Otr Wheel Engineering, Inc. v. West Worldwide Services, Inc. ( 2021 )

NOT FOR PUBLICATION FILED
UNITED STATES COURT OF APPEALS MAR 26 2021
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
OTR WHEEL ENGINEERING, INC.; et al., No. 19-35925
Plaintiffs-Appellees, D.C. No. 2:14-cv-00085-LRS
v.
MEMORANDUM*
WEST WORLDWIDE SERVICES, INC.; et
al.,
Defendants-Appellants.
Appeal from the United States District Court
for the Eastern District of Washington
Lonny R. Suko, District Judge, Presiding
Submitted December 16, 2020**
San Francisco, California
Before: RAWLINSON, MURGUIA, and R. NELSON, Circuit Judges.
Partial Concurrence and Partial Dissent by Judge Rawlinson
Appellants (collectively “West”) appeal the district court’s denial of their
motion for recovery of a cash bond based on the preliminary injunction issued on
May 14, 2014, and modified on March 18, 2015. The district court held that the
*
This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
**
The panel unanimously concludes this case is suitable for decision
without oral argument. See Fed. R. App. P. 34(a)(2).
preliminary injunction granted in favor of Appellees (collectively “OTR”) pending
trial was not wrongful and that the injunction pending appeal, though wrongful,
was not accompanied by a sufficient showing of damages. As we find the
preliminary injunction was wrongful both pre-trial and pending appeal, we affirm
the district court in part, reverse in part, and remand so the district court can allow
discovery regarding potential injunction damages for the entire relevant time
period and consider whether that additional discovery changes its damages
analysis. We have jurisdiction under 28 U.S.C. §§ 1291 and 1292(a)(1).
1. “[B]efore a court may execute a bond, it must find the enjoined or
restrained party was ‘wrongfully enjoined or restrained.’” Nintendo of Am., Inc. v.
Lewis Galoob Toys, Inc., 16 F.3d 1032, 1036 (9th Cir. 1994) (quoting Fed. R. Civ.
P. 65(c)). A party is wrongfully enjoined “when it turns out the party enjoined had
the right all along to do what it was enjoined from doing.” Id. (citation omitted).
“The standard of review for an order denying a motion to execute a bond is de
novo.” Newspaper & Periodical Drivers’ & Helpers’ Union, Local 921 v. S.F.
Newspaper Agency, 89 F.3d 629, 631 (9th Cir. 1996) (citing Nintendo, 16 F.3d at
1036).
The district court enjoined West from:
[d]irectly or indirectly making any commercial use of OTR’s
registered trade dress . . . for the Outrigger tire tread design, or any tire
tread design that is confusingly similar to the Outrigger tire tread
design; . . . using OTR’s Outrigger trade dress, or any colorable
2
imitations thereof, in connection with the sale, offer for sale, advertising
or promotion of any goods or services; . . . manufacturing, producing,
distributing, circulating, selling, offering for sale, advertising,
promoting or displaying any product or service which tends to relate or
connect such product or service in any way to OTR’s Outrigger model
tires; . . . utilizing any of OTR’s confidential and proprietary trade
secrets pertaining to the Outrigger model tire for any reason.
In effect, West was broadly enjoined from making commercial use of some of its
tires, including its Extremelift tires, which were the basis of OTR’s trade dress and
trade secret claims.1
However, the injunction against West was wrongful both pre-trial and
pending appeal. When OTR’s trade dress and trade secret claims failed at trial, it
became clear that these concerns were never satisfactory reasons to enjoin West
from making commercial use of its Extremelift tires. Thus, it “turn[ed] out [West]
had the right all along to do what it was enjoined from doing.” Nintendo, 16 F.3d
at 1036. Moreover, there is no basis for treating the pre- and post-trial phases of
the injunction differently. During either period, West could have tried to sell or
otherwise commercially benefit from its Extremelift tires. As a result, West was
“wrongfully enjoined” for the purposes of its motion for bond recovery during the
1
OTR argues that West was only enjoined from selling its Extremelift
tires to Genie Industries (“Genie”). In addition, OTR argues that an injunction was
necessary to prevent West from benefitting from Genie’s business because it had
obtained that business through tortious interference, Washington Consumer
Protection Act violations, and false designation. But the text of the injunction does
not limit its scope to dealings with Genie or to West’s benefit from Genie’s
business.
