment at any
time in the future, Schwartz shall contact RA WA. and RAW A shall update the
recording without delay.

12

B. Monetary Relief
I.

Attornevs' Fees and Costs

At a minimum, Schwartz is entitled to an award of attorneys' fees. The Court concludes
that he is not entitled to attorneys'

fees dating back to the start of the litigation.

Without

question, however, he is due compensation for attorneys' fees related to bringing and litigating
the instant contempt motion. These relate to all the pleadings, preparation, and multiple court
appearances required to bring RAW A's contemptuous actions to the Court's attention:
Based upon evidence received at the September 30, 2016 Show Cause Hearing and for all
the reasons stated above, the Court finds that RAW A's violation of the Court's March 4, 2011
Order rises to the requisite level of obstinacy or recalcitrance justifying an award of attorneys'
fees. See CapitalSource

Fin., LLC v. Delco Oil, Inc.. Civ. No. DKC-06-2706,

2010 WL

3733934, at *7 (D. Md. Sept. 20, 2010).
To calculate an attorneys' fees award, the Court must calculate the "lodestar" figure, i.e.,
the number of hours reasonably expended on the litigation multiplied by an hourly rate that is
also reasonable. See Robinson v. Equifax Injb. Servs., LLC, 560 F.3d 235, 243 (4th Cir.2009).
See also Penmylvania

v. Delaware Valley Citizens' Council for Clean Air, 478 U.S. 546, 565

(1986) (holding that the lodestar amount is "the product of reasonable hours times a reasonable
rate"). In deciding what constitutes a "reasonable" number of hours expended and "reasonable"
hourly rate, the Court is guided by the factors set forth in Johnson v. Ga. Highway Express. Inc ..
488 F.2d 714, 717-19 (5th Cir. 1974), abrogated on other grounds by Blanchard v. Bergeron, et
al., 489 U.S. 87 (1989), and adopted by the Fourth Circuit in Barber v. Kimbrell's, Inc., 577 F.2d
216,226 (4th Cir. 1978). They include the (I) time and labor required; (2) novelty and dif1iculty
of the questions; (3) skill requisite to perform the legal service properly; (4) preclusion of other

13

employment by the attorney due to acceptance of the case; (5) customary fee; (6) whether fee is
fixed or contingent; (7) time limitations imposed by the client or the circumstances; (8) amount
involved and the results obtained; (9) experience, reputation, and ability of the attorney; (10) the
"undesirability"

of the case; (II) nature and length of professional relationship with the client;

and (12) awards in similar cases. The "court enjoys wide discretion" in making its lodestar
determination. See Thompson l'. U.S. Dep't (!f Hous. & Urban Del'.. No. CIY.A. MGJ-95-309,
2002 WL 31777631, at *13 (D. Md. Nov. 21, 2002) (citing Daly l'. Hill, 790 F.2d 1071, 1078
(4th Cir. 1986)).
Schwartz's counsel submitted a Fees and Costs Supplement, ECF No. 566-3, accounting
for $87,440.00 in attorneys' fees and $2,982.00 in costs, which the Court has carefully reviewed.
The Court holds that attorneys' fees in the amount of $60,000.00, roughly two-thirds of what
Schwartz seeks, are justified based upon its finding that counsel's billing rates of $200 per hour
are reasonable and appropriate, given the time reasonably needed to research the relevant legal
issues, prepare motions, and prepare for and appear at the hearings.

10

The Court holds that costs

in the amount of $2,982.00 are justified.
Accordingly,

RAW A, jointly

and severally,

shall pay Schwartz

$60,000.00

lor

Schwartz's reasonable attorneys' fees and $2,982.00 for his reasonable costs incurred between
April 12,2016, when his counsel began preparing to file the instant contempt motion, and April
17,2017, the date Schwartz's last pleadings pertaining to the contempt were filed.
11.

Lost Profits and Reputational Harm

With regard to Schwartz's request for monetary sanctions lor lost profits, the Court has
no trouble concluding that Schwartz's request for $500,000 is, to put it mildly, over the top. Still,
RA\VA's complaint that three different atlomeys were involved in pursuing the contempt issue for
Schwartz is seriously undercut by the fact that RA\VA itself has apparently employed at least four
attorneys (including in-house counsel) during the course of this litigation.
10

