McKeon Prod Inc v. Howard S. Leight, et al
Filing
111
OPINION AND ORDER GRANTING 106 PLAINTIFF McKEON PRODUCTS, INC.'S MOTION (1) FOR AN ACCOUNTING OF DEFENDANT HONEYWELL SAFETY PRODUCTS USA, INC.'S VIOLATIVE RETAIL SALES AND PROFITS IN VIOLATION OF THE COURT'S CONSENT ORDER ENTERED FEBRUARY 11, 1997, AND (2) FOR ATTORNEY FEES AND COSTS. Signed by District Judge Paul D. Borman. (DTof)
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UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
MCKEON PRODUCTS, INC.,
Plaintiff,
v.
Case No. 95-cv-76322
Paul D. Borman
United States District Judge
HONEYWELL SAFETY PRODUCTS
USA, INC., successor-in-interest to
HOWARD S. LEIGHT AND
ASSOCIATES, INC.
Defendant.
__________________________/
OPINION AND ORDER GRANTING PLAINTIFF
McKEON PRODUCTS, INC.’S MOTION
(1) FOR AN ACCOUNTING OF DEFENDANT HONEYWELL SAFETY
PRODUCTS USA, INC.’S VIOLATIVE RETAIL SALES AND PROFITS IN
VIOLATION OF THE COURT’S CONSENT ORDER ENTERED
FEBRUARY 11, 1997, AND
(2) FOR ATTORNEY FEES AND COSTS (ECF NO. 106)
On November 25, 2020, this Court issued an Opinion and Order, adopting the
Magistrate Judge’s Amended Report and Recommendation, and granting Plaintiff
McKeon Products Inc.’s (McKeon) Motion to Reopen Case and Enforce the Court’s
February 11, 1997 Final Judgment and Permanent Consent Order Against
Honeywell Safety Products, USA, Inc. (Honeywell), successor-in-interest to
Howard S. Leight & Associates, Inc. (ECF No. 78, Opinion and Order Granting
McKeon’s Motion to Reopen.) The Court ordered that:
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Defendant Honeywell, successor-in-interest to Howard S. Leight &
Associates, Inc., cease selling Max and Max-Lite earplugs to and
through the Retail Market, consisting of all retail establishments
including the Drug and Grocery Market, sporting goods stores, and
retail mass merchandisers, including online retail mass merchandisers
such as Amazon.com and Walmart.com.
(Id. at p. 9, PageID.921.)
On January 28, 2021, the Court entered an Opinion and Order granting
Defendant Honeywell’s motion to stay the Court’s November 25, 2020 Opinion and
Order pending appeal, and subject to posting a $500,000.00 supersedeas bond. (ECF
No. 95, Order Granting Honeywell’s Motion to Stay.)
On October 8, 2021, the United States Court of Appeals for the Sixth Circuit
affirmed this Court’s Opinion and Order granting McKeon’s Motion to Reopen the
Case, and remanded the case to this Court for further proceedings, including
dissolution of the stay. McKeon Prods., Inc. v. Howard S. Leight & Assocs., Inc., 15
F.4th 736 (6th Cir. 2021) (also at ECF No. 100). The Sixth Circuit’s mandate was
issued on November 1, 2021 (ECF No. 101, Mandate), and thereafter this Court
dissolved the stay of its November 25, 2020 Opinion and Order, on November 2,
2021. (ECF No. 102, Order Dissolving Stay.)
Now before the Court is Plaintiff McKeon’s Motion for an Accounting, and
Reimbursement for Attorney Fees and Costs: (1) requiring Defendant Honeywell to
account for its retail sales and profits; (2) providing limited discovery to McKeon;
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(3) requiring Honeywell to disgorge profits it received from its actual sales of its
Max and Max-Lite earplugs in violation of the Consent Order; (4) awarding McKeon
attorney fees and costs incurred in enforcing the 1997 Consent Order against
Honeywell; and (5) any other relief the Court finds just and equitable. (ECF No. 106,
Pl.’s Mot.) On January 10, 2021, Honeywell filed a Response in opposition. (ECF
No. 108, Def.’s Resp.) McKeon filed a Reply on January 24, 2021. (ECF No. 110,
Pl.’s Reply.)
Because the Court does not believe that oral argument will aid in its
disposition of the motion, it is dispensing with oral argument, pursuant to Eastern
District of Michigan Local Rule 7.1(f)(2).
For the reasons that follow, the Court GRANTS McKeon’s Motion for an
accounting, discovery by McKeon, disgorgement of Honeywell’s profits, and
McKeon’s request for attorney fees and costs. The Court DENIES Honeywell’s
request for discovery.
I.
BACKGROUND
McKeon has sold its soft earplugs under the name “MACK’S” since the
1960’s. (ECF No. 32, Pl.’s Mot. to Reopen Case, PageID.11.) Defendant Howard S.
Leight began selling its own line of earplugs under the trademark “MAX” in 1986.
(Id.) McKeon sued Howard Leight in 1995, and in 1996 moved for a preliminary
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injunction, alleging that Howard Leight’s sales of earplugs under the registered
“MAX” and “MAX-LITE” trademarks violated the Lanham Act, the Michigan
Consumer Protection Act, and Michigan common law. (ECF Nos. 1, 8, 10.)