3
entire injunction period.2
2. When an enjoined party can show it was wrongfully enjoined, it may
be entitled to receive the “amount that the court considers proper to pay the costs
and damages sustained by” the wrongfully enjoined party, which was set aside as
security by the movant. Fed. R. Civ. P. 65(c). “[T]here is a rebuttable
presumption that [the] wrongfully enjoined party is entitled to have the bond
executed and recover provable damages up to the amount of the bond.” Nintendo,
16 F.3d at 1036. Demonstrating “provable damages” requires the party to show
“by a preponderance of the evidence that it sustained actual injury as a result of the
wrongful issuance of the preliminary injunction.” Id. at 1038 (internal quotation
marks omitted).
Here, OTR was required to provide $3 million in security for the injunction.
The district court found that West was not wrongfully enjoined as to the pre-trial
portion of the injunction and limited discovery to the post-trial period. But the
limited nature of the record makes it unclear what portion of the $3 million, if any,
2
Of course, our prior modification and affirmance of the grant of the
preliminary injunction do not preclude us from finding that West was wrongfully
enjoined. “[A] preliminary injunction may be granted on a mere probability of
success on the merits. . . .” Edgar v. MITE Corp., 457 U.S. 624, 649 (1982)
(Stevens, J., concurring in part and concurring in the judgment). But a properly
granted injunction can later be found to have wrongfully enjoined a party. As a
result, the “bond, in effect, is the moving party’s warranty that the law will uphold
the issuance of the injunction.” Id.4
is potentially recoverable as “provable damages.” Id. at 1036. Because West was
wrongfully enjoined at all relevant times, the district court on remand should allow
discovery for the full period of the injunction to address the entirety of West’s
damages evidence. The district court should also address how West’s alleged
failure to mitigate damages affects its analysis. See Icicle Seafoods, Inc. v.
Worthington, 475 U.S. 709, 714 (1986) (“If the Court of Appeals believed that the
District Court had failed to make findings of fact essential to a proper resolution of
the legal question, it should have remanded to the District Court to make those
findings.”).
AFFIRMED IN PART AND REVERSED IN PART.
5
FILED
OTR Wheel Engineering, Inc. v. West Worldwide Services, Inc., No. 19-35925
MAR 26 2021
Rawlinson, Circuit Judge, concurring in part and dissenting in part:
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
I agree with the majority that the injunction against Defendants-Appellants
West Worldwide Services, Inc., Samuel J. West, SSL Holdings, Inc., SSL Global,
Inc., SSL China, LLC, and Qingdao STW Tire Co., Ltd. was wrongful pending
appeal. However, I do not agree with the majority’s view that the injunction was
wrongful pre-trial. The injunction enjoined the Defendants-Appellants from:
a. Directly or indirectly making any commercial use
of [Plaintiff-Appellee] OTR Wheel Engineering, Inc.’s
registered trade dress . . . for the Outrigger tire tread
design, or any tire tread design that is confusingly similar
to the Outrigger tire tread design;
b. Directly or indirectly using OTR’s Outrigger trade
dress, or any of OTR’s trademarks or colorable imitations
thereof, in connection with the sale, offer for sale,
advertising or promotion of any goods or services;
c. Directly or indirectly: (i) manufacturing,
producing, distributing, circulating, selling, offering for
sale, advertising, promoting or displaying any product or
service which tends to relate or connect such product or
service in any way to OTR; or (ii) making any false
description or representation of origin concerning any
goods or services offered for sale by Defendants; and
d. Directly or indirectly utilizing any of OTR’s
confidential and proprietary trade secrets for any reason.
1
When the case went to trial, the jury found that Defendants-Appellants were
liable under the Lanham Act for reverse passing off. See OTR Wheel Eng’g., Inc.
v. West Worldwide Servs., Inc., 897 F.3d 1008, 1014 (9th Cir. 2018). In other
words, the jury concluded that Defendants-Appellants represented that OTR’s tires
were actually Defendants-Appellants’ product. See id. at 1013-14. The jury
awarded OTR $967,015 in damages. See id. at 1014. At a minimum, this Lanham
Act violation fell within the portion of the injunction prohibiting Defendants-
Appellants from “making any false description or representation of origin
concerning any goods or services offered for sale by Defendants.” Accordingly, it
is not accurate to say that the injunction was wrongful pre-trial. After all, the jury
found that Defendants-Appellants acted wrongly in passing off OTR’s tires as their
own. See id. at 1013-14. For that reason, I respectfully dissent from the majority’s
conclusion that the injunction was wrongful pre-trial. I would affirm the judgment
of the district court.
2