JERRY E. SMITH, Circuit Judge:
These consolidated appeals involve a trademark infringement dispute and a counterclaim for alleged wrongful seizure. Judith and Frank Juhasz and their proprietorship, Diamond & Gem Trading United States of America Company (collectively "Diamond & Gem"),appeal (1) the denial of their motion to amend and clarify the effect of a permanent injunction entered against them in the trademark dispute; (2) a partial summary judgment in favor of Martin's Herend Imports, Inc. ("Martin's"), and Herendi Porcelangyar ("Herendi") that Martin's lacked bad faith in obtaining a seizure order for Diamond & Gem's goods; (3) a jury instruction that Diamond & Gem had the burden of proof on its wrongful seizure counterclaim; and (4) an order, given on remand after a prior appeal, limiting Diamond & Gem to the witnesses, issues, and discovery it had offered at the first trial. We affirm in part, reverse in part, and remand.
This matter began with a dispute over the import and sale of high-end porcelain products manufactured by Herendi, a Hungarian company that owns a federally registered trademark that consists of the hand-painted "Herend" name and design. Martin's is a U.S. corporation that owns the exclusive right to import Herendi's products into the United States. Frank and Judith Juhasz owned and operated Diamond & Gem, a Houston proprietorship that sold, among other things, porcelain pieces bearing the Herend trademark. Diamond & Gem acquired the pieces from American and foreign sources, including Herendi's stores in Hungary, and sold them in the United States. Among the Herend pieces Diamond & Gem sold were pieces that Martin's did not offer for sale in the United States.
Martin's sued Diamond & Gem, alleging, inter alia, trademark infringement, and obtained an ex parte temporary restraining order against Diamond & Gem and a seizure order based, in part, on affidavit evidence that Diamond & Gem had sold counterfeit Herend porcelain goods. Counsel for Martin's, along with U.S. marshals, seized porcelain pieces and records from Diamond & Gem's business premises.
Diamond & Gem counterclaimed, alleging that the seizure was wrongful. Following the presentation of Martin's's evidence, the court granted summary judgment for Martin's on the wrongful seizure counterclaim. The jury then returned a verdict in favor of Martin's for $685,000 on the trademark infringement claim, and the court entered final judgment and a permanent injunction against Diamond & Gem and later entered a contempt order against Diamond & Gem for violating the terms of the injunction.
After entry of final judgment, Diamond & Gem filed for bankruptcy protection under
On remand, the district court asked the parties which issues they felt still needed to be resolved. Diamond & Gem identified for retrial the wrongful seizure counterclaim and the language of the "over broad" injunction. Despite failing to request additional discovery at that time, Diamond & Gem subsequently made numerous attempts to introduce new evidence, which the court denied.
Diamond & Gem moved for leave to file a First Amended Counterclaim to seek declaratory relief with respect to the scope of the injunction. The court denied the motion, then entered the Amended Permanent Injunction; Diamond & Gem appealed that and filed an unsuccessful petition for writ of mandamus.
Martin's filed a motion for partial summary, judgment alleging that it had not acted in bad faith as a matter of law at the ex parte hearing to obtain the seizure of Diamond & Gem's merchandise. The court granted the summary judgment motion on the issue of bad faith and held that Diamond & Gem was not entitled to summary judgment establishing the scope of the injunction based on its denied First Amended Counterclaim and that Diamond & Gem could not introduce any new evidence.
The wrongful seizure case went to the jury, which found in favor of Martin's. The court entered final judgment incorporating the verdict, and Diamond & Gem appealed. We consolidated Diamond & Gem's two appeals.
Diamond & Gem appeals the denial of the motion for leave to amend to request a declaratory judgment that "all Herend porcelain found in the United States is presumed to have been adopted by Herend." Diamond & Gem also contends that the district court erred in its modification of the permanent injunction to comply with Martin's I.
As an initial matter, we must consider whether we have jurisdiction to hear an immediate appeal of the injunction. Under § 1292(a)(1), the modification of an injunction is "independently appealable." See Western Water Management, Inc. v. Brown, 40 F.3d 105, 108 n. 1 (5th Cir.1994). And if we have jurisdiction over the modification of the injunction, we also may review the denial of Diamond & Gem's motion to amend and clarify the effect of the injunction. See id.
For us to have jurisdiction over this interlocutory appeal, the district court's order must "modify" the earlier order, not merely "interpret" it. See In re Ingram Towing Co., 59 F.3d 513, 516 (5th Cir.1995). The line between modification and interpretation is a functional one, and the dispositive issue is whether "the ruling appealed from can fairly be said to have changed the underlying decree in a jurisdictionally significant way." See Sierra Club v. Marsh, 907 F.2d 210, 212 (1st Cir.1990).
