KARS 4 KIDS INC. v. AMERICA CAN!

Filing 507

MEMORANDUM AND ORDER that the 456 Motion for Reconsideration and Clarification is Granted; and it is Ordered that the 453 ORDER is VACATED in its entirety; and it is Ordred that the relief sought in letter applications 427 , 428 , 429 , 430 , 437 , 438 , 495 , 500 , 501 and 504 is Denied. Signed by Judge Peter G. Sheridan on 3/22/2023. (jdg, )

Case 3:14-cv-07770-PGS-LHG Document 507 Filed 03/23/23 Page 1 of 11 PageID: 18793

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY

KARS 4 KIDS INC.,
MEMORANDUM AND ORDER
Plaintiff,
v.

Civil Action No.
3:14-cv-7770-PGS-LHG

AMERICA CAN!,
Defendant.

AMERICA CAN! CARS FOR KIDS,
Plaintiff,
Civil Action No.
3:16-cv-4232-PGS-LHG

v.
KARS 4 KIDS INC.,
Defendant.

This case has a long, torturous history. Presently, a Motion for
Reconsideration (ECF No. 456; hereinafter the “Motion”) remains open at the
District Court level. In addition, there are a number of letter applications seeking
overlapping relief (ECF Nos. 427, 428, 429, 430, 437, 438, 495, 500, 501 and 504;
hereinafter the “Application”). A brief procedural history is necessary to orient the
discussion around the Motion and the Application.
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I.
During the pre-trial stage of the litigation, the Court severed the matter by
trying the liability issues before a jury, while damages and equitable remedies were
reserved for the Court. On May 28, 2019, the jury found that Kars 4 Kids Inc.
(“K4K”) infringed on America Can! Cars for Kids’ (“ACCFK”) trademark in
Texas. (ECF No. 245). In order to enforce the jury’s determination, the Court
entered a Final Judgment Imposing Permanent Injunction (ECF No. 378; the
“Permanent Injunction”) and awarded monetary damages to disgorge K4K’s
profits in Texas. The Permanent Injunction also implemented thirty (30) internal
controls that limit the use of K4K’s mark in Te xas. Those controls are set forth in
a comprehensive report developed by K4K’s internal control expert, William J.
Mellon of FTI Consulting, Inc. (the “Mellon Report”). The internal controls
developed in the Mellon Report include:
1.

Controlling donations submitted through call
center personnel and K4K’s websites (Section 4,
Exhibit I);

2.

Controlling practices of advertising managers and
staff who monitor “pay-per-check advertising via
search engines, websites and social media
‘platforms’ (e.g., Yahoo and Facebook are
examples of advertising platforms).” (Section 5,
Exhibit II); and

3.

Controlling Texas-related procedures for potential
future advertising channels, non-advertising
vendors, local Texas phone numbers and K4K’s
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website and training of personnel (Section 6,
Exhibit III).
(ECF No. 378, Appendix A).
The Permanent Injunction did not impact K4K’s advertising on SiriusXM
Radio for two reasons. First, in layman’s terms, SiriusXM Radio is transmitted
from a satellite, and then connects to receivers of SiriusXM subscribers, wherever
they may be. Therefore, there are no precise geographical boundaries that could
exclude advertising from SiriusXM transmissions from entering into Texas.
Secondly, there was little or no data on the volume of SiriusXM advertising by
K4K.
Despite those reasons, the Court ordered the parties to confer and select an
independent auditor to “assess whether Kars 4 Kids received Texas donations in
connection with SiriusXM Radio advertising during that period and recommend
whether the internal control procedure set forth in Section 7, Exhibit IV—
Alternative Control for SiriusXM—of the Mellon Report is warranted under the
circumstances.” (ECF No. 378). The parties selected and the Court appointed
William Morrison, a forensic accountant of Withum Smith & Brown, P.C. (ECF
No. 397). Mr. Morrison submitted a report with his findings and conclusions on
October 27, 2021 (the “Withum Report”). Ultimately, the Withum Report
concluded that “the internal control procedure set forth in Section 7, Exhibit IV—

