Gary Brown & Associates, Inc. v. Ashdon, Inc.

[DO NOT PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FILED
FOR THE ELEVENTH CIRCUIT U.S. COURT OF APPEALS
________________________ ELEVENTH CIRCUIT
MARCH 7, 2008
Nos. 06-15262 & THOMAS K. KAHN
CLERK
07-10167
________________________
D. C. Docket No. 05-80359-CV-DMM
GARY BROWN & ASSOCIATES, INC.,
a Florida corporation,
Plaintiff-Appellee
Cross-Appellant,
versus
ASHDON, INC.,
d.b.a. Impression Bridal,
EMME BRIDAL, INC.,
a Texas corporation,
IMPRESSION BRIDAL, INC.,
a Texas corporation,
Defendants-Appellants
Cross-Appellees.
________________________
Appeals from the United States District Court
for the Southern District of Florida
_________________________
(March 7, 2008)
Before TJOFLAT, MARCUS and WILSON, Circuit Judges.
PER CURIAM:
Appellant/Cross-Appellee Ashdon, Inc., Emme Bridal, Inc. (“Emme”), and
Impression Bridal, Inc. (“Impression”) (collectively, “Appellants”) appeal the
district court’s allowance of testimony relating to a prior copyright infringement
lawsuit against Impression.
Appellee/Cross-Appellant Gary Brown & Associates, Inc. (“GBA”) appeals
on three grounds: (1) error in dismissing Emme’s contract liability at summary
judgment; (2) error in dismissing exemplary damages under the Illinois Sales
Representative Act (“ISRA”) at summary judgment; and (3) abuse of discretion in
reducing attorney’s fees and costs. Upon thorough consideration of the parties’
presentations at oral argument, the parties’ briefs, and the record, we affirm.
I. BACKGROUND
GBA is a Florida corporation that acts as an independent sales
representative for clothing apparel companies. GBA’s revenues are generated
solely from the commissions earned by its president, Gary Brown.
Nick Yeh is the sole owner of Impression, which manufactures women’s
apparel in China for sale throughout the United States. In 1992, GBA entered into
2
an agreement to sell bridal dresses for Impression.1 Over the next several years,
the two companies enjoyed a close and amicable business relationship.
In 1997, Eve of Milady, an unrelated competitor, brought a copyright
infringement suit alleging that Impression had been copying its designs.
According to GBA, the Special Magistrate informed Impression that it could
continue manufacturing the subject bridal wear if a small modification was made
to the patterns of lace. Eve of Milady and Impression ultimately settled the
lawsuit.
On April 7, 1997, either while the lawsuit was still pending or shortly after
settlement, Mike Yeh, who had spent ten years learning the bridal business from
his brother Nick, formed the separate company, Emme Bridal, Inc. From its
inception, Mike has been the sole owner of Emme, which carries a line of
modified, compliant versions of the Eve of Milady dresses.
GBA began selling dresses for Emme, while continuing to sell for
Impression. GBA did not enter into a written contract with Emme. For reasons
not relevant here, the relationship between Gary Brown and the Yeh brothers
eventually fell into disharmony. On January 14, 2005, GBA received a letter from
1
In 2000, Impression was dissolved and Ashdon, Inc. was created. Ashdon assumed the
assets and liabilities of Impression.
3
Nick Yeh terminating the relationship for both Impression and Emme.
When GBA was unable to collect certain commissions from Impression or
Emme, GBA filed suit against both companies for breach of contract (Count I),
violation of the Illinois Sales Representative Act (“ISRA”) (Count II), and
accounting (Count III). At summary judgment, the district court held that Emme
was not liable for Counts I and III because Emme was not a party to the original
agreement and was not a successor-in-interest to Impression. Further, the court
held that exemplary damages under ISRA were not available to GBA.
At trial, the primary issue was whether Impression was bound by the terms
of a written contract proffered by GBA. If the written contract controlled, GBA
was entitled to certain commissions extending sixty days past GBA’s date of
termination. Conversely, if the jury were to find that the parties did not bind
themselves to the written contract, but instead were bound by the same oral
understanding that Impression and Emme used with nearly all of their sales
representatives, GBA had no claim to commissions past the date of termination.
Also at issue was whether Impression and Emme violated ISRA, which requires
payment of commissions within thirteen days of a sales representative’s
termination date. 820 Ill. Comp. Stat. 120/2.
After a three-day trial, the jury returned a verdict for GBA on: (1) the breach
4
of contract claim against Impression ($88,839.60); (2) the ISRA claim against
Impression ($30,367.38); and (3) the ISRA claim against Emme ($11,020.48).