14

in the Court's view, Schwartz is entitled to some lesser amount for lost profits stemming from
both the sales he would have likely made but for RAW A's diversion of business and for the
reputational damage he suffered when RAW A broadcast to the public that his franchise was nonexistent or shuttered.
It is true that a compensatory civil contempt sanction cannot "exceed the actual loss to
the complainant caused by the actions of respondent, lest the contempt fine become punitive in
nature, which is not appropriate in a civil contempt proceeding." Enovalive Techs .. LLC v. Leor,
86 F. Supp. 3d 445, 447 (D. Md. 2015). But the prolits Schwartz's business lost and the harm to
his business'

reputation stemming from RA WA's employees'

misstatements

about the non-

existence or closure of his business represent real harms suffered by Schwartz's business and real
linancial losses stemming from those hanus. It is undisputed that for 39 days Schwartz's
prospective customers were explicitly told that his business ceased operating or never existed.
This clearly caused loss, which the Court is able to reasonably estimate using data supplied by
the parties. Moreover, the reputational harm done to Schwartz's business has resulted in and, in
the future, will result in actual loss. Therefore, the Court must endeavor to compute with
appropriate care the magnitude of this reputational harm.
First, as to lost profits:
As an initial matter, the lost profits are limited to Schwartz's losses caused by RAW A's
employees'

misstatements.

Although the Court recognizes that Schwartz's business was likely

aflccted by RA WA's inaccurate listing of information about Schwartz's franchise on its website
and by its allegedly malfunctioning website referral system, the Court's finding of contempt, and
compensation for same, is limited to the call center misstatements. See Goodyear Tire & Rubber

15

Co. v. Haeger, 137 S. Ct. 1178, 1186 (2017) ("[A] sanction counts as compensatory
"calibrate[d]

to [the] damages caused by" the bad-faith

Aided
the parties,

by averages,

II

the Court concludes

RA W A diverted
potential

historic

business

customers

Hearing Transcript,

performance

from his franchise.

that Schwartz's

franchise

acts on which it is based.").

data, and industry-wide

that Schwartz

lost $6,879.60

of 97.5 referrals
referrals
reservation
an average

actually rent a vehicle;lJ
protit

per rental

assuming

further,

and assuming

of $400.

would have received

that 73.5%

concludes

infonned

an average of 2.5

This amounts

based on the evidence,

further, as Schwartz

the Court

by

See February 27. 2017

was closed or non-existent.

58. The Court accepts that Schwartz

book a reservation;

provided

For a total of 39 days, RAW A employees

over the course of the 39 days. Assuming,

actually

statistics

in pro tits during the period when

from the RA W A Call Center per day but for RA WA's actions.12

referrals

only if it is

of customers
testitied,

that Schwartz

to a total

that 24% of
who book a

that he received
lost $6,879.60

in

protitS.14
Then there is the matter of reputational
The damage done to Schwartz's

hann.

business

by RA W A's employees'

misstatements

did not

simply result in protits lost during and around the month of April 2016. There can be little doubt
that Schwartz's

business

also suffered

substantial

reputational

ham1. Prospective

customers

who

II The sanction imposed by the Court need not be dependent upon proof of actual loss. See In re Gen.
Molars Corp .. 110 F.3d 1003, 1018, n. I6 (4th Cir. 1997) C'[AJ civil compensatory sanction need not
always be dependent upon proof of actual loss.)" This is especially true given the nature of the
contemptuous act-Schwartz
cannot possibly know exactly how many potential customers did not call
him because of the misinformation provided to them.
12 In an affidavit attached to his original Motion for Contempt, Schwartz stated that he normally received
2 to 3 referrals from the RA WA Call Center per day. See ECF No. 528-14.
I) Although the parties disagree somewhat about these numbers, the suggested percentages
each side
suggests are actually relatively close. in reaching its damage calculation, the Court has averaged the
parties' suggested percentages. Schwartz asserts that 25% of inquires result in a reservation. RA WA
claims it is actually 23%. Schwartz states that 75% of those reservations materialize into actual rentals.
RA WA says it is 72%.
14 This figure represents 2.5 calls per day x 39 days x .24 x .735 x $400 profit per rental.

16

-,

were falsely told that his business was closed or non-existent may never patronize his busincss
again. and may even have disseminated that falsehood to others. Pursuant to its broad discretion.
see In re Gel!. lvlatars Corp .. 61 F.3d at 259, the Court has determined to award Schwartz
$13.759.20 in reputational damage, representing double his calculated lost profit.
In reaching the decision to award Schwartz that amount, the Court has consulted case law
In the commercial defamation and defamation per se contexts, where courts havc enhanced
damages to compensate plaintiffs for harm that is otherwise not easily calculated, especially
where. precisely because of defendants'

conduct, a plaintiff cannot prove the hann.15 See 15

U.S.C. ~ 1117(a) (provision in the Lanham Act allowing a court. in its discretion, to award
enhanced damages up to three times the amount found as actual damages). See also Vanwyk
Textile Sys .. B. V v. Zimmer Mach. Am .. Inc., 994 F. Supp. 350, 380 (W.D.N.C. 1997) (cnhanced
damages can, "consistent with the 'principles of equity' promoted in Scction 35. providc proper
redress to an otherwise undercompensated