The parties settled in early 1997, and memorialized their agreement in a Final
Judgment and Permanent Consent Order Against Howard S. Leight & Associates,
Inc., dated February 11, 1997. (ECF No. 32-2, Consent Order.) The Consent Order
addresses Howard Leight’s sale of the MAX Products, with Howard Leight agreeing
to cease selling earplugs under the “MAX” or “MAX-LITE” trademarks in the
“Retail Market.” (Id.) The “Retail Market” is defined as “the market consisting of
all retail establishments including the Drug and Grocery Markets, sporting goods
stores and mass merchandisers.” (Id. ¶ 7.) The Order “expressly acknowledges
[Defendant’s] continuing rights to use Leight’s “MAX” and “MAX-LITE”
trademarks in the Industrial Safety Market and elsewhere, except as expressly agreed
in this Consent Order.” (Id. ¶ 8.) Defendant Honeywell, having purchased Howard
Leight in 2010, is a successor-in-interest to Howard Leight and thus bound by the
terms of the Consent Order.
According to Honeywell, starting in 2004, some third-party distributors began
selling Leight MAX earplugs on Amazon.com. (ECF No. 79, Def.’s Mot. Stay at p.
3, PageID.932, citing ECF No. 40-2, Declaration of Honeywell’s Deborah J.
4
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Gendreau-Flynn (Gendreau-Flynn Decl.) ¶ 9, PageID.173-74.)1 Gendreau-Flynn’s
Declaration further states that, starting in 2009, Howard Leight began directly selling
its Leight MAX earplugs on Amazon.com. (Id.) Honeywell made online sales a
focus of its marketing and distribution strategies since it acquired Howard Leight,
and continued the online sales, which grew by almost 70% from 2016 to 2017, after
growing by 52% from 2015 to 2016. (Gendreau-Flynn Decl. ¶ 11, PageID.175). See
McKeon Prods., 15 F.4th at 740.
McKeon alleges that in or around September 2017, it learned that Leight
MAX earplugs were being sold “in the retail market through various online retailers
such as Amazon[.com], Walmart[.com], and Ebay[.com].” (Pl.’s Mot. Reopen Case
pp. 3-4, PageID.13-14; ECF No. 32-7, Declaration of McKeon Chief Executive
Officer (CEO) Devin Benner (Benner Decl.) ¶ 2, PageID.80.) McKeon informed
Honeywell on September 19, 2017, that the sales violated the Consent Order and
requested Honeywell to cease sales, but Honeywell refused. When it was unable to
informally resolve the dispute, McKeon filed its motion to enforce the Consent
1
Deborah J. Gendreau-Flynn is the “Sales Leader, Americas, Retail, Honeywell
Safety and Productivity Solutions, responsible for Strategic Distribution of all PPE
(personal protection equipment) and Footwear in the marketplace, including Howard
Leight earplug products.” (Gendreau-Flynn Decl. ¶ 1, PageID.171.) A sealed copy
of Gendreau-Flynn’s declaration is filed at ECF No. 41-2.
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Order on March 21, 2018. (Pl.’s Mot. Reopen Case.) Honeywell opposed the motion.
(ECF Nos. 40, 41.)
This Court referred Plaintiff’s Motion to Reopen the Case to Magistrate Judge
Elizabeth A. Stafford for initial resolution. (ECF No. 52.) The parties appeared
before Magistrate Judge Stafford for a hearing on November 2, 2018, and the
Magistrate Judge issued her Report and Recommendation on November 13, 2018,
recommending that the Motion be granted and that Defendant Honeywell be ordered
to “cease selling Max and Max-Lite earplugs through the online retail market
pursuant to the permanent injunction.” (ECF No. 58, Report and Recommendation;
ECF No. 59, Transcript of 11/2/18 Hearing.) Thereafter, this Court recommitted the
matter to the Magistrate Judge for further consideration. The Magistrate Judge
subsequently issued an Amended Report and Recommendation on May 23, 2019,
recommending the same resolution. (ECF No. 68, Amended Report and
Recommendation (Amended Report).) Honeywell filed objections to the Amended
Report and Recommendation.
On November 27, 2019, this Court referred this matter for facilitative
mediation (ECF No. 77); the case did not resolve.
On November 25, 2020, this Court entered an Opinion and Order adopting the
Amended Report, and required Honeywell to cease selling Max and Max-Lite
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earplugs to and through the Retail Market, including online retail mass
merchandisers such as Amazon.com. (Opinion and Order Granting McKeon’s Mot.
to Reopen.)
On December 2, 2020, Honeywell moved to stay the Court’s November 25,
2020 Opinion and Order pending Honeywell’s then-imminent appeal. (Honeywell’s
Mot. to Stay.) McKeon opposed the motion. On January 28, 2021, the Court granted
Honeywell’s request to stay, and required Honeywell to post a $500,000.00
supersedeas bond. (Opinion and Order Granting Mot. to Stay.)
On October 8, 2021, the Sixth Circuit Court of Appeals affirmed this Court’s
November 25, 2020 Opinion and Order. McKeon Prods., Inc. v. Howard S. Leight
& Assocs., Inc., 15 F.4th 736 (6th Cir. 2021). The Sixth Circuit noted that “this
appeal poses three questions. Is laches available to Honeywell? If so, does laches bar
McKeon’s motion to enforce the consent decree against the allegedly prohibited
online sales? And, if McKeon’s motion was timely, is its argument that some
websites fall into the consent decree’s definition of the retail market correct?” (Id. at
739.
The Sixth Circuit answered the first two questions, by holding that while an
affirmative defense of laches might be available to Honeywell, it did not apply to
the facts in this case. Id. at 742-45. The Court explained that “a motion to enforce a
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consent decree is an equitable action subject to equitable defenses” and that “[l]egal
doctrines that would apply to the underlying disputes are inapplicable.” Id. at 742.