II. DISCUSSION
A. Admission of Prior Copyright Lawsuit
Appellants argue that the district court abused its discretion by allowing
trial testimony and argument relating to Eve of Milady’s copyright infringement
case against Impression. Appellants moved in limine to preclude evidence of the
lawsuit, arguing that accusations of Nick Yeh unlawfully copying Eve of Milady’s
designs would have a highly prejudicial effect. The district court denied the
motion. Appellants also objected throughout trial to GBA’s references to the
lawsuit, but the district court overruled each objection.
GBA asserts that the lawsuit evidence was necessary to show the manner in
which Emme was formed; i.e., Emme was formed in response to the lawsuit
against Impression. Likewise, in its order denying Appellants’ motion for new
trial, the district court stated that “[t]he evidence was introduced to explain why
and how Emme Bridal came into existence, and was therefore relevant.” (D.E.
127 at 4.) Both Emme and the district court fail to connect the bridge; neither
explains why Emme’s formation remained relevant to the discrete issues before
the jury: (1) breach of contract against Impression; and (2) ISRA against
5
Impression and Emme. The evidence only remained plausibly relevant to show
that Emme arose out of Impression in a manner giving rise to successorship
liability thereby making Emme liable under the contract. But this was precisely
the argument made by GBA at summary judgment that the district court rejected.
GBA provides us with no reason, and we know of none, why the prior lawsuit had
any probative value.
Nonetheless, while the district court’s allowance of the evidence may have
been questionable, it is clear that any prejudice suffered by Impression did not rise
to the level requiring reversal. It is well established that “an erroneous evidentiary
ruling is a basis for reversal only if the complaining party’s substantial rights were
affected.” Proctor v. Fluor Enters., Inc., 494 F.3d 1337, 1352 (11th Cir. 2007);
see also Tran v. Toyota Motor Corp., 420 F.3d 1310, 1316 (11th Cir. 2005) (“We
will only reverse a district court’s ruling concerning the admissibility of evidence
where the appellant can show that the judge abused his broad discretion and that
the decision affected the substantial rights of the complaining party.” (internal
quotation marks omitted)). To satisfy this standard, Appellants bear “the burden
of proving that the error probably had a substantial influence on the jury’s
verdict.” Proctor, 494 F.3d at 1352 (internal quotation marks omitted).
Appellants refer to five points during the trial where GBA raised the
6
copyright lawsuit. First, GBA stated at opening argument that Eve of Milady
claimed, in its copyright infringement case, that Impression “improperly copied
Eve of Milady lace patterns” and that Nick Yeh told his sales reps that he was
“going to do what he needed to do to preserve Impression,” which led to the
formation of Emme for the purpose of manufacturing “not impermissible copies.”
(Tr. Vol. 4 at 7.)
Second, Gary Brown, on direct examination, testified that: (a) “there was a
lawsuit filed against Impression by Eve of Milady for copyright infringement for
copying lace patterns on [Eve of Milady] dresses that were declared artwork and
copyrighted”; (b) the name “Emme” was created from the “initials of Eve Muscio,
who was the designer of Eve of Milady, so it was sort of a way to stick it a little
bit”; and (c) Emme was created to “protect Impression” and to keep Emme’s
designs from becoming part of the copyright lawsuit. (Tr. Vol. 5 at 110-113.)
Third, Nick Yeh, on cross-examination, was asked whether: (a) Eve of
Milady claimed that Impression was making copies of Eve of Milady’s dresses
(Yeh agreed); (b) as a result of the lawsuit, Impression had to stop making exact
copies (Yeh agreed); (c) there was a way to copy the dresses without violating Eve
of Milady’s patent rights (Yeh agreed); and (d) the compliant copies ultimately
became the Emme product line (Yeh disagreed). (Tr. Vol. 8 at 84-85.)
7
Fourth, Mike Yeh, on cross-examination, was asked several questions
relating to the copyright lawsuit. The heart of the exchange was as follows:
Question: [Y]ou acknowledged that the dresses that Emme made initially
were in fact copies of the Eve of Milady dresses, but compliant – but
which didn’t improperly copy the lace designs, correct?
Answer: Yes, that’s pretty much standard in the business, that other people
mix in with a dress that’s similar to other people, when there’s a hot dress,
hot line, everybody does the same thing. It’s a standard of the industry
and Mr. Brown also knew about that and testified that also.
(Tr. Vol 8 at 120.)
Finally, at closing argument GBA stated: “You also heard evidence that
some time around 1997 a lawsuit was filed against Impression Bridal claiming that
Impression Bridal improperly copied designer styles. It was at that point in time
that Emme Bridal arose, which was born.” (Tr. Vol. 10 at 68.)
