Tom James Co. v. Walter Louie Morgan, Jr.

[DO NOT PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT FILED
________________________ U.S. COURT OF APPEALS
ELEVENTH CIRCUIT
No. 04-15664 AUGUST 22, 2005
Non-Argument Calendar THOMAS K. KAHN
________________________ CLERK
D. C. Docket No. 02-00497-CV-JOF-1
TOM JAMES COMPANY,
Plaintiff-Counter-
Defendant-Appellee
Cross-Appellant,
versus
WALTER LOUIE MORGAN, JR.,
Individually and
d.b.a. Benchmade Clothing of
Atlanta, a sole proprietorship, et al.,
Defendant-Appellant
Cross-Appellee.
________________________
Appeal from the United States District Court
for the Northern District of Georgia
_________________________
(August 22, 2005)
ON PETITION FOR REHEARING
Before ANDERSON, BLACK and WILSON, Circuit Judges.
PER CURIAM:
Our opinion in this case issued on June 7, 2005. In this petition for panel
rehearing, Tom James Company requests that we rehear its cross appeal with
respect to the narrow issue of disgorgement of Walter Louie Morgan, Jr.’s profits.
The petition for panel rehearing is GRANTED. We vacate our prior opinion in this
appeal and substitute the following opinion, in which we have made substantive
changes to section II.B. and conclude that the denial of disgorgement of Morgan’s
profits should be vacated and remanded to the district court.
Defendant Walter Louie Morgan, Jr. (“Morgan”) seeks review of the district
court’s January 14, 2004, order of civil contempt, and its September 28, 2004,
order awarding attorney’s fees and costs to Plaintiff Tom James Co. (“Tom
James”). Tom James also appeals the district court’s September 28, 2004, order
awarding attorney’s fees and costs.
I. Background
Morgan is a former sales employee of Tom James Co., a men’s business and
business casual clothing retailer. Morgan worked for Tom James for
approximately fifteen years before he left the company to start his own business,
Benchmade Clothing of Atlanta. Since ending his employment with Tom James
Co., Morgan has contacted and made sales to customers whom he previously
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serviced while employed by Tom James. As a result, on February 21, 2002, Tom
James sued Morgan for alleged violations of covenants not to compete and not to
disclose confidential information and trade secrets. In December of 2002, Tom
James and Morgan amicably resolved the suit by entering into a Settlement
Agreement and Release. Additionally, Morgan agreed and consented to an
injunction that was prepared and submitted to the court by Tom James. The
district court entered the injunction on December 20, 2002. Pursuant to the terms
of the injunction, Morgan was “enjoined, until December 12, 2004, from directly
or indirectly soliciting, for the sale of clothing and wardrobe accessories of the sort
he sold for [Tom James], those customers of [Tom James] as to whom he was paid
a sales commission while employed by [Tom James], . . . [and is further enjoined]
from directly or indirectly selling such clothing and wardrobe accessories to any
such customers even in the absence of any solicitation.”
In September 2003, Tom James, alleging that Morgan had violated the
injunction, filed a motion for criminal and civil contempt. Over several days in
November and December of 2003, the district court held an evidentiary hearing on
the motion. During the lengthy evidentiary hearing, the district court, citing Young
v. U.S. ex rel Vuitton et Fils, SA, 481 U.S. 787 (1987), suspended the criminal
contempt proceedings, and proceeded only with the civil contempt proceedings.
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As evidence that Morgan violated the injunction, Tom James offered the testimony
of five men who originally were customers of Morgan when he was employed by
Tom James and had continued to be customers of Morgan after he terminated his
employment with Tom James.
In its January 14, 2004, order (“contempt order”), the district court found
Morgan in civil contempt, ordered Morgan to pay nominal damages of $500.00
($100.00 per each of the five customer witnesses) plus attorney’s fees, and
declined to award compensatory damages or equitable relief to Tom James. In
accordance with the terms of the contempt order, Tom James submitted a fee
petition in which it requested $115,375.20 in attorney’s fees and $26,917.86 in
costs. After reviewing the attorney’s fees and costs incurred, the district court
awarded Tom James $76,917.00 in attorney’s fees and $5,324.08 in costs.
II. Discussion
Morgan asserts that the district court’s finding of civil contempt constitutes
reversible error. Alternatively, Morgan claims that the district court awarded Tom
James an excessive amount of attorney’s fees and costs. Tom James, on the
contrary, argues that the amount of attorney’s fees and costs awarded was not
sufficient.
A. Civil Contempt
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“A finding of civil contempt must be based on clear and convincing
evidence that a court order was violated.” Jove Eng’g v. I.R.S., 92 F.3d 1539, 1545
(11th Cir. 1996) (citation and internal quotation omitted). This standard is more
exacting than the preponderance of the evidence standard, but does not require
proof beyond a reasonable doubt. See id.