The Sixth Circuit concluded that McKeon had discovered Honeywell’s sale of its
earplugs on Amazon in September 2017, “when the sales began to spike,” and that
McKeon had timely moved to enforce the Consent Order in March 2018, after
Honeywell had refused McKeon’s attempts to resolve the dispute without resorting
to the court. Id. at 743-44. The Sixth Circuit further found that Honeywell failed to
show that it was prejudiced by the elapsed time, held that the Michigan six-year
contract statute of limitations applied to this case, and that McKeon sued “well
within the six-year statutory period” after discovering Honeywell’s violations of the
Consent Order. Id. at 744. The Sixth Circuit found that, “[i]n fact, the presumption
[of prejudice] here favors McKeon’s claim being timely and unprejudicial” because
“[a]s McKeon puts it, Honeywell ‘gambled that it found a loophole in the Consent
Order’ so that it can ‘exploit the Retail Market,’” and “Honeywell has lost that bet.”
Id. at 744-45.
The Sixth Circuit Court of Appeals then turned to the question of whether the
Consent Order bars Honeywell’s online retail sales. The Court found that “a retail
website, like Amazon, is a ‘retail establishment’ under the Decree,” and thus held
that the Consent Order bars Honeywell’s online retail sales on Amazon and similar
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retail websites. Id. at 745. That decision noted that “Honeywell remains free to sell
in ‘the Industrial Safety Market or elsewhere,’” explaining that, “or elsewhere”
includes “direct sales of MAX-brand earplugs to corporate consumers, like hotels,
hospitals, or airlines.” Id. at 746.
Thus, the Sixth Circuit affirmed this Court’s Order and remanded the matter
for further proceedings consistent with its opinion, and ordered dissolution of the
stay. Id. at 746-47.
Following issuance of the Sixth Circuit’s mandate, this Court entered an Order
lifting the stay and scheduling a status conference for November 16, 2021. (ECF No.
102, Order Lifting Stay.) At the status conference, counsel for McKeon stated that
McKeon seeks an equitable remedy from the Court consisting of disgorgement of
Honeywell’s profits from sales it made in the online retail market for an extended
period of time, as well as discovery of Honeywell’s sales information. The Court
requested the parties to brief the issue of the remedies sought by McKeon.
On December 10, 2021, McKeon filed the instant Motion for an Accounting
and for its Attorney Fees and Costs. (ECF No. 106, Pl.’s Mot.) McKeon argues that
when it moved to reopen the case for purposes of enforcing the 1997 Consent Order,
it requested that the Court “enter an Order that will enforce the Consent Order and
remedy, to the extent possible, past violations of it by Defendant [Honeywell].”
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McKeon contends that because “[n]ow that the first part of this request has been
conclusively resolved in McKeon’s favor, McKeon respectfully asks the Court to
address the second part by remedying the past violations of the Consent Order.”
McKeon asks the Court to order Honeywell to provide an accounting of its
retail sales and profits “as far back as its records allow until the date of the order
dissolving the stay,” and to “[o]rder the parties to engage in limited discovery to
allow McKeon to probe the sales data provided by Honeywell.” McKeon further
seeks an order that Honeywell disgorge to McKeon the full amount of profits
Honeywell received from sales that were in violation of the Consent Order. McKeon
also seeks an award of its attorney fees and costs, and “any other relief the Court
finds just and equitable.”
Defendant Honeywell’s Response in opposition to McKeon’s motion
contends that McKeon’s motion “impermissibly asks post hoc for a monetary
award,” when McKeon expressly disclaimed any claim for such relief during the
litigation of its Motion to Enforce, and instead sought only injunctive relief. (ECF
No. 108, Def.’s Resp.)
Honeywell further contends that McKeon should be prevented from
relitigating the Magistrate Judge’s statement that “McKeon did not identify authority
that would allow the Court to award costs and attorney’s fees.” (Id. at p. 21,
10
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PageID.1313, quoting Amended Report, PageID.609-10, 621.) McKeon had
requested fees and costs in its Motion to Enforce the Consent Order. Honeywell
contends that McKeon could have appealed the scope of relief awarded in this
Court’s final order, but did not.
Honeywell further argues that if the Court is inclined to order some profit
award, that any monetary recovery be limited to the period after the January 2021
hearing on Honeywell’s motion to stay, when it contends McKeon first indicated a
desire to seek monetary relief. Honeywell also contends that both parties should be
permitted to seek discovery.
McKeon’s Reply brief argues that this Court has not yet fully addressed
McKeon’s request for all remedies available for Honeywell’s past violations of the
Consent Order. (ECF No. 110, Pl.’s Reply.) McKeon “agree[s] that it did not seek
damages with its first motion,” but contends that it has never waived or disclaimed
monetary relief in the form of disgorged profits, or relief based on its attorney fees
and costs in seeking enforcement of the Consent Order.
McKeon concludes that Honeywell should not be entitled to any discovery
from McKeon, and that nothing in the Magistrate Judge’s Amended Report and
Recommendation, or this Court’s Opinion and Order, prevents McKeon from
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seeking its attorneys’ fees and costs pursuant to the Court’s inherent equitable power
to administer, enforce, and punish violations of the Consent Order.
II. LEGAL STANDARD
“[A] consent decree is a ‘settlement agreement subject to continued judicial
policing.’” Vanguards of Cleveland v. City of Cleveland, 23 F.3d 1013, 1017 (6th
Cir. 1994) (quoting Williams v. Vukovich, 720 F.2d 909, 920 (6th Cir. 1983)). “[I]t
is well-settled that ‘courts retain the inherent power to enforce agreements entered
into in settlement of litigation pending before them.’” Id. at 1018 (quoting Sarabia
v. Toledo Police Patrolman’s Ass’n, 601 F.2d 914, 917 (6th Cir. 1979)); Innovation
Ventures, LLC v. N2G Distrib., Inc., 763 F.3d 524, 544 (6th Cir. 2014) (stating that
the court’s authority to issue and enforce injunctions “springs from the court’s
inherent equitable powers.”).
