Apex Fountain Sales v. Klienfeld

Opinions of the United
1994 Decisions States Court of Appeals
for the Third Circuit
6-29-1994
Apex Fountain Sales v. Klienfeld, et al.
Precedential or Non-Precedential:
Docket 93-1943
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"Apex Fountain Sales v. Klienfeld, et al." (1994). 1994 Decisions. Paper 64.
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UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 93-1943
APEX FOUNTAIN SALES, INC.
v.
ERNIE KLEINFELD; FLO AIRE, INC.;
RALPH KEARNEY, JR.; MICHAEL KEARNEY;
RALPH KEARNEY & SON, INC.
Appellants
On Appeal from the United States District Court
for the Eastern District of Pennsylvania
(D.C. Civ. No. 83-06153)
Argued: March 2, 1994
Before: SLOVITER, Chief Judge,
ALITO, Circuit Judge and PARELL,1 District Judge
(Filed June 29, l994 )
Robert J. Sugarman (Argued)
Sugarman & Associates
Philadelphia, PA 19103
Attorney for Appellants
Norman Perlberger (Argued)
Jeffrey A. Cohen
Perlberger Law Associates, P.C.
Bala Cynwyd, PA 19004
Of Counsel:
Stephen E. Feldman
1
Hon. Mary Little Parell, United States District Judge for the
District of New Jersey, sitting by designation.
1
Kenneth S. Feldman
Attorneys for Appellee
OPINION OF THE COURT
SLOVITER, Chief Judge.
The dispute between the parties to this appeal is no
stranger to this court. See Apex Fountain Sales, Inc. v.
Kleinfeld, 818 F.2d 1089 (3d Cir. 1987) (Apex II). This bitter
business litigation shows no sign of abating, and it is likely
that we will see it again since neither settlement nor
proceedings akin to arbitration have reduced the animosity shown
by the parties as well as their lawyers. In this appeal
defendant-appellant Ralph G. Kearney & Son, Inc. appeals from a
finding of contempt for violating a 1985 consent decree settling
a suit initiated by appellee Apex Fountain Sales, Inc. claiming
Kearney infringed Apex's trademarks in champagne fountains. We
also have pending a related appeal from a permanent injunction
involving the same parties but a different fountain. See Apex
Fountain Sales, Inc. v. Kleinfeld, No. 93-2150 (3d Cir.
June 29, 1994) (Apex IV). While we are cognizant that the
parties desire a resolution of this phase of this lengthy
litigation, we must dismiss this appeal because the district
court's contempt order is not yet final.
I.
FACTS AND PROCEDURAL HISTORY
Apex Fountain Sales, Inc. manufactures champagne
fountains, decorative devices containing a pump that are used for
2
filling glasses of champagne or punch by means of a fountain
arrangement. Apex used to purchase parts for its fountains from
Ralph G. Kearney & Son, Inc.2 After a contract dispute between
them, Kearney used the parts it manufactured for Apex to market
its own, virtually identical, fountains. Apex sued Kearney in
1983 for infringement of its trademark and trade design under the
Lanham Act, 15 U.S.C. § 1125(a) (1988). The parties entered into
a comprehensive settlement agreement which was incorporated into
a consent decree entered by the district court on August 14,
1984.
The crucial portion of the consent decree for purposes
of the contempt findings is paragraph seven, which provided:
Defendants will change their fountain design so that
the fountains can no longer be identified as Apex
Fountains and no longer use the Trademarks. Defendants
will submit their new fountain designs for prior
written approval to a panel consisting of Alvin Gruber,
Ralph Kearney, Sr. and a third person to be chosen by
the consent of Gruber and Kearney to decide on a
majority basis whether the fountain designs meet the
above standard and that decision will be binding on the
parties.
App. at 13.
On January 4, 1985, Apex moved for contempt because
Kearney was still selling the fountains it had promised not to
sell. On January 24, 1986, the parties entered a stipulation
settling Apex's contempt claim for $75,000, releasing "defendants
2
The other defendant-appellants, Flo Aire, Inc., Ralph Kearney,
Jr., Michael Kearney and Ernie Kleinfeld, are all associated with
Ralph G. Kearney & Son, Inc. and will be collectively referred to
as Kearney.
3
from any and all liability resulting, directly or indirectly,
from the conduct alleged in the contempt Motion." App. at 41.