We review the district court’s determination of civil contempt for abuse of
discretion. Howard Johnson Co., Inc. v. Khimani, 892 F.2d 1512, 1516 (11th
Cir.1990) (citing Afro-American Patrolmen's League v. City of Atlanta, 817 F.2d
719, 723 (11th Cir.1987)). “A district court abuses its discretion when it
misconstrues its proper role, ignores or misunderstands the relevant evidence, and
bases its decision upon considerations having little factual support.” Arlook v. S.
Lichtenberg & Co., Inc., 952 F.2d 367, 374 (11th Cir.1992). Morgan argues
numerous grounds on which we should find that the district court abused its
discretion in finding him in civil contempt.
1. The Injunction
Morgan first argues that the December 20, 2002, injunction is unenforceable
because it is vague, ambiguous, and overly broad. Rule 65 of the Federal Rules of
Civil Procedure requires that an injunction be “specific in terms” and describe “in
reasonable detail the acts sought to be restrained.” Nevertheless, we “do not set
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aside injunctions under Rule 65(d) unless they are so vague that they have no
reasonably specific meaning.” Planetary Motion, Inc. v. Techsplosion, Inc., 261
F.3d 1188, 1203 (11th Cir. 2001) (internal quotations omitted). In other words,
“the inquiry should be whether the parties subject to the injunctive order
understood their obligations under the order.” Williams v. City of Dothan, Ala.,
818 F.2d 755, 761 (11th Cir. 1987).
Morgan asserts that the injunction did not explain with specificity what
actions were enjoined, and is broader in scope than the relief Tom James originally
requested in the complaint. We note, however, that Morgan voluntarily agreed to
be bound by the terms of the injunction as part of the settlement agreement
negotiated to amicably resolve the suit Tom James filed against Morgan. In return,
Tom James agreed to dismiss with prejudice its claims against Morgan. Moreover,
Morgan was represented by counsel in this bargained for exchange. At no point
prior to the contempt proceeding did Morgan complain to the court about the
adequacy of the terms of the injunction or seek to have it modified. Accordingly,
at this point, any objection to the specific terms of the injunction is deemed
waived. See Combs v. Ryan’s Cole Co., Inc., 785 F.2d 970, 979 (11th Cir. 1986).
Nevertheless, even if Morgan had not waived his objections to the
injunction, the injunction is not vague, ambiguous, or overly broad. Pursuant to
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the terms of the injunction, Morgan was prohibited for a period of approximately
two years from selling “clothing and wardrobe accessories of the sort he sold”
while employed by Tom James to the customers to whom he sold while employed
by Tom James. Morgan worked at Tom James for over fourteen years and was
familiar with the clothing sold by that company such that he should understand his
obligations under the injunction. Further, the relief resulting from the injunction
does not exceed the scope of the relief requested in the complaint. Nonetheless,
even if it did, the voluntary injunction is enforceable. See Local No. 93, Int’l Ass’n
of Firefighters v. City of Cleveland, 478 U.S. 501, 525-26 (1986) (court may issue
an agreed upon injunction providing for broader relief than available pursuant to
the terms of the complaint so long as the agreement is “within the general scope of
the case made by the pleadings” and does not “conflict[] with or violate[] the
statute upon which the complaint was based”). Since the injunction was not vague,
ambiguous, or overly broad, we will not reverse the district court’s order of civil
contempt on these grounds.
2. Exclusion of Evidence
Morgan appeals the district court’s exclusion of the testimony of two of his
experts and evidence regarding the differences between the clothing that he sold
while at Tom James and after leaving Tom James. Rather than permit the experts
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to testify, the district court permitted Morgan to submit a written proffer of their
testimony. For these evidentiary rulings to be reversible, Morgan must not only
show that the error was an abuse of the district court’s discretion, but also that he
was prejudiced by the omission. See Brochu v. City of Riviera Beach, 304 F.3d
1144, 1155 (11th Cir. 2002). Morgan has shown neither. Thus, we will not
reverse the district court on these evidentiary rulings.
3. Sufficiency of the Evidence
Morgan asserts that Tom James failed to prove with clear and convincing
evidence that the clothing Morgan sold after December 20, 2002, violated the
terms of the injunction. Specifically, Morgan alleges that Tom James should have
admitted samples of the clothing at issue into evidence during its case in chief.
Notably, any alleged failure on the part of Tom James was cured when Morgan
himself entered samples of the clothing sold by him as well as clothing sold by
Tom James into evidence during his defense. Moreover, the district court had the
benefit of voluminous testimony, including that of Tom James’s former customers.
Based on this testimony and other evidence, the district court did not abuse its
discretion in finding that Tom James had proven a violation of the injunction with
clear and convincing evidence.
B. Damages Award
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Ultimately, the district court awarded Tom James nominal damages in the
amount of $500.00, attorney’s fees in the amount of $76,917.00, and costs in the
amount of $5,324.08. Both Morgan and Tom James dispute this damages award.