“When a party to a consent decree is injured by the violation of the consent
decree, ‘the injured party must ask the court for an equitable remedy.’” Shy v.
Navistar Int’l Corp., 701 F.3d 523, 532-33 (6th Cir. 2012) (quoting Cook v. City of
Chicago, 192 F.3d 693, 695 (7th Cir. 1999)). The Sixth Circuit Court of Appeals has
recognized that a district court’s inherent power to enforce a consent decree is
“broad,” United States v. Bd. of Cnty. Comm’rs of Hamilton Cnty., 937 F.3d 679,
688 (6th Cir. 2019) (citation omitted), and “[t]he court’s choice of remedies is
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reviewed for an abuse of discretion.” Shy, 701 F.3d at 533 (quoting Stone v. City &
Cnty. of S.F., 968 F.2d 850, 861 (9th Cir. 1992)).
Where a consent decree “does not specify the consequences of a breach,” the
district court has “equitable discretion” to fashion a remedy for violations of the
decree. Cook, 192 F.3d at 698; accord Shy, 701 F.3d at 532-33. On the other hand,
“if parties to a consent decree wish to cabin the district court’s equitable discretion
by stipulating the remedies for breach, they are free to do so,” and “the stipulation
will fix the measure of relief to which the victim of a breach is entitled.” Cook, 192
F.3d at 698.
The parties’ 1997 Consent Order provides in paragraph F, Jurisdiction and
Enforcement:
This Court retains jurisdiction to enforce all terms of this Consent Order
and this Court retains jurisdiction to enter further orders and directions
as may be necessary or appropriate for the construction or
administration of this Consent Order, for the modification of any of the
provisions contained in it or for the enforcement of compliance with it
and for the punishment for violations of it.
(ECF No. 32-2, Consent Order, ¶ F, PageID.32.)
While the Consent Order does not specify the consequences of a breach, the
District Court may exercise its “equitable discretion” to fashion a remedy for
violations of the Consent Order. This Consent Order did not cabin the District
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Court’s equitable discretion by stipulating the remedies for breach. See Cook, 192
F.3d at 698; accord Shy, 701 F.3d at 532-33.
III.
ANALYSIS
This Court had concluded that Defendant Honeywell violated the parties’
Consent Order through its online retail sales, and issued an order that Honeywell
must:
cease selling Max and Max-Lite earplugs to and through the Retail
Market, consisting of all retail establishments including the Drug and
Grocery Market, sporting goods stores, and retail mass merchandisers,
including online retail mass merchandisers such as Amazon.com and
Walmart.com.
(11/25/2020 Opinion and Order, PageID.921.) The Sixth Circuit Court of Appeals
has affirmed that Order, holding that the parties’ Consent Order barred Honeywell
from selling Max and Max-Lite earplugs in the online retail market that includes
Amazon, et al. McKeon Prods., 15 F.4th 736.
McKeon argues that Honeywell should now be held accountable for its
violations of the Consent Order. Specifically, McKeon asks this Court to order
Honeywell to account for and disgorge the profits it earned through its online retail
sales that violated the Consent Order, and to pay for McKeon’s attorneys’ fees and
costs incurred in enforcing the Consent Order.
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A.
Honeywell Must Provide an Accounting to McKeon and Disgorge
Profits Earned From Its Violation of the Consent Order
McKeon argues that it is undisputed that the Court can hold Honeywell
accountable for violating the Consent Order by entering an order requiring
Honeywell to account for “its ill-gotten profits and disgorge them.” (Pl.’s Mot. at
pp. 6-7, PageID.1260-61.) McKeon asserts, as the Sixth Circuit opinion confirmed,
that Honeywell violated the Consent Order for years, even after McKeon demanded
that it cease, and even after the District Court had ruled against Honeywell. (Id. at p.
7, PageID.1261.) McKeon contends that equity demands it be compensated for
Honeywell’s violations, and that disgorgement of profits is the most reasonable and
practical means of providing that compensation. (Id.) McKeon argues that
Honeywell should not benefit from its Consent Order violations. (Id. at p. 8,
PageID.1262.)
Honeywell does not dispute that the Court has equitable power to enforce the
Consent Order and provide an equitable remedy, and that an accounting for profits
and an award of disgorgement and are equitable remedies. (Def.’s Resp. at p. 15,
PageID.1307.) Honeywell argues, however, that McKeon’s request for an
accounting should be denied because McKeon did not seek – and in fact expressly
disclaimed – such monetary relief in its Motion to Enforce, and instead only sought
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injunctive relief from the Court, and not damages. (Id. at pp. 10-12, PageID.130204.)
Honeywell contends that Magistrate Judge Stafford considered McKeon’s
request for injunctive relief, fees and costs, and “any additional relief deemed
equitable and just,” and recommended awarding only injunctive relief, and that
McKeon did not appeal that ruling, or the final Opinion and Order by this Court
adopting the Amended Report and Recommendation. (Id. at pp. 11-13,
PageID.1303-05, citing, in part, Amended Report, PageID.621, Opinion & Order,
PageID.921.) Honeywell argues that McKeon litigated its Motion to Enforce to a
final order, and cannot now assert a claim for new relief based on the same facts.
(Id. at pp. 13-14, PageID.1305-06.) Honeywell further asserts that equity demands
denying McKeon’s “belated” request for attorney fees and costs, and that McKeon
will not be left without a remedy because it received the injunctive relief it sought
as its primary goal. (Id. at pp. 16-17, PageID.107-08.) The Court notes this
recognition by Honeywell that this case involves equitable remedies and defenses.
