American Honda Motor Co., Inc. v. V.M. Paolozzi Imports, Inc. et al

Filing 56

MEMORANDUM-DECISION AND ORDER directing Defendants to file and serve affidavits to Show Cause why they should not be held in contempt w/in 14 days of the date of this Memorandum-Decision and Order; Plaintiff may file and serve a response w/in 10 days of the date of Defendant's filing of their submissions; Plaintiff shall file and serve an affidavit and documentation re: costs w/in 14 days from the date of this Memorandum-Decision and Order. Signed by Senior Judge Frederick J. Scullin, Jr on 9/1/2012. (amt)

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF NEW YORK
______________________________________________
AMERICAN HONDA MOTOR CO., INC.,
Plaintiff,
v.

7:10-CV-955
(FJS/ATB)

V.M. PAOLOZZI IMPORTS, INC.,
f/d/b/a DEALMAKER HONDA OF
WATERTOWN, and DEALMAKER
OF POTSDAM, LLC, f/d/b/a
DEALMAKER HONDA OF POTSDAM,
Defendants.
______________________________________________
APPEARANCES

OF COUNSEL

HOGAN LOVELLS US LLP
875 Third Avenue
New York, New York 10022
Attorneys for Plaintiff

JOHN J. SULLIVAN, ESQ.

MCMAHON, KUBLICK & SMITH, P.C.
500 South Salina Street, Suite 800
Syracuse, New York 13202
Attorneys for Defendants

JAN S. KUBLICK, ESQ.

SCULLIN, Senior Judge

MEMORANDUM-DECISION AND ORDER
I. INTRODUCTION
Currently before the Court is Plaintiff's motion to hold Defendants in contempt and for
sanctions and attorney's fees.

II. BACKGROUND
Plaintiff American Honda Motor Co., Inc. commenced this action on August 6, 2010, to
obtain, among other things, injunctive relief preventing Defendant V.M. Paolozzi Imports, Inc.
f/d/b/a DealMaker Honda of Watertown ("Defendant Watertown") and Defendant DealMaker of
Potsdam, LLC d/b/a DealMaker of Potsdam ("Defendant Potsdam") from continuing to use and
display Honda trademarks and trade dress design elements on their former dealership properties.
See Dkt. No. 1. On January 10, 2011, Plaintiff filed a motion for a preliminary injunction against
Defendants. See Dkt. No. 16. In a Memorandum-Decision and Order dated December 13, 2011,
the Court granted that motion, see Dkt. No. 26, and, on February 13, 2012, enjoined Defendants
from displaying Honda trademarks and trade designs on their former dealership properties, see
Dkt. No. 37. Plaintiff asserts that Defendants continue to display Honda marks on their former
dealership properties in violation of the Court's Order.

III. DISCUSSION
"There can be no question that courts have inherent power to enforce compliance with
their lawful orders through civil contempt." Shillitani v. United States, 384 U.S. 364, 370 (1966)
(citations omitted). A court may hold a party in civil contempt "'if (1) the order the contemnor
failed to comply with is clear and unambiguous, (2) the proof of noncompliance is clear and
convincing, and (3) the contemnor has not diligently attempted to comply in a reasonable
manner.'" Cold Stone Creamery, Inc. v. Gorman, 361 F. App'x 282, 287 (2d Cir. 2010)
(quotation omitted). Furthermore, the moving party need not establish that the violation was

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willful. See id. (quotation omitted).1
This Court's Order dated February 13, 2012, required Defendants to (1) remove all Honda
signage and trade dress design elements from their former dealership properties by February 27,
2012, and (2) destroy all of the signs referred to in the Order and "provide proof of such
destruction to the Court and opposing counsel by filing and serving an affidavit or other selfauthenticating document" by March 5, 2012. See Dkt. No. 37. Defendants have violated this
Order by (1) failing to comply with Court-Ordered deadlines; (2) by failing to comply with the
letter of the Order in that, although they have removed Honda panels displaying the Honda
trademark and the stylized "H" trademark, they have not "destroy[ed]" sign displays at both
locations bearing Honda's blue and white color scheme and the identifiable shape of a Honda
sign; and Defendants have not "provide[d] proof of such destruction"; and (3) by failing to
comply with the Court's Order to "cause to be removed from the premises at 42 Maple Street,
Potsdam, New York 13676 . . . the trade dress design elements used to identify authorized Honda
dealerships, including the trade dress Honda barrel entrance design element . . . [and] the trade
dress Honda [b]lue 'wave' design element . . . ." See id.2

1

A district court's civil contempt order is generally not appealable because it is neither a
final order nor an injunctive order. See Cold Stone Creamery, Inc., 361 F. App'x at 287 n.1
(citation omitted). "However, 'under . . . particular circumstances' where the district court has
entered monetary judgments as sanctions for civil contempt, [the Second Circuit has] allowed
appeals from contempt orders." Id. (citation omitted).
2