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Alternative Control for SiriusXM—of the Mellon Report is not warranted . . . .”
(Withum Report at 2) (emphasis in original).
Subsequently, litigation events – namely the appeal of the equitable damages
and Mr. Morrison’s audit – ran into the Fall of 2021. In November and December
2021, the parties submitted a flurry of letters regarding the Withum Report. (ECF
Nos. 427, 428, 429, 430, 437 and 438). ACCFK’s initial position concerning the
Withum Report was that it:
fails to address any calls or Internet inquiries from within
the State of Texas received by Kars 4 Kids (“K4K”),
including both from those who intended to donate to
ACCFK, and mistakenly contacted K4K, and from those
who sought to donate to K4K as a result of K4K
advertising on Sirius. Withum’s Report is focused on
actual completed transactions; the Report does not
address any situation where a vehicle came in from Texas
which K4K could not accept under the injunction.
(ECF No. 427). K4K opposed any further audit and responded that the Withum
Report satisfied the Court’s directive. (ECF No. 428).
Supplementing its prior objection, ACCFK alleged, without a certification or
documentary evidence, that “the Withum Report does not address whether K4K
has referred potential donors to Junk for Joy (a “sister organization”) . . . from
which K4K or those in active concert with it receive a benefit.” (ECF No. 429)
(emphasis in original). K4K replied to this charge noting that “(i) it does not
forward any ‘attempted donations’ to any entity (Junk for Joy included) and (ii)
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Junk for Joy has no public-facing affiliation with Kars 4 Kids and employs no use
of KARS 4 KIDS or 1‐877‐KARS‐4‐KIDS . . . or any form thereof in its
advertising.” (ECF No. 430) (emphasis in original).
Overlapping the parties’ dispute concerning the Withum Report was the
Third Circuit remand decision, Kars 4 Kids Inc. v. America Can!, 8 F.4th 209 (3d
Cir. 2021), which mandated that the district court reexamine, among other things,
its laches decision and the application of the Banjo Buddies factors with respect to
disgorgement. The Third Circuit placed in issue whether ACCFK’s claim could
survive the laches objection. Accordingly, the Court concentrated its efforts on
reviewing the Third Circuit’s Opinion and applying the instructions of the Mandate
to issue a decision wherein it denied the laches objection based on the Court’s
evaluation of the facts. (ECF No. 450). The Court’s findings of facts therein were
far different from the proposed findings submitted by either party, and may not
have been considered by Mr. Morrison in performing his audit. Hence, the Court
ordered Mr. Morrison to review the Withum Report in light of the Court’s findings
of fact and conclusions of law (ECF No. 450) and ACCFK’s objection to the
Withum Report (ECF No. 427) in order to advise whether the Permanent
Injunction should be amended. (ECF No. 453).
At that point, on June 23, 2022, K4K brought the instant Motion for
Reconsideration and Clarification of that Order. (ECF No. 456). K4K objected to
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the Court’s Order on several grounds including (1) that Mr. Morrison was not
qualified to perform the work prescribed by the Court’s Order; (2) K4K was
uncertain about the scope of Mr. Morrison’s assignment in assessing a
modification, and (3) Mr. Morrison should review all of the related correspondence
submitted. ACCFK opposed the Motion and reiterated its arguments from
November and December 2021.
Also pending on the Court’s docket at the time was a Motion to Alter or
Amend Judgment. (ECF No. 466). Once again, the Court set aside the dispute
regarding K4K’s SiriusXM advertising and reevaluated equitable damages in light
of the Court’s findings of fact in its June 10, 2022 Memorandum and Order. (ECF
No. 450). After determining the appropriate damages amount in a Memorandum
and Order (ECF No. 490), the Court turned back to the Motion and noticed a lack
of activity on the Motion and Application. Therefore, it appeared that the status
quo was operating reasonably. As such, the Court expressed its intent to grant the
Motion and vacate the June 15, 2022 Order. (ECF No. 494).
ACCFK objects because it alleges, once again without a certification, that
K4K receives communications from potential donors in Texas who heard K4K’s
advertisements on SiriusXM Radio. Further, ACCFK alleges that in order to
circumvent the Permanent Injunction, K4K refers said donors to an affiliated
organization, such as Junk for Joy. (ECF No. 460).
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II.
Pursuant to Rule 60(b), “the court may relieve a party . . . from a final judgment,
order, or proceeding for the following reasons:
(1) mistake, inadvertence, surprise, or excusable neglect;
(2) newly discovered evidence that, with reasonable
diligence, could not have been discovered in time to
move for a new trial under Rule 59(b); (3) fraud (whether
previously called intrinsic or extrinsic),
misrepresentation, or misconduct by an opposing party;
(4) the judgment is void; the judgment has been satisfied,
released, or discharged; (5) it is based on an earlier
judgment that has been reversed or vacated; or applying
it prospectively is no longer equitable; or (6) any other
reason that justifies relief.
Fed. R. Civ. P. 60(b).
A Rule 60(b) motion “must be made within a reasonable time--and for
reasons (1), (2), and (3) no more than a year after the entry of the judgment or
order or the date of the proceeding.” Fed. R. Civ. P. 60(c)(1). Reconsideration is
within the District Court’s “sound discretion.” Pierce Assocs., Inc. v. Nemours
Found., 865 F.2d 530, 548 (3d Cir. 1988).
K4K did not specify under which subsection of Rule 60(b) it seeks
reconsideration, however, the Court will assume the motion is made pursuant to
Rule 60(b)(1) or (6). Whereas, “Rule 60(b)(1) is concerned with mistakes of a
substantive nature,” Stradley v. Cortez, 518 F.2d 488, 493 (3d Cir. 1975), Rule
60(b)(6) is a “catch-all provision” for relief. See Linbald v. Nationwide Mut. Ins.