In its Reply brief, McKeon disputes that it waived or disclaimed all “monetary
relief” for Honeywell’s violations. (Pl.’s Reply at p. 2, PageID.1369.) McKeon
agrees that “it did not seek damages with its first motion and mainly sought an
injunction at that stage,” but argues that it did not in any way suggest that “it would
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forgo seeking disgorgement of Honeywell’s ill-gotten profits [which McKeon
distinguishes from “damages”] through a subsequent motion,” or forgo attorney fees
and costs. (Id.) McKeon asserts that the Court has not yet addressed the issue of
other equitable relief, and thus McKeon had no reason to cross-appeal a decision
awarding injunctive relief. (Id. at pp. 3-4, PageID.1370-71.) McKeon argues that the
Court granted McKeon’s motion, reopened the case, and ordered Honeywell to cease
selling MAX-products through the online retail market, but that the Court has not
had an opportunity to address the merits of McKeon’s request for equitable monetary
relief for Honeywell’s violations of the Consent Order, and its request for attorney
fees and costs. (Id. at p. 4, PageID.1371.)
The Court finds that equitable relief, in the form of an accounting and
disgorgement of profits, is appropriate relief for Honeywell’s violation of the
Consent Order. The scope of such relief is at issue. The parties disagree as to whether
McKeon has waived its right to seek attorney fees and costs.
In its initial Motion to Reopen the Case and Enforce the Consent Order, filed
on March 21, 2018, McKeon expressly requested the following relief from the Court:
(i) reopen this case for the limited purpose of enforcing the Court’s
Final Judgment and Permanent Consent Order; (ii) order Defendant to
immediately discontinue its sale of products in violation of the Consent
Order; (iii) award McKeon its costs and attorneys’ fees in bringing this
Motion; and (3) grant McKeon any additional relief that it deems
equitable and just.
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(Pl.’s Mot. to Reopen, PageID.4-5, 23 (emphasis added).) The briefing on this
Motion did not directly address any other equitable relief, such as an accounting and
disgorgement of profits or attorney fees and costs. During the hearing on this motion,
the Magistrate Judge noted that “McKeon’s motion didn’t actually ask for damages.
It asked for attorneys’ fees and costs but not damages. It asked for injunctive relief.”
(See ECF No. 59, 11/2/2018 Hr’g Tr., PageID.341.) Thus, additional equitable relief,
such as disgorgement of profits, was not discussed.2
The Magistrate Judge’s Amended Report recommended that McKeon’s
motion to reopen this case to enforce the consent order against Honeywell be
granted, and that Honeywell be ordered to “cease selling Max and Max-Lite earplugs
through the online retail market, as required by the permanent injunction.” The
Amended Report did not otherwise discuss any other equitable relief. (Amended
Report at p. 19, PageID.621.)
This Court, in adopting the Amended Report and Recommendation,
concentrated on providing McKeon with the immediate relief on its request for
injunctive relief, and did not rule out the availability of additional equitable
2
In the transcript of oral argument before Magistrate Judge Stafford, McKeon states
that it is concentrating on the securing of an injunction, but it does not explicitly
waive claims of equitable disgorgement of profits, and seeking attorney fees and
costs. (See ECF No. 59, Transcript of 11/2/18 Hearing, PageID.369-70.)
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remedies, including attorney fees and costs to McKeon, the prevailing party. The
Sixth Circuit Court of Appeals noted that the scope of Magistrate Judge Stafford’s
hearing was “on laches and the interpretation of the consent decree.” McKeon
Prods., 15. F.4th at 741.
This Court’s 1997 Consent Order required Honeywell to cease selling Max
and Max-Lite earplugs on the online retail market. (Opinion and Order at p. 9,
PageID.921.) This Order did not otherwise address other equitable relief available
to, or sought by McKeon. Thus, McKeon contends in its Reply brief that the Court
has never addressed the issue of other equitable relief, including attorney fees and
costs, available to McKeon. (Pl.’s Reply at p. 1, PageID.1368 (“The Court granted
the first part of that request. It never addressed the second.”)).
The Court finds that McKeon did not “belatedly seek” or “strategically
disclaim” available equitable relief, including an accounting and disgorgement of
profits, and its attorney fees and costs.
The Court, exercising its “broad” equitable powers, will now consider
McKeon’s request for equitable relief in the form of an accounting and disgorgement
of Honeywell’s profits, and reimbursement for its attorney fees and costs necessary
to facilitate McKeon’s relief: Honeywell should not be permitted to benefit from its
longtime violation of the parties’ Consent Order, and its continuing violations after
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McKeon’s communication to Honeywell in September 2017, after McKeon filed its
Motion to Enforce the Consent Order in 2018, and after this Court had issued the
instant injunction in 2020. Indeed, Honeywell has admitted that it has been
continuously selling its Max and Max-Lite earplugs in the online retail market since
2009. (Gendreau-Flynn Decl. ¶ 9, PageID.173-74.)
While this Court stayed its Opinion and Order pending appeal at Honeywell’s
request, it ordered Honeywell to post a significant $500,000 supersedeas bond,
stating that “[i]t is undisputed that Honeywell is continuing to sell its Max and MaxLite earplugs on Amazon.com, and other websites, and that at least some part of
those ‘substantial’ sales are to retail customers,” and “it is undisputed that
Honeywell has not acted to limit online sales to industrial safety customers, as the
Consent Order requires.” (Order Granting Stay at p. 25, PageID.1205.)