Defendants have provided photographic evidence of such non-compliance. See Dkt.
No. 53, Exhs. "A" through "G" attached thereto. Although the photographs were taken on March
20, 2012, and Philip J. Simao, Defendants' managing member and majority owner, thereafter
submitted an affidavit stating that he personally inspected both dealership properties on April 10,
2012, and April 12, 2012, Simao is silent regarding these violations of the Court's Order. See
Dkt. No. 55.
(continued...)
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Defendants responded to Plaintiff's motion by submitting two affidavits — one from
Defendants' counsel, Jan S. Kublick, and one from Philip J. Simao, Defendants' managing
member and majority owner. In his affidavit, Jan S. Kublick stated that, "[w]ith the exception of
the modification of the building in Potsdam, the ordered work has been accomplished, including
the removal of the pylon sign panels, the monument sign panels and the lettering on the building.
This work was substantially begun before March 9th and finished by March 26th." See Dkt. No.
51, Attorney Affidavit of Jan S. Kublick, Esq. dated March 27, 2012, at ¶ 4. Kublick asserted
that Simao's affidavit "makes clear that there was no willful or deliberate delay or refusal" on the
part of Defendants to comply with the Court's Order. See id. at ¶ 6. As to the exterior structural
work required at the Potsdam property, Kublick stated that this cannot be accomplished without
the approval of Protective Life Insurance Company, the holder of the Mortgage with a lien on the
property; and, "[b]ased on [his] discussions with Protective, permission is at best uncertain, and
would be expensive, difficult, and time consuming to seek, and would involve a contractor or
architect preparing plans and estimates, a review by an appraiser, and then review by a
committee." See id. at ¶¶ 7-8.
In his affidavit, Simao asserted that "Defendants have no cash, no income, and no
2