This is unlike the circumstance in Ingram Towing, in which we lacked jurisdiction because the district court had only
Martin's objects to our jurisdiction under § 1292(a)(1) by seeking to draw a distinction between permanent and preliminary injunctions, arguing that only the latter are subject to interlocutory appeal. But neither § 1292(a)(1) nor Fifth Circuit precedent draws any distinction between preliminary and permanent injunctions in this regard.
In Association of Co-Operative Members, Inc. v. Farmland Indus., Inc., 684 F.2d 1134 (5th Cir.1982), we held that jurisdiction was proper and noted that § 1292(a)(1), "on its face," provided jurisdiction over the issuance of a permanent injunction. See id. at 1137-38. Thus, we properly have jurisdiction under § 1292(a)(1).
Before the district court ruled on Diamond & Gem's motion to amend and clarify the injunction, Diamond & Gem filed a second motion for partial summary judgment, seeking to have the court find, as a matter of law, that all Herend porcelain manufactured by the Herendi factory had been approved by Martin's or Herendi, or both, for importation into and sale in the United States. In support of this motion, Diamond & Gem sought to introduce declarations by Frank Juhasz and Edwin Pound, a sales representative who had worked with Martin's for about thirteen years.
According to Diamond & Gem, Pound's testimony "suggests that all of the porcelain manufactured by the [Herendi] factory over time has been approved for importation and sale in the United States" and also supports Diamond & Gem's theory, during the first trial, that anything Diamond & Gem, a retailer in a secondary market, purchased in the United States "should be presumed" to have come from Martin's. The district court denied the motion to amend.
We review denials of leave to amend for abuse of discretion. See Dussouy v. Gulf Coast Inv. Corp., 660 F.2d 594, 597 (5th Cir.1981). In the context of motions to amend pleadings, "discretion" may be misleading, because FED.R.CIV.P. 15(a) "evinces a bias in favor of granting leave to amend." Id. Indeed, "unless there is a substantial reason," such as undue delay, bad faith, dilatory motive, or undue prejudice to the opposing party, "the discretion of the district court is not broad enough to permit denial." Id. at 598 (citing Lone Star Motor Import v. Citroen Cars, 288 F.2d 69, 75 (5th Cir.1961)).
The problem with Diamond & Gem's motion to amend, however, is that through the guise of clarifying the scope of the injunction, Diamond & Gem seeks to go far beyond the command of Martin's I. There, we held that Diamond & Gem would be "allowed to sell any Herend piece offered in a Martin's catalogue" and would be "free to sell any individual piece of the same quality from the same product line" if Martin's "ever approved a piece for importation and sale in this country." See Martin's I, 112 F.3d at 1308. In its amended counterclaim, Diamond & Gem offers a much more expansive reading, asserting that "all Herend porcelain found in the United States is presumed to have been approved."
In Martin's I, we agreed that Martin's was entitled to injunctive relief, and, accordingly, we affirmed the summary judgment in favor of Martin's's trademark infringement claim. See id. at 1299. The "law of the case" doctrine counsels that "when a court decides upon a rule of law, that decision should continue to govern the same issues in subsequent stages of the same case." Schiro v. Farley, 510 U.S. 222, 232, 114 S.Ct. 783, 127 L.Ed.2d 47 (1994).
A district court acts within its discretion when dismissing a motion to amend that is frivolous or futile.
Diamond & Gem contends that the district court erred in its modification of the injunction to conform to Martin's I. The relevant portion of the modified injunction reads:
Diamond & Gem points to several deficiencies and inaccuracies in the injunction. First, it complains that the modified injunction uses the term "physically different" ambiguously, and that such broad language can lead to imprecise interpretations of which products it is prohibited from selling. Martin's responds that "physically different" becomes something of a term of art for purposes of this dispute.
While injunctions should be specific, the command for specificity is not absolute; it merely requires injunctions to be "framed so that those enjoined will know what conduct the court has prohibited." Meyer v. Brown & Root Constr. Co., 661 F.2d 369, 373 (5th Cir.1981). "The mere fact that ... interpretation is necessary does not render the injunction so vague and ambiguous that a party cannot know what is expected of him." United States v. Greyhound Corp., 508 F.2d 529, 536 (7th Cir.1974).
This approach seems reasonable. It is enough that the phrase "physically different" will be understood by both parties in
The other deficiencies, however, are more problematic. Diamond & Gem complains of the omission of a crucial "not" that should have been inserted before "of the same quality." Next, it argues that the injunction contains a confusing string of "which" clauses that fail to specify the type of products (prohibited or allowed) that each clause concerns. Moreover, Diamond & Gem points to the injunction's failure to mention pieces imported into the United States before 1957, which, by the terms of Martin's I, Diamond & Gem may sell.