As the Sixth Circuit has recognized, “[w]here a consent decree is violated, the
court should fashion equitable relief that is ‘designed to make the party whole for
his or her loss.’” Shy, 701 F.3d at 533 (emphasis added). When equity jurisdiction
has been invoked, the court may exercise its “inherent equitable powers … for the
proper and complete exercise of that jurisdiction,” including ordering monetary
remedies. Liu v. SEC, 140 S. Ct. 1936, 1947 (2020). It is settled that “[r]elief that
enforces a consent decree, ‘[e]ven if compensatory in purpose and effect … is … an
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equitable order.’” Shy, 701 F.3d at 533 (quoting Cook, 192 F.3d at 695 (italics
removed)). “Disgorgement is an equitable remedy,” SEC v. Blavin, 760 F.2d 706,
713 (6th Cir. 1985), that forces “a defendant to give up the amount of money equal
to the defendant’s unjust enrichment.” Gavriles v. Verizon Wireless, 194 F. Supp. 2d
674, 681 (E.D. Mich. 2002). “That remedy may be imposed for the intentional or
reckless violation of a settlement agreement.” A.B. Cernelle v. Graminex, L.L.C.,
437 F. Supp. 3d 574, 594 (E.D. Mich. 2020) (citing Kansas v. Nebraska, 574 U.S.
445 (2015)).
McKeon here asks the Court to order Honeywell to disgorge the profits earned
by its conduct that violated the Consent Order. Honeywell (and its predecessor
Leight) has been selling Max and Max-Lite earplugs in the online retail market since
at least 2009. Those sales have been determined to be in violation of the parties’
Consent Order, and McKeon is requesting equitable relief to make it whole for its
losses from such violations.
The Court agrees that Honeywell should not be permitted to benefit from those
years of prior sales in violation of the Consent Order – selling MAX-branded
earplugs directly on Amazon since at least 2009, and after McKeon put Honeywell
on notice of such violations as early as September 2017.
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The Court grants McKeon’s request for equitable relief in the form of an
accounting and disgorgement of profits from Honeywell’s illegal retail sales, and
further grants McKeon’s request for attorney fees and costs. “On the equity side,
some of the restitutionary remedies” include “accounting for profits.” William M.
Tabb & Rachel M. Janutis, REMEDIES IN A NUTSHELL, 156 (3d ed. 2017).
B.
The Time Period for an Accounting and Disgorgement of Profits
McKeon proposes several time periods for an accounting and disgorgement
of profits. McKeon first requests that the Court should require Honeywell to
disgorge the profits “from sales going back as far as Honeywell has records, but at
least to 2010.” (Pl.’s Mot. at pp. 8-9, PageID.1262-63 (noting that Honeywell has
cited sales data from 2010 and 2012).) Honeywell acquired Leight in 2010.
McKeon requests, alternatively, that Honeywell disgorge profits for the past
six years before McKeon moved to reopen this case (from March 21, 2012 to March
21, 2018) – based on the Michigan six-year statute of limitations applicable to breach
of contract actions. (Id. at p. 9, PageID.1263.)
Honeywell argues in response that, if the Court is inclined to award monetary
relief, that such relief should be limited to the time period after the motion to stay
hearing on January 23, 2021, because Honeywell contends that was the first time it
was “arguably put on notice that there could be monetary consequences if it
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continued selling its product during the pendency of the appeal.” (Def.’s Resp. at p.
18, PageID.1310.) Honeywell contends that McKeon’s request to recover for longer
time periods, as far back as 2010, is “overreaching to the extreme.” Honeywell
proposes, in a footnote in its brief, that McKeon “might more plausibly argue for
monetary relief going back to January 2015 – six years before it first hinted at a
claim for monetary relief,” but that “even that would be highly inequitable on this
record.” (Id. at pp. 18-19 & n.9, PageID.1310-11.)
In its Reply brief, McKeon states that even “accepting all of Honeywell’s
assertions at face value, Honeywell at most makes a case for limiting, not denying,
the relief McKeon seeks.” McKeon contends that “Honeywell has no credible
defense for its sales after the Court enjoined it and during its requested stay,” and
that “Honeywell must, at a minimum, account to McKeon for its actions during that
time period.” (Pl.’s Reply at p. 4, PageID.1371.)
The Court exercises its inherent equitable power and discretion, and adopts
the time period during which Honeywell must account for and disgorge its profits
from its prohibited online retail sales of Max and Max-Lite earplugs, as March 21,
2012, six years before March 21, 2018, when McKeon moved to reopen this case.
The first time period proposed by Plaintiff – “as far back as Honeywell has
records, but at least to 2010” – appears to be overreaching. However, Honeywell’s
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counter-proposal to limit the time period to after the January 23, 2021 hearing on
Honeywell’s motion to stay, almost three years after McKeon moved to reopen this
case and enforce the Consent Order, is not meritorious.
The Court finds appropriate Plaintiff’s alternative time period – back to March
21, 2012, six years before McKeon filed its Motion to Enforce. As the Sixth Circuit
found, “McKeon has not unduly delayed its efforts to enforce the consent decree.”
McKeon Prods., 15 F.4th at 743. Honeywell admits that it was directly selling MAXbranded earplugs directly on retail websites like Amazon.com as far back as 2009,
and the Sixth Circuit found that Honeywell’s Amazon sales increased by almost 70%
from 2016 to 2017, and that this increased volume led McKeon to discover the
violations. Id. This 2017 discovery point was reasonable because, as the Sixth
Circuit noted, McKeon was “not responsible for policing every corner of the
internet,” and “McKeon moved to enforce the consent decree a mere six months
later.” Id. Further, the Sixth Circuit recognized that the six-year contract statute of
limitations period applies to consent decrees like the Consent Order in this case. Id.
at 744.