Meanwhile, because the parties could not agree on a
third member for the design panel as contemplated by the consent
decree, the court, on petition by Kearney, appointed a
Philadelphia patent and trademark lawyer, Manny Pokotilow, as the
third panelist. Apex appealed the order and we affirmed the
court's decision. See Apex Fountain Sales, Inc. v. Kleinfeld,
800 F.2d 1130 (3d Cir. 1986) (table) (Apex I).
The Pokotilow panel convened in November 1985 to
consider two fountain designs submitted by Kearney for approval,
the Moselle and the Ameretta. Both fountains were rejected on
December 18, 1985 because they were likely to be confused with
Apex's. See Pokotilow I, App. at 34. However, the panel stated
that if certain specific changes were made "the panel will
consider these fountains not likely to be confused with those of
the Plaintiff." App. at 48. The district court "accept[ed],
adopt[ed] and confirm[ed]" this opinion on March 17, 1986. App.
at 37.
Kearney altered the fountains to comply with the
panel's suggestions, but also modified the fountains in two other
respects which Apex claimed made them more similar. Kearney then
marketed the two designs and the Grand Chablis (another fountain
design), exhibiting them at the Chicago Trade Fair in May 1986.
Apex sought to hold Kearney in contempt for failing to get these
fountains pre-approved by the panel. The district court
appointed the panel as a board of special masters and referred
4
the issue to them. In September 1986, acting in this capacity,
the panel reviewed the fountains. In effect its ruling
recommended against contempt because it found that: (1) its
earlier decision in Pokotilow I authorized Kearney to market
fountains which complied with the panel's recommendations without
having them reviewed by the panel; (2) the two additional
modifications were immaterial; and (3) the Grand Chablis did not
violate the consent decree. See Pokotilow II, App. at 49, 52,
56. The district court adopted and confirmed this opinion on
October 10, 1986 and found "that the proposed . . . designs
submitted to the Panel . . . and displayed at the exhibit in
Chicago, Illinois are in conformity with the Order of this Court
dated March 17, 1986." App. at 58. Apex appealed.
Our opinion on appeal dealt with three separate issues.
First, we held that the statement in Pokotilow I that certain
changes would bring the fountains submitted into compliance was
"mere dicta," Apex II, 818 F.2d 1095, and thus we declined to
overturn the district court's approval of Pokotilow I despite our
concerns that such language was contrary to the consent decree.
Second, we held that the district court erred in referring the
contempt proceeding to a panel of special masters. See id. at
1096-97. Finally, we rejected the holding of the panel in
Pokotilow II that "no approval was necessary so long as Kearney
complied with the suggestions" in Pokotilow I. We held that the
panel recommendations "could not exempt Kearney from the
obligation to submit new designs to the panel before exhibiting
them." Id. at 1097-98. We concluded that "[b]ecause it
5
exhibited new fountains without the prior approval of the panel,
Kearney would appear to be in contempt of the consent decree.
There may be defenses to the contempt charge, however, and this
issue has not been properly presented either to the district
court or to this court." Id. at 1098. We directed that "[o]n
remand, the district court should hold a hearing to determine if
Kearney is in contempt, and if so, to determine the appropriate
sanction." Id.
After this decision, Kearney continued to market the
fountains approved by Pokotilow II without any changes. Apex
petitioned for contempt in September 1987 and again in August
1988, and although the district court scheduled hearings on at
least two occasions, it never completed them. Then a newly
constituted design panel, Karl L. Spivak presiding, met in July
1989 to consider whether three fountains, the Moselle, the
Ameretta and the Grand Chablis, violated the consent decree. In
its October 6, 1989 decision, the panel rejected the Moselle and
approved the Ameretta and Grand Chablis. See Spivak I, App. at
84. In a second hearing, Apex sought reconsideration of the
approval of the Ameretta and Grand Chablis, and Kearney sought
approval of a modified Moselle. The design panel rejected Apex's
position, and approved all three fountains, the Ameretta, Grand
Chablis, and the modified Moselle, in July 1990. See Spivak II,
App. at 88.
Responding to a fifth motion for contempt filed in July
1992, the district court held two days of hearings in May 1993
6
regarding Apex's pending contempt motions.3 The first witness at
the hearing was Apex's accountant who testified about its losses
in fountain sales. During cross-examination, the court secured
the agreement of the parties that an independent accountant would
audit the books of both companies. The remainder of the hearing
consisted of viewing the fountains and hearing testimony from the
principals of Kearney and Apex. After receiving proposed
findings of fact and conclusions of law, the district court
entered a contempt order against Kearney on July 7, 1993. It
concluded that
Apex has demonstrated by clear and convincing evidence
that Kearney knowingly failed to comply with the
requirements of the . . . consent decree in the
following respects:
a. It violated, ab initio, the provisions of ¶ 7 of
the parties' agreement by failing to submit its Moselle
and Ameretta designs for prior design panel approval.
b. It exhibited the Grand Chablis fountain at the
Chicago trade show which was never shown to the
Pokotilow panel.
c. Kearney continued to market the never approved
original Moselle model along with the approved modified
Moselle.