Finally, Diamond & Gem challenges the injunction's language that allows Diamond & Gem to sell Herend products that are of the same quality as the products "which have ever been sold" by Martin's. Diamond & Gem asserts that this language is not consistent with Martin's I, in which we stated that Diamond & Gem could sell any pieces "ever approved ... for importation and sale in this country," including "any Herend piece offered in a Martin's catalogue." Id. (emphasis added).
"An order granting or denying a preliminary injunction will be reversed only upon a showing that the district court abused its discretion," but "legal determinations are subject to plenary review on appeal." Lakedreams v. Taylor, 932 F.2d 1103, 1107 (5th Cir.1991). Because in Martin's I we articulated a legal standard for when products sold by Diamond & Gem would be held to infringe Martin's's trademark rights, the portions of the amended permanent injunction that speak to those standards should be reviewed de novo to ensure that they are consistent with Martin's I. We conclude that they are not fully consistent.
Diamond & Gem correctly observes that "not" needs to be inserted before "of the same quality" and that the injunction should permit Diamond & Gem to sell pieces imported into this country before 1957. Moreover, because the injunction requires that the products must have actually been "sold"—rather than merely "approved" or "offered in a Martin's catalogue"—it places an improper limit on those products that Diamond & Gem can permissibly sell.
We also observe that the critical part of the modified injunction proscribes Diamond & Gem from involvement with the subject products that have ever been sold in the United States "or which are of the same quality from the same product line...." This wording is more restrictive than what is required by Martin's I. The injunction should read "and are of the same quality" instead of "or which are of the same quality." As a result of the discrepancies we have noted, we remand for the district court to modify the injunction.
After remand, Diamond & Gem reasserted its wrongful seizure counterclaim against Martin's. Martin's moved for partial summary judgment to establish, inter alia, that when it obtained the ex parte order for the seizure, it did not act in bad faith as a matter of law. The district court granted the motion, and Diamond & Gem appeals.
We review summary judgments de novo, using the same standard employed by the district court.
The wrongful seizure counterclaim asserted by Diamond & Gem is predicated on 15 U.S.C. § 1116(d), which provides for the recovery of damages caused by a wrongful seizure and permits recovery of punitive damages "in instances where the seizure was sought in bad faith." The legislative history of the Lanham Act establishes that a seizure can be wrongful if brought "in bad faith."
Diamond & Gem contends that the court erred in granting summary judgment by applying the wrong legal standard and ignoring "numerous fact issues." These arguments are without merit.
First, Diamond & Gem contends that the standard for bad faith is an objective one that can be evinced by "anticompetitive motive" coupled with "knowing lack of need for a seizure." Despite Diamond & Gem's assertions, there is not such a large gulf between the standard it enunciates and the one used by the district court: namely, whether Martin's sought the seizure knowing it was baseless.
Diamond & Gem's second criticism is the district court's alleged failure to consider multiple fact issues that might rebut a finding of no bad faith. Material facts sufficient to overcome summary judgment are those that affect the outcome of litigation. See Kennett-Murray Corp. v. Bone, 622 F.2d 887, 892 (5th Cir.1980). Once a summary judgment motion is made, "an adverse party may not rest upon the mere allegations or denials of his pleading, but his response ... must set forth specific facts showing the there is a genuine issue for trial." FED.R.CIV.P. 56(e).
Diamond & Gem has presented no material fact, or anything rising above the level of bare accusation, that Martin's acted in bad faith. Although Diamond & Gem spends considerable time developing its theory that Martin's sought the seizure in retaliation for an earlier dispute over counterfeiting, there is not a single fact that tends to show Martin's obtained the seizure order with knowledge that it was baseless.
In addition, much of the evidence Diamond & Gem points to as establishing an issue of material fact was not even submitted in opposition to the summary
Diamond & Gem also criticizes the decision to authorize seizure in the first place, but as Martin's points out, the sole issue is whether Martin's may have acted in bad faith, not a second-guessing of the seizure. Martin's, on the other hand, reproduces testimony from various company officials articulating their belief that Diamond & Gem was selling counterfeit Herend porcelain.
At the ex parte hearing, Martin's presented a legal memorandum in support of its request for the seizure; the memorandum included the reasons for suspecting Diamond & Gem of counterfeiting.
Diamond & Gem contends that the court erred in its instruction to the jury that it, not Martin's, had the burden of proof on Diamond & Gem's wrongful seizure counterclaim. In support of this contention, Diamond & Gem argues (1) that Martin's I conclusively found that Diamond & Gem had not sold any counterfeit goods; (2) that the "regular, established" nature of the business required this burden shifting; and (3) that 15 U.S.C. § 1116(d)(4)(B) also requires shifting the burden to Martin's to disprove Diamond & Gem's "innocence." We disagree.