Appellants argue that credibility was crucial to this case because no copy of
a fully executed contract existed. The jury, therefore, had to decide whether to
believe GBA that there was a binding written agreement or believe Appellants that
there was only a verbal agreement. The copyright lawsuit, Appellants argue, was
GBA’s best evidence to put Impression’s credibility in question.
After conducting a thorough examination of the trial transcript, we cannot
hold that the evidence “probably had a substantial influence on the jury’s verdict.”
8
Proctor, 494 F.3d at 1352 (internal quotation marks omitted). Our review reveals
that the copyright lawsuit was never a focus of the trial;2 rather, the meat of the
trial involved the course of events surrounding the drafting, modifying, and
alleged signing of the written contract, the method in which Impression and Emme
operated their businesses, the sales and marketing efforts of GBA conducted over
thirteen years, the gradual dissolution of the relationship between GBA and the
Appellants, the ultimate termination of GBA, and the amount of commissions
GBA asserted it was entitled to.
Equally important, we do not believe that the substance of the evidence
substantially put into question Impression’s credibility. The evidence was that the
copyright infringement suit caused—whether by final judgment, settlement, or
voluntary cessation (it was not made clear at trial)—Impression to cease its
method of copying Eve of Milady’s designs. However, the evidence also showed
that a Special Magistrate advised that only a slight modification was necessary to
make permissible versions of Eve of Milady’s designs. In addition, the undisputed
testimony of Mike Yeh was that the standard practice of the bridal manufacturing
business was to “mix in” designs from other “hot line[s].” (Tr. Vol. 8 at 120). We
2
GBA represented, and Appellants did not dispute, that references made to the copyright
lawsuit amounted to no more than thirty-seven lines in the transcript of a three-day trial.
9
are unpersuaded that such evidence created an impression of untrustworthiness
worth any significance. Even if we were to assume it did, the impression would
still have to translate to the altogether unrelated action of refusing to pay
commissions due to a terminated sales representative, which stretches outside the
realm of probability.
We, therefore, hold that the admission of the copyright lawsuit was not
sufficiently prejudicial to require reversal.
B. Emme’s Breach of Contract Liability
GBA cross-appeals the district court’s holding that Emme was not liable
under the contract between GBA and Impression as a matter of law. We review
the district court’s grant of summary judgment de novo. Gibson v. Resolution
Trust Corp., 51 F.3d 1016, 1020 (11th Cir. 1995).
While it is undisputed that Emme did not come into existence until five
years after GBA and Impression entered into the contract, GBA relies on the
contractual language providing that the agreement shall be binding upon the
parties’ “heirs, successors, assigns and successors-in-interest.” GBA contends that
Emme was either a successor-in-interest, an assignee, or a ratifier.
10
1. Successor-in-Interest
Under Florida law,3 the liabilities of a selling predecessor corporation will
not be imposed upon the buying successor corporation unless “(1) the successor
impliedly assumes the obligations of the predecessor, (2) the transaction is a de
facto merger, (3) the successor corporation is a mere continuation of the
predecessor, or (4) the transaction is a fraudulent effort to avoid the liabilities of
the predecessor.” Orlando Light Bulb Serv. Inc. v. Laser Lighting & Elec. Supply,
Inc., 523 So. 2d 740, 742 (Fla. Dist. Ct. App. 1988).
In this case, GBA’s theory of successorship fails from the outset as GBA
does not establish a successor-predecessor relationship between Impression and
Emme. There was no transfer or merger of assets from Impression to Emme. As
we have said elsewhere, “[g]enerally, one of the fundamental requirements for
consideration of the imposition of successor liability is a merger or transfer of
assets between the predecessor and successor companies.” Coffman v. Chugach
Support Servs., Inc., 411 F.3d 1231, 1237 (11th Cir. 2005).
Here, where Emme was formed as a separate company, where Emme
purchased none of its assets from Impression, where neither Impression nor Nick
3
The district court applied Florida law to the question of Emme’s contractual liability and
no party raises the choice of law issue on appeal.
11
Yeh had any ownership interest in Emme and received no royalties from Emme,
where Impression continued its business and did not dissolve subsequent to
Emme’s formation, and where there has been no assertion of fraud, we cannot hold
that GBA established an issue of material fact as to successor-in-interest liability.