App. at 104-05.
The court recognized that the remedy for civil contempt
must either insure compliance or compensate for past violations.
To insure compliance, it ordered Kearney to turn over the
equipment used to manufacture the infringing articles to the
United States Marshall for destruction. To grant compensation,
3
We note this was some six years after our opinion directing the
district court to hold a hearing on the contempt motion.
7
it ordered Kearney and Apex to submit to an audit by "a certified
public accountant who shall, using standard accepted accounting
principles, determine the net profit which would have been
realized by Apex Fountain Sales, Inc. utilizing Kearney gross
sales figures of infringing fountains," App. at 108, which would
then be entered as a judgment in favor of Apex. App. at 109.
"Infringing fountains" was defined to include the Moselle and
Ameretta "from the date of the consent agreement" and the Grand
Chablis "from the date of first manufacture." App. at 109.
On July 19, Kearney filed a Motion for Reconsideration,
Extension, and Partial Stay, and submitted an Amended and
Amplified Motion for Reconsideration on July 27. The district
court denied the motion for reconsideration on August 31. On
September 22, Kearney filed a motion for a stay of the audit and
the destruction of the equipment pending appeal. The court
stayed its order in part on September 30, ordering the Marshall
to store the equipment pending appeal but refusing to delay the
audit. Kearney filed its appeal on September 30.
In its contempt order, the court stated that the
accounting would be done by an independent accountant stipulated
to by the parties within fifteen days of the contempt decree.
App. at 108. However, since the parties were unable to agree,
the court itself appointed one three months later. While the
accountant filed the audit report in February 1994, no judgment
containing a final dollar amount has been entered.
II.
JURISDICTION
8
Apex has filed a motion to dismiss the appeal, arguing
that because the amount of money that Kearney owes Apex has not
yet been determined, no final judgment has been entered. We
agree.4 Our appellate jurisdiction is limited to final
decisions. 28 U.S.C. § 1291 (1988). "It is a well-established
rule of appellate jurisdiction . . . that where liability has
been decided but the extent of damage remains undetermined, there
is no final order." Sun Shipbuilding & Dry Dock Co. v. Benefits
Review Bd., 535 F.2d 758, 760 (3d Cir. 1976) (per curiam)
(collecting cases); see also Republic Natural Gas Co. v.
Oklahoma, 334 U.S. 62, 68 (1948) ("[T]he requirement of finality
has not been met merely because the major issues in a case have
been decided and only a few loose ends remain to be tied up--for
example, where liability has been determined and all that needs
to be adjudicated is the amount of damages."); EEOC v. Delaware
Dep't of Health & Social Servs., 865 F.2d 1408, 1413 (3d Cir.
1989) ("An order which establishes liability without fixing the
amount of recovery is generally not final."); Weiss v. York
Hosp., 745 F.2d 786, 802 (3d Cir. 1984) ("because . . .
additional proceedings, including the determination of certain
defenses and of damages, are yet to take place, most of these
'judgments' . . . are not final within the meaning of 28 U.S.C.
§1291"), cert. denied, 470 U.S. 1060 (1985).
4
Since we determine the order is not final, we need not reach the
claim Apex asserts in its brief that the appeal was not timely
because the motion for reconsideration was ineffective in
suspending the 30-day time limit imposed by Fed. R. App. P.
4(a)(1).
9
Until the court enters a judgment with the precise
amount of damages calculated, the extent of Kearney's liability
is unknown. Given the contentiousness of this litigation, it is
not surprising that both parties have submitted lengthy motions
in the district court objecting to the accountant's findings and
seeking a hearing before the court. See Docket Nos. 118, 121,
122, 123, 124, 130, 133. Indeed, the district court has
recognized that the parties have factual and legal disputes about
the accountant's report and has ordered them to submit to it any
evidentiary materials no later than July 15, 1994. Docket No.
135.
It is more than likely that after the district court
resolves the issue, one or both parties will dispute the ultimate
amount of damages awarded, leading to a second appeal. This
would be contrary to the federal judiciary's general policy
against piecemeal litigation. "Permitting piecemeal appeals
would undermine the independence of the district judge, as well
as the special role that individual plays in our judicial system.
