Webb v. Trailer City, Inc et al

Filing 37

Opinion and Order. The Court awards sanctions in the amount of $6,399,540.00 in favor of Plaintiff Vincent L. Webb and against Defendant Changzhou Nanxiashu Tool Co., Ltd., as Plaintiff's damages for Defendant's failure to comply with the Courts Permanent Injunction 16 . The Court directs Plaintiff to submit a form of Supplemental Judgment no later than May 31, 2017. Signed on 05/15/2017 by Judge Anna J. Brown. See attached 10 page Opinion and Order for full text. (bb)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF OREGON

VINCENT L. WEBB,a resident
of the State of Nevada,

3:11-cv-00747-BR
OPINION AND ORDER

Plaintiffs,
v.
TRAILER CITY, INC., an Oregon
corporation; DAN E. WALKER, a
resident of Oregon; and
CHANGZHOU NANXIASHU TOOL CO.,
LTD., a foreign corporation,
Defendants.

BROWN, Judge.
This matter comes before the Court on Plaintiff Vincent L.
Webb’s request for damages (#26) against Defendant Changzhou
Nanxiashu Tool Co., Ltd.,1 for violation of the terms of the
Permanent Injunction (#16) issued against Defendant.
For the reasons that follow, the Court AWARDS Plaintiff

1

Plaintiff’s request for damages pertains only to
Defendant Changzhou Nanxiashu Tool Co., Ltd. Plaintiff’s claims
against all other named Defendants have been resolved.
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sanctions against Defendant for damages in the amount of
$6,399,540.00.

BACKGROUND
On June 20, 2011, Plaintiff filed a Complaint in this Court
and alleged claims for trademark infringement; violation of
Oregon Unlawful Trade Practices Act, Oregon Revised Statutes
§ 646.608(b); copyright infringement; and unfair competition
against Defendant.

On June 29, 2011, Defendant was served with

Summons and Complaint.

Defendant failed to answer or otherwise

to appear within the time required.

On August 19, 2011, the

Court entered a Default Judgment and Permanent Injunction (#16)
against Defendant.
Defendant was required under the terms of the Permanent
Injunction to return proprietary materials to Plaintiff and was
enjoined from “manufacturing, exporting, selling, or importing
into the United States” trailers that were manufactured using
Plaintiff’s proprietary materials or trailers “identical to any
of the models which [Defendant] previously manufactured for
Plaintiff.”

Although an unspecified amount of damages was

alleged in Plaintiff’s Complaint, no monetary damages were
requested by Plaintiff in the Default Judgment.
On September 14, 2016, Plaintiff filed a Motion (#18) to
Reopen Case and Order to Show Cause why Defendant should not be

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held in contempt for violating the terms of the Default Judgment
and Permanent Injunction.

On September 16, 2016, the Court

issued an Order (#21) and required Defendant to respond to
Plaintiff’s Motion for Order to Show Cause by October 3, 2016.
Defendant did not respond.

On October 7, 2016, Plaintiff filed a

Reply requesting the Court to reopen the case, issue an order to
show cause why Defendant should not be held in contempt, and set
a hearing to determine damages.
On October 12, 2016, the Court issued an Order to Show Cause
why Defendant should not be held in contempt, and the Court set a
hearing for November 3, 2016.

On October 17, 2016, Plaintiff

filed a certificate of service indicating Defendant had been
served with the Order to Show Cause.

On November 2, 2016,

Plaintiff filed a Brief (#26) in Support of Damages and requested
an award of $14,867,010.00 in damages.
On November 3, 2016, the Court held the show-cause hearing.
Defendant failed to appear as ordered.

The Court entered an

Order (#28) finding Defendant in contempt for failing to comply
with the terms of the Permanent Injunction and took the issue of
damages under advisement.
On January 5, 2017, the Court issued an Order (#29)
directing Plaintiff to file a supplemental brief to support the
amount of damages sought.