See, e.g., Bernard v. Kee Mfg. Co., Inc., 409 So. 2d 1047, 1048 (Fla. 1982)
(holding that successor-in-interest relationship did not exist where the old
company sold its manufacturing business to a new company operating under
different ownership and management); Orlando Light Bulb Servs., Inc., 523 So. 2d
at 742-43 (holding that successor-in-interest relationship did not exist where
alleged successor was separately owned and acquired only a limited amount of
assets from alleged predecessor); cf. Amjad Munim v. Azar, 648 So. 2d 145, 154-
55 (Fla. Dist. Ct. App. 1994) (holding that successor-in-interest existed where
ownership between the old and new companies was the same, the new company
began when the old company ceased, and the new company provided the same
services to the same clients while using the same staff).
2. Assignment
GBA asserts that Impression assigned the contract to Emme. An assignment
is “a transfer or setting over of property or of some right or interest therein, from
12
one person to another.” State Farm Fire & Cas. Co. v. Ray, 556 So. 2d 811, 812
(Fla. Dist. Ct. App. 1990) (internal quotation marks omitted). An “assignment
transfers to the assignee all the interest of the assignor under the assigned contract,
[leaving] the assignor [with] no right to make any claim on the contract once the
assignment is complete, unless authorized to do so by the assignee.” Id. at 813.
As Appellants point out, it is undisputed that Impression maintained its interest in
the employment contract from 1992 through GBA’s termination in 2003. Since
there was never a time when Impression relinquished its interest in the contract to
Emme or to anyone else, it follows that Emme was not assigned the contract.
3. Ratification
GBA argues that Emme ratified the agreement. “Ratification of an
agreement occurs where a person expressly or impliedly adopts an act or contract
entered into in his or her behalf by another without authority.” Deutsche Credit
Corp. v. Peninger, 603 So. 2d 57, 58 (Fla. Dist. Ct. App. 1992) (emphasis added);
Port Largo Club, Inc. v. Warren, 476 So. 2d 1330, 1333 (Fla. Dist. Ct. App. 1985)
(same). As stated previously, Impression and GBA entered into the contract in
1992—five years before Emme was formed. The contract, therefore, was not
entered into on Emme’s behalf or without Emme’s authorization as Emme did not
exist at the time.
13
Because Emme was not a successor-in-interest, assignee, or ratifier, we
affirm the district court’s grant of summary judgment precluding GBA from
recovering under the contract against Emme.
C. Exemplary Damages
GBA cross-appeals the district court’s grant of summary judgment that
barred GBA from seeking exemplary damages under ISRA. Our review is, again,
de novo. Gibson, 51 F.3d at 1020.
In its summary judgment order, the district court held that ISRA punitive
damages were unavailable because GBA had “not alleged any facts which, if true,
would establish that Defendants’ alleged failure to pay commissions rises to the
level of egregious or outrageous conduct.” (D.E. 82 at 5.) GBA argues that this
particular holding was sua sponte and failed to provide GBA with an adequate
opportunity to support its request for punitive damages.
In their Motion for Summary Judgment, Appellants attacked the ISRA claim
as a whole, arguing that GBA was not within the class of persons the statute was
designed to protect. While Appellants noted that GBA was requesting punitive
damages, Appellants did not challenge them separately.
Rule 56 of the Federal Rules of Civil Procedure provides that a motion for
14
summary judgment “shall be served at least 10 days before the time fixed for the
hearing” and allows nonmovants “to serve opposing affidavits at any time prior to
the day of the hearing.” Fed. R. Civ. P. 56(c). We have explained that Rule 56’s
notice provision is “a vital procedural safeguard” that ensures “litigants will have
at least ten days in which to formulate and prepare their best opposition to an
impending assault upon the continued viability of their claim or defense.” Massey
v. Congress Life Ins. Co., 116 F.3d 1414, 1417 (11th Cir. 1997).
We need not reach whether GBA was provided with sufficient notice
because even if GBA had been expressly notified that punitive damages were at
issue, the outcome would have been the same. See Artistic Entm’t, Inc. v. City of
Warner Robins, 331 F.3d 1196, 1202 (11th Cir. 2003) (per curiam) (“[E]ven if the
district court had formally told [appellant] that the new claims would be addressed
in the summary judgment proceedings, we are convinced that the outcome would
not have been different.”); Restigouche, Inc. v. Town of Jupiter, 59 F.3d 1208,
1213 (11th Cir. 1995) (holding that where appellant failed, even on appeal, to
marshal facts and arguments that would have precluded summary judgment, “any
violation of the 10-day notice rule [was] harmless”).4
4
We note that GBA gives no indication of additional evidence, beyond the evidence in
the record before the district court at summary judgment, that would create an issue of material
fact. As such, this is not a case that implicates the concern of a non-movant not being afforded
15
Because ISRA is an Illinois statute, we look to Illinois case law to interpret
the statute.5 Punitive damages under ISRA are only available when the “conduct
involv[es] an element of outrage similar to that normally found in crime.” Maher
and Assocs., Inc. v. Quality Cabinets, 640 N.E.2d 1000, 1008 (Ill. App. Ct. 1994)
(internal quotation marks omitted). The conduct must be “outrageous” such that
the “defendant’s acts are done with an evil motive or with reckless indifference to
the rights of others.” Id. (internal quotation marks omitted).