In addition, the [finality] rule is in accordance with the
sensible policy of avoiding the obstruction to just claims that
would come from permitting the harassment and cost of a
succession of separate appeals from the various rulings to which
a litigation may give rise, from its initiation to entry of
judgment." Van Cauwenberghe v. Biard, 486 U.S. 517, 521-22 n.3
(1988) (quotations omitted); see Catlin v. United States, 324
U.S. 229, 233-34 (1945) ("The foundation of this policy is not in
10
merely technical conceptions of 'finality.' It is one against
piecemeal litigation.").
This understanding is also reflected in our cases
holding that a district court order awarding "reasonable"
attorneys fees is not appealable until the fees are quantified in
order to prevent two appeals--one on whether attorneys fees
should be awarded and a second on the amount of the award. See
Pennsylvania v. Flaherty, 983 F.2d 1267, 1276-77 (3d Cir. 1993);
In re Colon, 941 F.2d 242, 246 (3d Cir. 1991); Frangos v. Doering
Equip. Corp., 860 F.2d 70, 72 (3d Cir. 1988); see also Napier v.
Thirty or More Unidentified Federal Agents, Employees or
Officers, 855 F.2d 1080, 1089-90 (3d Cir. 1988) (Rule 11
sanctions may not be appealed until judgment entered on the
amount).
Kearney argues that the order is final because
determining the precise amount of money due is a "ministerial" or
"mechanical" act and thus the order is "final" under what is
known as the Forgay-Conrad doctrine. See Forgay v. Conrad, 47
U.S. (6 How.) 201 (1848); Parks v. Pavkovic, 753 F.2d 1397, 1401
(7th Cir.) ("if the determination of damages will be mechanical
and uncontroversial, so that the issues the defendant wants to
appeal before that determination is made are very unlikely to be
mooted or altered by it--in legal jargon, if only a 'ministerial'
task remains for the district court to perform--then immediate
appeal is allowed"), cert. denied, 473 U.S. 906 (1985); 9 James
Wm. Moore et al., Moore's Federal Practice ¶ 110.11 (2d ed.
1994).
11
The district court seems to have viewed the judgment in
this way, noting that it had "resolved the legal rights of the
parties and provided the formula for calculating the amount of
the judgment; determining the dollar amount of damages is merely
a ministerial act." App. at 116 n.1; see also App. at 123 ("we
specifically noted that our July order resolved the legal rights
of the parties, provided the formula for calculating the amount
of the contempt judgment, and rejected any assertion that the
order was interlocutory or otherwise unappealable").
In Cromaglass Corp. v. Ferm, 500 F.2d 601, 605 (3d Cir.
1974) (in banc), we described the Forgay-Conrad doctrine as
permitting appellate jurisdiction for a "judgment which is final
except for ministerial acts." While not mentioning Forgay, we
have continued to recognize that an order is final even if it
does not reduce the damages to a sum certain if "the order
sufficiently disposes of the factual and legal issues and [if]
any unresolved issues are sufficiently 'ministerial' that there
would be no likelihood of further appeal." Polychrome Int'l
Corp. v. Krigger, 5 F.3d 1522, 1544 n.52 (3d Cir. 1993). Thus,
in Polychrome, we held that we had jurisdiction of the
government's appeal of a district court order invalidating a tax
regulation, even though the court did not state the amount of
refund to which the plaintiffs were entitled. Presumably, the
court viewed the determination of the amount of taxes paid by
each plaintiff as a ministerial calculation. Accord United
States v. Brook Contracting Corp., 759 F.2d 320, 322-23 (3d Cir.
1985); Hattersley v. Bollt, 512 F.2d 209, 213-14 (3d Cir. 1975).
12
The district court's order in this case does not fall
within the "ministerial" exception to the final judgment rule.
The record of this litigation indicates that the determination of
the "net profit which would have been realized by Apex" absent
the contemptuous acts will not be easily reached. See Goodman v.
Lee, 988 F.2d 619, 625 (5th Cir. 1993) (when calculating damages
would be a "nightmare," judgment was not final). While in some
circumstances this might be a simple calculation, in this
situation it has become a highly contested dispute about Kearney
and Apex sales over the past 10 years.