Accordingly, the Court orders Honeywell to provide to McKeon an
accounting of its profits from its sales of Max and Max-Lite earplugs through online
retail websites, in violation of the Consent Order, starting from March 21, 2012
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through the date of the order dissolving the stay, November 2, 2021, when
Honeywell stated that it ceased selling its products in the Retail Market. Of course,
McKeon can also seek further discovery of whether Honeywell has ceased its retail
sales as of November 2, 2021.
C.
The Court Will Permit McKeon Discovery Necessary to Determine
Honeywell’s Profits From Its Violations, but Deny Honeywell
Discovery
McKeon argues that the Court should order Honeywell to do a thorough
accounting for its profits and present the evidence supporting its calculations, and
then afford McKeon the right to take limited discovery to test those numbers. (Pl.’s
Mot. at p. 10, PageID.1264.)
Honeywell argues in response that, if monetary relief is awarded to McKeon,
that both parties should be permitted to obtain discovery and present evidence.
Honeywell also requests that an appropriate protective order be put in place, as the
parties are competitors. (Def.’s Resp. at p. 19, PageID.1311.) Honeywell states that
the Court will have to determine which websites are retail websites, and that
Honeywell should be allowed to seek discovery from McKeon about when it first
became aware that Honeywell was selling MAX earplugs on retail websites.
Honeywell also contends it would seek to explore, through discovery, whether sales
had been diverted from McKeon to Honeywell.
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McKeon notes in its Reply that Honeywell does not dispute that McKeon has
a right to discovery if an accounting is ordered. (Pl.’s Reply at p. 5, PageID.1372.)
McKeon opposes Honeywell’s counter-request for discovery as “mostly lack[ing]
merit.” McKeon states that it “has no issue with a reasonable protective order.” (Id.
& n.5.) McKeon argues that Honeywell’s requested discovery into a laches defense
should be denied because that issue has been litigated and denied, and that “no basis
exists for discovery into whether sales were diverted from McKeon to Honeywell
because McKeon’s disgorgement requests does not depend on diversion.” (Id.) The
Court agrees with McKeon.
The Court grants McKeon necessary discovery to determine Honeywell’s
online retail sales data. The Court approves the parties’ joint request for a reasonable
protective order.
The Court will not provide for discovery by Honeywell against McKeon, the
victim of its continuous illegal conduct. Honeywell has not articulated a legitimate
basis for obtaining discovery against McKeon. As the Sixth Circuit noted in its
opinion, “[n]one of the terms [of the Consent Order] prohibits McKeon’s sales or
marketing in any way. Instead, the parties regulated the business practices of Leight
[Honeywell] and its various distributors.” McKeon Prods., 15 F.4th at 739-40. Given
the Sixth Circuit’s opinion, Honeywell’s request for discovery about when McKeon
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first became aware of Honeywell’s online retail sales is not relevant to the
accounting issue. The Sixth Circuit addressed this issue, finding that McKeon’s
claims are not barred by laches, because the first time McKeon should have known
of Honeywell’s violation of the Consent Order through its sales on online retail
websites was “in 2017, when the sales began to spike.” McKeon Prods., 15 F.4th at
744.
Honeywell’s request for discovery regarding potential sales diverted from
McKeon to Honeywell, is not appropriate “because an award based on the
defendant’s profits, resting upon principles of unjust enrichment, focuses on the
defendant’s wrongdoing, not on damage to the plaintiff.” Manhattan Indus., Inc. v.
Sweater Bee by Banff, Ltd., 885 F.2d 1, 6 (2d Cir. 1989) (citing Blue Bell Co. v.
Frontier Refining Co., 213 F.2d 354, 363 (10th Cir. 1954) (in trademark
infringement case, a profits award is “predicated upon the equitable principle of
unjust enrichment, not the legal theory of provable damages”). The case Honeywell
relies on in its Response, Balance Dynamics Corp. v. Schmitt Indus., 204 F.3d 683,
689 (6th Cir. 2000), does not compel a different result. That case involved a false
advertising claim between competitors, and the court’s decision that the plaintiff was
not entitled to defendant’s profits unless it could show that it lost sales or profits, or
that defendant gained them, as a result of the alleged false advertising. Id. Here,
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McKeon seeks disgorgement of Honeywell’s profits related to its prohibited online
retail sales of MAX earplugs in violation of the Consent Order.
Further, Honeywell’s reliance on Powerhouse Marks LLC v. Chi Hsin Impex,
Inc., 463 F. Supp. 2d 733 (E.D. Mich. 2006) (Duggan, J.), is also misplaced. In that
trademark infringement case, following a trial, the jury awarded the plaintiff money
damages based on lost royalty revenue, which the court then trebled because
defendant intended to derive a benefit from the plaintiff’s goodwill or reputation. Id.
at 738. The court found that the jury properly did not award to plaintiff any of
defendant’s profits because “Powerhouse has never attempted to market home fitness
equipment for retail sale and has never licensed any other company to sell such
equipment under the POWERHOUSE name,” and “there was no credible evidence
introduced at trial of actual confusion or damage to Powerhouse’s reputation or
goodwill arising from Impex’s use of the POWERHOUSE mark.” Id. at 739
(emphasis added). Conversely, in this case, the Court has found that Honeywell sold
the product at issue, Max and Max-Lite earplugs, in the online retail market, in
violation of the 1997 Consent Order, which provided that Honeywell “recognizes
that one of the primary purposes of this Consent Order is to minimize the likelihood
of confusion concerning the parties’ respective trademarks by Leight’s
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[Honeywell’s] sale and marketing of earplugs sold under the trademarks “MAX” or
“MAX-LITE” in the Retail Market.” (Consent Order, ¶ E.8., PageID.31-32.)
