JL Powell Clothing LLC v. Powell , 590 F. App'x 3 ( 2014 )

Not for Publication in West's Federal Reporter
United States Court of Appeals
For the First Circuit
No. 14-1242
JL POWELL CLOTHING LLC; JL POWELL LLC,
Plaintiffs, Appellees,
v.
JOSHUA L. POWELL, individually,
d/b/a The Field, d/b/a The Field Outfitting,
d/b/a The Field Outfitting Company,
Defendant, Appellant,
BROWNELLS, INC., d/b/a The Field Outfitting Company,
Defendant.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MAINE
[Hon. Nancy Torresen, U.S. District Judge]
Before
Lynch, Chief Judge,
Selya and Barron, Circuit Judges.
Joseph Collins, with whom DLA Piper LLP (US), Roy T. Pierce,
and Preti, Flaherty, Beliveau & Pachios, LLP were on brief, for
appellant.
Thomas C. Newman, with whom Richard L. O'Meara, Stacey D.
Neumann, and Murray Plumb & Murray were on brief, for appellees.
October 24, 2014
PER CURIAM. This "moving target of a case" comes before
us on interlocutory appeal of a preliminary injunction entered
against Joshua L. Powell ("Joshua"), in litigation resulting from
several contracts, including an agreement between the company he
founded, JLP Retail Holding, Inc. ("Retail Holding"),1 and a new
joint venture, JL Powell LLC, formed with non-party Blue Highways
III LLC.
A detailed recitation of the facts is not needed. The
only issue before us is whether the district court abused its
discretion in issuing a preliminary injunction. See TEC Eng'g
Corp. v. Budget Molders Supply, Inc., 82 F.3d 542, 544-45 (1st Cir.
1996). Although we are permitted to resolve Joshua's motion to
dismiss when entertaining an interlocutory appeal of a preliminary
injunction, such jurisdiction is discretionary and we decline
Joshua's invitation to exercise it. See First Med. Health Plan,
Inc. v. Vega-Ramos, 479 F.3d 46, 50 (1st Cir. 2007) (holding that
appellate review of a motion to dismiss is "permissible where the
underlying facts are undisputed, the parties have had a fair
opportunity to brief the legal issues, and the court of appeals can
resolve the case as a matter of law" (emphasis added)); see also 16
Wright & Miller, Federal Practice and Procedure § 3921.1 (3d ed.)
("The court of appeals is not required to go beyond the issues that
1
The original name of Joshua's company was JL Powell Inc.,
but was changed pursuant to the transaction now at issue.
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must be resolved to conclude review of the injunction
determination."). Joshua's claims involve difficult questions of
state law, and the record before us is insufficiently developed to
make such review appropriate at this juncture. Cf. First Med., 479
F.3d at 50.
To issue a preliminary injunction under Federal Rule of
Civil Procedure 65, the district court must find that the moving
party has established (1) a likelihood of success on the merits,
(2) a likelihood of irreparable harm absent interim relief, (3)
that the balance of equities is in his favor, and (4) that a
preliminary injunction is in the public interest. See Voice of the
Arab World, Inc. v. MDTV Med. News Now, Inc., 645 F.3d 26, 32 (1st
Cir. 2011) (citing Winter v. Natural Res. Def. Council, Inc., 555
U.S. 7, 20 (2008)). "Though the district court enjoys considerable
discretion in applying this test, its decision to grant or deny a
preliminary injunction must be supported by adequate findings of
fact and conclusions of law." TEC Eng'g Corp., 82 F.3d at 544-45.
There was no abuse of discretion as to the third and
fourth factors. The court did not abuse its discretion in finding
that the equities tipped in the plaintiffs' favor because the court
found a likely sale, interim equitable relief is appropriate "to
foreclose attempts by the seller to 'keep for himself the essential
thing he sold,'" see Levitt Corp. v. Levitt, 593 F.2d 463, 468 (2d
Cir. 1979) (quoting Guth v. Guth Chocolate Co., 224 F. 932, 934
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(4th Cir. 1915)), and Joshua had failed to produce "evidence of
significant expense going forward" if such relief were granted.
Similarly, the court did not abuse its discretion in determining
that interim relief serves the public interest in enforcement of
agreements.
The first factor, likelihood of success on the merits,
supports the preliminary injunction. In particular, Joshua has not
shown that the district court's determination rests on a clearly
erroneous assessment of fact. Contrary to Joshua's arguments, the
district court did find that Retail Holding, not Joshua, received
the 43% stake in JL Powell LLC pursuant to the Contribution
Agreement. The district court, in making subsequent references to
Joshua's having received a 43% stake, was being loose with its
language in articulating the exact exchange. Such looseness is not
an abuse of discretion in granting interim relief. The parties'
positions continue to evolve, the issues are complex, and a
determination on the merits requires a more fully developed factual
record, findings, and explanations of findings. The legal issues
governing this case are close and difficult, such that their final
resolution also requires a developed record. But we cannot say the
district court abused its discretion in finding that the plaintiffs
would likely succeed on the merits.
But the second factor, likelihood of irreparable injury,
presents a difficulty. The district court based its conclusion
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solely on the existence of a contractual provision "agree[ing] that
irreparable damage would occur" in the event of a breach, a theory
that was not presented by either party. The court addressed the
preliminary injunction in the contract context, but not in the
trademark context, finding any relief under trademark law for the
mark "J.L. Powell" would be redundant. It did not, for example,
make any factual findings as to customer confusion. The
plaintiffs' argument for irreparable injury did not rest on the
contractual provision alone. Rather, they urged the court to find
likelihood of irreparable harm based on the contractual provision
combined with the lack of evidence rebutting the presumption of
such harm in intellectual property disputes of this nature, and the
impossibility or impracticability of calculating damages under the
circumstances of this case.