Further, before the order is sufficiently final for
review purposes the district court will undoubtedly make
particularized findings indicating specifically how the damages
are actually linked to the contemptuous behavior it found. It is
a general principle that "[t]he relief granted in civil contempt
proceedings is compensatory . . . [and] must not exceed the
actual damages caused the offended party by a violation of the
court's order." Quinter v. Volkswagen of America, 676 F.2d 969,
975 (3d Cir. 1982) (citations omitted); see also Gregory v.
Depte, 896 F.2d 31, 34 (3d Cir. 1990) (compensatory fine "must
not exceed the actual damages caused the offended party and must
be based on evidence of a complainant's actual loss" (citations
omitted)).
The numbers, even if the parties had agreed with the
accountant's report regarding total Kearney sales of the
"infringing fountains," will not speak for themselves. Although
we do not express any opinion on the merits, we question whether
13
the district court intended to assess damages based on the sales
of all Moselle, Ameretta and Grand Chablis fountains since 1984,
because for at least some of that period Kearney was marketing
these fountains with the acquiescence, if not the explicit
approval, of the design panel and the district court. A party
cannot be held in contempt for acts permitted by a court order
simply because that order was later reversed or disapproved, for
it is the knowledge of and disobedience of an existing court
order which are the predicates for any contempt sanction. See
United States v. Sarbello, 985 F.2d 716, 727 (3d Cir. 1993).
In short, while it appears that there were sales by
Kearney as to which the district court's contempt order might
well be found to be justified, that order is neither final nor
reviewable until the court details which of Kearney's sales had a
"sufficiently specific nexus" to the violations and the precise
amount of loss incurred by the sales. Inmates of Allegheny
County Jail v. Wecht, 754 F.2d 120, 130 (3d Cir. 1985); see also
Gregory, 896 F.2d at 34.5 Indeed, when the court enters its
final order with the specificity required, it will undoubtedly
clarify some ambiguities that appear on the record.6
5
We assume the court will also ensure that the damages do not
include any sales for which Apex released Kearney in the January
24, 1986 settlement.
6
For example, the court found that "Kearney continued to market
the never approved original Moselle model along with the approved
Moselle modified model." App. at 105. It is not clear whether
the phrase "continued to market" refers to a date from the entry
of the consent decree in August 1984, the panel decision in
Pokotilow I in December 1985 rejecting the Moselle, or the panel
decision in Spivak I in October 1989 rejecting the Moselle.
14
We make these comments in order to provide the district
court with some insight into the specificity that is necessary to
ensure proper appellate review.
Fact finding is the trial court's province. We do
remain responsible, however, for the ultimate justness
of trial determinations drawn before us. Since this is
so, we must know the basis of the trial court's
decisions: this Court cannot be left to second-guess
the factual basis for the district court's conclusion.
Review is our responsibility, and we cannot review bare
conclusions. In short, our duty to respect the trial
court's factual determinations gives rise to a
reciprocal one on its part to tell us the reasons for
them. [A] mere statement of a result [] cannot stand.
Chandler v. City of Dallas, 958 F.2d 85, 89 (5th Cir. 1992)
(quotations and ellipses omitted); see also Anthuis v. Colt
Indus. Operating Corp., 789 F.2d 207, 213 (3d Cir. 1986) ("Of
course, a district court is not required to write an opinion
explaining every judgment that it renders. But in a complex case
such as this one, . . . both the parties and this court should be
Kearney claims that if the court meant that Kearney
marketed the original Moselle after the decision in Spivak I, the
factual findings that the Moselle was marketed "through print
advertising appearing in September 1989 and at the National
Association of Food Equipment Manufacturers show in Dallas in
October 1989," App. at 102, are inapposite because the record
shows that the print advertising in September 1989 and the
October 1989 show in Dallas preceded the decision in Spivak I.
App. at 897, 925, 929-31, 955.
Similarly, before the order is final the district court
may want to clarify its finding that the Moselles were displayed
in two 1991 tradeshows, App. at 102, because we have found no
supporting testimony at the contempt hearing. Photographs of
Kearney's displays at the two shows, attached to the affidavit of
Apex's president, are not identified anywhere as depicting an
unmodified Moselle, and thus there is no contradiction on the
record to Ralph Kearney's testimony that he took the Moselle "off
the market" after Spivak I. App. at 867, 974-75; see also App.
at 422, 961, 971.
15
fully informed as to the bases of the district court's
decision."). We anticipate that, assuming this case is properly
appealed after the entry of final judgment, the next appellate
panel to review this case will be appreciative of the district
court's attention to these details.
III.
CONCLUSION
For the reasons set forth above, we will dismiss the
defendants' appeal for lack of an appealable order at this time.
16