(...continued)
Furthermore, although not specifically enumerated as one of Defendants' continued
violations of this Court's Order because such violations are less clearly evidenced in Defendants'
photographs, it appears that Defendants have not removed Honda branded Sales Consultation
endposts and a service banner bearing the Honda trademark and the stylized "H" trademark,
which remain visible through the windows of the building at the Potsdam location. See Dkt. No.
53, Exhs. "F," "G". In his affidavit, Simao stated that "there is nothing inside the building visible
to the public passing by on the sidewalk or public road" and that the no-trespassing signs have
been posted on the property "and so the public cannot, without trespassing[,] approach the
Potsdam building." See Dkt. No. 55 at ¶¶ 5-6. This, too, would constitute a violation of this
Court's Order if these items do, in fact, remain in public view.
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unencumbered assets, and have not for several years, since Plaintiff terminated Defendants'
dealerships, and Plaintiff's financing subsidiary seized cars and commenced an action for money
damages." See Dkt. No. 51-1, Affidavit of Philip J. Simao dated March 26, 2012, at ¶ 2. Simao
stated that he personally loaned money to Defendants to engage Atomic Sign Works, LLC to
perform the work the Court ordered; and, as of March 26, 2012, "signs and lettering have been
removed from both stores, and the unanticipated outline of the word HONDA has been erased."
See id. at ¶¶ 5, 10-11. However, Simao further stated that Defendants cannot modify the exterior
of the building on the Potsdam property to remove Honda design marks because the building "is
owned by Prime, LLC of which [he is] the managing member. The building was leased to
[Defendant Potsdam], and the Lease was approved by Plaintiff," and Protective Life Insurance
Company now holds a mortgage for more than $5,000,000 on the building. See id. at ¶¶ 14-15.
As such, even if Defendants had the money to do so, Simao claimed that Defendants "cannot
modify the building without the permission of Prime, LLC, and Prime cannot do so without the
permission of Protective. To do so without Protective's permission would be a breach under the
Mortgage documents." See id. at ¶ 16.
Most recently, on April 12, 2012, Simao submitted a second affidavit in which he added
that he "personally inspected both the Potsdam and the Watertown sites on Tuesday April 10,
2010, and the Watertown site again on April 12, 2012." See Dkt. No. 55 at ¶ 2. The only other
additional information to which Simao averred in this six-paragraph affidavit was that, with
regard to "the interior of the landlord Prime LLC's building in Potsdam, there is nothing inside
the building visible to the public passing by on the sidewalk or public road" and "[t]he Potsdam
site has[] been and continues to be posted against trespassing, and so the public cannot, without
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trespassing[,] approach the Potsdam building." See id. at ¶¶ 5-6.
Under these circumstances, the Court finds that it can and should hold Defendants in civil
contempt because this Court's Order was clear and unambiguous, proof of noncompliance is clear
and largely unrefuted, and Defendants have not diligently attempted to comply in a reasonable
manner. See Cold Stone Creamery, Inc., 361 F. App'x at 287 (quotation omitted).
With regard to whether Defendants have made a diligent attempt to comply with the
Order, their primary justification for noncompliance is their alleged lack of funds, their alleged
lack of landlord approval at Potsdam to make building design alterations, and Protective Life
Insurance Company's mortgage on the Potsdam building. Regarding their alleged lack of funds,
Defendants have not filed for bankruptcy and they have submitted nothing to the Court beyond
Simao's conclusory assertions to support their alleged financial inability to comply fully with the
Court's Order. See Capital Servs. of New York, Inc. v. E-Poxy Indus., Inc., No. 1:00 CV 873,
2005 WL 2033494, *7 (N.D.N.Y. Aug. 17, 2005) (granting the plaintiff's request for sanctions
due to the defendants' failure to pay their contempt judgment because the contemnors had not
offered sufficient documentation supporting their alleged financial inability to comply where they
submitted "one tax return, one bill of sale, and one transcript of judgment"); see also Huber v.
Marine Midland Bank, 51 F.3d 5, 10 (2d Cir. 1995) (holding that the contemnor failed to
demonstrate an inability to pay where he failed to provide any tax returns or other documentation
supporting his assertions because "[t]he alleged contemnor bears the burden of producing
evidence of his inability to comply" and must "establish his inability clearly, plainly, and
unmistakably" (citations omitted)).
Furthermore, regarding Defendants' excuse that they cannot modify the Potsdam building
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without the permission of Prime, LLC, which Prime cannot do without the permission of
Protective Life Insurance Company, Defendants have likewise submitted nothing evidencing
their inability to comply with the Court's Order. In addition, Simao is the "managing member" of
Prime, LLC.
Since the Court's Order is clear, proof of Defendants' noncompliance is clear, and
Defendants have not diligently attempted to comply with the Order in a reasonable manner, the
Court will issue a show cause order as to why it should not hold Defendants in civil contempt
and why it should not impose per diem sanctions on Defendants that would continue to accrue
daily until Defendants have complied in full with this Court's Order dated February 13, 2012.3
See Perfect Fit Indus., Inc. v. ACME Quilting Co., Inc., 673 F.2d 53, 57 (2d Cir. 1982),
(affirming contempt sanction of $5,000 per day for violation of the court's injunction regarding
trade dress infringement, reasoning that, when the purpose of the sanction imposed on a party
held in civil contempt is coercive, "the district court has broad discretion to design a remedy that
will bring about compliance" (citations omitted)). Here, the purpose of the contempt order and
sanction would be coercive as it does not appear Defendants will otherwise comply with the
Court's Order. When imposing sanctions, a court should consider several factors, including (1)
the character and magnitude of the harm threatened by the party's continued noncompliance, (2)
the efficacy of the sanction in bringing about compliance, and (3) the contemnor's ability to pay.

3

The Court shall issue a show cause order, rather than order contempt and impose
sanctions outright, in an abundance of caution to ensure that Defendants receive notice and an
opportunity to be heard. See Schoenberg v. Shapolsky Publishers, Inc., 971 F.2d 926, 934-35 (2d
Cir. 1992), overruled in part on other grounds, Bassett v. Mashantucket Pequot Tribe, 204 F.3d
343 (2d Cir. 2000)); Ahava (USA), Inc. v. J.W.G., Ltd., 279 F. Supp. 2d 219, 221 (S.D.N.Y.
2003) (quotation omitted).
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See id.
Finally, the Court grants Plaintiff's motion insofar as it seeks attorney's fees and costs it
has incurred in bringing this motion. See Capital Servs. of New York, Inc., 2005 WL 2033494, at
*7.

IV. CONCLUSION
Having reviewed the entire record in this matter, the parties' submissions and the
applicable law, and for the above-stated reasons, the Court hereby
ORDERS that, within FOURTEEN DAYS of the date of this Memorandum-Decision
and Order, Defendants shall file and serve affidavits and supporting documentation to SHOW
CAUSE why the Court should not hold them in civil contempt and why it should not impose per
diem sanctions that would continue to accrue daily until they have complied in full with this
Court's Order dated February 13, 2012. Plaintiff may file and serve a response to Defendants'
submission within TEN DAYS of the date of Defendants' filing of their submissions; and the
Court further

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ORDERS that, no later than FOURTEEN DAYS from the date of this MemorandumDecision and Order, Plaintiff shall file and serve an affidavit and supporting documentation
setting forth the reasonable attorney's fees and costs it has incurred in bringing this motion.4

IT IS SO ORDERED.

Dated: September 1, 2012
Syracuse, New York

4

This submission should include attorneys' billing statements, including the date, amount
of time expended, and the nature of the work performed.
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