On March 13, 2017, Plaintiff filed a

Supplemental Memo (#36) regarding damages at the direction of the

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Court and now seeks damages of $11,947,505.00 together with prejudgment interest pursuant to Oregon Revised Statutes
§ 82.010.

STANDARDS
The court may impose civil contempt sanctions to coerce the
defendant into compliance with the court’s order and to
compensate the complainant for losses sustained.
v. UMWA, 330 U.S.258, 303-04 (1947).

United States

See also Shell Offshore

Inc. v. Greenpeace, Inc., 815 F.3d 623, 629 (9th Cir. 2016)(“The
purpose of civil contempt is coercive or compensatory.”).
In a civil contempt proceeding based on a patentinfringement case the district court is free to exercise its
inherent discretion to correct willful violations of the court’s
orders when determining an award of damages.

The court is not

bound by provisions of the patent-infringement statute.

See Dow

Chem. Co. v. Chem. Cleaning, Inc., 434 F.2d 1212, 1214–15 (5th
Cir. 1970).

See also Rousseau v. 3 Eagles Aviation, Inc., 130 F.

App’x 687, 691 n.12 (5th Cir. 2005).

DISCUSSION
I.

Background.
Plaintiff states he met with Defendant on March 27, 2012,

concerning a new proposal by Defendant to obtain permission to
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manufacture Plaintiff’s products, but the parties did not reach
an agreement at that time.

Plaintiff did not ask the Court to

enforce the terms of the Permanent Injunction after the failed
attempts to reach an agreement in 2012.

Similarly, Plaintiff did

not seek to enforce the Permanent Injunction or to obtain damages
after a proposed sales program was rejected by Scotsco, a large
retail distributor of trailer equipment in the northwestern
United States, allegedly based on competition in the market place
from cheaply priced infringing products made by Defendant.
Plaintiff, however, contends he did not have evidence of such
infringing products until October 2015 when he discovered
trailers that infringed on his designs were being manufactured by
Defendant and were being sold by another distributor.

It seems

unlikely, however, that Plaintiff would not have had at least
some notice of the sale of infringing products in 2012 when his
marketing proposal to Scotsco was rejected.
II.

Plaintiff’s Calculation of Damages.
Plaintiff seeks damages of $11,947,505.00.

The damages are

based on the report prepared by Plaintiff’s expert, who is a
certified public accountant, certified in financial forensics and
business valuations, an accredited senior appraiser, and
experienced in economic-damages analysis and lost-profit
calculations.

The expert relied on information provided by

Plaintiff, and his calculation of damages was based on the

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following assumptions:

(1) the period over which Plaintiff

incurred damages, (2) the number or quantity of trailer units
that Plaintiff lost the opportunity to sell as a result of the
infringement, (3) the distributor cost/revenue per unit, (4) the
cost to produce each unit, (5) the freight/shipping cost per unit
of those trailers, and (6) the region affected.
The expert noted Plaintiff “does not have a traditional
accounting system.”

The expert considered the sales program that

Plaintiff attempted to negotiate in October 2012 with Scotsco and
that Plaintiff asserted Scotsco rejected “because of competition
from cheaply priced unauthorized trailers in the Northwest
market” that destroyed the market for Plaintiff’s authentic
trailers.

For example, Plaintiff asserts the retail

distributors’ wholesale cost for Plaintiff’s most popular trailer
model was $874 and sold for a retail price of $1,299, but
infringing models of the same trailer that were manufactured by
Defendant had a retail selling price as low as $675.

Thus,

Plaintiff contends he could not sell his authentic trailers
because the retail distributors’ wholesale price for the
authentic product was higher than the retail price of the
infringing product made by Defendant.
Based on Plaintiff’s pricing model for his trailers and the
estimated sales volumes for the period of 2013 through 2020,
Plaintiff’s expert determined Plaintiff’s damages were

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$6,445,644.00 for lost profits in the United States and
$5,501,870.00 for lost profits in Canada or a total of
$11,947,505.00.
Plaintiff contends the appropriate measure of sanctions for
Defendant’s violation of the Permanent Injunction is the measure
of compensatory damages for violation of the Lanham Act, 15
U.S.C. § 1117(a), which includes Plaintiff’s losses, Defendant’s
profits, and Plaintiff’s attorneys’ fees.