Thus, the Court permits discovery by McKeon of Honeywell’s retail sales data
and profits related to the online retail sales of Max and Max-Lite earplugs during the
relevant time period. The Court will also enter a reasonable protective order
provided to it by the parties for consideration. The Court denies discovery to
Honeywell.
D.
The Court Will Award McKeon Its Attorneys’ Fees and Costs
McKeon argues that the “American Rule” – that parties are generally
responsible for their own attorneys’ fees – is inapplicable here, and that equity
dictates that McKeon should be awarded the attorney fees and costs it was “forced
to expend to enforce its rights under the Consent Order.” (Pl.’s Mot. at pp. 10-11,
PageID.1264-65.)
Honeywell argues in response that McKeon had requested an award of
attorney fees and costs in its Motion to Enforce, and that the request was denied.
(Def.’s Resp. at pp. 20-21, PageID.1312-13.) This is not correct. Specifically,
Magistrate Judge Stafford questioned the basis for an award of attorneys’ fees and
costs, stating in the Amended Report that “McKeon did not identify authority that
would allow the Court to award costs and attorney’s fees, and its focus was on its
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request
to
enforce
the
permanent
injunction.”
(Amended
Report
and
Recommendation at pp. 7-8, PageID.609-10.) The primary focus of McKeon at that
time was the issuance of an injunction to stop Honeywell’s escalating violative retail
internet sales. Magistrate Judge Stafford ordered Honeywell to cease selling MAX
earplugs through the online retail market – the focus of McKeon’s request – but did
not decide the issue of whether there was a basis for awarding attorney fees and costs
to McKeon in her final order. (Id. at p. 19, PageID.621.) Nor did this Court, in its
Order of affirmance, focus on the issue of awarding attorney fees and costs to
Plaintiff McKeon. (See ECF No. 78, 11/25/2020 Opinion and Order.)
Honeywell argues that McKeon has waived any right it might have had to
attorney fees and costs. (Def.’s Resp. at p. 21, PageID.1313.) Honeywell further
argues that McKeon’s request should be denied, in any event, because the Consent
Order does not include a fee-shifting provision, and thus the default American Rule
that each party must bear its attorney fees and costs governs. (Id.)
McKeon argues in its Reply that the Magistrate Judge’s Amended Report and
Recommendation did not “deny or otherwise address the request” for attorney fees
and costs, but “left open the possibility for McKeon to recover its fees and costs.”
(Pl.’s Reply at p. 7, PageID.1374.) McKeon again contends that the Court should
30
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award that relief “pursuant to its inherent equitable powers and power to administer,
enforce, and punish violations of the Consent Order.” (Id.)
As the Sixth Circuit noted in this case, “a motion to enforce a consent decree
is an equitable action, subject to equitable defenses. Legal doctrines that would apply
to the underlying disputes are inapplicable.” McKeon Prods., 15 F.4th at 742. There
is a compelling argument that “[a] litigant in the role of a plaintiff entitled to recover
damages is also entitled to recover costs of recovering those damages, because
otherwise the aggrieved plaintiff is not made whole.” Dan B. Dobbs & Caprice L.
Roberts, LAW OF REMEDIES: DAMAGES, EQUITY, RESTITUTION, 280-81 (3d ed. 2018).
The Court finds that McKeon’s request for attorney fees and costs, as the injured and
prevailing party, is a proper equitable remedy in this case. The Sixth Circuit noted
that the scope of Magistrate Judge Stafford’s hearing was “on laches and the
interpretation of the consent decree,” McKeon Prods., 15 F.4th at 741, and the focus
of McKeon at that time was the issuance of an injunction to stop the ever increasing
sales by Honeywell in violation of the Consent Order. The Court notes that it has
“broad equitable remedial powers,” Shy, 701 F.3d at 533; the 1997 Consent Order
provides that the Court may enter all orders “necessary or appropriate” to the
“enforcement of compliance” with the Consent Order and for the “punishment of
violations” of its terms. (Consent Order ¶ F.)
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The Court finds that McKeon, the prevailing party, can only be “made whole”
upon being reimbursed for its reasonable attorney fees and costs litigation expenses,
in addition to the other relief granted, in pursuing Defendant Honeywell’s continuing
violations of the Consent Order. Accordingly, the Court will consider a request for
the reasonable attorney fees and costs McKeon expended in enforcing its equitable
rights under the Consent Order.
IV.
CONCLUSION
For the reasons set forth above, applying its powers to grant equitable relief,
the Court GRANTS Plaintiff McKeon’s Motion against Defendant Honeywell for
an Accounting of Profits and for its Attorney Fees and Costs (ECF No. 106).
Specifically, the Court:
1) ORDERS Honeywell to provide an ACCOUNTING to McKeon of its sales
and profits from sales in the online retail market made in violation of the
Consent Order, from March 21, 2012 through November 2, 2021, and
continuing if McKeon’s discovery establishes further Honeywell retail sales
after November 2, 2021;
2) PERMITS only McKeon to engage in discovery against Honeywell regarding
the retail sales data, and will sign a reasonable protective order. The Court
REJECTS Honeywell’s request for discovery against McKeon;
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3) ORDERS Honeywell to DISGORGE to McKeon the full profits received
from its online retail sales made in violation of the Consent Order between
March 21, 2012 and November 2, 2021, and thereafter, if such Honeywell
retail online sales occurred after November 2, 2021; and
4) AWARDS McKeon, the injured party, reasonable attorney fees and costs, to
be determined by the Court.
IT IS SO ORDERED.
s/Paul D. Borman
Paul D. Borman
United States District Judge
Dated: February 9, 2022
33
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