Both Joshua and the plaintiffs therefore lacked notice
that the district court might short-circuit both contract and
trademark analysis by merely resting on the contractual provision.
On appeal, Joshua has argued for the first time that this was
impermissible. The plaintiffs responded that the district court's
reliance on the contract was not an abuse of discretion given the
evidence in the record and the arguments that the plaintiffs made
below. These objections concern an important issue in the case law
about whether resting on a contractual provision of irreparable
injury alone is error, see, e.g., Baker's Aid v. Hussmann
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Foodservice Co., 830 F.2d 13, 16 (2d Cir. 1987), that none of the
parties had presented to the district court. But we do not resolve
this issue; it may, inter alia, become moot.
On remand, we direct that the district court review the
matter of irreparable injury promptly, and vacate the preliminary
injunction if it finds irreparable harm to be lacking. If the
district court vacates the current injunction, it may, of course,
proceed to consider whether a more limited injunction pertaining to
the "J.L. Powell" trademark is appropriate.
Given the difficulty the district court's ruling
presents, we do not vacate the injunction ourselves on appeal. The
district court appears to have relied on the contract out of
expediency, rather than because there was a lack of other support
in the record. This is analogous to the situation we faced in TEC
Engineering Corp. v. Budget Molders Supply, Inc., 82 F.3d 542 (1st
Cir. 1996), when we remanded, without vacating, a preliminary
injunction based on an alleged trade dress violation. The district
court had granted a preliminary injunction after "summarily
stat[ing] that TEC had met its burden" under the traditional
preliminary injunction test, with no finding other than that "it
believed the two products were confusingly similar." Id. at 545(internal quotation marks omitted).
Similarly, in this case, the district court found that
Section 12.13 of the Contribution Agreement demonstrated
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irreparable harm, without explanation of why the factual
circumstances of this case support reliance on the contractual
provision. See, e.g., Baker's Aid, 830 F.2d at 15 (recognizing
that preliminary injunctions often follow "when it appears likely
that the plaintiff will prevail in covenant-not-to-compete cases,"
depending on the facts). There has also been no addressing of the
plaintiffs' likelihood of success on its related intellectual
property claim to the trademark "J.L. Powell" -- and so no express
finding on customer confusion (or the difficulty of establishing
the damage from any such confusion) -- that might support a finding
of irreparable harm.2 Cf. Societe des Produits Nestle, S.A. v.
Casa Helvetia, Inc., 982 F.2d 633, 640 (1st Cir. 1992)
("[I]rreparable harm flows from an unlawful trademark infringement
as a matter of law."). But see Swarovski Aktiengesellschaft v.
Building #19, Inc., 704 F.3d 44, 54 (1st Cir. 2013). Because of
this, we leave the injunction in place, but remand to the district
court with instructions to "take steps expeditiously to correct the
errors." Fryzel v. Mortg. Elec. Registration Sys., Inc., 719 F.3d
40, 46 (1st Cir. 2013) (Souter, J.). Just as it would be unfair to
Joshua to uphold the district court's ruling implicating a
2
The plaintiffs brought trademark claims for violations of
two trademarks, "J.L. Powell" and "The Sporting Life." The
district court did not reach the alleged violations of the "J.L.
Powell" trademark "[b]ecause the Plaintiffs have already
established their right to enjoin [Joshua] from using his name,"
and so any injunctive relief to protect the "J.L. Powell" mark
would, in the district court's view, have been redundant.
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difficult issue of which he had no notice, "it would be inequitable
to punish [the plaintiffs] for the district court's" resort to
expediency. See Inverness Corp. v. Whitehall Labs., 819 F.2d 48,
51 (2d Cir. 1987); see also Bolduc v. Beal Bank, SSB, 167 F.3d 667,
674-75 (1st Cir. 1999).
This leaves the related question of the breadth of the
preliminary relief ordered by the district court. The preliminary
injunction reads:
The Defendant is hereby PRELIMINARILY ENJOINED
from using his name or endorsement in
connection with his business venture The
Field, and is directed to instruct other
persons or entities using his name or
endorsement in connection with [T]he Field to
cease any such use.
Joshua has argued to us, but did not to the district court, that
the phrase "use in connection with" is overbroad and precludes him
from such things as daily ordinary use of his name. The plaintiffs
deny this was the intent. This court directed the parties to
attempt to agree upon language of a modified preliminary
injunction, but they were unable to reach an agreement. We direct
the district court, should it find irreparable harm and an
otherwise sufficient basis for injunctive relief, to hear the
parties' arguments and tailor the injunction (if required) to meet
Joshua's legitimate concerns.
"Although it would be open to this court simply to vacate
the injunction" in light of these difficulties, we think the
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prudent course is to permit the preliminary injunction to continue
temporarily, subject to expeditious resolutions, first of the
irreparable injury and breadth of the injunction questions, and
then of the case. See Fryzel, 719 F.3d at 45-46. Because "[t]his
case gives every promise of producing more trial work, and probably
further appeals, . . . . [t]he parties might . . . wish to consider
whether there is any prospect of settling the case without further
litigation." Bolduc, 167 F.3d at 675. In any event, this order
has attempted to protect both sides during the interim. See id.;
see also TEC Eng'g Corp., 82 F.3d at 546. Accordingly, we leave
the preliminary injunction temporarily in place and remand with
instructions:
First, we direct the court on remand to address the
irreparable injury component within thirty days from the date on
which our order is docketed in the district court. Should the
district court find irreparable harm and an otherwise sufficient
basis for injunctive relief, the district court will then hear the
parties' arguments on the appropriate scope and language of the
injunction.
Second, unless the parties agree otherwise, we strongly
suggest the district court promptly resolve the case after a full
trial on the merits.
So ordered.
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