GBA contends that two post-termination emails from Nick Yeh to Garry
Brown, which were a part of the record evidence (D.E. 44 at 6), gave rise to an
issue of material fact as to Impression and Emme’s requisite mental state. The
emails both depict Nick Yeh requesting the return of certain sales materials before
payment would be made to GBA and, if not returned, GBA would have to resort to
litigation to get any commissions due.
We cannot conclude that Nick Yeh’s instruction to return his materials or
pursue litigation rises to the type of outrageous conduct “similar to that normally
an adequate opportunity to develop the record on a factual dispute. See Artistic Entm’t, Inc., 331
F.3d at 1201.
5
“In determining the law of the state, federal courts must follow the decisions of the
state’s highest court, and in the absence of such decisions on an issue, must adhere to the
decisions of the state’s intermediate appellate courts unless there is some persuasive indication
that the state’s highest court would decide the issue otherwise.” Flintkote Co. v. Dravo Corp.,
678 F.2d 942, 945 (11th Cir. 1982).
16
found in crime.” Id. As such, we find no error in the district court’s grant of
summary judgment on punitive damages under ISRA.
D. Reduction of Attorney’s Fees & Costs
“We review an award of attorney’s fees by the district court only for an
abuse of discretion.” Johnson v. Breeden, 280 F.3d 1308, 1326 (11th Cir. 2002).
“An abuse of discretion occurs if the judge fails to apply the proper legal standard
or to follow proper procedures in making the determination, or bases an award
upon findings of fact that are clearly erroneous.” Id. (internal quotation marks
omitted).
GBA cross-appeals the district court’s order that reduced GBA’s proffered
attorney’s fees by approximately sixty-five percent ($99,661.50 to $34,908.75)
and reduced proffered costs from $25,921.05 to $611.00. Fees and costs were
only recoverable under GBA’s ISRA claim—not GBA’s breach of contract or
accounting claims. The district court found that GBA made no attempt to specify
what fee entries related to which claim and submitted no testimony as to
apportionment. See Norman v. Hous. Auth. of City of Montgomery, 836 F.2d
1292, 1303 (11th Cir. 1988) (“[F]ee counsel should have maintained records to
show the time spent on the different claims, and the general subject matter of the
17
time expenditures ought to be set out with sufficient particularity so that the
district court can assess the time claimed for each activity.”). The district court
determined that GBA’s time was split fifty-fifty between the ISRA claim on the
one hand, and the breach of contract and accounting claims on the other. As such,
only fifty percent of the total fee was awardable. The court found that a further
fifteen percent reduction was necessary in light of the excessive and redundant
nature of the recorded entries; specifically, three lawyers worked on the case and
the majority of the time was billed in full or half-hour increments. We find no
abuse of discretion in the district court’s determination as to fees.
As for costs, the trial court found that plaintiff’s request was either: (1) not
recoverable under 28 U.S.C. § 1920; or (2) not stated with requisite specificity.
Specifically, GBA’s requests for mediation expenses, meals, courier/postage,
Lexis-Nexis research, air fare, and lodging are not included under § 1920. See 28
U.S.C. § 1920; Duckworth v. Whisenant, 97 F.3d 1393, 1399 (11th Cir. 1996) (per
curiam) (holding that “costs such as general copying, computerized legal research,
postage, courthouse parking fees and expert witness fees . . . are clearly
nonrecoverable” under § 1920). In addition, GBA requested a total of $6,698.82
for unspecified copying by an outside provider, which did not allow the court to
determine whether the documents were necessarily obtained for use in the case.
18
See 28 U.S.C. § 1920(4) ((providing for “[f]ees for exemplification and copies of
papers necessarily obtained for use in the case (emphasis added)). The district
court also found that a general $4,602.90 charge for deposition transcripts lacked
the requisite specificity. See 28 U.S.C. § 1920(2) (providing for “[f]ees of the
court reporter for all or any part of the stenographic transcript necessarily obtained
for use in the case” (emphasis added)). As before, we find no abuse of discretion.
III. CONCLUSION
After oral argument and careful consideration of the record and the parties’
briefs, we conclude that the judgment of the district court is due to be affirmed.
AFFIRMED.
19