We review jury instructions for harmful error. Even if an instruction erroneously states the applicable law or provides insufficient guidance, we will not disturb the judgment unless the error could have affected the outcome of the trial. See Arleth v. Freeport-McMoran Oil & Gas Co., 2 F.3d 630, 634 (5th Cir.1993); Colburn v. Bunge Towing, Inc., 883 F.2d 372, 377 (5th Cir.1989).
The district court correctly stated the law. Diamond & Gem filed its counterclaim alleging that Martin's conducted a wrongful seizure of its inventory. Accordingly, Diamond & Gem has the burden of establishing all the elements of its claim. See, e.g., Rhodes v. Guiberson Oil Tools, 75 F.3d 989, 992 (5th Cir.1996) (en banc) (holding that plaintiff had the burden of proof to establish her prima facie case). That burden requires that Diamond & Gem establish that the seizure was in fact wrongful.
None of the reasons cited by Diamond & Gem demonstrates that Martin's should have borne the proof to disprove Diamond & Gem's counterclaim. First, Martin's I did not establish that the seizure was wrongful or that the goods seized were all authentic. Instead, this court held only that at the first trial Martin's had not met its burden to prevail on summary judgment that the seizure was lawful. Second, the fact that Diamond & Gem was an "established, regular business" does not shift the burden at trial on a wrongful seizure counterclaim. The status of a business as "established" and "regular" is relevant only as a factor in determining
The statute does not in any way, directly or indirectly, shift the burden of proof for a wrongful counterclaim. The wrongful seizure provision of the Lanham Act is not in § 1116(d)(4) but in § 1116(d)(11). Thus, § 1116(d)(11) and its supporting legislative history establish the standards by which wrongful seizure claims may be pursued, and § 1116(d)(4) has nothing to do with those standards.
Second, § 1116(d)(11) says nothing about the burden of proof and thus gives no indication that we should abandon the general rule that the party asserting a claim carries the burden of proof. Third, § 1116(d)(11) does not mention or refer to § 1116(d)(4) or give any indication that any of § 1116(d)(4)'s provisions were meant to govern, or even be relevant to, § 1116(d)(11).
Fourth, § 1116(d)(4) on its face describes only the findings a district court must make before it enters a seizure order. It thus is up to the district court, not defendants, to determine whether the evidence supports entry of those findings. The court made such findings here and confirmed them when it entered a preliminary injunction.
Fifth, § 1116(d)(4) says nothing about the burden of proof in a wrongful seizure counterclaim and thus would not support Diamond & Gem's argument even if it were intended to apply to § 1116(d)(11). Because nothing in the statute or in Martin's I shifts the burden to Martin's to disprove Diamond & Gem's counterclaim, the jury instructions were proper.
Diamond & Gem argues that the district court, in the same order in which it granted Martin's partial summary judgment, improperly granted a motion by Martin's to strike or exclude evidence Diamond & Gem sought to introduce during the second trial on the wrongful seizure counterclaim. Diamond & Gem sought to introduce the testimony, in the form of declarations of seven witnesses, that Diamond & Gem contends would further bolster the claim that it never sold counterfeit Herend porcelain.
We review refusals to reopen discovery for abuse of discretion. Keyes v. Lauga, 635 F.2d 330, 335 (5th Cir. Unit A Jan.1981). The district court's discretion in managing trials "extends on remand to all areas not covered by the higher court's mandate." See Cleveland v. Piper Aircraft Corp., 985 F.2d 1438, 1449 (10th Cir. 1993). If the court perceives "manifest injustice" in limiting evidentiary proof at a new trial, however, it may, with proper notice, allow additional witnesses and relevant proof. See id. at 1450.
The court granted the motion by Martin's because the "discovery deadline expired long ago" and because at the time of the 1995 trial, it was Diamond & Gem that sought an expedited trial schedule. Moreover, Diamond & Gem never formally moved to have discovery reopened, and the court was skeptical that Diamond & Gem would prevail, even if it had filed, because it likely would not be able to demonstrate "manifest injustice."
In summary, we affirm in part the denial of Diamond & Gem's motion to amend and clarify the effect of the injunction, but we remand the injunction for further revision consistent with Martin's I and this opinion. The partial summary judgment in favor of Martin's on the question of bad faith is affirmed, and we conclude that the court did not err in charging the jury that Diamond & Gem had the burden of proof on its wrongful seizure counterclaim and did not abuse its discretion in limiting Diamond & Gem to the evidence it offered at the first trial.
The judgment is AFFIRMED in part, REVERSED in part, and REMANDED.