“[S]anctions in civil contempt proceedings may be employed for either or
both of two purposes: to coerce the defendant into compliance with the court’s
order, and to compensate the complainant for losses sustained.” Local 28, Sheet
Metal Workers’ Int’l Ass’n v. EEOC, 478 U.S. 421, 443, 106 S. Ct. 3019, 3033
(1986) (internal quotations omitted) (emphasis added). We give the district court
broad discretion in fashioning sanctions for civil contempt. See Khimani, 892 F.2d
at 1519.
Morgan argues that the district court’s award of attorney’s fees and costs
should be reversed because Tom James’ fee request is unreasonable. Specifically,
Morgan alleges that Tom James exercised poor billing judgment and maintained
improper and inaccurate billing records. We note that the district court has “wide
discretion” in awarding fees and costs. ACLU v. Barnes, 168 F.3d 423, 427 (11th
Cir. 1999). While we agree that Tom James’s billing records are not a good model
for filing a successful fee petition, we do not find that the amount of attorney’s fees
and costs, with the exception of investigative costs discussed infra, rises to the
level of reversible error.
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In its cross appeal, Tom James requests that we reverse the district court’s
award of attorney’s fees and remand so that the district court can award additional
damages. First, Tom James asserts that the district court erred in holding that lost
revenues and disgorgement of profits are not recoverable in civil contempt
proceeding. We disagree with Tom James’s assessment that the district court
misconstrued its power to award lost revenue as damages. At no point did the
district court state that lost revenue was not recoverable as civil contempt
sanctions. On the contrary, the district court exhibited that it was fully aware of its
discretion to award such damages, but ultimately determined that Tom James had
not presented sufficient evidence to merit damages for lost revenue. This decision
is well within the district court’s wide discretion and does not constitute reversible
error.
With regard to disgorgement of Morgan’s profits, we reach a different
conclusion. Having reviewed the transcripts of the contempt hearing and the
January 14, 2004 contempt order, it appears that the district court’s interpretation
of its inherent power to order disgorgement of Morgan’s profits as a civil contempt
sanction is ambiguous. We review de novo a district court’s decision that it does
not have the legal authority to award a particular type of contempt sanction. See
EEOC v. Guardian Pools, Inc., 828 F.2d 1507, 1515 (11th Cir. 1987). To the
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extent that the district court did not think that the disgorgement of Morgan’s profits
was within its power to award as a civil contempt sanction, the district court erred.
Accordingly, we vacate the portion of the district court’s January 14, 2004, order
relating to the disgorgement of Morgan’s alleged profits, and remand so that the
district court may exercise its broad discretion in awarding civil contempt
sanctions. Of course, implicit in this broad discretion to award civil contempt
sanctions is the discretion to choose not to award disgorgement of any alleged
profits.
Second, Tom James argues that it presented sufficient evidence that the
district court should have awarded it lost profits due to Morgan’s violations of the
injunction. Again, such a determination of compensatory damages is within the
district court’s wide discretion. Having reviewed the evidence proffered by Tom
James, we will not disturb the district court’s denial of recovery for alleged lost
profits.
Third, Tom James claims that the district court erred in disallowing
reimbursement for $16,966.50 in investigative expenses. Specifically, Tom James
asserts that the district court erred in its belief that Rule 54(d) and 28 U.S.C. §
1920 restricted its inherent authority to award expenses as a sanction for contempt
such that investigative fees were unrecoverable as a matter of law.
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In awarding costs as a sanction for contempt, the district court is not bound
by § 1920's list of costs that may be taxed pursuant to a final judgment. See
Sheila’s Shine Products, Inc. v. Sheila Shine, Inc, 486 F.2d 114, 130-31 (5th Cir.
1973).1 Instead, the district court, in its discretion, may exercise its “wide power . .
. to impose fines for disobedience to its orders.” Id. In this case, the district court
concluded that Tom James could not recover its investigative costs pursuant to
Rule 54(d) and § 1920. This narrow interpretation of its inherent power to sanction
was an error. Of course, as we stated above, implicit in the district court’s inherent
power to award contempt sanctions is also the district court’s inherent power to
decline to award reimbursement for these investigative expenses. Thus, we vacate
the denial of investigative expenses and remand to the district court so that it may
exercise its inherent power and broad discretion with an understanding that it is not
restricted by Rule 54(d) and § 1920.
III. Conclusion
We have carefully and thoroughly reviewed the record, the hearing
transcripts, the briefs of the parties, and the relevant orders of the district court.
With the exception of the denial as a matter of law of the disgorgement of
1
In Bonner v. Prichard, 661 F.2d 1206, 1209 (11th Cir. 1981) (en banc), we adopted as
binding precedent all decisions of the former Fifth Circuit handed down prior to October 1,
1981.
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Morgan’s profits and recovery for investigative expenses, we find no reversible
error, and affirm the orders of the district court. We vacate the district court’s
denial of disgorgement of Morgan’s profits and investigative expenses, and remand
to the district court for consideration of the propriety of awarding these damages to
Tom James.
AFFIRMED IN PART; VACATED AND REMANDED IN PART.
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