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Co., No. CV 14-908 (NLH/KMW), 2016 WL 614407, at *2 (D.N.J. Feb. 16,
2016). “Relief under Rule 60(b)(6) is ‘extraordinary, and special circumstances
must justify granting relief under it.’” Lifted Rsch. Grp.. Inc. v. Chaudry, No. 065580 (SDW), 2008 WL 11510727, at *1 (D.N.J. Mar. 6, 2008) (quoting Moolenaar
v. Government of Virgin Islands, 822 F.2d 1342, 1346 (3d Cir.1987)).
Extraordinary circumstances require a showing that “without relief from the
judgment, an extreme and unexpected hardship will result.” Id. (internal quotation
marks and citation omitted). Because K4K has not demonstrated extraordinary
circumstances to justify relief, the instant motion will be treated as one under Rule
60(b)(1). Under Rule 60(c)(1), K4K properly moved for reconsideration within one
year from the entry of the Court’s Order. (ECF No. 453).
III.
The Court grants the Motion for Reconsideration (ECF No. 456) and vacates
its June 15, 2022 Order (ECF No. 453) for the following reasons.
First, ACCFK’s allegations about K4K directing transactions to affiliated
entities are non-specific and lack any factual support. They are based on
supposition rather than facts. As an example, ACCFK asserts that it is harmed
because K4K is directing Texas donors to other organization. However, ACCFK
provides no evidence whatsoever to base its accusations against K4K, and
therefore, its allegations of harm are unfounded. (ECF No. 495). Moreover, the
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Court had informal conversations with Mr. Morrison who indicated that the audit
he conducted did not produce such information; and a further audit of same is
usually supported by an accompanying factual statement or a tip about an
impropriety. As such, the Court concludes that, without a factual basis, to act on
ACCFK’s supposition is unreasonable.
Moreover, the Withum Report complied with the Court’s Permanent
Injunction. That Order directed Mr. Morrison to “assess whether Kars 4 Kids
received Texas donations in connection with SiriusXM Radio advertising during
that period and recommend whether the internal control procedure set forth in . . .
the Mellon Report is warranted under the circumstances.” (ECF No. 378). Mr.
Morrison did precisely that. In short, the Withum Report concluded that “the
internal control procedures set forth in Section 7, Exhibit 11 – Alternate Control
for SiriusXM – of the Mellon Report is not warranted under the circumstances.”
(Withum Report at 2). With respect to K4K, the Withum Report made the
following findings:
a. Out of a sample of 50 vehicle donations picked up, only
two were referred by Sirius XM, but they were not from
Texas;
b. Out of sample of four vehicle donations awaiting pickup, one was referred by Sirius XM, but it was not from
Texas;
c. Out of a sample of four cash donations, none were
referred by Sirius XM; and
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d. Out of a sample of two real estate donations, none were
referred by Sirius XM.
(Withum Report at 6).
To expand the scope of the Final Judgment Imposing Permanent Injunction
and seek additional time and effort of Mr. Morrison at the expense of both parties,
ACCFK must provide some factual basis rather than rely on supposition.
Secondly, ACCFK may seek relief under the Final Judgment Imposing
Permanent Injunction (ECF No. 378) if it has factual support. The Permanent
Injunction provides “[e]ither party may apply for relief from this Order” so long as
10 days’ notice is given to one’s adversary setting forth “with specificity of the
nature of the alleged issue.” Hence, ACCFK has an open door for relief if it
follows this provision.
Notwithstanding the reasons above, the Court agrees with ACCFK’s
position that the Permanent Injunction imposed internal controls and the
appointment of a forensic accountant to evaluate the effectiveness of the
injunction. As such, Mr. Morrison is fully qualified to assess whether donations
have been re-directed or forwarded to an organization affiliated with K4K. But, in
light of the Court’s decision today, it is necessary to present evidence and some
substantive facts to prompt a re-audit.

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Nothing in this Memorandum bars any request for post-judgment discovery,
if appropriate and reasonable.
ORDER
IT IS on this 22nd day of March, 2023;
ORDERED that the Motion for Reconsideration and Clarification (ECF No.
456) is GRANTED; and it is further
ORDERED that the Court’s June 15, 2022 Order (ECF No. 453) is
VACATED in its entirety; and
ORDERED that the relief sought in the letter applications (ECF Nos. 427,
428, 429, 430, 437, 438, 495, 500, 501 and 504) is DENIED.

s/Peter G. Sheridan
PETER G. SHERIDAN, U.S.D.J.

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