plaintiff where imprecise damage calculations fail to

do justice, particularly where the imprecision results from defendant's conduct"); Victor Stanley.
Inc. v. Creative Pipe. Inc., 201 I WL 4596043
enhancement

at *13 (D. Md. Sept. 30, 2011) ("[AJn

of damages can also be used to provide rcdress to a plaintiff where imprecise

" These areas of law are particularly helpful considering that, in the course of violating the March 4. 2011
Order, RAWA not only diverted business from Schwartz's franchise, but also defamcd Schwartz's
business. A plaintiff asserting a claim for defamation under the Lanham Act must establish each of five
elements. showing that:
(I) the defendant made a false or misleading description of fact or representation of fact
in a commercial advertisement about his own or another's product; (2) the
misrepresentation is material, in that it is likely to influence the purchasing decision; (3)
the misrepresentation actually deceives or has the tendency to deceive a substantial
segment of its audience; (4) the defendant placed the false or misleading statement in
interstate commerce; and (5) the plaintiff has been or is likely to be injured as a result of
the misrepresentation, either by direct diversion of sales or by a lessening of goodwill
associated with its products.
Verisign. Inc. v. XYZ.COM LLC, 848 F.3d 292, 298-99 (4th Cir. 2017). See 15 U.S.c. ~ 1125(a)(2).
17

damage calculations

fail to do justice,

especially

where the imprecision

results from the

defendants' conduct."); Maryland Civil Pattern Jury Instructions "MPJI-Cv",

12:7 ("When a

person is the subject of a defamatory statement that was made with actual malice there is a
presumption that the statcment causes that person harm, and relief may be awarded even in the
absence of any evidence of actual damages.").
In fact, courts in the past have used the Lanham Act as a guide to structure civil contempt
sanctions. See, e.g.. Howard Johnson Co. v. Khimani, 892 F.2d 1512, 1519 (11th Cir. 1990)
("Thc district court's use of the Lanham Act to guide its structuring of the civil contempt
sanction was reasonable and within its discretion ....

[Sjoth he Lanham Act and the civil

contcmpt sanction share a common underlying compensatory

goal."); Colonial Williamsburg

Found. v. Killinger Co., 792 F. Supp. 1397, 1407, n.4 (E.D. Va. 1992), qfl'd. 38 F.3d 133 (4th
Cir. 1994) ("A useful analogy in determining what would constitute compensation for violations
such as the defendants' is provided by section 35(a) of the Lanham Act. ...

It should be noted

that section 35(a) is being used merely as an analogy; Colonial Williamsburg need not have
established all the elements of a cause of action under the Lanham Act to be entitled to a
disgorging of profits. Similarly, the Court will not hold the defendants to the standard of proof
set out in section 35(a) for the deduction of costs."); Conso!. HVAC. Inc. v. All Slale Plumbing.
Inc., 2006 WL 2563367, at *5 (D. Md. Aug. 30, 2006). While these civil contempt sanctions
stemmed from federal trademark infringement actions originally brought under the Lanham Act,
given that RA WA's contemptuous acts closely resemble those of commercial defamation, the
relevance of the cases to the instant case remains. With the Lanham Act as a guide, acting within
in the broad discretion that the Court is authorized to exercise in fashioning sanctions in a civil

18

contempt case, the Court awards Schwartz $13,759.20 in reputational damage, representing
double his calculated lost profit. Cf Consol. HVAC. Inc., 2006 WL 2563367, at

* 15, n.l.

IV.
Summing up, Schwartz's Motion to Enforce Court's Order and for Contempt, ECr No.
528, is GRANTED IN PART and DENIED IN PART.
RA WA SHALL comply with the injunctive relief set forth above. In addition, RAW A,
jointly and severally, SHALL pay Schwartz $60,000.00 for Schwartz's

reasonable attorneys'

fees and $2,982.00 reasonable costs incurred between April 12, 2016 and April 17, 2017.
Additionally,

RAW A. jointly and severally, SHALL pay Schwartz $6,879.60 for lost profits

suffered by Schwartz's West Los Angeles franchise and RAW A, jointly and severally, SHALL
pay Schwartz $13,759.20 for reputational damage to Schwartz's

West Los Angeles franchise.

The total amount payable to Schwartz by RAW A, jointly and severally, shall be $83,620.80.
Final Judgment will be entered in favor of Schwartz and against RA WA in that amount.

A separate Order will ISSUE.

lsI
ETER.J. MESSITTE
UNITED STATES DISTRICT JUDGE

19