Plaintiff, however,

seeks to recover only his compensatory damages on the grounds
that he has “scant evidence on which to estimate [Defendant’s]
profits” and Plaintiff’s attorneys’ fees “do not amount to a
significant fraction of his damages.”
Plaintiff’s pricing model and calculation of damages,
however, is based on the following assumptions:

All three models

of Plaintiff’s trailers would have been sold by a certain number
of retail distributors in the United States and Canada and the
number of retail distributors and units sold would increase each
year.

Plaintiff, however, does not take into account any

potential changes in the market place or the economy that could
impact sales in the future.
On this record Plaintiff’s request for damages over five
years after entry of the Permanent Injunction and for the period
from 2013 through 2020 is unreasonable, and, therefore, the Court
declines to award damages in the amount calculated by Plaintiff.

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III. Reasonable damages.
The Court, in the exercise of its discretion, may impose
reasonable damages that will correct willful violations of the
court’s orders.

The object of civil contempt sanctions is to

compel a defendant to comply or to compensate a plaintiff for
losses.

United States v. United Mine Workers of Am., 330 U.S.

258, 303–04 (1947).

See also Cunningham v. Weston, 180 F. App'x

644, 648 (9th Cir. 2006).

As noted, the determination of such

sanctions is within the sole discretion of the court.

See

Britton v. Co-op Banking Group, 916 F.2d 1405, 1409 n.4 (9th Cir.
1990).
On this record the Court concludes a reasonable period for
calculating Plaintiff’s damages is from 2011 when the Permanent
Injunction was entered through 2016 when Plaintiff filed his
Motion.

Plaintiff, however, did not provide any information to

support his claim for damages for the period 2011-2012.

The

Court, therefore, will consider only Plaintiff’s calculation of
damages for 2013-2016 when determining the reasonable amount for
sanctions.
Plaintiff calculated his loss of sales in the United States
and Canada for those years as follows:

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2013
2014
2015
2016
Total

US
$264,330
$583,200
$1,112,250
$1,601,640
$3,561,420

Canada
$176,220
$437,400
$889,800
$1,334,700
$2,838,120

Total
$440,550
$1,020,600
$2,002,050
$2,936,340
$6,399,540

On this record the Court determines a sanction for damages
suffered by Plaintiff in the amount of $6,399,540.00 is
reasonable.
IV.

Pre-judgment Interest.
Plaintiff also seeks pre-judgment interest pursuant to

Oregon Revised Statutes § 82.010.

Section 82.010(1) allows

interest at a rate of nine percent per annum on money due on an
open account, money “received to the use of another and retained
beyond a reasonable time without the owner’s express or implied
consent,” or money due under a contract that does not state a
rate of interest.

Section 82.010(2) also allows interest at the

rate of nine percent per annum on a judgment entered in favor of
the plaintiff in a civil action.
Here the damages sought by Plaintiff do not fall within any
of the categories indicated in § 82.010(1).

In addition

Plaintiff does not offer any authority for the imposition of prejudgment interest.
On this record the Court declines to award Plaintiff prejudgment interest.

The Court, however, awards Plaintiff post-

judgment interest at the rate authorized in 28 U.S.C. § 1961 to
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be set out in the Supplemental Judgment submitted to the Court no
later than May 31, 2017.

CONCLUSION
For these reasons, the Court awards sanctions in the amount
of $6,399,540.00 in favor of Plaintiff Vincent L. Webb and
against Defendant Changzhou Nanxiashu Tool Co., Ltd., as
Plaintiff’s damages for Defendant’s failure to comply with the
Court’s Permanent Injunction (#16).
The Court directs Plaintiff to submit a form of Supplemental
Judgment no later than May 31, 2017.
IT IS SO ORDERED.
DATED this 15th day of May, 2017.
/s/ Anna J. Brown
ANNA J. BROWN
United States District Judge

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