Tu Thien The, Inc. v. Tu Thien Telecom, Inc.

FILED
NOT FOR PUBLICATION
AUG 23 2016
UNITED STATES COURT OF APPEALS MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
TU THIEN THE, INC., a California No. 14-56487
corporation,
D.C. No.
Plaintiff-counter-defendant - 2:11-cv-09899-MWF-JEM
Appellee,
and MEMORANDUM*
HUONG THANH NGUYEN, an
individual, AKA Hai Le,
Counter-defendant - Appellee,
v.
TU THIEN TELECOM, INC., a California
corporation; LAM NGUYEN,
Defendants-counter-claimants
- Appellants.
Appeal from the United States District Court
for the Central District of California
Michael W. Fitzgerald, District Judge, Presiding
*
This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
Submitted August 5, 2016**
Pasadena, California
Before: KOZINSKI and WARDLAW, Circuit Judges, and BENCIVENGO,***
District Judge.
Tu Thien Telecom, Inc. and Lam Nguyen appeal the district court’s order
enhancing the actual damages awarded by the jury and declining to reduce the
jury’s award of disgorged profits. We have jurisdiction pursuant to 28 U.S.C.
§ 1291, and we affirm.
1. The district court did not err in enhancing the damages awarded by the
jury from $500,000 to $750,000. The district court is permitted to enhance a
judgment by up to three times the actual damages found, but the judgment assessed
“shall constitute compensation and not a penalty.” 15 U.S.C. § 1117(a). In
awarding damages, the court may consider any loss of reputation and goodwill,
including “a plaintiff’s expenditures in building its reputation . . . after a
defendant’s bad acts.” Skydive Ariz., Inc. v. Quattrocchi, 673 F.3d 1105, 1112 (9th
Cir. 2012). Furthermore, a district court is permitted to consider the “likely
deterrent effect” of the damages assessed. Faberge, Inc. v. Saxony Prods., Inc.,
**
The panel unanimously concludes this case is suitable for decision
without oral argument. See Fed. R. App. P. 34(a)(2).
***
The Honorable Cathy Ann Bencivengo, United States District Judge
for the Southern District of California, sitting by designation.
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605 F.2d 426, 429 (9th Cir. 1979). Here, the district court determined that “the
‘circumstances of the case’ warrant a small increase” in damages, see 15 U.S.C.
§ 1117(a), because “[t]he jury found that Defendants acted willfully or in bad
faith” and because “the damages do not account for the intangible harm to
Plaintiff’s reputation and goodwill.” Additionally, the district court noted in its
order that damages assessed “shall constitute compensation and not a penalty.”
Because the district court’s order reveals that the goals of the enhanced award were
to compensate for reputational harm and to deter future misconduct, not to penalize
prior bad acts, the enhancement was not an abuse of discretion.
2. The district court did not err in declining to sua sponte reduce the award
of disgorged profits in the amount of $668,000. Assuming the issue was
preserved, we conclude that the district court did not abuse its discretion by
sustaining the disgorged profit. Defendants bore the burden of proving any
deductions from the assessment of defendants’ profits. 15 U.S.C. § 1117(a). In
reviewing a jury’s award of disgorged profits, the district court “only ascertain[s]
whether the award was based on reasonable inferences and fair assessments of the
evidence in the record.” Skydive, 673 F.3d at 1113. Though defendants claimed to
have operated at a loss every year, defendants failed to document certain costs,
including defendants’ largest expense, the cost of purchasing minutes from
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Vietnam. In addition, defendants did not account for inconsistencies in their
testimony, such as why they maintained an unprofitable business for years or why
defendant Lam Nguyen paid thousands of dollars for a failing company. The jury
could have reasonably rejected defendants’ accounting of expenses and credited
plaintiffs’ argument that defendants “were not honest about what their operating
costs were.” The district court therefore did not abuse its discretion in declining to
disturb the jury’s award of disgorged profits.
AFFIRMED.
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